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Interim Rules Adopted to accommodate the Small Business Reorganization Act of 2019

Redline Rule Changes

$2.725 million or less of business debt may reorganize under a new subchapter of Chapter 11 that eliminates some of the most cumbersome aspects of Chapter 11.

Eliminates the absolute priority rule. Allowing individuals to retain non-exempt assets, and business owners to retain equity, even if all creditors are not paid in full.


  • Rules requiring the approval of comprehensive disclosure statements prior to solicitation of votes for confirmation
  • Rules allowing creditors to form oversight committees whose administrative expenses must also be paid at confirmation
  • Rules allowing creditors and other parties to propose competing plans of reorganization
  • exception to the rule prohibiting debtors from modifying home mortgages in bankruptcy;
    • a small business debtor now may modify a home mortgage that is not a purchase-money mortgage and that was given in connection with the debtor’s business,
      • e.g., small business loans secured with a second or third mortgage on the residence.
  • real estate investors qualify as a small business debtors
  • small business debtors may pay administrative expense claims over several years