Chapter 11 More Viable for Small Business
The current version of the Bankruptcy Code makes it cost prohibitive for small businesses to seek relief intended by a Chapter 11 bankruptcy reorganization. However, a bi-partisan effort has sought to make a reorganization possible for businesses with debt less than $2.5 million.
The Small Business Reorganization Act of 2018 would make a Chapter 11 reorganization more akin to the much more efficient Chapter 12 or Chapter 13 reorganization for qualifying debtors. The proposed legislation eliminates certain requirements regarding disclosure and solicitation of votes and instead focuses reorganization on the disposable income of the business going forward rather than the numerous, existing issues including: having an impaired consenting class of creditors, the new value requirement and no requirement for a creditors committee.
While the debt limit proposed by the legislation still leaves a many debtors without an affordable remedy, this is an important first step. Contact our Business Reorganization attorneys for an update on the proposed legislation or to determine if a reorganization is right for your business.
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