Historically, small businesses struggled to confirm plans of reorganization and successfully reorganize under chapter 11 of the Bankruptcy Code.2 Conventional chapter 11 was designed for large corporations, not family-owned limited liability companies.3 Previous attempts to adapt chapter 11 for small businesses were unsuccessful. Congress passed the Small Business Reorganization Act of 2019 (the “SBRA”) to adapt the chapter 11 process for small businesses because it was concerned that small businesses could not successfully reorganize under conventional chapter 11.
With an effective date of February 19, 2020, the primary goal of the SBRA is to promote successful reorganizations of small businesses. The SBRA achieves this by giving small business debtors a new option within chapter 11 – subchapter V. The SBRA and subchapter V implemented numerous changes for small business debtors. While a comprehensive analysis of subchapter V is beyond the scope of this article, this article will focus on a unique (and perhaps unintended) benefit of subchapter V for small business debtors—the ability to deal with large, unliquidated
and/or contingent debts.