Federal lawmakers have introduced a bill that would require financially troubled companies filing for bankruptcy protection to use a courtroom close to their headquarters, resurrecting an issue that has divided leading presidential challengers, WSJ Pro Bankruptcy reported. The bipartisan bill introduced last week would send chapter 11 cases to courtrooms across the country and, in some instances, away from the popular New York and Delaware hubs. Current federal law allows companies to file for bankruptcy protection — enabling them to close locations, sell operations, renegotiate union contracts and cut debt — either where they are incorporated or where they operate much smaller affiliates. The bill, if successful, would mark the biggest change in decades to the corporate bankruptcy industry’s landscape. Rep. Zoe Lofgren (D-Calif.) said in a statement after introducing the bill with House co-sponsors Jim Sensenbrenner (R-Wis.), Charlie Crist (D-Fla.) and Gregory Steube (R-Fla.), that it would ensure that “employees, small businesses, and local communities that are most impacted by a chapter 11 bankruptcy are able to fully and fairly participate in proceedings.” The bill, called the Bankruptcy Venue Reform Act of 2019, would force companies to file for bankruptcy in a courtroom close to their principal place of business. And it would strengthen the public’s confidence in the bankruptcy system, its authors said. Supporters of the existing rules argue that the experienced judges in the two popular venues for bankruptcy filings can better handle complicated issues in a big case. Potential delays in the courtroom of a less experienced judge cost money that bankrupt companies don’t have, they have argued.
