New Federal Law Provides Protections For Small Businesses

No small business owner wants to file for bankruptcy.  But, with the massive impact of the coronavirus, everyone is asking the same questions.   What if my business stays closed for an extended period?  What if my lender and my creditors won’t give me time to pay them?  Can I save my business?

A new federal law gives an opportunity for small business to get up to 5 years to pay their debts.  The Small Business Reorganization Act of 2019 (SBRA) went into effect on February 19, 2020.  Businesses with less than $2.725,626 in total debt can take advantage of special rules:

  • Confirming a payment plan that does not require the approval of creditors
  • Reduced administrative expenses
  • Expedited procedures
  • Greater opportunities for owners to keep their company even if all debts cannot be paid in full

In the past, most small businesses were required to follow most of the same rules and procedures as the largest corporate bankruptcies.  This meant it was too expensive to use bankruptcy reorganization laws.  The new law is intended to make reorganization possible for small business.

We expect that many lenders and vendors will agree to short extensions of time as all of their customers are facing similar financial issues at this time.  The new federal law provides additional protections to small businesses if they won’t.

Dennis Wickham, Chair of the Bankruptcy Department
Seltzer Caplan McMahon Vitek

March 23rd, 2020  |  Categories: News
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