The Small Business Reorganization Act of 2019 is an amendment of the Bankruptcy Code and Title 28 of the United States Code addressing small business reorganization. The Act will take effect in February 2020 and will streamline existing procedures for bankruptcy and allow small businesses to successfully restructure their organizations.
The law prior to enactment was geared toward larger multi-billion-dollar organizations. Applying the prior Chapter 11 bankruptcy rules to small businesses prevented them from restructuring effectively and created several procedural roadblocks and high costs. The Act will only apply to business debtors with debts subject to certain qualifications that are less than $2,725,625. Key provisions of the Act provide for the following:
Increased Ability of Debtors to Negotiate and Control Their Business
Only small business debtors can propose a plan for reorganization. There is no need to obtain approval of a disclosure statement or approval of plan through solicitation of votes. Additionally, the owner of the business can retain a stake in the company if the plan is not discriminatory toward other classes of claims and interests. The plan will also provide that if a trustee or holder of an unsecured claim objects to the plan, the plan cannot be approved without providing that the business debtor’s disposable income is received into the plan and used for payments under the plan for three to five years.
Reduced Procedural Burdens
Official committees and unsecured creditors will not be appointed, and disclosure statements will be required only if a court orders it for cause.
A trustee will be appointed to perform duties related to ensuring successful reorganization. The small business debtor will be required to file a plan within 90 days of declaring bankruptcy. An initial status conference will be required in every case within 60 days of commencement of bankruptcy to further expedite the restructuring process.
Debtors under this Act can pay for administrative expense claims over the term of the plan instead of the day the plan goes into effect.
Discharge Exceptions Expanded
The bankruptcy court may grant the debtor a discharge after completion of all payments that are due within the first three to five years of the plan.
Philadelphia Business Lawyers at the Harty Law Group Provide Counsel to Small Business Owners
Small business owners facing bankruptcy can rely on the astute legal advice of the Philadelphia business lawyers at the Harty Law Group to successfully reorganize their businesses. For an initial consultation, contact us online or call us at 267-383-3899 today. Located in Philadelphia and Haddonfield, New Jersey, we serve clients throughout Pennsylvania and New Jersey.