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March 27, 2020 – The “Coronavirus Aid, Relief, and Economic Security Act” amends the Small Business Reorganizations Act of 2019 to help small business owners restructure their debts when they cannot “work it out” outside of a bankruptcy filing.

Key takeaways of the SBRA, as amended, are:

  • Debt Limit Increased to $7,500,000:  The eligibility threshold has been increased from $2,725,625 of secured and unsecured debt to $7,500,000.  This change will make the SBRA available for many more small businesses!
  • No Disclosure Statement.  A debtor is not required to file or obtain approval of a “disclosure statement” in connection with a plan of reorganization. This change eliminates a time consuming and expensive procedure required in traditional Chapter 11 reorganization plans.
  • Creditors Do Not Vote on a Plan of Reorganization.  While creditors may object to a Plan of Reorganization, they do not vote to approve or reject the Plan.  In a traditional Chapter 11, a debtor is required to solicit acceptances of its Plan and, if all classes of creditors do not vote in favor of the plan, the debtor must do a “cramdown” by obtaining the approval of at least one class of impaired creditors.  This change gives business owners much more control over the end-game and greatly increases the chance of a quick and successful restructuring.
  • Existing Owners Have Better Chance to Retain Their Equity.  Existing owners can retain their equity in the business over the objection of a class of unsecured creditors, if they commit all of the “disposable income” to pay creditors over a three- to five-year period.  This change eliminates the requirement that owners must provide “new value” if unsecured creditors are not paid in full and they object to the Plan.
  • Debtor Has 90 Days to File a Plan.  A small business debtor must file its reorganization plan within 90 days of its Chapter 11 filing.  This change keeps everyone’s “feet to the fire” so the small business can quickly emerge from bankruptcy as a financially viable entity.
  • No Creditors Committee.  There is no official committee of unsecured creditors in a small business Chapter 11 bankruptcy. This change prevents creditors from organizing at the debtor’s expense and will cut down on the cost and adversarial nature of SBRA bankruptcy filing.

These changes under SBRA can make a chapter 11 reorganization for a small business much quicker and cheaper, while also giving the owner a much better chance of keeping their business.

For more information about SBRA and whether it may be an appropriate option for your business to consider, please contact Davidoff Hutcher & Citron’s Bankruptcy, Restructuring, and Creditor Rights Group.


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