Small Business Reorganization Act
Small Business Reorganization Act.
This is a chapter 5 bankruptcy designed to make the process easier for a business than a Chapter 11 reorganization
Small businesses now have an alternative to a chapter 11 bankruptcy called the chapter 5 bankruptcy. This statute, Chapter 5 is designed to ease some of the burdens that certain mechanical processes in the typical Chapter 11 reorganization require of an entity filing a petition for relief under the United States Bankruptcy Code.
On Feb. 19, 2020, a new law went into effect known as SBRA, or the Small Business Reorganization Act of 2019, also known as “Subchapter 5”. The new Bankruptcy Code will provide for a more compact and easier version of Chapter 11 Reorganizations for small business corporate and individual debtors.
SBRA is aimed at simplifying the bankruptcy process for small businesses by increasing efficiency, lowering costs, and easing the plan confirmation process. It could mean the difference between staying open or closing a business.
This statute, Chapter 5 is designed to ease some of the burdens that certain mechanical processes in the typical Chapter 11 reorganization require of an entity filing a petition for relief under the United States Bankruptcy Code.
The major differences for small businesses under the new subchapter 5 compared to the regular chapter 11 procedures include the appointment of a standing trustee, no requirement to pay United States Trustee (“UST”) quarterly fees, no appointment of a committee of unsecured creditors, and no requirement for a disclosure statement to accompany the debtor’s plan of reorganization.
The lack of committee and UST fees will save on administrative fees for the debtor, thus meeting the objective of lowering the cost of bankruptcy for the small business. The standing trustee will be similar to the trustee’s role in a chapter 12 case by overseeing the claims distribution process, but will not be an operating trustee; the small business will remain a debtor-in-possession.
Within 60 days of filing, the court will schedule a substantive status conference to help chart the course for the debtor. The debtor’s plan is due within 90 days of the date of filing.
The goal of the SBRA is to simplify the bankruptcy process for small businesses by increasing efficiency, lowering costs, and easing the plan confirmation process. S
Below are the chapter bankruptcy code sections:
SUBCHAPTER I – CREDITORS AND CLAIMS (§§ 501 – 511) / Small Business Reorganization Act
- 501. Filing of proofs of claims or interests
- 502. Allowance of claims or interests
- 503. Allowance of administrative expenses
- 504. Sharing of compensation
- 505. Determination of tax liability
- 506. Determination of secured status
- 507. Priorities
- 508. Effect of distribution other than under this title
- 509. Claims of codebtors
- 510. Subordination
- 511. Rate of interest on tax claims
11 U.S. Code SUBCHAPTER II—DEBTOR’S DUTIES AND BENEFITS / Small Business Reorganization Act
- 521. Debtor’s duties
- 522. Exemptions
- 523. Exceptions to discharge
- 524. Effect of discharge
- 525. Protection against discriminatory treatment
- 526. Restrictions on debt relief agencies
- 527. Disclosures
- 528. Requirements for debt relief agencies
SUBCHAPTER III—THE ESTATE (§§ 541 – 562) / Small Business Reorganization Act
- 541. Property of the estate
- 542. Turnover of property to the estate
- 543. Turnover of property by a custodian
- 544. Trustee as lien creditor and as successor to certain creditors and purchasers
- 545. Statutory liens
- 546. Limitations on avoiding powers
- 547. Preferences
- 548. Fraudulent transfers and obligations
- 549. Postpetition transactions
- 550. Liability of transferee of avoided transfer
- 551. Automatic preservation of avoided transfer
- 552. Postpetition effect of security interest
- 553. Setoff
- 554. Abandonment of property of the estate
- 555. Contractual right to liquidate, terminate, or accelerate a securities contract
- 556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract
- 557. Expedited determination of interests in, and abandonment or other disposition of grain assets
- 558. Defenses of the estate
- 559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement
- 560. Contractual right to liquidate, terminate, or accelerate a swap agreement
- 561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts; proceedings under chapter 15
- 562. Timing of damage measurement in connection with swap agreements, securities contracts, forward contracts, commodity contracts, repurchase agreements, and master netting agreements
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