The Small Business Reorganization Act (SBRA) has been signed and is considered the most extensive reform to the Bankruptcy Code since 2005. The resulting changes that attempt to make it easier for small businesses to reorganize go into effect February of 2020.
For small businesses, the major differences include the appointment of a standing trustee, no requirement to pay United States Trustee (UST) quarterly fees, no appointment of a committee of unsecured creditors, and no requirement for the disclosure statement to accompany the debtor’s plan of reorganization.
For election the debtor must “elect” to have SBRA apply. The election timing must be determined, but would likely occur at the time of filing. Also, a small business debtor may operate in Chapter 11 as a debtor-in-possession.
Filing requirements are as follows:
- Schedules and Statement of Financial Affairs
- Balance Sheet
- Statement of Operation
- Cash-Flow Statement
- Federal Income Tax Returns
(Sworn Statement could be provided in place of documents that do not exist)
Only the debtor can propose their plan of reorganization in these changes and that plan will likely be accepted if it does not unfairly discriminate, is fair and equitable, and no excess income is received by the debtor that does not directly go toward maintaining the entity to ensure the continuation of business.
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For further details about changes and how they may affect what you do please contact a legal professional. We’ll be here behind the scenes supporting what they do.
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