[Congressional Record Volume 149, Number 172 (Sunday, November 23, 2003)]
[Extensions of Remarks]
[Page E2440]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               SMALL BUSINESS BANKRUPTCY VENUE RELIEF ACT

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                         HON. RICHARD H. BAKER

                              of louisiana

                    in the house of representatives

                       Friday, November 21, 2003

  Mr. BAKER. Mr. Speaker, the recent bankruptcy of a large chemical 
company in Louisiana has alerted me to the difficulties that small 
businesses can face in bankruptcy proceedings. In the wake of this 
chemical company's bankruptcy, a number of small businesses in 
Louisiana found themselves defendants in preferential payment lawsuits 
brought by the bankruptcy trustee. Many of these companies were shocked 
that they would be accused of receiving preferential payments when they 
had had a long history of consistent business dealings with the 
chemical company. Not only were these businesses surprised by the 
lawsuits, but they were dismayed that they were forced to defend these 
lawsuits in Delaware. The burden of hiring an attorney in Louisiana and 
Delaware was significant and a number of these small businesses were 
forced to settle these meritless lawsuits to avoid the costs associated 
with a legal defense.
  I believe that we are placing these small businesses in an 
unacceptable position. Asking small businesses to pay several thousand 
dollars in legal fees or settlement fees is a significant burden for 
many of these businesses. It appears that in a number of cases, 
bankruptcy trustees realize the leverage they have on these small 
businesses and exploit this leverage. It costs little for the trustees 
to file suit against these small businesses and then the trustees have 
the luxury of adjudicating the lawsuits in the State they are working 
in. Authorizing penalties for frivolous lawsuits and changing the venue 
for preferential payments cases that fall below a meager $5,000 
threshold has done little to improve the situation for small 
businesses. I believe that we must force bankruptcy trustees to take a 
harder look at the merits of these preferential payments cases and we 
need to allow small businesses the courtesy of defending these lawsuits 
in the State in which they reside.
  For this reason, I have introduced the ``Small Business Bankruptcy 
Venue Relief Act.'' This legislation will allow small businesses of 
under 25 full-time employees to defend preferential payments claims in 
the State where they reside. In addition to lowering legal costs for 
these small businesses, this legislation will force bankruptcy trustees 
to give greater consideration to the merits of preferential payment 
claims against small businesses.
  Mr. Speaker, I hope that members will consider the plight of small 
businesses and cosponsor the ``Small Business Bankruptcy Venue Relief 
Act.''

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