[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 3675 Introduced in Senate (IS)]

111th CONGRESS
  2d Session
                                S. 3675

    To amend chapter 11 of title 11, United States Code, to address 
                  reorganization of small businesses.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 29, 2010

Mr. Whitehouse introduced the following bill; which was read twice and 
               referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
    To amend chapter 11 of title 11, United States Code, to address 
                  reorganization of small businesses.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Jobs Preservation Act 
of 2010''.

SEC. 2. SMALL BUSINESS REORGANIZATION.

    Chapter 11 of title 11, United States Code, is amended by adding at 
the end the following:

  ``SUBCHAPTER V--REORGANIZATION OF A SMALL BUSINESS ENTERPRISE DEBTOR

``Sec. 1181 Applicability of subchapter
    ``This subchapter shall apply only in those cases arising under 
this chapter in which a small business enterprise debtor elects that 
this subchapter shall apply.
``Sec. 1182. Inapplicability of other sections
    ``(a) In General.--Sections 105(d), 1101(1), 1104, 1105, 1106, 
1107, 1108, 1115, 1116, 1121, 1123(a)(8), 1123(b)(5), 1123(c), 1127, 
1129(a)(15), 1129(b), 1129(c), 1129(e), and 1141(d)(5) of this title do 
not apply in a case under this subchapter.
    ``(b) Court Authority.--Unless the court for cause orders 
otherwise, sections 1102, 1103, 1125 of this title do not apply in a 
case under this subchapter.
    ``(c) Special Rule for Discharge.--If a plan is confirmed under 
section 1193(b), section 1141(d) of this title shall not apply, except 
as provided in section 1194.
``Sec. 1183. Definitions
    ``In this subchapter--
            ``(1) the term `small business enterprise debtor' means a 
        debtor--
                    ``(A) that is engaged in commercial or business 
                activities; and
                    ``(B) that has aggregate noncontingent, liquidated, 
                secured, and unsecured debts as of the date of the 
                order for relief--
                            ``(i) in an amount equal to not more than 
                        $7,500,000 (excluding debts owed to 1 or more 
                        affiliates or insiders); and
                            ``(ii) not less than 50 percent of which 
                        arose from the commercial or business 
                        activities of the debtor; and
            ``(2) the term `debtor in possession' means the small 
        business enterprise debtor, unless removed as debtor in 
        possession under section 1186(a).
``Sec. 1184. Trustee
    ``(a) In General.--If the United States trustee has appointed an 
individual under section 586(b) of title 28 to serve as standing 
trustee in cases under this subchapter, and if such individual 
qualifies as a trustee under section 322, then such individual shall 
serve as trustee in any case under this subchapter. Otherwise, the 
United States trustee shall appoint one disinterested person to serve 
as trustee in the case or the United States trustee may serve as 
trustee in the case, as necessary.
    ``(b) Duties.--The trustee shall--
            ``(1) perform the duties specified in paragraphs (2), (5), 
        (6), (7), and (9) of section 704(a) of this title;
            ``(2) perform the duties specified in paragraphs (3), (4), 
        and (7) of section 1106(a) of this title, if the court, for 
        cause and on request of a party in interest, the trustee, or 
        the United States trustee, so orders;
            ``(3) appear and be heard at any hearing that concerns--
                    ``(A) the value of property subject to a lien;
                    ``(B) confirmation of a plan filed under this 
                subchapter;
                    ``(C) modification of the plan after confirmation; 
                or
                    ``(D) the sale of property of the estate;
            ``(4) ensure that the small business enterprise debtor 
        commences making timely payments required by a plan confirmed 
        under this subchapter;
            ``(5) if the small business enterprise debtor ceases to be 
        a debtor in possession, perform the duties specified in section 
        704(a)(8), paragraphs (1), (2), and (6) of section 1106(a) of 
        this title, including operating the business of the small 
        business enterprise debtor;
            ``(6) if there is a claim for a domestic support obligation 
        with respect to the small business enterprise debtor, perform 
        the duties specified in section 704(c); and
            ``(7) facilitate the development of a consensual plan of 
        reorganization.
    ``(c) Termination of Trustee Service.--If the plan of the small 
business enterprise debtor is confirmed under section 1193(a), the 
service of the trustee in the case shall terminate when the plan has 
been substantially consummated.
``Sec. 1185. Rights and powers of a debtor in possession
    ``Subject to such limitations or conditions as the court may 
prescribe, a debtor in possession shall have all the rights, other than 
the right to compensation under section 330 of this title, and powers, 
and shall perform all functions and duties, except the duties specified 
in paragraphs (2), (3), (4), and (6) of section 1106(a) of this title, 
of a trustee serving in a case under this chapter, including operating 
the business of the small business enterprise debtor.
``Sec. 1186. Removal of debtor in possession
    ``(a) In General.--On request of a party in interest, and after 
notice and a hearing, the court shall order that the debtor shall not 
be a debtor in possession for cause, including fraud, dishonesty, 
incompetence, or gross mismanagement of the affairs of the debtor, 
either before or after the date of commencement of the case, or for 
failure to perform the obligations of the debtor under a confirmed 
plan.
    ``(b) Reinstatement.--On request of a party in interest, and after 
notice and a hearing, the court may reinstate the debtor in possession.
``Sec. 1187. Property of the estate
    ``(a) Inclusions.--If a plan is confirmed under section 1193(b) of 
this title, property of the estate includes, in addition to the 
property specified in section 541 of this title--
            ``(1) all property of the kind specified in such section 
        that the debtor acquires after the date of commencement of the 
        case, but before the case is closed, dismissed, or converted to 
        a case under chapter 7 of this title, whichever occurs first; 
        and
            ``(2) earnings from services performed by the debtor after 
        the date of commencement of the case, but before the case is 
        closed, dismissed, or converted to a case under chapter 7 of 
        this title, whichever occurs first.
    ``(b) Debtor Remaining in Possession.--Except as provided in 
section 1186 of this title, a confirmed plan, or an order confirming a 
plan, the small business enterprise debtor shall remain in possession 
of all property of the estate.
``Sec. 1188. Duties and reporting requirements of small business 
              enterprise debtor
    ``(a) Filing Requirements.--Upon electing to be a debtor under this 
subchapter, the small business enterprise debtor shall file the 
documents required by subparagraphs (A) and (B) of section 1116(1) of 
this title, whether or not such debtor is a small business debtor.
    ``(b) Other Applicable Provisions.--A small business enterprise 
debtor, in addition to the duties provided in this title and as 
otherwise required by law, shall comply with the requirements of 
sections 308 and paragraphs (2), (3), (4), (5), (6), and (7) of section 
1116 of this title, whether or not such debtor is a small business 
debtor.
    ``(c) Separate Disclosure Statement Exemption.--If the court orders 
under section 1182(b) that section 1125 of this title applies, section 
1125(f) of this title shall apply whether or not such debtor is a small 
business debtor.
``Sec. 1189. Filing of the plan
    ``(a) Who May File a Plan.--Only the small business enterprise 
debtor may file a plan under this subchapter.
    ``(b) Deadline.--The small business enterprise debtor shall file a 
plan not later than 90 days after the order for relief under this 
chapter, except that the court may extend that period if the need for 
an extension is attributable to circumstances for which the small 
business enterprise debtor should not justly be held accountable.
``Sec. 1190. Contents of plan
    ``A plan filed under this subchapter shall include a brief history 
of the business operations of the small business enterprise debtor, a 
liquidation analysis, and projections with respect to the ability of 
the small business enterprise debtor to make payments under the 
proposed plan of reorganization.
``Sec. 1191. Deemed acceptance of plan
    ``For purposes of subsection (c) or (d) of section 1126 of this 
title, a holder of a claim or interest shall be deemed to have accepted 
a plan, if the holder fails to file a timely ballot after being 
notified by the small business enterprise debtor of--
            ``(1) the treatment that such holder will receive under the 
        proposed plan; and
            ``(2) the consequence under this section of the failure by 
        the holder to file a timely ballot.
``Sec. 1192. Status conference
    ``The court shall hold a status conference to further the 
expeditious and economical resolution of a case under this subchapter, 
and to encourage and facilitate the attainment of a consensual plan of 
reorganization.
``Sec. 1193. Confirmation of plan
    ``(a) Terms.--The court shall confirm a plan under this subchapter 
only if all of the requirements of section 1129(a), other than section 
1129(a)(15), of this title are met.
    ``(b) Exception.--Notwithstanding section 510(a) of this title, if 
all of the applicable requirements of section 1129(a), other than 
paragraphs (8), (10), and (15) thereof, are met with respect to a plan, 
the court, on request of the small business enterprise debtor, shall 
confirm the plan notwithstanding the requirements of such paragraphs, 
if the plan does not discriminate unfairly, and is fair and equitable, 
with respect to each class of claims or interests that is impaired 
under, and has not accepted, the plan.
    ``(c) Rule of Construction.--For purposes of this subsection, the 
condition that a plan be fair and equitable with respect to each class 
of claims or interests includes the following requirements:
            ``(1) With respect to a class of secured claims, the plan 
        meets the requirements of section 1129(b)(2)(A).
            ``(2) As of the effective date of the plan--
                    ``(A) the plan provides that all of the debtor's 
                projected disposable income to be received in the 3-
                year period, or such longer period not to exceed 5 
                years as the court may fix, beginning on the date that 
                the first payment is due under the plan will be applied 
                to make payments under the plan; or
                    ``(B) the value of the property to be distributed 
                under the plan in the 3-year period, or longer period 
                not to exceed 5 years as the court may fix, beginning 
                on the date on which the first distribution is due 
                under the plan is not less than the projected 
                disposable income of the debtor.
            ``(3) The small business enterprise debtor will be able to 
        make all payments under the plan, or there is a reasonable 
        likelihood that the small business enterprise debtor will be 
        able to make all payments under the plan, and the plan provides 
        appropriate remedies, that may include the liquidation of 
        nonexempt assets, to protect the holders of claims or interests 
        in the event that the payments are not made.
    ``(d) Definition of Disposable Income.--For purposes of this 
subsection, the term `disposable income' means the income which is 
received by the small business enterprise debtor and which is not 
reasonably necessary to be expended--
            ``(1) for the maintenance or support of the debtor or a 
        dependent of the debtor or for a domestic support obligation 
        that first becomes payable after the date of the filing of the 
        petition; or
            ``(2) for the payment of expenditures necessary for the 
        continuation, preservation, or operation of the business of the 
        debtor.
    ``(e) Special Rule.--Notwithstanding section 1129(a)(9)(A) of this 
title, a plan that provides for the payment through the plan of a claim 
of a kind specified in paragraph (2) or (3) of section 507(a) of this 
title may be confirmed under section 1193(b) of this title.
``Sec. 1194. Discharge
    ``If the plan of the small business enterprise debtor is confirmed 
under section 1193(b) of this title, as soon as practicable after 
completion by the debtor of all payments due within the first 3 years 
of the plan, or such longer period not to exceed 5 years as the court 
may fix, unless the court approves a written waiver of discharge 
executed by the debtor after the order for relief under this chapter, 
the court shall grant the small business enterprise debtor a discharge 
of all debts provided in section 1141(d)(1)(A) of this title, and all 
other debts allowed under section 503 of this title and provided for in 
the plan, except any debt--
            ``(1) on which the last payment is due after the first 3 
        years of the plan, or such other time not to exceed 5 years 
        fixed by the court; or
            ``(2) of the kind specified in section 523(a) of this 
        title.
``Sec. 1195. Modification of plan
    ``(a) Modification Before Confirmation.--The small business 
enterprise debtor may modify a plan at any time before confirmation of 
the plan, but may not modify such plan so that such plan as modified 
fails to meet the requirements of section 1122 and section 1123 of this 
title, with the exception of subsection (a)(8) of such section 1123. 
After the modification is filed with the court, the plan, as modified, 
becomes the plan.
    ``(b) Modification After Confirmation.--If a plan has been 
confirmed under section 1193(a), the small business enterprise debtor 
may modify such plan at any time after confirmation of such plan and 
before substantial consummation of such plan, but may not modify such 
plan so that such plan as modified fails to meet the requirements of 
section 1122 and section 1123 of this title, with the exception of 
subsection (a)(8) of such section 1123. Such plan, as modified under 
this subsection, becomes the plan only if circumstances warrant such 
modification and the court, after notice and a hearing, confirms such 
plan, as modified, under section 1193(a) of this title.
    ``(c) Certain Other Modifications.--If a plan has been confirmed 
under section 1193(b), the small business enterprise debtor may modify 
such plan at any time within 3 years, or such longer time not to exceed 
5 years, as fixed by the court, but may not modify such plan so that 
such plan as modified fails to meet the requirements of section 1193(b) 
of this title. Such plan, as modified under this subsection, becomes 
the plan only if circumstances warrant such modification and the court, 
after notice and a hearing, confirms such plan, as modified, under 
section 1193(b) of this title.
    ``(d) Holders of a Claim or Interest.--If a plan has been confirmed 
under section 1193(a), any holder of a claim or interest that has 
accepted or rejected such plan is deemed to have accepted or rejected, 
as the case may be, such plan as modified, unless, within the time 
fixed by the court, such holder changes the previous acceptance or 
rejection of such holder.
``Sec. 1196. Payments
    ``(a) Retention and Distribution by Trustee.--Payments and funds 
received by the trustee shall be retained by the trustee until 
confirmation or denial of confirmation of a plan. If a plan is 
confirmed, the trustee shall distribute any such payment in accordance 
with the plan. If a plan is not confirmed, the trustee shall return any 
such payments to the small business enterprise debtor, after 
deducting--
            ``(1) any unpaid claim allowed under section 503(b) of this 
        title;
            ``(2) any payment made for the purpose of providing 
        adequate protection of an interest in property due to the 
        holder of a secured claim; and
            ``(3) any fee owing to the trustee.
    ``(b) Other Plans.--If a plan is confirmed under section 1193(b) of 
this title, except as otherwise provided in the plan or in the order 
confirming the plan, the trustee shall make payments to creditors under 
the plan.
    ``(c) Payments Prior to Confirmation.--Prior to confirmation of a 
plan, the court, after notice and a hearing, may authorize the trustee 
to make payments to the holder of a secured claim for the purpose of 
providing adequate protection of an interest in property.
``Sec. 1197. Transactions with professionals
    ``Notwithstanding section 327(a) of this title, a person is not 
disqualified for employment under section 327 of this title, by a small 
business enterprise debtor solely because such person holds a claim of 
less than $5,000 that arose prior to commencement of the case.''.

SEC. 3. CONFORMING AMENDMENTS.

    (a) Title 11.--Title 11, United States Code, is amended--
            (1) in section 103(h)--
                    (A) by striking ``Subchapter IV of'' and inserting 
                the following: ``Subchapter--
            ``(1) IV of''; and
                    (B) by striking the period at the end and inserting 
                the following: ``; and
            ``(2) V of chapter 11 of this title applies only in a case 
        under chapter 11 concerning a small business enterprise debtor 
        (as defined in section 1183) in which such debtor elects that 
        subchapter V of chapter 11 shall apply.'';
            (2) in section 322(a), by inserting ``1184,'' after 
        ``1163,'';
            (3) in section 326(a) insert ``, other than a case under 
        subchapter V of chapter 11'' after ``7 or 11'';
            (4) in section 326(b) insert ``subchapter V of chapter 11 
        or under'' after ``In a case under'';
            (5) in section 347--
                    (A) in subsection (a)--
                            (i) by inserting ``1196,'' after ``726,''; 
                        and
                            (ii) by inserting ``subchapter V of chapter 
                        11,'' after ``chapter 7,''; and
                    (B) in subsection (b), by inserting ``1196,'' after 
                ``1173,'';
            (6) in section 363(c)(1), by inserting ``1184, 1185,'' 
        after ``1108,'';
            (7) in section 364(a), by inserting ``1184, 1185'' after 
        ``1108,'';
            (8) in section 523(a), by inserting ``1194,'' after 
        ``1141,'';
            (9) in section 524--
                    (A) in subsection (a)--
                            (i) in paragraph (1), by inserting 
                        ``1194,'' after ``1141,''; and
                            (ii) in paragraph (3), by inserting 
                        ``1194'' after ``523,'';
                    (B) in subsection (c)(1), by inserting ``1194,'' 
                after ``1141,''; and
                    (C) in subsection (d), by inserting ``1194,'' after 
                ``1141,'';
            (10) in section 557(d)(3), by inserting ``1184,'' after 
        ``1104,''; and
            (11) in section 1146(a), by inserting ``or 1193'' after 
        ``1129''.
    (b) Title 28.--Title 28 United States Code, is amended--
            (1) in section 586(a)(3), by inserting ``(including 
        subchapter V of chapter 11)'' after ``7, 11'';
            (2) in section 586(b), by inserting ``subchapter V of 
        chapter 11 or under'' after ``cases under'';
            (3) in section 586(d)(1), by inserting ``subchapter V of 
        chapter 11 or under'' after ``cases under'' each place that 
        term appears;
            (4) in section 586(e)--
                    (A) in paragraph (1), by inserting ``subchapter V 
                of chapter 11 or under'' after ``cases under'';
                    (B) in paragraph (2), by inserting ``subchapter V 
                of chapter 11 or under'' after ``cases under'' each 
                place that term appears; and
                    (C) by adding at the end the following:
    ``(5) In the event that the services of the trustee are terminated 
upon substantial consummation under section 1184(c) of title 11, the 
court shall award compensation to the trustee consistent with services 
performed by the trustee and the limits on the compensation of the 
trustee established pursuant to section 586(e)(1) of this title.'';
            (5) in section 589b--
                    (A) in subsection (a)(1), by inserting ``subchapter 
                V of chapter 11 or under'' after ``cases under''; and
                    (B) in subsection (d)--
                            (i) by inserting ``subchapter V of chapter 
                        11 or under'' after ``trustees under''; and
                            (ii) in the undesignated matter following 
                        paragraph (8), by inserting ``subchapter V of 
                        chapter 11 or under'' after ``cases under''; 
                        and
            (6) in section 1930(a)(6), by inserting ``, other than 
        under subchapter V of that chapter 11,'' after ``chapter 11 of 
        title 11''.
                                 <all>