Nearly 500 Small Businesses File Bankruptcy Using Increased Eligibility Limit Since February
NNPA NEWSWIRE — In response to the economic distress caused by the COVID-19 coronavirus pandemic, the CARES Act on March 27 increased the eligibility limit for small businesses looking to file under subchapter V from $2,725,625 of debt to $7,500,000. The threshold will return to $2,725,625 after 1 year.
New statistical table and analysis available on the American Banking Institute’s (ABI) SBRA Resources website show that 471 small businesses have elected to file for bankruptcy relief under new subchapter V to chapter 11 of the Code since it was enacted.
The Small Business Reorganization Act of 2019 (SBRA) took effect on February 19, 2020, to provide a better path for small businesses to successfully restructure, reduce liquidations, save jobs and increase recoveries to creditors, and it also recognizes the value provided by entrepreneurs.
In response to the economic distress caused by the COVID-19 coronavirus pandemic, the CARES Act on March 27 increased the eligibility limit for small businesses looking to file under subchapter V from $2,725,625 of debt to $7,500,000. The threshold will return to $2,725,625 after 1 year.
While no official (e.g., government) figures on subchapter V cases have been released to date, ABI’s Ed Flynn compiled the figures after a case-by-case review of records from the PACER system. A consultant and special editor to the ABI Journal, Flynn previously worked for more than 30 years at the Executive Office for U.S. Trustees and the Administrative Office of the U.S. Courts. In addition to providing the monthly totals of subchapter V elections, he included an analysis of the filings on the SBRA Resources website that also breaks down the subchapter V elections by circuit.
“The data on subchapter V elections and additional analysis from Ed Flynn will help provide a better picture to practitioners, researchers and the public about how struggling small businesses are utilizing the new law,” said ABI Executive Director Amy Quackenboss. “These statistics, and the wealth of information contained within ABI’s SBRA Resources site, make the site an invaluable reference.”
ABI launched the “SBRA Resources” website in February to help practitioners and struggling small businesses learn about the new law and stay updated on SBRA developments. The site features information on ABI events on the new law, FAQs about the SBRA, an infographic, the legislative history of the SBRA, informative videos of ABI presentations on the SBRA, updated news and commentary, articles from the ABI Journal and ABI committee newsletters, and more.
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information.