Recent Amendments in the U.S Bankruptcy Laws: Unpacking Implications for Individuals and Corporations
In a move to align with contemporary economic conditions, the United States recently reformed its bankruptcy laws. This updated regulation has stirred significant conversation within various industry circles.
Bankruptcy Law: Its Essence and Evolution
U.S bankruptcy law offers a fresh start to individuals and corporations overwhelmed with debts. Throughout history, several amendments, like the 1978 Bankruptcy Reform Act and the 2005 Bankruptcy Abuse Prevention Act, have reshaped these laws to match economic progressions.
The Fresh Legislative Revisions
In March 2020, the U.S unveiled the Small Business Reorganization Act (SBRA). This act simplifies the Chapter 11 process for small businesses. Furthermore, the Coronavirus Aid, Relief, and Economic Security (CARES) Act broadened the SBRA’s utility, targeting economic fallout from the COVID-19 pandemic.
Interpreting the Small Business Reorganization Act
The SBRA presents an efficient, less expensive route for small business debtors to restructure their debts. Additionally, the CARES Act increased the eligibility threshold for SBRA from $2,725,625 to $7,500,000. This change, unfortunately, is temporary and set to revert after a year.
Impacts on Individuals and Corporations
The modified bankruptcy law benefits small business owners by expediting the reorganization process and reducing costs. By expanding the eligibility threshold, more enterprises can take advantage of it. However, creditors face a tougher challenge recovering their financial claims from bankrupt companies.
Looking Forward: Potential Consequences
The recent amendments are timely, considering the current economic crisis. Indeed, they offer an oxygen mask to struggling businesses. However, the prospective return to the original eligibility threshold for the SBRA poses uncertainty. It may dampen this initial intent, provoking a surge in filings before the threshold reverts.
Closing Remarks: As the economic ramifications of the COVID-19 pandemic continue to unfold, the recent amendments to the U.S bankruptcy laws provide some relief for beleaguered businesses. Nevertheless, the temporary nature of some provisions warrants close scrutiny and potential legislative intervention in the future.
