Sen. Chuck Grassley (R-Iowa) and Sen. Sheldon Whitehouse (D-R.I.) yesterday unveiled legislation that could make the chapter 11 bankruptcy process cheaper and faster for companies that file for protection with about $2.5 million or less in debt, the WSJ Pro Bankruptcy reported. The "Small Business Reorganization Act of 2018" creates a new voluntary process with incentives for owners who want to keep ownership stakes and protections for creditors who want to be repaid quickly and reliably. The process applies to companies that file for chapter 11 protection with about $2.5 million of debt or less. The bill could cut the cost of bankruptcy by requiring companies to file a repayment plan within 90 days and eliminating half of the two-step process for judges to approve that plan. The quick deadline is meant to get money into the hands of creditors faster and under supervision by a new court-appointed financial professional. Federal lawmakers have tried twice before to make it easier for small businesses to survive using bankruptcy, but bankruptcy experts said neither effort was successful. A 2014 report from ABI's Chapter 11 Reform Commission found “significant and troubling issues” for small and middle-market companies. The legislation would also cut costs by eliminating the automatic appointment of an unsecured creditors committee, an oversight group that typically pressures company executives to get their firm out of bankruptcy quickly and put forth the most money possible toward repayment. Read more.
Click here to read the bill text.
Click here to read Sen. Grassley’s press release.
Click here to read Chapter 11 Reform Commission Co-Chair Bob Keach’s statements on the introduction of the legislation.