Joseph C. Barsalona II Quoted in the Deal, “Washington Inertia Threatens Key Bankruptcy Provision”

Joseph C. Barsalona II, partner in the Bankruptcy, Restructuring and Creditors’ Rights practice at Pashman Stein Walder Hayden P.C., was recently quoted in an article in The Deal titled, “Washington Inertia Threatens Key Bankruptcy Provision.” The article discusses the 2019 Small Business Reorganization Act, which allows businesses with debt totaling less than $7.5million, to go through bankruptcy proceedings quickly and cheaply, among other benefits. This was increased in 2020 via the CARES Act from a previous $2.7 million limit. Now, that $7.5 million debt limit is in danger. Despite being maintained via the March 2022 Covid-19 Bankruptcy Relief Extension Act, if Congress fails to act by June 21, the limit will revert to the original $2.7 million level.

“[It would be] incredibly harmful to small businesses,” said Barsalona, who's been involved in several Subchapter V cases, including that of Lunya Co., a loungewear and sleepwear brand. “It will be a lost opportunity to help middle market businesses reorganize and will potentially increase liquidations under both state and federal law.”

“Equity investors should care because they will lose their only means of getting a recovery in their small investments. I’ve said it once and I’ll say it a million times: there is no other restructuring law in the world that gives equity holders the opportunity to retain value like Subchapter V. The ramifications of more liquidations will lead to negative impacts on the macro economy and will set other trends in motion for medium and larger credit defaults,” said Barsalona.