Culhane Meadows partners Mette H. Kurth and Dan Mette of Delaware and New York offices, respectively, recently co-authored an article for New York Law Journal that outlines the potential impact of the Warren bankruptcy plan, should Biden win the election.
Here are a few excerpts from the article:
Bankruptcy reform is not a new topic. In 2005, the credit card industry secured the passage of The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which not only transformed consumer bankruptcies, making them more difficult and costly for individuals, but had far-reaching impacts on commercial bankruptcies under Chapter 11, making business reorganizations more challenging. In 2011, the American Bankruptcy Institute (ABI) formed a Commission to Explore Overhauling Chapter 11.
The Commission’s recommendations, published after three years and weighing in at 402 pages, was comprehensive. In 2018, the commission’s co-chair presented its findings to a Senate judiciary subcommittee. And in 2019, the ABI’s Commission on Consumer Bankruptcy unveiled recommendations for making the bankruptcy system more accessible for both financially struggling Americans and the professionals who serve them. And… nothing much has happened since.
Meanwhile, Senator Elizabeth Warren has been relentlessly pursuing bankruptcy reform for two decades. And notwithstanding her exit from the 2020 presidential race, she has persisted. By March, following regular policy meetings between Biden and Warren, Biden capitulated, adopting Warren’s comprehensive proposal, Fixing Our Bankruptcy System to Give People a Second Chance, renaming it the Biden Plan for Bankruptcy Reform, and ending their feud over BAPCPA. The proposals are driven by Warren’s empirical studies of American consumers and her dedication to ensuring that not only the American dream, but also America’s promise of a fresh start, are not lost to them. But the proposals could also impact commercial bankruptcy law and reverberate across our financial systems.
While Biden’s reforms are focused on consumer bankruptcy, not all the ABI’s recommendations for reforming Chapter 11 have been ignored. Last year, Congress passed the Small Business Reorganization Act, which gave more small businesses access to the bankruptcy system while also making numerous improvements to the way that their cases are handled. But an unprecedented number of middle market and big businesses are also in deep distress, jeopardizing American jobs and our prospects for economic recovery.
Luckily, we already know how to help them. The answers are in the report published by the ABI’s Commission to Explore Overhauling Chapter 11, which provides a comprehensive manual for additional reforms and related statutory provisions needed to better balance the goals of reorganizing business debtors and preserving jobs with the interests of creditors and stakeholders. With the American economy reeling from the pandemic, this is not just important but urgent.
Read their entire article HERE to learn more.
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