By Jessica Ljustina (Harvard Law School)
Congress passed the Small Business Reorganization Act of 2019 (“SBRA”) to streamline and reduce the cost of bankruptcy for small businesses; it went into effect on February 19, 2020.
As originally enacted, the Act allowed certain small businesses with no more than approximately $2.7 million of debt to file for bankruptcy under a new subchapter V of chapter 11 of the Bankruptcy Code.
The recently enacted Coronavirus Aid, Relief, and Economic Security (“CARES”) Act has temporarily increased the debt limit to $7.5 million for cases commenced in the next year. That may greatly expand the SBRA’s scope, as Professor Robert Lawless has estimated that over 50% of businesses that filed under chapter 11 between 2013 and 2017 had debt below $7.5 million.
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