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.
The SBRA was negotiated and enacted before the COVID-19 pandemic.  In its wake, corporations urged Congress to raise the debt ceiling to 10 million.  In response, the CARES Act increased the debt limit to 7.5 million for cases filed before March 27, 2021.  After this deadline the cap reverts to 2.726 million.  Temporary, but disabling, reductions of cash flow are impairing otherwise viable businesses.  SBRA/CARES provide an opportunity for struggling business debtors to discount and stretch out repayment of suspended landlord, vendor, and other similar payment-deferred obligations.  If the foregoing debt restructuring provisions (the crisis “vaccine”) seem helpful, and/or necessary, management should contact reorganization attorney Jon Clarke for further details and discussion.
Check out this bankruptcy business information if your business is in debt. You can also contact the Denver bankruptcy lawyer at the Law Office of Jon B. Clarke.

Check out this bankruptcy business information if your business is in debt. You can also contact the Denver bankruptcy lawyer at the Law Office of Jon B. Clarke.

Chapter 13 Bankruptcy Attorney in Denver

In a Chapter 13 bankruptcy, there is a reorganization of the company’s debt. Most businesses that wish to remain in business select reorganization, rather than liquidation. Chapter 13 generally applies to individual consumers with smaller debts. Corporations and partnerships cannot file under Chapter 13, but self-employed individuals and individuals who own unincorporated businesses are eligible…

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Business Bankruptcy Resource Links

Useful Bankruptcy Resource Links Legal Information Institute This page, maintained by the Cornell University Law School, provides general information about bankruptcy. American Bankruptcy Institute The ABI is a multi-disciplinary, nonpartisan organization dedicated to research and education on issues related to bankruptcy and insolvency. This site contains general information, news and various other online resources. American…

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Frequently Asked Questions about Business Bankruptcy

Q: What are the fundamental purposes of bankruptcy? A: First, bankruptcy allows a debtor a judicially supervised method of resolving debt, either through liquidation of assets or through restructuring of debt. The business can pay off its debt, and in reorganization cases, the business can still remain in operation. Second, the creditor can receive some…

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Business Bankruptcy and Reorganization Information

One of the leading business bankruptcy law firms in Colorado, Jon B. Clarke, P.C., helps businesses facing creditor pressures to obtain debt relief through bankruptcy and reorganization, through Chapter 11 reorganizations, Chapter 7 bankruptcy filings. There are also some creative alternatives to bankruptcy. The firm focuses on steering struggling businesses and their owners through troubled…

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Business Bankruptcy – Overview, Options and Procedures

The primary purpose of bankruptcy is to deal with debts that cannot be paid in full without some sort of court-monitored plan. The debtor may wish to close its business and liquidate its assets to pay its debts or the debtor may wish to reorganize its debt and enter into a repayment plan while continuing…

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Liquidation Under Chapter 7

In a Chapter 7 bankruptcy, the debtor’s assets are liquidated and the proceeds are distributed to creditors. Partnerships, sole proprietorships and corporations, in addition to individuals, are eligible to file under Chapter 7. However, unlike individuals, these business entities are not eligible to receive a discharge. 11 U.S.C. § 727(a)(1). Chapter 7 business liquidations are…

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Chapter 11 Bankruptcy Procedures

Chapter 11 allows for the reorganization of debts. Chapter 11 also allows a business to continue to carry on routine operations in the ordinary course of business while going through the reorganization. Corporations, partnerships and sole proprietorships are all eligible for Chapter 11 reorganization. 11 U.S.C. § 109. If a corporation files under Chapter 11,…

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Issues to Consider Before Filing Bankruptcy

Businesses that are struggling to pay debt or that are facing other financial difficulties may wonder how to fix their financial problems. There are several bankruptcy and non-bankruptcy options that a stressed business may consider using to help it out of a tough spot. An experienced attorney can explain these options to you and help…

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