My Business is Drowning in Debt! What Can I Do?
If your business was badly hurt by the pandemic shut down, you may be able to reorganize your company’s debts under a special type of Chapter 11 bankruptcy.
COVID Was Also a Small Business Disaster
In New York, small businesses were hit hard when the state shut down for almost a year. While some service industries were able to pivot to working from home, small retail owners were left with no customers and growing bills. If you have reached the point where your business’s debts are becoming overwhelming, the right debt lawyer may be able to help.
The Small Business Reorganization Act
The Small Business Reorganization Act (SBRA) is a part of Chapter 11 bankruptcy (subchapter V) that was designed specifically to help smaller business. Like Chapter 11, SBRA allows small businesses keep their businesses open while reorganizing their company’s debts. Previously, to be able to be a part of an SBRA program, your business could be in no more than $2,725,625 in debt.
As part of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act, this limit was raised to $7,500,000. This, however, is a temporary change and will revert back to the original limit on March 27, 2022.
SBRA vs. Standard Chapter 11 Proceedings
The SBRA program was designed to be a faster, easier, and more cost-effective option over a traditional Chapter 11 bankruptcy case. There are a number of differences between SBRA proceedings and regular Chapter 11 bankruptcies:
- SBRA programs are only for smaller businesses. To qualify, your debts must come from at least 50% or more from commercial or business activities. You must also be under the current debt limit ($7,5000,000). You also can not fall under the following businesses: public companies, shopping centers, office buildings, apartment complexes, or warehouses.
- Under the SBRA, with the help of your debt attorney you can create your own debt reorganization plan. In some Chapter 11 cases, your creditors may be able to submit their own, conflicting, plan.
- Another advantage over Chapter 11, with an SBRA plan you won’t have to prepare and file a separate disclosure statement along with your restructuring plan, saving time and money.
- Unlike in Chapter 11 proceedings, the court in an SBRA hearing can accept your debt reorganization plan even if your creditors want to reject it.
- The administrative fees for an SBRA plan can be paid over the life of the plan. Chapter 11 fees must be paid all at once.
- Under SBRA you won’t have to deal with U.S. Trustee fees (which you would under Chapter 11).
- In fact, while having a Trustee is still a mandatory part of the process, with SBRA you are able be assigned what is known as a “subchapter V trustee”. These specially trained Trustees come from a business background and were chosen from a pool of lawyers, CPAs, MBAs, restructuring consultants and financial advisors with diverse backgrounds.
This is just a simplified overview of these programs. To learn more about how the basics of Chapter 11 Bankruptcies work, click here – https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
There are multiple procedures available in Chapter 11 bankruptcy, and it is easy to get confused and overwhelmed. If you’d like to talk directly to a compassionate, knowledgeable, human being, reach out to New York debt attorney Ronald D. Weiss, P.C. for a free consultation. He can tell you which type of Chapter 11 bankruptcy is right for you, and help you get the process started. Call 631-271-3737 and take the first step to a fresh start.