Bankruptcy Threshold Adjustment and Technical Corrections Act
Floor Speech
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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:
``(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.
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Mr. NEGUSE. 3823.
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.
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Mr. NEGUSE. 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.
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Mr. NEGUSE. 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.
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