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The 2020 CARES Act, enacted in response to the COVID-19 pandemic, included what was thought to be a temporary increase in the debt limits for Subchapter V bankruptcy filings under the Small Business Reorganization Act. Specifically, the CARES Act increased the Subchapter V maximum debt limit from $2,725,625 to $7.5 million. The intent was to, essentially, allow additional small businesses with debt in excess of the previous debt limits to qualify for reorganization under the Small Business Reorganization Act. However, under the terms of the CARES Act, this temporary debt limit increase was set to expire on March 27, 2021.
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We previously informed you that if you are a small business
that needed to file bankruptcy to save your company, then you may
be able to take advantage of Subchapter V of Chapter 11 of the Bankruptcy
Code.
The new subsection, which took effect in February 2020, creates
a more streamlined and less expensive Chapter 11 reorganization
path for small business debtors. Under the law as originally
passed, to be eligible for Subchapter V, a debtor (whether an
entity or an individual) had to be engaged in commercial activity,
To embed, copy and paste the code into your website or blog:
We previously informed you that if you are a small business that needed to file bankruptcy to save your company, then you may be able to take advantage of Subchapter V of Chapter 11 of the Bankruptcy Code.
The new subsection, which took effect in February 2020, creates a more streamlined and less expensive Chapter 11 reorganization path for small business debtors. Under the law as originally passed, to be eligible for Subchapter V, a debtor (whether an entity or an individual) had to be engaged in commercial activity, and its total debts secured and unsecured – must be less than $2,725,625. At least half of those debts must have come from business activity.
On March 27, 2021, President Biden signed into law the
COVID-19 Bankruptcy Relief Extension Act (the Extension Act). The Extension Act temporarily extends certain COVID-19 bankruptcy relief provisions enacted as part of the
Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which were further amended and/or extended as part of the
Consolidated Appropriations Act (the CAA). Certain of the amendments included in the CAA and the Extension Act are highlighted below:
Debtors and Paycheck Protection Program Loans
Under the CARES Act, Congress established the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA), whereby businesses may obtain loans that would be forgiven if the borrowers used the funds for certain permitted purposes. The SBA promulgated a rule declaring debtors in bankruptcy ineligible for PPP loans. Debtors across the country have challenged this rule. The CAA attempts to address this issue by expressly authorizi
On March 27, 2021, President Biden signed the “COVID-19 Bankruptcy Relief Extension Act of 2021” to extend the expiration dates of certain bankruptcy provisions of the CARES Act to.