Small Business Reorganization Act Will Bring Changes to Preference Litigation

The Small Business Reorganization Act of 2019 (the “Act”) will go into effect on February 19, 2020. Most of the attention given to the new law deservedly addresses the impact of those provisions that are intended to streamline the bankruptcy process for “small business debtors” that might not otherwise have the financial resources to reorganize under Chapter 11. Recognizing that a Chapter 11 proceeding has become very expensive, lawmakers have offered small business owners (generally persons or entities engaged in commercial activities and having aggregate debts not exceeding $2,725,625) an opportunity to reorganize under a new Subchapter V of Chapter 11. These provisions reduce the likelihood that an unsecured creditors’ committee will be appointed, lighten reporting requirements, and provide for guidance of a “small business trustee,” among other things. Although critically important, these changes will not have any effect on middle-market and large corporate bankruptcies. Much less attention has been paid to a provision in the Act that is applicable in bankruptcy cases of all sizes and could prove to be of material benefit to a debtor’s vendors. Continue reading “Small Business Reorganization Act Will Bring Changes to Preference Litigation”