With small businesses across the country struggling in the wake of the recession, the Senate Judiciary Committee today approved bipartisan legislation by U.S. Senators Sheldon Whitehouse (D-RI) and Chuck Grassley (R-IA) that would help small businesses facing bankruptcy. The Small Business Reorganization Efficiency and Clarity Act would modify the Chapter 11 bankruptcy process to be more manageable for small businesses hoping to remain in business and preserve jobs.
"Chapter 11 was designed for large publicly-traded corporations and does not work for many small businesses," said Whitehouse. "Our bill is a first step in improving the process for small companies and would implement some important changes to make it more flexible. Providing viable small companies with a better reorganization process will help businesses maintain jobs."
"Judges, attorneys and businesses raised concerns. This bill responds with good, common sense changes to help small businesses in bankruptcy. It will also help us, the Congress, in determining whether future changes are needed," Grassley said. "The bill is a step in the right direction as we continue work going forward."
The Small Business Reorganization Efficiency and Clarity Act would:
* Give debtors and courts 45 additional days (total of 90) to confirm bankruptcy plans. While the current 45-day deadline was intended to expedite small business cases, it has proven to be an insufficient amount of time for many debtors and courts;
* Eliminate an ambiguous "catch all" reporting requirement that results in unnecessary filings and wasted attorney hours; and
* Allow small business debtors to retain pre-filing counsel and other professionals even if such professionals have small claims against the estate. It doesn't make sense to disqualify a lawyer familiar with a company from representing it just because the lawyer has a small claim.
The legislation would also direct the Government Accountability Office and the Administrative Office of U.S. Courts to report information on small business cases and to make recommendations for further reforms.