WASHINGTON – U.S. Senator Amy Klobuchar (D-MN) joined her colleagues, Chuck Grassley (R-IA), Sheldon Whitehouse (D-RI), Thom Tillis (R-NC), Joni Ernst (R-IA), and Richard Blumenthal (D-CT) to introduce the Small Business Reorganization Act (SBRA). The bill streamlines existing bankruptcy procedures and provides new tools to improve small businesses’ ability to restructure. Representatives Doug Collins (R-GA) and David Cicilline (D-RI) are working to introduce companion legislation in the House of Representatives.
“We need to make sure that businesses on Main Street have the same opportunities as big businesses to utilize the protections offered by our bankruptcy laws. This legislation will help streamline bankruptcy procedures for small businesses, ensuring that when mom-and-pop businesses fall on hard times, they have a chance to recover and be successful,” Klobuchar said.
“Our bankruptcy system is designed to help highly complex businesses reorganize after falling on hard times, but for many small businesses going through bankruptcy, these requirements can create unnecessary burdens that stall recovery. The Small Business Reorganization Act takes into account the unique needs of small businesses and streamlines existing reorganization processes. A well-functioning bankruptcy system, specifically for small businesses, allows businesses to reorganize, preserve jobs, maximize the value of assets and ensure the proper allocation of resources,” Grassley said.
“The strength of Rhode Island’s economy depends on the strength of the nearly one hundred thousand small businesses that have set up shop here. We need to improve the bankruptcy process to give smaller employers who are struggling better tools to get back on their feet and preserve jobs,” Whitehouse said.
“The current one-size-fits-all method that dictates the Chapter 11 bankruptcy process unfairly disadvantages small businesses. This bipartisan legislation is a common sense approach to streamlining existing bankruptcy procedures while also providing new tools for small businesses looking for a successful path through restructuring,” Tillis said.
“Iowa is home to more than 267,700 small businesses, making up just over 99% of the businesses in our state. While many of these businesses are thriving, those that experience financial distress face an overly burdensome and costly bankruptcy system Our bipartisan bill would streamline the reorganization process, preserve jobs, and allow small business owners to maintain control and negotiate a successful reorganization,” Ernst said.
“All too often, an outdated bankruptcy system forces small businesses to close their doors when they hit hard times. When a small business owner requires relief from overwhelming debt, bankruptcy should offer a path forward to preserve jobs – not an endless, money-draining process. Our bipartisan legislation implements thoughtful, commonsense reforms to make our bankruptcy system work for small businesses instead of against them,” Blumenthal said.
Chapter 11 in the bankruptcy code was designed for administering complex business reorganizations involving multi-million dollar companies. Though several provisions specifically focus on small business debtors, a significant amount of research shows that Chapter 11 may still create difficulties for small businesses, including high costs, deficits and procedural roadblocks. The legislation addresses these issues by adding a new subchapter V to Chapter 11 to streamline the bankruptcy process for small business debtors. By reducing liquidations and increasing recoveries to creditors, the bill will lead to more successful restructurings.
Specifically, key provisions of the Small Business Reorganization Act will increase debtors’ ability to negotiate a successful reorganization and retain control of the business, reduce unnecessary procedural burdens and costs and increase oversight and ensure quick reorganization.
The SBRA was crafted in consultation with the National Bankruptcy Conference, American Bankruptcy Institute and National Conference of Bankruptcy Judges and incorporates input from numerous stakeholders ranging from commercial lenders to the U.S. Trustee.