Judges in the east and west agree that a debtor can elect treatment under the Small Business Reorganization Act more than a year after commencing a chapter 11 reorganization that is on the verge of failure.
In an opinion on April 30, Chief Bankruptcy Judge Robert H. Jacobvitz of New Mexico aligned with an April 10 decision by Bankruptcy Judge Robert E. Grossman of Central Islip, N.Y. See In re Ventura, 18-77193, 2020 BL 134496, 2020 WL 1867898 (Bankr. E.D.N.Y. April 10, 2020). To read ABI’s report on Ventura, click here.
Judge Jacobvitz’s corporate debtor filed a small business petition under chapter 11 in February 2019. The secured lender had a motion to dismiss set for hearing when the SBRA came into effect on February 19, 2020. Dismissal seemed inevitable because the debtor could not confirm a plan, and the 45-day deadline for confirmation had already elapsed under Section 1129(e).
Nine days after the SBRA came into effect and before the hearing on the motion to dismiss, the debtor amended the chapter 11 petition to elect treatment as a small business debtor under subchapter V, codified principally at 11 U.S.C. §§ 1181 – 1195.
Only the U.S. Trustee objected to the debtor’s right to treatment under subchapter V, contending that the deadlines under the SBRA for a status conference and plan had already lapsed under Sections 1188 and 1189.
Like Judge Grossman, Judge Jacobvitz rejected the argument. Those sections allow for extensions of deadlines under circumstances “for which the debtor should not justly be held accountable.” He said the debtor cannot be held accountable for deadlines that lapsed before the SBRA became effective on February 19.
The U.S. Trustee also argued that the court should not exercise discretion to extend the deadlines because the “old” chapter 11 case was on the verge of failure. To that, Judge Jacobvitz said that the SBRA was “geared to increase the possibility of success for debtors struggling to confirm a plan under chapter 11. It does not make sense to bar Debtor’s Amended Petition to take advantage of those provisions after it has encountered the very difficulties Congress sought to address.”
Judge Jacobvitz ruled that the debtor was not even required to file a motion for permission to proceed under the SBRA. He overruled the objection and set deadlines for a status conference and the filing of an amended plan.
Judges in the east and west agree that a debtor can elect treatment under the Small Business Reorganization Act more than a year after commencing a chapter 11 reorganization that is on the verge of failure.
In an opinion on April 30, Chief Bankruptcy Judge Robert H. Jacobvitz of New Mexico aligned with an April 10 decision by Bankruptcy Judge Robert E. Grossman of Central Islip, N.Y. See In re Ventura, 18-77193, 2020 BL 134496, 2020 WL 1867898 (Bankr. E.D.N.Y. April 10, 2020). To read ABI’s report on Ventura, click here.
Judge Jacobvitz’s corporate debtor filed a small business petition under chapter 11 in February 2019. The secured lender had a motion to dismiss set for hearing when the SBRA came into effect on February 19, 2020. Dismissal seemed inevitable because the debtor could not confirm a plan, and the 45-day deadline for confirmation had already elapsed under Section 1129(e).
Nine days after the SBRA came into effect and before the hearing on the motion to dismiss, the debtor amended the chapter 11 petition to elect treatment as a small business debtor under subchapter V, codified principally at 11 U.S.C. §§ 1181 – 1195.
Only the U.S. Trustee objected to the debtor’s right to treatment under subchapter V, contending that the deadlines under the SBRA for a status conference and plan had already lapsed under Sections 1188 and 1189.