Small businesses often struggle to reorganize in bankruptcy. To address this issue, Congress passed the Small Business Reorganization Act of 2019 (the SBRA). The SBRA took effect in February 2020 and makes small business bankruptcies faster and less expensive.
There have been debates for years about the pros and cons of owners withholding retainage (usually 5% or 10%, depending on each state’s retainage laws or local “industry standard”) from prime contractors. Typically, the primes will, in turn, withhold retainage from all subcontractors. However, in these crazy times, when the future of private and public projects is unknown and profit margins are in question, it might be a good time to revisit this issue.
In a potentially ground-breaking decision, Judge David R. Jones of the United States Bankruptcy Court for the Southern District of Texas temporarily enjoined the Small Business Administration (SBA) from denying a Paycheck Protection Program (PPP) loan to Hidalgo County Emergency Service Foundation due solely to its status as a Chapter 11 debtor in bankruptcy. While the order will expire on May 8, 2020, and only applies to Hidalgo, the order could mark a significant change in the SBA’s administering of the PPP.
On March 27, 2020, President Donald Trump signed into law the third major coronavirus-related legislation in the last several weeks – the Coronavirus Aid, Relief, and Economic Security (CARES) Act – in response to the pandemic and resulting economic crisis. The CARES Act includes substantial federal spending and loan commitments that will benefit individuals and businesses.
Guest Author: Karlene A. Archer of Karlene A. Archer Law P.L.L.C.
Consumers that have pending Chapter 13 bankruptcy cases undoubtedly suffered from financial hardship prior to the COVID-19 pandemic. For many of those consumers, the pandemic may have exacerbated that hardship. The CARES Act’s mortgage forbearance provisions allow some breathing room for consumers that anticipate a temporary inability to pay their mortgage. These provisions also apply to consumers in bankruptcy and in that sphere present unique difficulties.
The BEIS press release does not give much more by way of detail. However the notes to the release state:-
On Friday March 27, 2020, President Trump signed into law the third major piece of coronavirus-related legislation in the last several weeks – the Coronavirus Aid, Relief, and Economic Security Act (CARES). The new law contains several amendments to the Bankruptcy Code.
- Talk to your contracting partners about any difficulties that have arisen or that you anticipate might arise. Everyone knows that unanticipated issues are going to get in the way of normal business. So address them head on. Pretending that they don't exist isn't going to be of any help to you or your business partners.
- If you are struggling financially take advantage of the government support. Our website provides guidance on how to access that support. Speak to your bank. The risk to banks is significantly mitigated by the government guarantee.
Bankruptcy & Creditors’ Rights Alert
Small businesses often struggle to reorganize in bankruptcy. To address this issue, Congress passed the Small Business Reorganization Act of 2019. The act took effect in February 2020 and makes small business bankruptcies faster and less expensive. At the time of enactment, the act only applied to business debtors with secured and unsecured debts less than $2,725,625.
Midlothian Council v Raeburn Drilling and Geotechnical Limited & Others