The President recently signed the Coronavirus Aid, Relief, and Economic Security Act or “CARES Act” in response to the coronavirus pandemic that is hammering businesses worldwide. The Act includes changes to the Small Business Reorganization Act (SBRA), also known as subchapter V of chapter 11 of the Bankruptcy Code. Specifically, the CARES Act increased the debt ceiling for eligibility under subchapter V from $2,725,625 to $7.5 million. The increase is set to phase-out after one year. The amendment only applies to cases commenced after enactment of the CARES Act. The SBRA provides an alternative, faster, streamlined, less expensive version of chapter 11 for qualifying businesses. Hence, its expansion under the CARES Act should benefit a significant number of small businesses struggling due to the COVID-19 shutdown.
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