September 11, 2020

When President Trump signed the historic CARES Act into law on March 27, 2020, most of the focus, and rightfully so, was on the relief it would bring to American workers and families hit hard by the global pandemic. But there is an important component of the legislation that offers critical relief to businesses struggling to stay afloat in the wake of the ongoing economic fallout from COVID-19.

Under the Small Business Reorganization Act of 2019 (SBRA), companies with a debt threshold below $2,725,625 are able to utilize the debt reorganization provisions under Chapter 11 of the United States bankruptcy code in a much more streamlined, cost-effective manner. This was a game-changer for businesses who previously faced the sometimes insurmountable cost and requirements of traditional Chapter 11 proceedings.

Companies with debt thresholds above the $2,725,625 mark had to go the traditional Chapter 11 route—until the CARES Act was passed. One of the key provisions of the legislation increased the maximum debt threshold to $7.5 million.

The good news for business owners who may be forced to seek relief during these challenging times – the window is open to expanded coverage under the SBRA. The bad news – the clock is ticking. Barring an extension, the provision will sunset on March 27, 2021. This means the time to act is now for companies who may seek to take advantage of the expanded SBRA.

With less than seven months remaining, if your business is in a position where you want to explore your options, you should contact an experienced bankruptcy and reorganization attorney. These type of decisions are never easy for a business owner to make, but this may be your chance to protect your business for the long-haul.

Robert J. Feldman’s practice is devoted principally to the areas of corporate and business bankruptcy law and commercial litigation. In more than four decades practicing law, Bob has represented debtors, creditors and creditors’ committees in Bankruptcy Court in business reorganizations under Chapter 11 of the United States Bankruptcy Code and in bankruptcy proceedings under Chapters 7, 11 and 13 of the United States Bankruptcy Code for individual business owners and professionals. He has also represented a number of bankruptcy trustees in complex bankruptcy and commercial litigation matters.

Bob has been recognized for his legal acumen with inclusion in the annual Super Lawyers rankings for the last 13 years. He has also been honored by Best Lawyers in America every year since 2009. He can be reached at 716-854-4300 ext. 248 or [email protected]