Chapter 11 Bankruptcy Made Easier for Small Businesses Struggling with COVID-19 Downturn

by Martin Lincoln Hoffman on Oct. 22, 2020

Bankruptcy & Debt Bankruptcy 

Summary: The Small Business Reorganization Act of 2019 became effective on February 19, 2020. The Act, along with recent changes to the Bankruptcy Code contained in the CARES stimulus bill, will make it easier for small businesses to reorganize through Chapter 11. The new law could not have come at a better time for South Florida companies suffering from the financial ramifications of the COVID-19 pandemic.

Changes That Came At The Right Time

The Small Business Reorganization Act of 2019 became effective on February 19, 2020. The Act, along with recent changes to the Bankruptcy Code contained in the CARES stimulus bill, will make it easier for small businesses to reorganize through Chapter 11.

The new law could not have come at a better time for South Florida companies suffering from the financial ramifications of the COVID-19 pandemic.

Chapter 11 bankruptcy allows financially troubled businesses to restructure their debts through a plan of reorganization. Unfortunately, the skyrocketing legal costs and the complex legal requirements surrounding plan confirmation have historically made Chapter 11 impractical for small businesses, which make up 99% of all businesses in the United States. This reality has forced many otherwise viable companies into shutting their doors.

The Small Business Reorganization Act of 2019 Opens new Opportunities

The Small Business Reorganization Act of 2019 has reopened the doors of Chapter 11 bankruptcy to the small business community. The reorganization process has been simplified and streamlined. Small business debtors have new tools at their disposal when negotiating with creditors and have a reason for optimism that they will be able to persevere through tough times.

The COVID 19 pandemic has been devastating to the small business community. Many companies are unsure how they will be able to pay rent, make payroll, and keep their doors open. The Small Business Reorganization Act of 2019 will undoubtedly help many businesses persevere through this crisis.

HLA’s team of highly respected and experienced bankruptcy lawyers wants to be a resource during these challenging times. We invite those struggling to deal with the financial impacts of COVID 19 to contact us at mshoffman@hlalaw.com or 305-653-5555 to discuss whether a small business Chapter 11 is a good option for your company.

Michael S. Hoffman, Esq

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