[Congressional Record Volume 168, Number 97 (Tuesday, June 7, 2022)]
[House]
[Pages H5260-H5262]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
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BANKRUPTCY THRESHOLD ADJUSTMENT AND TECHNICAL CORRECTIONS ACT
Mr. NEGUSE. Mr. Speaker, I move to suspend the rules and pass the
bill (S. 3823) to amend title 11, United States Code, to modify the
eligibility requirements for a debtor under chapter 13, and for other
purposes.
The Clerk read the title of the bill.
The text of the bill is as follows:
S. 3823
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 ``Bankruptcy Threshold
Adjustment and Technical Corrections Act''.
SEC. 2. BANKRUPTCY AMENDMENTS.
(a) Definition of Small Business Debtor.--Section
101(51D)(B) of title 11, United States Code, is amended--
(1) in clause (i), by inserting ``under this title'' after
``affiliated debtors''; and
(2) in clause (iii), by striking ``an issuer'' and all that
follows and inserting ``a corporation described in clause
(ii).''.
(b) Adjustments for Inflation.--Section 104 of title 11,
United States Code, is amended--
(1) in subsection (a), by inserting ``1182(1),'' after
``707(b),''; and
(2) in subsection (b), by inserting ``1182(1),'' after
``707(b),''.
(c) Who May Be a Debtor Under Chapter 13.--Section 109 of
title 11, United States Code is amended by striking
subsection (e) and inserting the following:
``(e) Only an individual with regular income that owes, on
the date of the filing of the petition, noncontingent,
liquidated debts of less than $2,750,000 or an individual
with regular income and such individual's spouse, except a
stockbroker or a commodity broker, that owe, on the date of
the filing of the petition, noncontingent, liquidated debts
that aggregate less than $2,750,000 may be a debtor under
chapter 13 of this title.''.
(d) Definition of Debtor.--Section 1182(1) of title 11,
United States Code, is amended to read as follows:
``(1) Debtor.--The term `debtor'--
``(A) subject to subparagraph (B), means a person engaged
in commercial or business activities (including any affiliate
of such person that is also a debtor under this title and
excluding a person whose primary activity is the business of
owning single asset real estate) that has aggregate
noncontingent liquidated secured and unsecured debts as of
the date of the filing of the petition or the date of the
order for relief in an amount not more than $7,500,000
(excluding debts owed to 1 or more affiliates or insiders)
not less than 50 percent of which arose from the commercial
or business activities of the debtor; and
``(B) does not include--
``(i) any member of a group of affiliated debtors under
this title that has aggregate noncontingent liquidated
secured and unsecured debts in an amount greater than
$7,500,000 (excluding debt owed to 1 or more affiliates or
insiders);
``(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 debtor that is an affiliate of a corporation
described in clause (ii).''.
(e) Trustee.--Section 1183(b)(5) of title 11, United States
Code, is amended--
(1) by striking ``possession, perform'' and inserting
``possession--
``(A) perform'';
(2) in subparagraph (A), as so designated--
(A) by striking ``, including operating the business of the
debtor''; and
(B) by adding ``and'' at the end; and
(3) by adding at the end the following:
``(B) be authorized to operate the business of the
debtor;''.
(f) Confirmation of Plan.--Section 1191(c) of title 11,
United States Code, is amended by striking paragraph (3) and
inserting the following:
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``(3)(A) The debtor will be able to make all payments under
the plan; or
``(B)(i) there is a reasonable likelihood that the debtor
will be able to make all payments under the plan; and
``(ii) 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.''.
(g) Technical Corrections to the Bankruptcy Administration
Improvement Act.--Section 589a of title 28, United States
Code is amended--
(1) in subsection (c) by striking ``subsection (a)'' and
inserting ``subsections (a) and (f)''; and
(2) in subsection (f)(1)--
(A) in the matter preceding subparagraph (A), by striking
``subsections (b) and (c)'' and inserting ``subsection
(b)(5)''; and
(B) in subparagraph (A), by inserting ``needed to offset
the amount'' after ``amounts''.
(h) Effective Date; Applicability.--
(1) In general.--Subsections (b) and (c) and the amendments
made by subsections (b) and (c) shall take effect on the date
of enactment of this Act.
(2) Retroactive application of certain amendments.--The
amendments made by subsections (a), (d), (e), and (f) shall
apply with respect to any case that--
(A) is commenced under title 11, United States Code, on or
after March 27, 2020; and
(B) with respect to a case that was commenced on or after
March 27, 2020 and before the date of enactment of this Act,
is pending on the date of enactment of this Act.
(3) Effective date of technical corrections to baia.--The
amendments made by subsection (g) shall take effect as if
enacted on October 1, 2021.
(i) Sunsets.--
(1) In general.--Effective on the date that is 2 years
after the date of enactment of this Act--
(A) subsection (e) of section 109 of title 11, United
States Code is amended to read as such subsection read on the
day before the date of enactment of this Act; and
(B) section 1182(1) of title 11, United States Code, is
amended to read as follows:
``(1) Debtor.--The term `debtor' means a small business
debtor.''.
(2) Amounts.--For purposes of applying subsection (e) of
section 109 of title 11, United States Code, as amended by
paragraph (1)(A), the amounts specified in such subsection
shall be the amounts that were in effect on the day before
the date of enactment of this Act.
The SPEAKER pro tempore (Mr. Veasey). Pursuant to the rule, the
gentleman from Colorado (Mr. Neguse) and the gentleman from Oregon (Mr.
Bentz) each will control 20 minutes.
The Chair recognizes the gentleman from Colorado.
General Leave
Mr. NEGUSE. Mr. Speaker, I ask unanimous consent that all Members
have 5 legislative days to revise and extend their remarks and include
extraneous material on S. 3823.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Colorado?
There was no objection.
Mr. NEGUSE. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank Senator Durbin and Senator Grassley for their
work on this bill. I also thank my colleague on the other side of the
aisle, Representative Cline, for being the Republican lead on the bill.
The Bankruptcy Threshold Adjustment and Technical Corrections Act
shows that we can still come together in a bipartisan and bicameral way
and make commonsense changes to the law that help small businesses on
Main Street and everyday Americans.
Before the COVID-19 pandemic, Mr. Speaker, many sole proprietors and
middle-class families who live in high cost-of-living areas were
ineligible to receive chapter 13 bankruptcy protections because the
debt limits were far too low. For families forced into bankruptcy who
wanted to keep their homes, vehicles, or any essential property, and
were willing to pay off their debts under court supervision, chapter 13
is their only lifeline. The alternative for these families can be
devastating. Many have lost everything, including their homes.
The story is similar for small businesses. In 2019, the American
Bankruptcy Institute's Commission on Consumer Bankruptcy found that the
artificially low chapter 13 limits were driving people away from the
relief that they needed, and they called on this Congress to act.
Sole proprietors who could otherwise save their businesses and
protect their families have been forced to liquidate everything because
they exceeded the debt limits of chapter 13.
The Small Business Reorganization Act of 2019, the SBRA, as the
Speaker pro tempore knows, created subchapter V in chapter 11
bankruptcy, a voluntary option for small businesses in need of
expedited bankruptcy relief. But that low debt limit meant that many
small businesses simply could not take advantage of the program.
The travesty of the pandemic really brought the need to increase
these debt limits into stark relief. The CARES Act raised the debt
limit threshold under the SBRA. That was done on a bipartisan basis by
this House. It provided important protections to families and
homeowners, but those provisions were temporary.
My office has been contacted by countless professionals from all over
the bankruptcy community expressing the need for this legislation. The
National Conference of Bankruptcy Judges, an association of the
bankruptcy judges of the United States, has said that the SBRA was one
of the best modifications to the Bankruptcy Code in recent years. It
assisted nearly 3,000 small businesses across the country that were in
need of expedited relief through the pandemic. The Office of the United
States Trustee Program also reported that more than half of these small
business debtors received successful outcomes through a confirmed
reorganization plan in 6 months or less.
Despite the success of this program, the debt limit increase under
the SBRA expired earlier this year, just a few months ago, on March 27,
2022, which created an environment of uncertainty and unpredictability
within the bankruptcy arena. Today's legislation retroactively restores
that higher debt limit and extends it for another 2 years, allowing
more businesses to take advantage of these protections under court
supervision.
This bill passed the Senate by unanimous consent, and I certainly
hope that we can get a similar level of bipartisan support here in the
House. This bill will make a big difference by allowing families to
keep their homes, vehicles, and livelihoods intact while they repay
their debt.
Mr. Speaker, I reserve the balance of my time.
Mr. BENTZ. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, S. 3823 would make modest and temporary changes to the
U.S. Bankruptcy Code.
First, the bill temporarily increases debt limits for small business
debtors under subchapter V of chapter 11 and for individual debtors
reorganizing debt under chapter 13.
Subchapter V of the Bankruptcy Code is a lower cost reorganization
bankruptcy option for small businesses. These businesses don't have
deep pockets, and traditional, expensive chapter 11 reorganizations may
not be feasible.
Subchapter V is a more affordable and streamlined approach, which can
lead to more successful reorganizations. That means that both debtors
and creditors should be better off because, hopefully, less of the
debtor's estate will go toward professional fees and more will be left
for the debtor's business and, ultimately, the creditors.
Subchapter V took effect in February 2020. At that time, the debt
limit for those wishing to utilize this more streamlined law was just
over $2.7 million. Due in part to expected trouble for small
businesses, the CARES Act and later legislation temporarily increased
the debt limit for subchapter V filers to $7.5 million. That temporary
increase sunsetted in March of this year. This bill again extends the
$7.5 million debt limit for another 2 years.
Likewise, the bill also changes the bankruptcy debt limits for
chapter 13, which is a way for eligible individuals, including sole
proprietors, to reorganize their debts. The bill removes the
distinction between secured and unsecured debt limits under chapter 13
and increases the overall debt limit for those who wish to file for
their individual protection from about $1.9 million to $2.75 million.
Like the adjustment to subchapter V, these changes to chapter 13
apply for only 2 years. Put simply, Americans are having a harder time
making ends meet due to what I think we would agree are mistakes made
under the Biden administration and Democrats in control of Congress.
Raising the debt limit will allow those suffering from these failed
policies to adjust their debts to fit the new
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realities of our economy, skyrocketing energy and input costs, not
enough workers, and more. A successful reorganization can leave both
debtors and creditors better off.
At the same time, we just don't have certain data about some of these
bankruptcy policy changes or their likely long-term effects. That is
why these changes to our Bankruptcy Code should be temporary.
An additional 2 years of normal post-pandemic bankruptcy activity
will give us a better understanding of the underlying policy issues and
will help guide the future design of our bankruptcy system.
It is also worth noting that this bill did not go through regular
order in the Judiciary Committee, so it did not benefit from robust
oversight or legislative hearings. Americans are best served when
Federal policy is made after careful and focused congressional
deliberation, something that would have occurred in regular order.
The bill makes clarifications to small business bankruptcies that
relate to eligibility, trustee responsibilities, and bankruptcy plan
requirements. These would be permanent. The bill also makes accounting-
related clarifications that will operate to improve the U.S. Trustee
System Fund.
Mr. Speaker, I reserve the balance of my time.
Mr. NEGUSE. Mr. Speaker, I yield 3 minutes to the distinguished
gentlewoman from Texas (Ms. Jackson Lee).
Ms. JACKSON LEE. Mr. Speaker, I thank the distinguished member of our
committee, Mr. Neguse, for his leadership joining with the Senate, and
I thank him for yielding, Mr. Speaker.
This is a fresh start. This is a new opportunity in important
bipartisan, bicameral legislation that Mr. Neguse has nurtured and
introduced and will ensure, under his leadership, that our bankruptcy
system works for the entrepreneurs, small businesses, homeowners, and
American families, who are the backbone of this country and of the
communities where they live and work.
Having the privilege of having served on the Judiciary Committee for
some time, I am reminded of the work that we have done, almost like a
puzzle putting together a better matrix for the American people to be
able to renew their lives even as they may have the necessity of filing
for bankruptcy.
If there is one fundamental principle of American bankruptcy law, it
is the promise of a fresh start, and the fresh start is
quintessentially an American idea. It is a promise that even when your
best efforts have failed, you are not a failure, and you will have a
chance to get back up and try again. It is a promise that your debts
will not destroy you.
Increasing the debt limit for small businesses electing to file for
bankruptcy under subchapter V of chapter 11 to $7.5 million is long
overdue.
Mr. Speaker, I particularly thank Mr. Neguse because really small
businesses across America have been raising this question, making the
point that it is impossible for them to survive with the previous cap
for individual chapter 11 filers of $2.75 million.
This legislation will provide much-needed certainty that the
bankruptcy system will be responsive to hardworking Americans and their
families trying to stay afloat in a world that can be turned upside
down by global economic shocks.
Just as I started, again, the filing of bankruptcy should not cause
one to never renew again. This legislation, with the leadership of Mr.
Neguse, gives our American businesspersons, homeowners, and others a
fresh start.
I ask my colleagues to support this legislation.
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Mr. NEGUSE. Mr. Speaker, I am prepared to close and I reserve the
balance of my time.
Mr. BENTZ. Mr. Speaker, I yield back the balance of my time.
Mr. NEGUSE. Mr. Speaker, I yield myself the balance of my time. I
will simply close by first thanking the distinguished chairwoman from
Texas (Ms. Jackson Lee), who is always so articulate and I am grateful
for her leadership and kind remarks.
I also thank Mr. Cicilline, the chairman of the subcommittee of
jurisdiction, whose leadership was pivotal; and as I mentioned before,
my Senate partners and Representative Cline.
At the end of the day, I think we have a real opportunity today to
honor American ingenuity, entrepreneurship, and innovation by providing
our small businesses across the United States in Main Street after Main
Street with the opportunity and the tools that they need to be able to
survive.
Mr. Speaker, I think this bill is a small step in that direction. It
is bipartisan. It passed the Senate unanimously, and I certainly hope
that it will pass this Chamber unanimously as well.
Mr. Speaker, I urge my colleagues to support the bill, and I yield
back the balance of my time.
Mr. CICILLINE. Mr. Speaker, I rise in strong support of S. 3823, the
``Bankruptcy Threshold Adjustment and Technical Corrections Act.''
This important bipartisan, bicameral legislation introduced by my
colleague, Congressman Neguse, will ensure that our bankruptcy system
works for the entrepreneurs, small businesses, homeowners, and American
families who are the backbone of this country and of the communities
where they live and work.
If there is one foundational principle of American bankruptcy law, it
is the promise of the ``fresh start.'' The fresh start is a
quintessentially American idea. It is the promise that even when your
best efforts have failed, you will have a chance to get back up and try
again. It is the promise that your debts will not destroy you.
By increasing the debt limit for small businesses electing to file
for bankruptcy under subchapter V of Chapter 11 to $7.5 million, and
for individual Chapter 13 filers to $2.75 million, this legislation
will provide much-needed certainty that the bankruptcy system will be
responsive to hardworking Americans and their families trying to stay
afloat in a world that can get turned upside down by global economic
shocks.
We all benefit from the fresh start. When it works as intended, it
boosts economic growth, reduces unemployment, and encourages innovation
and entrepreneurship. This legislation represents a major step toward
ensuring that our bankruptcy system makes good on that promise.
I thank my colleagues, Representatives Neguse and Cline, for their
leadership on this bill and for their work to ensure that small
businesses and families have meaningful access to the bankruptcy
process.
I urge my colleagues to support S. 3823.
The SPEAKER pro tempore. The question is on the motion offered by the
gentleman from Colorado (Mr. Neguse) that the House suspend the rules
and pass the bill, S. 3823.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds
being in the affirmative, the ayes have it.
Mr. ROY. Mr. Speaker, on that I demand the yeas and nays.
The SPEAKER pro tempore. Pursuant to section 3(s) of House Resolution
8, the yeas and nays are ordered.
Pursuant to clause 8 of rule XX, further proceedings on this motion
are postponed.
____________________