Published on:

Filing Bankruptcy for a Small Business?

Filing bankruptcy for small businesses just got a whole lot easier!  The Small Business Reorganization Act of 2019 takes effect on February 19, 2020.  Some of the new features are that it adds a new subchapter V to Chapter 11 of the Bankruptcy Code which is good for small business bankruptcies because:

  • There are no quarterly trustee fees;
  • There is no absolute priority rule;
  • Better communication between parties; and
  • the Trustee and Debtor in Possession are allied.

Normally filing a Chapter 7 for a business is not warranted – a company doesn’t get a discharge anyway; and a Chapter 7 is process which simply allows for the ordinary dissolution of assets.  However, it exposes the officers and directors to challenge for prior business decisions that is risky at times.  A reorganization in a Chapter 11 can be a very expensive and cumbersome process.  This new SBRA process may help fix a longstanding problem where small businesses could not historically obtain bankruptcy relief.


To Schedule a Consultation
Contact Information