CARES Act Expands Debt Limitations to Allow More Businesses to Qualify for Relief Under the Small Business Reorganization Act

On March 27, 2020, Congress passed and President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act, known somewhat fittingly as the “CARES Act.”  Among the wide-ranging and unprecedented relief it provides for our struggling economy is a significant boon to “small businesses” that may be in need of relief under our bankruptcy laws.   

In a previous Alert, I provided a summary of the groundbreaking changes brought about by the Small Business Reorganization Act of 2019 (SBRA) for “small businesses” seeking relief under Chapter 11.  It can be found here. 

As reported there, to qualify for relief under the SBRA, the total amount of the business’s debts (secured and unsecured) must not exceed $2,725,625.  The CARES Act now significantly expands that debt limitation to $7.5 million, which is certain to reach a much broader population of businesses.  This is a truly remarkable form of relief that has been made available for the small business, and was argued by some bankruptcy professionals to have been needed even before the country was beset by the current health crisis. 

Irve J. Goldman is a member of the Bankruptcy and Creditors Rights Practice at Pullman & Comley, LLC, and has been certified as a business bankruptcy specialist by the American Board of Certification since 1993.  He can be reached at igoldman@pullcom.com.