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  • Writer's pictureBrett Weiss

The Numbers Are Changing--Why Now's the Time to File Under the Small Business Reorganization Act

Updated: Jan 16

The Small Business Reorganization Act (SBRA) is a special set of provisions under Chapter 11 that make it easier for small businesses and individuals with business debt to reorganize their finances. When it took effect on February 19, 2020, it had a "debt cap" -- a limit on the total amount of debt you could have to be eligible to file under the SBRA--of $2,725,625.

Covid changed things.

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) temporarily increased the debt cap to $7.5 million until March 27, 2021, letting many individuals and businesses that otherwise wouldn't qualify to be able to take advantage of the SBRA. The increased debt cap was extended for another year by the Covid-19 Bankruptcy Relief Extension Act of 2021.

But it expires soon, on March 27, 2022.

If you or your business owe more than $2,725,625 and could benefit from the SBRA, now is the time to start planning to file. Because on March 28, 2022, when the debt cap drops, although you can still file a "regular" Chapter 11, you won't be able to file under the SBRA.

Note: The $7,500,000 debt limit was extended temporarily once more, until June 21, 2024. While Congress is considering making the higher debt limit permanent, there are no guarantees. Make sure you file before this number drops back down.

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