The debt ceiling enhance in chapter will expire | Kerr russell
In February 2020, Congress created a brand new subchapter of Chapter 11 of the Chapter Code aimed toward lowering the burden and prices of reorganization for small companies. This new subchapter V, enacted underneath the Small Enterprise Reorganization Act of 2019 (SBRA), has considerably simplified the common Chapter 11 course of for sure “small enterprise debtors”.
An in depth overview of the SBRA and its most notable adjustments might be discovered HERE.
Initially, solely corporations with whole debt of lower than $ 2,725,625 had been eligible to make the most of this simplified reorganization. Nonetheless, in response to the COVID-19 pandemic, Congress handed the Coronavirus Help, Restoration, and Financial Safety (CARES) Act which raised the “debt ceiling” underneath the SBRA from $ 2,725,625 to $ 7,500,000. This enhance allowed extra small companies to qualify for the extra streamlined and worthwhile reorganization course of. Nonetheless, the rise within the debt ceiling underneath the SBRA is predicted to “lapse” or expire on March 31, 2021.
So far, Congress has not handed further laws that will prolong the rise within the debt ceiling past the March 31 deadline. Nonetheless, Senators Dick Durbin and Chuck Grassley lately launched new bipartisan laws known as the COVID-19 Chapter Aid Extension Act. If handed, this invoice would prolong the debt ceiling for an extra yr till March 31, 2022.
If this new laws just isn’t handed by March 31, small companies with money owed better than $ 2,725,625 should file a return underneath conventional Chapter 11 somewhat than the simplified Subchapter V. laws and think about submitting for chapter by March 31 to make sure they’re eligible to sue underneath Subchapter V.