The COVID-19 Bankruptcy Relief Extension Act of 2021 was signed this week.  This law extends the $7,500,000 debt cap for businesses under the Small Business Reorganization Act of 2019 (SBRA).  The extension will last for one additional year, to March 27, 2022.

The Act is less than one page long, but is of great importance to small businesses.  Among the benefits it offers are the following:

  • Eliminates what is known as the absolute priority rule in Sub. V Chapter 11 cases.  This elimination allows business owners to retain their ownership interest in the business, even if creditors are not paid in full.
  • A reorganization plan can be confirmed by the Court even if all creditors reject the plan proposed by the owner.
  • No quarterly U.S. Trustee fees need be paid in a Sub. V case.  These fees alone can be many thousands of dollars.
  • Generally, there will be no creditors committee appointed.  That means no creditors committee attorneys’ fee to be paid, again saving thousands of dollars for the business owners and other creditors.
  • Administrative expenses, like my attorney fees, can be paid over time, rather than in cash when the plan is confirmed.

There are a number of other advantages, but the above are those which are most important and most beneficial to any business owner trying to save his or her own business.  We have for a long time been fans of the SBRA and Sub. V form of bankruptcy which it created.  We have written extensively about this.  If you would like a summary article, please contact us.