Growing Use of Small Business Reorganization Bankruptcy Cases

As part of the CARES Act, Congress enacted Subchapter V of Chapter 11 of the Bankruptcy Code — the “Small Business Reorganization Act.” The Small Business Reorganization Act created a more streamlined and cost-effective process for businesses with less than $7.5 million in debt to reorganize. Certain provisions, including the $7.5 million debt limit, were set to expire after one year. Congress, however, took action and extended the Small Business Reorganization Act until March of 2022.

In the year since its enactment, more than 1,500 businesses and individuals have filed cases under the Small Business Reorganization Act. These business and individuals have taken advantage of the more debtor-friendly requirements for confirming a plan. For example, an individual owner does not have to pay all creditors in full to keep the business.

In addition, the Small Business Reorganization Act has created a shorter timeline to successfully conclude a case and reduced the fees and expenses to get there, which include the elimination of the Committee of Unsecured Creditors and U.S. Trustee fees. Generally speaking, the Small Business Reorganization Act is working as intended in allowing many more businesses to reorganize.

Fredrikson & Byron has stayed on top of it all, representing clients involved in Small Business Reorganizations and speaking and writing on the Small Business Reorganization Act. Many more businesses and individuals qualify and may need the rights afforded by the Small Business Reorganization Act, particularly as stimulus funds may no longer be available.

Fredrikson & Byron’s resources explaining the Act and how it may be used successfully include:

  1. Summary of Uses and Strategies of the Small Business Reorganization Act
  2. How Does a Small Business Bankruptcy Case Work?
  3. Serving Up Some Help: How Subchapter V Can Solve Problems for Businesses in the Service Industry

If you would like to learn more about the Small Business Reorganization Act and how it may help a business, Fredrikson & Byron’s Bankruptcy, Restructuring & Workouts team is here to help.

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