Small Business Reorganization Act FAQ
A new law was recently passed by Congress and will change the way businesses are restructured during bankruptcy. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act was passed, but in the years since then, lawmakers have determined that Chapter 11 bankruptcy cases were still running into issues and the law needed to be updated.
What is the intention of the Small Business Reorganization Act?
Congress states that the intention of the Act is to “streamline the bankruptcy process by which small businesses [sic] debtors reorganize and rehabilitate their financial affairs.”
When does the Small Business Reorganization Act become effective?
The Act was signed by the President on August 26, 2019. It became effective 180 days from that date, which was February 22, 2020.
What changes does the Small Business Reorganization Act make?
It adds a new subchapter (Subchapter V) to Chapter 11 bankruptcy for small business debtors. It also declares a handful of sections and subsections of Chapter 11 inapplicable in Subsection V cases.
Is the Small Business Reorganization Act good or bad news for debtors?
The rules and requirements in the new Subchapter V are more debtor-friendly than regular Chapter 11. This new subsection is also designed to help reduce the costs of a Chapter 11 bankruptcy to business owners. It makes bankruptcy a much more attractive option for small businesses under financial distress, so this is good news for debtors in the long run.
Which bankruptcy option is right for me and my business?
If you are facing financial distress, you need to talk with a bankruptcy attorney. Bankruptcy attorneys are well-versed in the different types of bankruptcies and the changing laws that regulate them.
Contact an Experienced Bankruptcy Attorney at Maxwell Dunn PLC
Our firm filed the very first Subchapter V bankruptcy in the Eastern District of Michigan and has experience with the new law.
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