On August 23, 2019, the Small Business Reorganization Act of 2019 (the Act) was signed into law. The Act, which goes into effect in February of 2020, creates a new Subchapter V under Chapter 11 of the U.S. Bankruptcy Code.

In the past, few small businesses have been able to reorganize under Chapter 11 of the Bankruptcy Code due to the costs and administrative burdens associated with the process.

The Act is meant to eliminate and/or streamline some of the more costly and burdensome elements of traditional Chapter 11 relief. It should give small businesses greater access to the benefits that Chapter 11 affordsnamely, breathing room to improve financial and operational performance, and the ability to reduce or at least restructure debts.

Some of the key elements of the Act include:

The Act, which will take effect in February of 2020, gives small businesses expanded access to the Bankruptcy Codes reorganization tools.. Small business ownersand the customers, suppliers, and lenders who do business with themshould prepare to exercise their rights and protect their interests under this new subchapter of the Bankruptcy Code. Foster Swift will continue to monitor and share developments related to the Act.

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The Small Business Reorganization ActComing to a Bankruptcy Court Near You in February 2020 - Lexology