The Small Business Reorganization Act of 2019 took effect on August 23, 2019. The new law eases requirements for small business bankruptcy in several ways.
Now a trustee will be assigned to each case
Now a standing trustee will oversee each case, assisting in the reorganization process and monitoring the business’s compliance with the Bankruptcy Code. The assignment of a trustee will greatly improve the chances of the successful completion of the plan of reorganization.
Only the debtor can propose a plan of reorganization
Previously, there was an exclusive period for a small business to propose a plan of reorganization, then any interested party could propose a plan for the business. Now, only the debtor can propose a reorganization plan. In addition, small business debtors no longer need obtain independent approval of a disclosure statement. Nor do small businesses in bankruptcy need to solicit votes for plan confirmation. These changes dramatically reduce the burden on small businesses in bankruptcy.
Small business bankruptcy is now more like Chapter 13
No longer must small business owners provide “new value” to retain control of their companies. Instead, the new law requires only that business owners commit all projected disposable income to the plan of reorganization, similar to a Chapter 13 bankruptcy. The plan’s term will span from three to five years, just like Chapter 13.
Small business bankruptcy just got easier
The Small Business Reorganization Act of 2019 greatly simplifies the bankruptcy process for small business owners. Business owners are no longer required to pay all debts in full in order to retain ownership of the business. The law provides more flexibility for business owners to reorganize, while cutting down the red tape.
If you are considering bankruptcy for your small business in the Washington, D.C. area, call Lee Legal for a free consultation.