The American Bankruptcy Institute (ABI) sent a letter to Senate Judiciary Committee leadership on Friday supporting S. 473, the "COVID-19 Bankruptcy Relief Extension Act," to extend, for another year, bankruptcy-relief provisions due to sunset in the 2020 CARES Act and December 2020 omnibus appropriations bill. “There is no doubt that the COVID-19 pandemic and its aftermath will continue to put significant strain on U.S. small businesses in the near future and perhaps for years to come,” ABI Executive Director Amy Quackenboss writes in the letter to bill co-sponsors Senate Judiciary Chairman Richard Durbin (D-Ill.) and Ranking Member Charles Grassley (R-Iowa). “By extending the increased debt limit of the SBRA, the COVID-19 Bankruptcy Relief Extension Act offers much-needed relief to a growing number of U.S. small businesses who find themselves in need of reorganizing in order to stay in business.”
Click here to read ABI’s letter.
Prior to the start of the pandemic, the “Small Business Reorganization Act of 2019” became effective on Feb. 19, 2020, creating the new subchapter V election to make it more cost-effective and efficient for small businesses to reorganize under chapter 11. With the passage of the CARES Act on March 27, 2020, the subchapter V debt eligibility limit was raised from its original amount of $2,725,625 to $7.5 million, with a sunset date of March 27, 2021. “This debt limit increase offered a favorable alternative to companies that may have otherwise been forced to shutter and liquidate as a result of the economic strain caused by the COVID-19 pandemic,” Quackenboss writes in the letter.
Sens. Durbin and Grassley introduced the bipartisan S. 473 on February 25, 2021, aiming to extend, by a year, the bankruptcy provisions passed last year for struggling families and small businesses facing the financial challenges due to the COVID-19 pandemic. In addition to ABI, the bill is being supported by the American College of Bankruptcy, the Association of Insolvency & Restructuring Advisors and other prominent bankruptcy and restructuring organizations.