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Expanded Eligibility for Small Business Bankruptcy Relief Set to Expire This Week Expanded Eligibility for Small Business Bankruptcy Relief Set to Expire This Week

Expanded Eligibility for Small Business Bankruptcy Relief Set to Expire This Week

The Small Business Reorganization Act of 2019 (“SBRA”) took effect in February 2020. The SBRA gives small businesses new forms of bankruptcy relief that were not previously available to them under federal law, including the ability for business owners to retain ownership of their businesses without first paying their creditors in full. Under the original act, a small business could qualify for relief under the SBRA provided it had no more than $2,725,635 in aggregate secured and unsecured debt. To help small businesses address the impacts of COVID-19, the CARES Act temporarily expanded this limit to $7,500,000. The debt limit expansion greatly increased the number of businesses eligible to take advantage of the SBRA.

Expanded SBRA eligibility is set to expire on March 27, 2021. While efforts were made to extend the CARES Act’s eligibility expansion in the most recent COVID-19 relief legislation, the Consolidated Appropriations Act ultimately did not change the expiration date. On February 25, 2021, Senators Dick Durbin (D-IL) and Chuck Grassley (R-IO) introduced the bipartisan COVID-19 Bankruptcy Relief Extension Act. If passed, this legislation would extend the expanded eligibility for relief under the SBRA for another year. It is currently unclear whether this bill has the support needed to pass.

If your business is need of a solvency solution, you may no longer qualify for relief under the SBRA effective as of March 27, 2021. If you have any questions regarding the SBRA or other relief options currently available to small businesses, please reach out to the Bankruptcy and Restructuring Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.
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