Many small businesses are using a new part of the Bankruptcy Code to discharge their debts amid the COVID-19 crisis, and bankruptcy experts are encouraging other ailing small businesses to consider the option instead of shutting down entirely, CFO.com reported. More than 1,000 small businesses have elected to file under subchapter V, established this year by the Small Business Reorganization Act, in 2020 according to statistics cited yesterday in a session of Insolvency 2020 Virtual Summit. Part of the reason might be the enhancement to Subchapter V in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. CARES temporarily raised the ceiling on a filer’s aggregate secured and unsecured non-contingent and liquidated debt to $7.5 million from $2.7 million. The higher debt limit is scheduled to end on March 27, 2021. “[Subchapter V] is tailor-made for small businesses that can survive COVID and come out on the other end,” said Deirdre O’Connor, a managing director at Epiq Global. The bankruptcy bar and the courts are expecting more such cases to be filed in 2020, as Paycheck Protection Program funds are exhausted. Read more.
SBRA: A Guide to Subchapter V of the U.S. Bankruptcy Code, written by distinguished judge Paul W. Bonapfel (U.S. Bankruptcy Court, N.D., Georgia), is a free ebook offering an analysis of the new Subchapter V of the Bankruptcy Code, as well as insights into the emerging case law. Download it here.
