U.S. Reps. Doug Collins (R-GA) and Tom Marino (R-PA) on Nov. 29 introduced the bipartisan Small Business Reorganization Act in the U.S. House of Representatives to improve the bankruptcy system for America’s small businesses while a similar bill was introduced in the U.S. Senate.
H.R. 7190, cosponsored by U.S. Rep. David Cicilline (D-RI), would amend Chapter 11 bankruptcies in the United States Code to address reorganization of small businesses, according to the text of the bill in the congressional record. The related bill in the Senate, S. 3689, was introduced by U.S. Sen. Chuck Grassley (R-IA) and cosponsored by U.S. Sen. Sheldon Whitehouse (D-RI).
“Small businesses are some of the best innovators in our local economies, and this bill would bring much-needed improvements to the bankruptcy code so that owner-operated businesses can recover from financial hardship and continue creating jobs,” said Rep. Collins.
Rep. Marino added that, “By reducing unnecessary procedural burdens, enhancing oversight, and increasing the debtors’ ability to negotiate, we will ensure quick and successful reorganization and provide small business the ability to restructure in a way that meets their needs.”
Chapter 11 in the U.S. bankruptcy code includes several provisions focused on small business debtors. However, Chapter 11 principally was designed for handling the bankruptcy reorganizations of multimillion-dollar companies that, in turn, have produced difficulties for small businesses, such as procedural roadblocks, according to statements released by the offices of Reps. Collins and Marino.
The legislation would address such issues by adding a new subchapter V to Chapter 11 that would decrease liquidations and increase recoveries to creditors.
Specifically, key provisions in the legislation would increase small business debtors’ ability to negotiate a successful reorganization and retain control of the business, reduce unnecessary procedural burdens and costs, while also ramping up oversight for faster reorganizations, according to the statements.
“The Small Business Reorganization Act is a tremendous step forward in streamlining bankruptcy procedures,” said Rep. Marino, who urged for timely consideration of the measure in both the House and Senate.
“Our economy depends on locally owned businesses to create good jobs, invest in our communities, and help hard-working Americans get ahead,” Rep. Cicilline said. “The Small Business Reorganization Act is an important step to ensuring that our bankruptcy system works for everyone by giving financially distressed small businesses the tools they need for a fresh start.”
Sen. Grassley, chairman of the U.S. Senate Judiciary Committee, which is reviewing S. 3689, said he and his colleagues worked with the National Bankruptcy Conference, the American Bankruptcy Institute and the National Conference of Bankruptcy Judges, among other stakeholders, to develop the legislation.
“A well-functioning bankruptcy system, specifically for small businesses, allows businesses to reorganize, preserve jobs, maximize the value of assets and ensure the proper allocation of resources,” he said. “To that end, I’ve been working to improve the bankruptcy code for decades and will continue that effort.”
H.R. 7190 has been referred to the U.S. House Judiciary Committee for consideration.