On August 23, 2019, President Trump signed into law the
"Small Business Reorganization Act of 2019." The primary
effect of the "SBRA" is the creation of a subchapter to
Chapter 11 for small business debtors, i.e. those with no
more than $2,725,625 in secured and unsecured debts combined, to
address the unique issues faced by those companies in the
bankruptcy process.
In addition to the creation of "subchapter V" to
Chapter 11, the SBRA also makes important amendments to statutory
provisions governing preference actions. As a reminder, section 547
of the Bankruptcy Code permits a debtor, subject to certain
conditions and defenses, to "clawback" payments made to
creditors within 90-days of the filing of a bankruptcy petition (or
one-year for "insiders"). Currently, the Bankruptcy Code
does not explicitly require a debtor or trustee to undertake any
due diligence prior to commencing an action under section 547, but
simply says that a debtor or trustee "may" do so.
