The SBRA, or the Small Business Reorganization Act, was recently enacted in February of 2020, and is used to help small businesses streamline the restructuring of their debts. As the coronavirus continues to plague our nation, many small businesses are suffering financially, leading them to file for bankruptcy and ultimately close their doors. At Grossbart, Portney & Rosenberg, P.A., it is our priority to help small businesses navigate the bankruptcy process so they can achieve financial freedom. Here, our team of Baltimore bankruptcy attorneys discusses the SBRA, and how this act will bring changes to many small businesses in Maryland and beyond.
A High-Level Overview of the SBRA
The main goal of the Small Business Reorganization Act is to strike a balance between Chapter 7 and Chapter 11 bankruptcy filings. While Chapter 7 bankruptcy can be filed for both individuals and businesses, it is generally seen under individual filings, while Chapter 11 bankruptcy focuses on business debts. Under the SBRA, business owners are able to maintain some sense of control in their business operations as they work to relieve their debts, while not having to incur additional financial strain from the usual costs of Chapter 11 bankruptcy. Additionally, a trustee will be appointed in each small business case to ensure that debts are being repaid in a timely manner while business owners focus on pivoting their current strategy.
The SBRA Reduces Additional Costs for Debtors
One of the largest changes seen through the SBRA is the costs associated with filing for bankruptcy. During this time of the novel coronavirus, small businesses are struggling to stay afloat, and having to deal with the complexities of the bankruptcy process can feel overwhelming, if not impossible to overcome. However, under the SBRA, additional costs have been minimized to help small business owners focus on repaying their debts without the concern of additional payments. Under the SBRA, a committee of creditors will not be appointed unless explicitly stated, decreasing the costs of Chapter 11 bankruptcy. In normal circumstances, a committee of creditors can be formed, which requires the debtor to pay the fees associated.
Moreover, the SBRA streamlines reorganization for debtors, and prevents creditors from pursuing common additional costs against the debtor. First, a reorganization plan submitted by the debtor is not required under the SBRA, hastening the bankruptcy process. Generally, creditors are able to file competing reorganization plans in Chapter 11 cases, however, under the SBRA, creditors are unable to do so, lessening court costs and potential additional hearings for debtors. Finally, the requirements for a confirmation plan have been relaxed under the SBRA, letting debtors begin the payment process quickly and efficiently. As long as their plan remains “fair and equitable”, meeting the requirements of Chapter 7 or Chapter 11 bankruptcy, it will be approved.
Navigate the Complexities of Bankruptcy With the Attorneys at Grossbart, Portney & Rosenberg, P.A.
When considering filing for bankruptcy as a small business, it is vital to be proactive in seeking professional counsel. If you are a small business owner in Maryland seeking help with bankruptcy proceedings, the qualified bankruptcy attorneys at Grossbart, Portney & Rosenberg, P.A. are here for you. We understand how complicated the bankruptcy process can be and make it our top priority to provide guidance and clarity throughout the entirety of the process. Your business is your livelihood, and during this time, you want to do everything you can to protect it. To see how our team of experienced attorneys at Grossbart, Portney & Rosenberg, P.A. can help you, contact our Baltimore office today.