The CARES Act greatly expands the availability of businesses to use new bankruptcy law that makes it easier to reorganize. Among other things, the CARES Act also provides for direct stimulus to individuals, limited temporary relief for student loan borrowers, and greatly expands SBA loan relief for small businesses (including the possibility that the loan may be forgivable).
The Small Business Reorganization Act became effective in February 2020, ushering in the new “subchapter 5” of Chapter 11. The SBRA generally allows small businesses and individuals to reorganize based on a disposable income concept and eliminates or reduces some of the hurdles to a successful reorganization.
Under the CARES Act, the debt limit for a business to use “subchapter 5” of Chapter 11 was increased from about $2.7 million to $7.5 million (at least temporarily). Debtors and creditors alike should be aware of the tools available to both under the SBRA, especially considering this expansion in eligibility.
Our bankruptcy team is here to answer your questions and assist in this time of crisis.