Small businesses often struggle to reorganize effectively under Chapter 11 of the Bankruptcy Code. To address this issue, Congress passed the Small Business Reorganization Act of 2019, effective February 2020. The Act aims to make small business bankruptcies faster and less expensive, thereby making Ch. 11 a viable option for small businesses who previously could not afford to take advantage of Ch. 11 reorganization.
The Act applies to business debtors with secured and unsecured debts totaling less than $2,725,625. However, the CARES Act temporarily increased the debt limit to $7.5 million for cases filed on or before March 27, 2021 – so for the next full year.