[Congressional Record Volume 165, Number 124 (Tuesday, July 23, 2019)]
[House]
[Pages H7217-H7220]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SMALL BUSINESS REORGANIZATION ACT OF 2019
Mr. CICILLINE. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 3311) to amend chapter 11 of title 11, United States Code,
to address reorganization of small businesses, and for other purposes,
as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 3311
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
Reorganization Act of 2019''.
SEC. 2. REORGANIZATION OF SMALL BUSINESS DEBTORS.
(a) In General.--Chapter 11 of title 11, United States
Code, is amended by adding at the end the following:
``SUBCHAPTER V--SMALL BUSINESS DEBTOR REORGANIZATION
``Sec. 1181. Inapplicability of other sections
``(a) In General.--Sections 105(d), 1101(1), 1104, 1105,
1106, 1107, 1108, 1115, 1116, 1121, 1123(a)(8), 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, paragraphs (1), (2), and (4) of section 1102(a)
and sections 1102(b), 1103, and 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 1191(b) of this title, section 1141(d) of this
title shall not apply, except as provided in section 1192 of
this title.
``Sec. 1182. Definitions
``In this subchapter:
``(1) Debtor.--The term `debtor' means a small business
debtor.
``(2) Debtor in possession.--The term `debtor in
possession' means the debtor, unless removed as debtor in
possession under section 1185(a) of this title.
``Sec. 1183. 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
of this title, then that individual shall serve as trustee in
any case under this subchapter. Otherwise, the United States
trustee shall appoint 1 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 the status conference under
section 1188 of this title and 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 debtor commences making timely
payments required by a plan confirmed under this subchapter;
``(5) if the debtor ceases to be a debtor in possession,
perform the duties specified in section 704(a)(8) and
paragraphs (1), (2), and (6) of section 1106(a) of this
title, including operating the business of the debtor;
``(6) if there is a claim for a domestic support obligation
with respect to the debtor, perform the duties specified in
section 704(c) of this title; and
``(7) facilitate the development of a consensual plan of
reorganization.
``(c) Termination of Trustee Service.--
``(1) In general.--If the plan of the debtor is confirmed
under section 1191(a) of this title, the service of the
trustee in the case shall terminate when the plan has been
substantially consummated, except that the United States
trustee may reappoint a trustee as needed for performance of
duties under subsection (b)(3)(C) of this section and section
1185(a) of this title.
``(2) Service of notice of substantial consummation.--Not
later than 14 days after the plan of the debtor is
substantially consummated, the debtor shall file with the
court and serve on the trustee, the United States trustee,
and all parties in interest notice of such substantial
consummation.
``Sec. 1184. 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), and (4) of section 1106(a) of this
title, of a trustee serving in a case under this chapter,
including operating the business of the debtor.
``Sec. 1185. 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
[[Page H7218]]
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 plan confirmed under this
subchapter.
``(b) Reinstatement.--On request of a party in interest,
and after notice and a hearing, the court may reinstate the
debtor in possession.
``Sec. 1186. Property of the estate
``(a) Inclusions.--If a plan is confirmed under section
1191(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 that 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, 12, or 13 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,
12, or 13 of this title, whichever occurs first.
``(b) Debtor Remaining in Possession.--Except as provided
in section 1185 of this title, a plan confirmed under this
subchapter, or an order confirming a plan under this
subchapter, the debtor shall remain in possession of all
property of the estate.
``Sec. 1187. Duties and reporting requirements of debtors
``(a) Filing Requirements.--Upon electing to be a debtor
under this subchapter, the debtor shall file the documents
required by subparagraphs (A) and (B) of section 1116(1) of
this title.
``(b) Other Applicable Provisions.--A debtor, in addition
to the duties provided in this title and as otherwise
required by law, shall comply with the requirements of
section 308 and paragraphs (2), (3), (4), (5), (6), and (7)
of section 1116 of this title.
``(c) Separate Disclosure Statement Exemption.--If the
court orders under section 1181(b) of this title that section
1125 of this title applies, section 1125(f) of this title
shall apply.
``Sec. 1188. Status conference
``(a) In General.--Except as provided in subsection (b),
not later than 60 days after the entry of the order for
relief under this chapter, the court shall hold a status
conference to further the expeditious and economical
resolution of a case under this subchapter.
``(b) Exception.--The court may extend the period of time
for holding a status conference under subsection (a) if the
need for an extension is attributable to circumstances for
which the debtor should not justly be held accountable.
``(c) Report.--Not later than 14 days before the date of
the status conference under subsection (a), the debtor shall
file with the court and serve on the trustee and all parties
in interest a report that details the efforts the debtor has
undertaken and will undertake to attain a consensual plan of
reorganization.
``Sec. 1189. Filing of the plan
``(a) Who May File a Plan.--Only the debtor may file a plan
under this subchapter.
``(b) Deadline.--The debtor shall file a plan not later
than 90 days after the order for relief under this chapter,
except that the court may extend the period if the need for
the extension is attributable to circumstances for which the
debtor should not justly be held accountable.
``Sec. 1190. Contents of plan
``A plan filed under this subchapter--
``(1) shall include--
``(A) a brief history of the business operations of the
debtor;
``(B) a liquidation analysis; and
``(C) projections with respect to the ability of the debtor
to make payments under the proposed plan of reorganization;
``(2) shall provide for the submission of all or such
portion of the future earnings or other future income of the
debtor to the supervision and control of the trustee as is
necessary for the execution of the plan; and
``(3) notwithstanding section 1123(b)(5) of this title, may
modify the rights of the holder of a claim secured only by a
security interest in real property that is the principal
residence of the debtor if the new value received in
connection with the granting of the security interest was--
``(A) not used primarily to acquire the real property; and
``(B) used primarily in connection with the small business
of the debtor.
``Sec. 1191. 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 paragraph (15) of that section, of this
title are met.
``(b) Exception.--Notwithstanding section 510(a) of this
title, if all of the applicable requirements of section
1129(a) of this title, other than paragraphs (8), (10), and
(15) of that section, are met with respect to a plan, the
court, on request of the 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 section,
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) of this
title.
``(2) As of the effective date of the plan--
``(A) the plan provides that all of the projected
disposable income of the debtor 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 such 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)(A)(i) The debtor will be able to make all payments
under the plan; or
``(ii) there is a reasonable likelihood that the debtor
will be able to make all payments under the plan; and
``(B) the plan provides appropriate remedies, which 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) Disposable Income.--For purposes of this section, the
term `disposable income' means the income that is received by
the debtor and that is not reasonably necessary to be
expended--
``(1) for--
``(A) the maintenance or support of the debtor or a
dependent of the debtor; or
``(B) 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
subsection (b) of this section.
``Sec. 1192. Discharge
``If the plan of the debtor is confirmed under section
1191(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 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. 1193. Modification of plan
``(a) Modification Before Confirmation.--The debtor may
modify a plan at any time before confirmation, but may not
modify the plan so that the plan as modified fails to meet
the requirements of sections 1122 and 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 1191(a) of this title, the debtor may
modify the plan at any time after confirmation of the plan
and before substantial consummation of the plan, but may not
modify the plan so that the plan as modified fails to meet
the requirements of sections 1122 and 1123 of this title,
with the exception of subsection (a)(8) of such section 1123.
The plan, as modified under this subsection, becomes the plan
only if circumstances warrant the modification and the court,
after notice and a hearing, confirms the plan as modified
under section 1191(a) of this title.
``(c) Certain Other Modifications.--If a plan has been
confirmed under section 1191(b) of this title, the debtor may
modify the 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 the plan so that the plan as modified fails to
meet the requirements of section 1191(b) of this title. The
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 1191(b) of this title.
``(d) Holders of a Claim or Interest.--If a plan has been
confirmed under section 1191(a) of this title, any holder of
a claim or interest that has accepted or rejected the plan is
deemed to have accepted or rejected, as the case may be, the
plan as modified, unless, within the time fixed by the court,
such holder changes the previous acceptance or rejection of
the holder.
``Sec. 1194. 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 debtor after deducting--
``(1) any unpaid claim allowed under section 503(b) of this
title;
[[Page H7219]]
``(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
1191(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. 1195. 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 debtor solely because that person holds a claim
of less than $10,000 that arose prior to commencement of the
case.''.
(b) Clerical Amendment.--The table of subchapters at the
beginning of chapter 11 of title 11, United States Code, is
amended by adding at the end the following:
``subchapter v--small business debtor reorganization
``1181. Inapplicability of other sections.
``1182. Definitions.
``1183. Trustee.
``1184. Rights and powers of a debtor in possession.
``1185. Removal of debtor in possession.
``1186. Property of the estate.
``1187. Duties and reporting requirements of debtors.
``1188. Status conference.
``1189. Filing of the plan.
``1190. Contents of plan.
``1191. Confirmation of plan.
``1192. Discharge.
``1193. Modification of plan.
``1194. Payments.
``1195. Transactions with professionals.''.
SEC. 3. PREFERENCES; VENUE OF CERTAIN PROCEEDINGS.
(a) Preferences.--Section 547(b) of title 11, United States
Code, is amended by inserting ``, based on reasonable due
diligence in the circumstances of the case and taking into
account a party's known or reasonably knowable affirmative
defenses under subsection (c),'' after ``may''.
(b) Venue of Certain Proceedings.--Section 1409(b) of title
28, United States Code, is amended by striking ``$10,000''
and inserting ``$25,000''.
SEC. 4. CONFORMING AMENDMENTS.
(a) Title 11.--Title 11, United States Code, is amended--
(1) in section 101--
(A) in paragraph (51C), by inserting ``and has not elected
that subchapter V of chapter 11 of this title shall apply''
after ``is a small business debtor''; and
(B) in paragraph (51D)--
(i) in subparagraph (A)--
(I) by striking ``or operating real property or activities
incidental thereto'' and inserting ``single asset real
estate''; and
(II) by striking ``for a case in which'' and all that
follows and inserting ``not less than 50 percent of which
arose from the commercial or business activities of the
debtor; and''; and
(ii) in subparagraph (B)--
(I) by striking the period at the end and inserting a
semicolon;
(II) by striking ``does not include any member'' and
inserting the following: ``does not include--
``(i) any member''; and
(III) by adding at the end the following:
``(ii) any debtor that is a corporation subject to the
reporting requirements under section 13 or 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m, 78o(d)); or
``(iii) any corporation that--
``(I) is subject to the reporting requirements under
section 13 or 15(d) of the Securities Exchange Act of 1934
(15 U.S.C. 78m, 78o(d)); and
``(II) is an affiliate of a debtor.'';
(2) in section 103--
(A) by redesignating subsections (i) through (k) as
subsections (j) through (l), respectively; and
(B) by inserting after subsection (h) the following:
``(i) Subchapter V of chapter 11 of this title applies only
in a case under chapter 11 in which a small business debtor
elects that subchapter V of chapter 11 shall apply.'';
(3) in section 322(a), by inserting ``1183,'' after
``1163,'';
(4) in section 326--
(A) in subsection (a), by inserting ``, other than a case
under subchapter V of chapter 11'' after ``7 or 11''; and
(B) in subsection (b), by inserting ``subchapter V of
chapter 11 or'' after ``In a case under'';
(5) in section 347--
(A) in subsection (a)--
(i) by inserting ``1194,'' after ``726,''; and
(ii) by inserting ``subchapter V of chapter 11,'' after
``chapter 7,''; and
(B) in subsection (b), by inserting ``1194,'' after
``1173,'';
(6) in section 363(c)(1), by inserting ``1183, 1184,''
after ``1108,'';
(7) in section 364(a), by inserting ``1183, 1184,'' after
``1108,'';
(8) in section 523(a), in the matter preceding paragraph
(1), by inserting ``1192'' after ``1141,'';
(9) in section 524--
(A) in subsection (a)--
(i) in paragraph (1), by inserting ``1192,'' after
``1141,''; and
(ii) in paragraph (3), by inserting ``1192,'' after
``523,'';
(B) in subsection (c)(1), by inserting ``1192,'' after
``1141,''; and
(C) in subsection (d), by inserting ``1192,'' after
``1141,'';
(10) in section 557(d)(3), by inserting ``1183,'' after
``1104,'';
(11) in section 1102(a), by striking paragraph (3) and
inserting the following:
``(3) Unless the court for cause orders otherwise, a
committee of creditors may not be appointed in a small
business case or a case under subchapter V of this
chapter.''; and
(12) in section 1146(a), by inserting ``or 1191'' after
``1129''.
(b) Title 28.--Title 28 United States Code, is amended--
(1) in section 586--
(A) in subsection (a)(3), by inserting ``(including
subchapter V of chapter 11)'' after ``7, 11'';
(B) in subsection (b), by inserting ``subchapter V of
chapter 11 or'' after ``cases under'' the first place it
appears;
(C) in subsection (d)(1), by inserting ``subchapter V of
chapter 11 or'' after ``cases under'' each place that term
appears; and
(D) in subsection (e)--
(i) in paragraph (1), by inserting ``subchapter V of
chapter 11 or'' after ``cases under'';
(ii) in paragraph (2), by inserting ``subchapter V of
chapter 11 or'' after ``cases under'' each place that term
appears; and
(iii) by adding at the end the following:
``(5) In the event that the services of the trustee in a
case under subchapter V of chapter 11 of title 11 are
terminated by dismissal or conversion of the case, or upon
substantial consummation of a plan under section 1183(c)(1)
of that title, 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 paragraph (1) of this subsection.'';
(2) in section 589b--
(A) in subsection (a)(1), by inserting ``subchapter V of
chapter 11 and'' after ``cases under''; and
(B) in subsection (d)--
(i) in the matter preceding paragraph (1), by inserting
``subchapter V of chapter 11 and'' after ``trustees under'';
and
(ii) in the undesignated matter following paragraph (8), by
inserting ``subchapter V of chapter 11 and'' after ``cases
under''; and
(3) in section 1930(a)(6)(A), by inserting ``, other than
under subchapter V,'' after ``chapter 11 of title 11''.
SEC. 5. EFFECTIVE DATE.
This Act and the amendments made by this Act shall take
effect 180 days after the date of enactment of this Act.
SEC. 6. DETERMINATION OF BUDGETARY EFFECTS.
The budgetary effects of this Act, for the purpose of
complying with the Statutory Pay-As-You-Go Act of 2010, shall
be determined by reference to the latest statement titled
``Budgetary Effects of PAYGO Legislation'' for this Act,
submitted for printing in the Congressional Record by the
Chairman of the House Budget Committee, provided that such
statement has been submitted prior to the vote on passage.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Rhode Island (Mr. Cicilline) and the gentleman from Virginia (Mr.
Cline) each will control 20 minutes.
The Chair recognizes the gentleman from Rhode Island.
General Leave
Mr. CICILLINE. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days to revise and extend their remarks and include
extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Rhode Island?
There was no objection.
Mr. CICILLINE. I yield myself such time as I may consume.
H.R. 3311, the Small Business Reorganization Act of 2019, is
legislation that I introduced with the gentleman from Virginia (Mr.
Cline), to make a series of reforms to current bankruptcy law, which
would streamline the financial reorganization of small businesses.
Small, locally-owned businesses are the economic lifeblood of our
communities. But according to the Small Business Administration, only
about 20 percent of small businesses survive after their first year.
It is essential that our bankruptcy system does not punish
entrepreneurship and investment by foreclosing opportunities for small
businesses to financially reorganize.
This gap in the Bankruptcy Code is primarily due to the fact that
this process was designed with large, complex corporations in mind, and
does not include adequate protections or safeguards for small
businesses.
H.R. 3311 addresses this shortcoming by requiring the appointment of
a
[[Page H7220]]
trustee to monitor these cases and giving cases greater flexibility to
approve small business reorganization plans in a fair and equitable
manner.
I urge my colleagues to support H.R. 3311, and I reserve the balance
of my time.
Mr. CLINE. Mr. Speaker, I yield myself such time as I may consume.
I rise in support of the bill. I want to thank the gentleman from
Rhode Island for his leadership on this issue.
The bankruptcy system is a critical component of our economy. It
provides an important step, an important safety net for households and
entrepreneurs when they need a fresh start. It also stabilizes and
encourages lending, because it is a tried-and-true way for creditors to
recover as much as feasible when things go wrong for borrowers.
It is particularly important that the Bankruptcy Code work for small
businesses. Small business owners are the backbone of communities
across our country. It is their risk-taking that drives the creation of
new jobs in America. When they need the Bankruptcy Code's help to
reorganize their debts and keep their businesses going, the Bankruptcy
Code should be there as a tool to help them.
That is why I am particularly happy that the House today considers
the Small Business Reorganization Act. This important bill offers long-
needed reform of Chapter 11 in the Bankruptcy Code to help small
businesses, and I am proud to introduce it, along with Chairman
Cicilline.
I want to thank the full committee chairman, Chairman Nadler, and
Ranking Member, Mr. Collins, for their support for this legislation and
for being original cosponsors this term.
Mr. Speaker, this bill promises to finally make Chapter 11 work for
the entrepreneurs whose small businesses are critical to life in
communities across this Nation, and I encourage all my colleagues to
support the bill.
I yield back the balance of my time.
Mr. CICILLINE. Mr. Speaker, in closing, I am proud to have introduced
H.R. 3311, the Small Business Reorganization Act of 2019 with the
gentleman from Virginia (Mr. Cline), and I thank him for his strong
leadership on this issue, as well as the gentleman from Georgia (Mr.
Collins).
This bipartisan legislation was unanimously approved by the Judiciary
Committee and will address gaps in our bankruptcy system to provide
financial relief to small businesses.
This legislation is supported by the nonpartisan National Bankruptcy
Conference, as well as the American Bankruptcy Institute. I urge my
colleagues on both sides of the aisle to pass H.R. 3311.
I yield back the balance of my time.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Rhode Island (Mr. Cicilline) that the House suspend the
rules and pass the bill, H.R. 3311, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
____________________