In August 2019, President Donald J. Trump signed the Small Business Reorganization Act of 2019, effective February 19, 2020 (“Act”). This law is a useful tool to simply, quickly and effectively reorganize small businesses through the bankruptcy process, especially small businesses that are financed by a loan on the family home. Prior to the Act, such a mortgage could not be altered. Now, with the Act’s passage, that has radically changed. The bankruptcy court now has the power to extend, change the interest rate and even reduce the principal amount of the mortgage provided the mortgage loan proceeds were primarily used in connection with the business.
Other sections of the Act are extremely beneficial to small business owners. The Act streamlines the bankruptcy process by eliminating the need for a cumbersome disclosure statement to explain a repayment plan which must be filed 90 days from the bankruptcy filing. Such a plan permits as long as a 5 year period out to pay creditors even including the professional fees incurred in connection with the case.
The Act permits all debts to be discharged upon approval of the plan by the bankruptcy court and does not require creditor approval so long as the disposable income of the debtor is devoted to the repayment plan, typically 5 years. This means that debts don’t even need to be paid in full provided the plan is filed in good faith.
When originally passed the Act’s benefits only extended to businesses whose debts were under $2,725,625.00. However, because of COVID-19, for the next year, the cap has been enlarged to $7,500,000.00.
In the right hands, the Act is a lifeline to owners of small businesses.
Michael S. Kopelman, Esq.
Kopelman & Kopelman LLP
90 Main Street, Suite 205,
Hackensack, NJ 07601
Michael S. Kopelman, Esq. has been successfully practicing bankruptcy law for over 47 years. His office is located at 90 Main Street, Suite 205, Hackensack, NJ 07601 and its phone number is 201 489-5500. An office member is fluent in Korean. An initial consultation is free.