Modern Restaurant Management
In the wake of the pandemic, more than 32,000 restaurants closed their doors between March and August 2020. In an article published November 5 by Modern Restaurant Management, Hirschler bankruptcy partner David Swan discusses the Small Business Reorganization Act (SBRA) and its potential to provide efficient, low-cost relief for struggling restaurateurs.
It’s not new for distressed businesses to look to the bankruptcy courts for relief, but the Chapter 11 process can be draining for a small business with limited resources. The SBRA, which went into effect in February 2020, offers small businesses with less than $7.5 million in total debt an option of proceeding under a streamlined version of Chapter 11 with substantially lower costs. Swan highlights some of the benefits of filing under the SBRA, including:
- Debtor’s exclusive right to file a plan of reorganization, and ability of court to approve plan even if creditors reject it, as long as the plan provides that the next three to five years of “disposable income” will be distributed to creditors;
- Retention of ownership even if trade vendors and other unsecured creditors are not repaid in full under the plan;
- Streamlined process where no creditors committee is appointed, creditors may not file a competing plan, and the debtor is not required to file a disclosure statement with the plan;
- Trustee is appointed to serve as a financial monitor and to facilitate the development of a consensual plan of reorganization; and,
- Home equity loan modifications allowed if the loan was used primarily in connection with the business.
For the full article, please click here.
Kristen M. Chatterton