President Donald J. Trump signed the “Small Business Reorganization Act of 2019” (SBRA; H.R. 3311) into law. The bipartisan legislation passed the House in late July and the Senate on August 1. The law will take effect in February 2020.
SBRA ensures that small businesses will be able to reorganize and rehabilitate their financial affairs effectively under the Bankruptcy Code. SBRA will add a new subchapter V to chapter 11, providing a better path for small businesses to successfully restructure, reduce liquidations, save jobs and increase recoveries to creditors while recognizing the value provided by the entrepreneur. It adopts the current definition of a “small business debtor” as a person in commercial or business activity with aggregate or noncontingent liquidated secured and unsecured debts as of its bankruptcy filing date of not more than $2,725,625. It is estimated that about half the chapter 11 cases filed today could qualify for subchapter V treatment.