COVID-19 Client Alert Series - The CARES Act’s Expansion of Relief for Small Business Debtors

While it did not focus on bankruptcy relief, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act contained provisions relating to small bankruptcy debtors.

• The CARES Act increased the debt limit for debtors interested in taking advantage of the Small Business Reorganization Act of 2019 (the “SBRA”), which became effective in mid-February 2020. This makes it a viable option for a wider group of entities.
• As background, the SBRA added subchapter V to Title 11 of the Bankruptcy Code. This new law is designed to allow small business debtors “to file bankruptcy in a timely, cost-effective manner . . . [which] hopefully allows them to remain in business, [and] not only benefits the owners, but employees, suppliers, customers, and others who rely on that business.” H.R. REP. No. 116-171, at 2 (2019).
• Bankruptcy courts will likely see an increase in chapter 11 filings during the next twelve months, as the fallout from the coronavirus epidemic continues.

Read the full client alert below.