A Recent Significant Change in the Bankruptcy Code that Can Help a Distressed Small Business Becomes Much More Useful Because of the CARES Act

On February 19, 2020, the Small Business Reorganization Act of 2019 (the “SBRA”) came into effect. This act was created to enable a small business – a business with less than $2,725,625 of debt – to reorganize its financial affairs faster and less expensively than it could in a traditional Chapter 11 case by reducing or streamlining many of the administrative and procedural burdens of traditional chapter 11 cases.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on March 29, 2020, temporarily amends the SBRA by increasing the debt limit to $7,500,000 so that more businesses can qualify for the new process.