The Small Business Reorganization Act of 2019 went into effect on August 23, 2019. The new law simplifies the requirements for small business bankruptcy in several ways.
A trustee is now assigned to each case
Now a permanent trustee will oversee each case, support the reorganization process and monitor the company’s compliance with the bankruptcy law. Hiring a trustee will greatly improve the chances of successfully completing the restructuring plan.
Only the debtor can propose a restructuring plan
Previously, there was an exclusive time limit for a small business to propose a restructuring plan and then any interested party could propose a plan for the business. Now only the debtor can propose a restructuring plan. In addition, small business debtors no longer require independent approval of a disclosure statement. Even small bankruptcy businesses do not need to get votes to validate the plan. These changes reduce the burden of small businesses going bankrupt.
Small business bankruptcy is now more like Chapter 13
Small business owners are no longer allowed to offer “new value” in order to maintain control of their businesses. Instead, the new law just stipulates that entrepreneurs must set all projected available income for the restructuring plan, similar to a Chapter 13 bankruptcy. The duration of the plan will be between three and five years, as in Chapter 13.
Small business bankruptcy just got easier
The Small Business Reorganization Act of 2019 greatly simplifies the bankruptcy process for small business owners. Entrepreneurs are no longer required to pay all debts in full in order to retain ownership of the business. The law gives business owners more flexibility in restructuring while reducing the bureaucratic burden.
If you are considering bankruptcy for your Washington, DC area small business, call Lee Legal for free consultation.
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