In our ongoing effort to keep members informed of recent legislation, below is a summary of recent federal legislation we believed would be of interest to our members:
Small Business Reorganization Act of 2019(H.R. 3311)
The Small Business Reorganization Act has passed in both the House and the Senate and is expected to be signed by the President. The new Act will go into effect 180 days after it is enacted into law. The Act will add a new subchapter V to Chapter 11, aimed at loosening certain requirements for “small business debtor,” which is defined as a person in commercial or business activity with total non-contingent liquidated secured and unsecured debts of not more than $2,725,625. The Act contains provisions geared towards the “expeditious and economical resolution” of the case, requiring the court to hold a status conference within 60 days of the petition date and the debtor to file a report that details the efforts taken to “attain a consensual plan of reorganization.” Unless otherwise extended by the court, the debtor must file a plan within 90 days of the petition date. In addition, the standards for confirmation of a plan have been relaxed. The traditional “cramdown” scenarios under section 1129(a)(8) has been expanded to also excuse the debtor’s compliance with subsections (10), and (15) of that section. In other words, a debtor may still obtain confirmation of a plan if the plan is fair and equitable to each class of claims or interests even if (a) no class has accepted the plan under section 1129(a)(10), or (b) if the debtor is an individual, the plan fails to pay each unsecured creditor the full value of its claim (provided that the debtor still pays its projected disposable income to creditors for the time period set under the plan) under section 1129(a)(15). The new Act would go into effect 180 days after it is enacted into law.
On July 23, 2019, the U.S. House of Representatives approved the following bankruptcy bills:
Family Farmer Relief Act of 2019(H.R. 2336)
The Family Farmer Relief Act has passed in both the House and the Senate and is expected to be signed by the President. The new Act will go into effect on the date it is signed. The Act significantly increases the “debt limit” for agricultural producers seeking to reorganize under Chapter 12 from $4 million to $10 million. The raising of the debt limit to $10 million will give family farmers above the prior threshold the ability to enjoy the benefits of Chapter 12, instead of being forced into Chapter 11 simply because they are “too big.”
HAVEN Act(H.R. 2938)
The HAVEN Act has passed in both the House and the Senate and is expected to be signed by the President. Under current bankruptcy law, disability benefits paid by the Department of Veterans Affairs and the Department of Defense are included in the calculation of a debtor’s disposable income, which increases the portion of the debtor’s income that is subject to the reach of creditors. The HAVEN Act will exclude certain benefits paid by the Department of Veterans Affairs and the Department of Defense to veterans or their dependent survivors from the monthly income calculation used for bankruptcy means testing.
National Guard and Reservists Debt Relief Extension Act of 2019(H.R. 3304)
The National Guard and Reservists Debt Relief Extension Act has passed in both the House and the Senate and is expected to be signed by the President. The Act will exempt for an additional 4-year period, from the application of the means-test presumption of abuse under chapter 7, qualifying members of reserve components of the Armed Forces and members of the National Guard who, after September 11, 2001, are called to active duty or to perform a homeland defense activity for not less than 90 days.
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