Establishes a temporary state assistance fund to provide legal counsel for bankruptcy proceedings under chapter eleven of the federal bankruptcy code; provides for the administration thereof.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A343
SPONSOR: Cruz TITLE OF BILL:
An act to amend the executive law, in relation to establishing a tempo-
rary state assistance fund to provide legal counsel in certain bankrupt-
cy proceedings and providing for the administration thereof
PURPOSE OR GENERAL IDE OF BILL:
To provide free legal counsel for small businesses adversely affected by
the COVID-19 so that they may take advantage of recently expanded feder-
al bankruptcy protections. Such fund is necessary.to ensure that small
businesses reorganize debt and get a fresh start before the timeline
closes on a greater debt threshold permitted under the federal CARES
Act.
SUMMARY OF SPECIFIC PROVISIONS:
Section (1) provides this act shall be known as may be cited as the
SMART ("Save Merchants and Retail Tenants") Act.
§ 2 amends the Executive law by adding new section 94-d; Subdivision (1)
provides relevant definitions Subdivision (2) provides that all eligible
businesses shall have access to legal services in certain small business
bankruptcy cases.
The subsection further provides for the creation of a legal services
fund and details program limitations.
- Subdivision (3) provides guidelines for administration and oversight
of the legal fund including competent representation, targeting of
grants, and general administration over the program.
- Subdivision (4) provides the requirements for the legal fund to fully
comply with the intent of the legislation. Section (3) sets the effec-
tive date.
JUSTIFICATION:
Small businesses are essential to maintaining a vibrant and diverse
community. COVID-19 has brought great strain upon small business, forc-
ing many to either temporarily shut down or scale back their oper-
ations.. The federal CARES Act gave struggling small business an oppor-
tunity to take advantage of the more efficient and cost-effective
Subchapter 5 of Chapter 11 of the Bankruptcy Code by increasing the debt
limit for eligible debtors from about $2.7 million to $7.5 million. This
provision also permits a debt cramdown In cases where a Chapter 11 plan
does not discriminate unfairly and is "fair and equitable" to each
impaired nonaccepting class.
Unfortunately, the debt limit reverts to the $2.7 million threshold on
March 28, 2021, and many small businesses are not aware of this limited
opportunity. We are faced with a limited budget to assist with the
financial recovery of small businesses in response to COVID-19 and
government forced shutdowns, this temporary fund to provide legal
assistance will provide the best possible return on investment to
protect our Main Street businesses. It's a SMART Investment for New York
to rebuild small businesses, protect the character of our communities,
and prevent the spread of vacant neighborhood storefronts.
PRIOR LEGISLATIVE HISTORY:
2019-20: S9022/A11084
FISCAL IMPLICATIONS:
To be determined.
EFFECTIVE DATE:
This act shall take effect immediately.
