The Benefits of the Small Business Reorganization Act of 2019
Small businesses in NJ can now restructure cost-effectively while continuing to operate
If you are the sole proprietor of a small business or own an LLC and you are struggling with business debt, you may have heard that the only way out is to file Chapter 7 bankruptcy. While it’s true that you can discharge qualifying debt quickly through Chapter 7, it’s important to understand that this type of filing involves liquidation and would force you to shutter your business. But the good news is that the Small Business Reorganization Act of 2019 makes it easier than ever for small business owners to get Chapter 11 protections. Now you can restructure your debt, continue to operate and give your business a new lease on life. If you own an indebted, small business, the Law Offices of James C. Zimmermann is prepared to help. Since 1991, I have provided personalized assistance and detailed advice for distressed businesses in Vernon, Wayne, Nutley, Pompton Lakes, Hackensack and vicinity. If you want a second chance at business success, I can guide you through the process to a favorable resolution.
How the SBRA of 2019 can save your New Jersey businesses through bankruptcy
Historically, it has been very hard for sole proprietorships and LLCs to file business bankruptcy and restructure their debts. The costs of a Chapter 11 bankruptcy were just too high, so it only made sense for larger companies. Since the process was prohibitively expensive, many small business owners were forced into Chapter 7 personal bankruptcy, which required them to liquidate assets, effectively killing the business. But, small business debtors got a huge boost from the Small Business Reorganization Act of 2019, which went into effect in February 2020.
Business owners with debt totaling $2,725,625 or less can opt for SBRA protection. Key provisions of the new law include:
- Allowing debtors to remain in possession of their property and assets while they continue to operate their businesses
- Giving the debtor sole authority to file a reorganization plan, so that creditors cannot file competing plans
- Barring, in most cases, the appointment of a creditors’ committee
- Oversight of a trustee, similar to a Chapter 13 trustee, to assist the debtor with the reorganization and to implement the repayment of debtors for the length of the plan
The SBRA bankruptcy process is similar to Chapter 13, in that a debtor commits to a repayment plan that lasts three to five years. During the plan, the debtor makes payments from business earnings to the trustee who distributes the payments to the business creditors. At the end of the plan period, the bankruptcy court discharges the remaining eligible business debt.
The SBRA process includes several key steps:
- Debtors must file a reorganization plan within 90 days.
- The bankruptcy court must hold an initial status conference within 60 days from the filing date.
- The debtor must file a status report at least 14 days prior to the status conference, detailing efforts made to create a reorganization plan.
One notable aspect of this small business bankruptcy is that the process can help you keep your home. If you use your home as collateral to secure a loan for your business, you can change the terms of that loan under your reorganization plan. In other words, you don’t have to worry about foreclosure on your home because of your business debts.
Contact our skilled bankruptcy attorney to discuss small business bankruptcy in New Jersey
The Law Offices of James C. Zimmermann assists New Jersey small business owners with bankruptcy under the new Small Business Reorganization Act, so they can continue to operate and most importantly save their homes. Please call 973-764-1633 or contact us online for a free initial consultation at one of our five North Jersey offices, located in Vernon, Wayne, Pompton Lakes, Hackensack and Nutley.