The COVID-19 pandemic has hobbled Connecticut’s economy, forcing an estimated 36% of small businesses to close their doors as of December, according to a recent Harvard University analysis.
Amid that turmoil, one might expect bankruptcy filings to be skyrocketing. However, defying predictions from seasoned area attorneys, that hasn’t been the case. In fact, the exact opposite has happened and it’s got nothing to do with any federal courthouse closures related to the pandemic.
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Robert Kaelin
Commercial bankruptcy cases in Connecticut fell nearly 30% in 2020 from the year prior, close to twice the rate of decline nationwide, according to the latest available data from the American Bankruptcy Institute.
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Fixing Ch. 11 For Small Biz: What SBRA Means By Engaged
Law360 (February 5, 2021, 4:44 PM EST) On Feb. 19, 2020, Congress enacted the Small Business Reorganization Act to improve the Chapter 11 reorganization process for small business debtors. In this Expert Analysis series, bankruptcy experts reflect on ways the law has worked and ways it hasn t during the past year, a time of crisis for many small businesses.
Brian Shaw
Christina Sanfelippo
As the fallout from the pandemic continues to decimate America s small businesses, many have chosen to take advantage of the Small Business Reorganization Act, or SBRA, and Subchapter V of the Bankruptcy Code, exclusively available to a person engaged in commercial or business activities ..
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By now, the Paycheck Protection Program, or PPP, is a familiar term to most Arkansas businesses. Under the CARES Act, an eligible recipient of a PPP loan can receive forgiveness of the loan in an amount equal to the payments made for certain expenses during the covered period, including costs for payroll, rent and utilities. Congress addressed this issue, to a degree, in the CARES Act by providing that the debt discharge of a PPP loan is excluded from the gross income of the business for federal income tax purposes. This was good news to all businesses applying for PPP loans earlier this year.
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The Consolidated Appropriation Act of 2021 (“CAA”) enacted on December 27, 2020 bolsters the bankruptcy relief available to small businesses in several key ways. In June 2020, we outlined here ways in which the Small Business Restructuring Act of 2020 (“SBRA”) offered small businesses having aggregate debts up to $7.5 million a less costly and more streamlined alternative to restructuring under chapter 11 of the United States Bankruptcy Code. The CAA furthers those benefits in several important ways for two years until December 27, 2022:
PPP Loan Eligibility: After the passage of the CARES Act in March 2020, the Small Business Administration and several bankruptcy courts rejected efforts by small business debtors from receiving loans under the Paycheck Protection Program (“PPP”) administered by the Small Business Administration. The CAA remedies that issue by amending section 364 of the Bankruptcy Code t
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President Trump signed the Consolidated Appropriations Act, 2021 yesterday, December 27, 2020. Although not widely reported, the legislation makes several amendments to the Bankruptcy Code based upon the severe financial hardships created by the COVID-19 pandemic.
The amendments relate to Section 365(d)(3) (the deferral of rent by small business debtors), Section 365(d)(4) (the period of time to assume, assume and assign, or reject a nonresidential real property lease), and Section 547 (preferential transfers). All of the amendments will sunset on December 27, 2022.
Preferential Transfer Protection
Perhaps most significantly, landlords which entered into lease amendments with tenants on or after March 13, 2020, to defer the payment of rent as a result of the pandemic are protected from claims of preferential transfers. Normally, payments made by a debtor within 90 days of a bankruptcy filing and outside the ordinary c