The Small Business Reorganization Act (the “SBRA”), also known as Subchapter V of Chapter 11 of the Bankruptcy Code, went into effect in February 2020. Notwithstanding COVID-19, business bankruptcy filings remained relatively low in 2020. It is anticipated, however, that they will pick up in the second half of 2021 as stimulus money runs out, and businesses start to face pressure from creditors. The SBRA was designed to help small businesses reorganize in the face of financial distress. It provides a cheaper and faster alternative to a traditional Chapter 11, and makes it easier for small business owners to confirm a plan of reorganization and retain equity in their companies. The SBRA was originally available only to businesses with debts under $2,725,625. Because of COVID-19, Congress increased the debt limit to $7,500,000 until March 2022. By making it easier for businesses to reorganize, Congress has increased the likelihood that creditors of distressed business will get repaid, and employees will keep their jobs. This course provides a general analysis of the provisions of the SBRA, and how they differ from the provisions of a traditional Chapter 11 case.
