The Coronavirus Aid, Relief and Economic Security Act of 2020 (“CARES Act”) which Congress approved last week, together with the Small Business Reorganization Act of 2019 (the “SBRA”) which became effective on February 19, 2020, will make Chapter 11 bankruptcy protection much more attractive for small business debtors.
The newly enacted Coronavirus Aid, Relief and Economic Security Act (CARES Act) contains some significant bankruptcy-related provisions, including those which amend the Small Business Reorganization Act of 2019 (SBRA) to make bankruptcy relief available to an increased number of small businesses.
For those who are contemplating the need to develop a bankruptcy strategy – and for creditors evaluating a debtor’s bankruptcy plan – it is important to understand these changes in the law.
On February 19, 2020, the federal Small Business Reorganization Act (SBRA) took effect, providing qualifying small businesses access to a streamlined and less expensive version of the traditional Chapter 11 bankruptcy process. On the heels of SBRA, and in light of the coronavirus outbreak, the March 27, 2020 enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided further relief and opportunity to small businesses by including particular bankruptcy provisions.
Eligibility to File Bankruptcy under the SBRA and CARES Act
No one can yet predict the overall effect the COVID-19 pandemic will have on the economy in the long run. However, the immediate impact on small businesses seems readily apparent. The dramatic disruption has impeded cash flow and upset daily operations to the point that some business owners question whether recovery is possible.
Should a business find themselves in that unfortunate position, there is relief available under Chapter 11 of the Bankruptcy Code, but the Chapter 11 process can be unwieldy and expensive for small or even medium-sized businesses.
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.
On March 27, 2020, the President signed into law the historic Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”), a $2.2 trillion stimulus package designed to mitigate the widespread economic effects of the novel coronavirus (“COVID-19”). The Act includes several temporary modifications to chapter 7 and chapter 13 of the U.S. Bankruptcy Code.[1] This alert details these modifications as follows:
Certain Federal Payments Excluded From Definition of “Income”
On March 27, 2020, President Donald J. Trump signed a $2 trillion stimulus package in response to the unprecedented chilling impact of COVID-19 on the U.S. economy. With the goal of providing widespread economic relief to an economy which unexpectedly has ground to a halt, the Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) temporarily provides greater access to bankruptcy relief for small businesses.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act or the “CARES Act.”The legislation includes a historic $2 trillion aid package intended to stabilize the U.S. economy and provide disaster relief aid to American citizens and businesses impacted by the COVID-19 pandemic. The emergency aid package, which is by far the largest in American history, contains many provisions focused on providing relief. Among these are certain temporary amendments to Title 11 of the United States Code (the “Bankruptcy Code”).
On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which provides $2 trillion in economic stimulus for industries and individuals faced with challenges from the COVID-19 coronavirus.
Smaller Chapter 11 Cases Will Impact Many and Move Swiftly
One provision of the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act makes available to a greatly expanded group of small businesses what is viewed as a cost-effective and time-saving bankruptcy reorganization process.