Small Business Reorganization Act
Last November, lawmakers proposed a bill called the Small Business Reorganization Act of 2018, which would potentially change the way small businesses with less than $2.5 million in debt file for bankruptcy. The bill is intended to expedite the restructuring process for SMBs and get creditors paid faster.
As it currently stands, creditors of SMBs that file for Chapter 11 bankruptcies face heavy attorney fees and lengthy processing time with the courts. Large corporations usually don’t ever receive payment in full, since so much of the owed amount goes back into the courts to cover the associated fees. The new bill would aim to shorten those turnaround times thus expediting the entire bankruptcy process and cutting down on overall costs, putting more money back into the creditors’ pockets.
The longer a bankruptcy lasts for a SMB, the more expensive it becomes for the creditor. If the bill gets passed, creditors in 2019 and beyond will get paid more easily when their SMB customers file for bankruptcy.
According to USCourts.gov, over 23K businesses filed for bankruptcy in 2018. The SMB market is growing faster than the enterprise market, but there are also more bankruptcies being filed. Historically, Mom & Pop shops have been required to follow the same bankruptcy laws as large corporations, yet the differences between the two types of businesses are immense. Since the laws don’t make sense for the way these small organizations function, it has been extremely difficult for SMBs to achieve success while restructuring. Under the new act, additional tools designed specifically for the needs of SMBs will be provided.
For more information on this bill, visit https://www.judiciary.senate.gov/download/small-business-reorganization-act-fact-sheet