In August 2019, effective in February 2020, Congress enacted SBRA in response to complaints the 2005 Chapter 11 was too cumbersome (and expensive) for small businesses. Unfortunately, only businesses with less than 2.726 million of debt were eligible. The virus-driven CARES Act later raised the cap (temporarily) to 7.5 million. The SBRA provides that so long as secured creditors receive the value of their collateral (over time), and the debtor pays all of its discretionary income (after operating expenses) to unsecured creditors for 3-5 years, the debtor (individual or corporate) can retain ownership of the business.
Some features:
- A “SBRA Trustee” is appointed to help (but not replace) debtor’s management;
- A Plan with Disclosure Statement is to be proposed in the first 90 days;
- Creditors can’t propose a Plan or vote on debtor’s Plan of Reorganization;
- The “absolute priority rule” is eliminated (it required owners paying creditors in full or injecting new capital to retain ownership); and
- Certain burdensome admin reporting and financial requirements were relaxed or eliminated.
Statewide clientele but with emphasis on the Front Range communities of Greenwood Village, Boulder, Aurora, Centennial, Lakewood, Englewood, Avada, Westminster, Broomfield, Thornton, Golden, Littleton, Castle Rock, Monument, Colorado Springs, Highlands Ranch, Aurora, Parker, Centennial and Pueblo as well as other cities throughout Arapahoe County, Boulder County, Douglas County, City & County of Denver, Elbert County and Jefferson County.