Trucking News: Chapter 7 death knell for smaller companies now has shortcut to Chapter 11 survival

Mike

Well-Known Member
Just in time for what is almost certainly going to be a rush of bankruptcies in the trucking sector, two changes in federal bankruptcy law are set to potentially keep more companies alive that might have faced liquidation in the past.

The changes, discussed last week on the Drilling Deep podcast with attorney Matt Ferris of the law firm of Haynes & Boone, were rolled out in February in a fortuitous piece of timing: just as the COVID-19 pandemic raised the prospect of pushing a likely enormous number of companies, including trucking firms, into liquidation under Chapter 7 of the Federal Bankruptcy Act.

But the Small Business Reorganization Act (SBRA), passed last year in a rare display of bipartisanship and signed by President Donald Trump, went into effect Feb. 19. Soon after, as Congress passed and the president signed the CARES Act for pandemic relief, the provisions in the SBRA suddenly were opened to an even larger number of troubled companies.

What the SBRA does is make the Chapter 11 process in bankruptcy law easier, cheaper and available to smaller companies. And what the expansion in the CARES Act did was allow companies with an even bigger debt load than what was in the original SBRA law to seek relief under its provisions.

 

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