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Senate Considers New Bankruptcy Bill Geared toward Small Businesses

In 2010, the National Association of Credit Management (NACM) worked with Senator Sheldon Whitehouse (D-RI) and his staff on a bankruptcy reform bill geared toward expediting the Chapter 11 process for small businesses.

While that legislation went nowhere then, Whitehouse has redoubled his efforts to reform the bankruptcy process for smaller companies with a new bill. The Small Business Reorganization Efficiency and Clarity Act, S. 2370, introduced at the end of April without any fanfare or notice, is now set for markup today, May 24, in the Senate Judiciary Committee.

It's expected to be voted out of the committee by a bipartisan voice vote without amendments, due in part to its noncontroversial nature. Much of the bill stipulates a number of research requirements for the U.S. Comptroller General, the Administrative Office of the U.S. Courts and the Executive Office of U.S. Trustees, all of which will result in a report to Congress on small business bankruptcies no less than a year after the bill's enactment.

Changes the bill would make include doubling the deadline by which the court must confirm a small business reorganization plan, from 45 days to 90 days, and establishing a new category of "cause" that may be considered by the court in deciding whether to grant the debtor's motion to dismiss a Chapter 11 reorganization case or convert it to a Chapter 7 liquidation case—namely, "failure of a small business debtor to designate itself as a small business debtor." This last provision is similar in some ways to NACM's recommendations on Whitehouse's previous bill from the last Congress, and suggests that small businesses should be compelled to make use of the bankruptcy process designed specifically for them.

A full copy of the bill can be found here. Stay tuned to NACM's eNews and blog for forthcoming updates on NACM's activities and analysis of the bill.

- Jacob Barron, CICP, NACM staff writer, government affairs liaison