News: NACM News

Senate Bankruptcy Bill Would Limit “Forum Shopping”

Tuesday, February 27, 2018  
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On Jan. 8, 2018, Sens. John Cornyn (R-Texas) and Elizabeth Warren (D-Massachusetts) introduced S. 2282, the Bankruptcy Venue Reform Act of 2018. The bill is intended to address the issue of “forum shopping” in Chapter 11 bankruptcy cases.

Currently, bankruptcy law provides multiple venue options for filing bankruptcy under Chapter 11, including place of incorporation, principal place of business and assets, or where an affiliate has filed a case under Chapter 11. This has led to an increase in companies filing for bankruptcy outside of their home states, concentrating bankruptcy cases in a few districts.

“Forum shopping” prevents small businesses, employees, creditors and other stakeholders from fully participating in bankruptcy cases affecting them. Ensuring all creditor interests are protected and reforming forum shopping is a step in this direction. Do so strengthens the integrity and fairness of the bankruptcy system, according to the bill’s authors.

“Solving this issue would be a huge win,” said Lauren Wilson, vice president of Pace LLC, NACM’s federal lobbying firm. “For every bankruptcy filed, creditors would no longer necessarily have to go to the location where the organization is incorporated to fight the bankruptcy.”

Getting a bill of this nature introduced – especially by two powerful senators on opposite ends of the political spectrum – was a significant hurdle. The next step is moving the bill through the Senate Judiciary Committee.

“In the Senate, getting a bill introduced is the first step,” Wilson said. “Bankruptcy issues are very specific, and there are not many senators or congressional staff who understand this process. We must educate and develop support for our common-sense solutions to unfair bankruptcy practices. This is especially true when Senate leadership is increasingly calling for a more regular process for hearings and discussion. Critical to this process is the need for impacted interests like NACM members to have a voice in this legislation.”

As with most legislation, this bill faces several hurdles. Getting any bill through Congress during an election year is challenging. Plus, high-priority issues, including infrastructure and government funding take precedent for limited Senate floor time. The bill also faces opposition from officials in states that the current system favors, most significantly Delaware.

Delaware lawmakers issued a joint statement. “Denying American businesses the ability to file for bankruptcy in the courts of their choice would not only hurt Delaware’s economy, but also hurt businesses of all sizes and the national economy as a whole,” said Delaware Governor John Carney and Delaware’s Congressional Delegation. “Experienced bankruptcy judges are critical to ensuring that companies can restructure in a way that saves jobs and preserves value.”

To help build momentum, NACM members are encouraged to contact their senators to encourage signing on as co-sponsors. As elected officials seek to demonstrate their willingness to “reach across the aisle” and work with member of both political parties, this bill provides a great opportunity. The bills authors, Sens. Cornyn and Warren, often stand on opposite ends of issues under consideration, so their willingness to work together on this issue may help build support. Call or email your senator today to encourage their support and co-sponsorship of S. 2282, the Bankruptcy Venue Reform Act of 2018.

At NACM North Central’s Fresh Ground Networking Breakfast, Lauren Wilson will provide an on-the-ground overview of the current dynamics in Washington, D.C., and explain how legislation, including the new bankruptcy bill, is likely to affect commercial credit professionals. Fresh Ground will also feature an update on NACM National initiatives from President Robin Schauseil, and an interactive open forum to help attendees find solutions to their most pressing challenges. Learn more and register today.