Bankruptcy in a Time of Coronavirus

As confirmed cases of the Covid-19 virus climbed across the country, bankruptcy courts and the U.S. Trustee's office have been seeking ways to adapt to the new normal.  This post will look at how the court system has rolled out its disaster preparedness through the lens of the Bankruptcy Courts for the Western District of Texas, Southern District of Texas and District of Delaware.

Here is a timeline of announcements from the Courts with a few random anecdotes thrown in.  All of the standing orders and announcements can be found on the respective websites of their courts.

Congress to Expand Small Business Eligibility Limits to $7.5 Million

On March 25, 2020, the U.S. Senate passed the Coronavirus Aid, Relief and Economic Security Act” (CARES Act). The House is expected to pass the bill today. One provision of the bill increases the eligibility limits for small business debtors from $2.7 million to $7.5 million. The amendment will only apply to cases commenced after its effective date and will be subject to a sunset provision after one year.

Since many more businesses will be eligible to file under the small business provisions, it is worthwhile to review the pluses and minuses of falling within Subchapter V.  Subchapter V, which is titled Small Business Debtor Reorganization consists of 11 U.S.C. Sec. 1181-1195.