March 26, 2020
Eric A. Browndorf, Esq. | Rebecca C. Lafferty, Esq.

FINALLY, some positive news for Small Business. Effective last month, a financially struggling small business does not have to choose between an expensive Chapter 11 bankruptcy or a complete liquidation under Chapter 7. Congress has tailored a quick, streamlined restructuring process for struggling small businesses with debts of less than $2.7 million.

While Congress is infusing the economy with cash in the short term, it is unlikely to be much more than the proverbial band aid. The Small Business Reorganization Act of 2019 (the “Act”) will allow many struggling small businesses to survive and flourish when the Covid-19 virus is defeated and pent up demand is released. Simply put, the Act provides a mechanism for small businesses to obtain Chapter 11 bankruptcy relief but in a more expedited, cost-efficient and debtor-friendly manner. 

What are the benefits of the Act to the small business owner?
It removes some of the procedural burdens and costs that are usually associated with a Chapter 11 bankruptcy including but not limited to: (1) shorter deadlines in order to expedite proceedings; (2) to permit debtor’s administrative expenses to be stretched out over the term of the plan and (3) the removal of the prohibition on modifying residential mortgages. The list of changes is not exhaustive of the changes

What debts are dischargeable under the Act?
A discharge will not granted until the debtor completes all payments due within the first three years of the plan (or a longer period not to exceed five years as the court may fix). The discharge applies to all debts addressed by the plan except for: (1) debts on which the last payment is due after the first three years of the plan (or such other time fixed by the court not beyond five years); or (2) debts otherwise non-dischargeable.

 How do I know if my small business qualifies to file for relief under the Act?
The Act only applies to small business owners with secured and unsecured debts of less than $2.7 million, subject to certain other qualifications. The attorneys at Cooper Levenson, PA can assist you in determining if your business otherwise qualifies to file under the Act and answer any other questions you may have related to your business. Please reach out anytime to Eric A. Browndorf, Esq. at

To learn more about the Bankruptcy & Financial Restructuring group click here.

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