Alexandria, Va. — The American Bankruptcy Institute (ABI) applauds the Senate’s swift passage yesterday of the amended S.3823, the “Bankruptcy Threshold Adjustment and Technical Corrections Act.” Sen. Charles Grassley (R-Iowa) had recently introduced the legislative substitute to raise the debt limit back to $7.5 million for small businesses electing to file for bankruptcy under subchapter V of chapter 11. Consistent with the recommendations of ABI’s Commission on Consumer Bankruptcy, the substitute also raises the debt limit for individual chapter 13 filings to $2.75 million and removes the distinction between secured and unsecured debt for that calculation. All provisions of the legislation will sunset two years after enactment. The legislation now moves to the House of Representatives for consideration.
Due to priorities and procedural issues, the Senate was not able to address S.3823 prior to the March 27 sunset of the $7.5 million eligibility limit for small businesses electing to file for bankruptcy under subchapter V of chapter 11. The debt-eligibility limit returned to the original $2,725,625 threshold on March 28 that had been established under the “Small Business Reorganization Act of 2019” (SBRA). In addition to providing a two-year extension of the subchapter V debt limit back to $7.5 million, the substitute bill also covers any subchapter V cases that were pending at the time of the March 27 sunset.
“ABI appreciates the swift passage by the Senate and the continued work of Senator Grassley to provide greater access for struggling small businesses and families to achieve a financial fresh start,” said ABI Executive Director Amy Quackenboss. “Providing an extension of the debt limit for subchapter V at $7.5 million and increasing the eligibility of individuals to access relief under chapter 13 provides a cost-effective and efficient path for more consumers and businesses to reorganize their finances.”
As a direct result of the work of ABI’s Commission to Study the Reform of Chapter 11, the Small Business Reorganization Act of 2019 (SBRA) became effective on February 19, 2020, to provide Main Street business debtors with a more streamlined path for restructuring their debts. Since then, more than 3,000 debtors have elected to file under subchapter V of chapter 11. In response to the economic distress caused by the COVID-19 pandemic, the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act; P.L. 116-136) was enacted on March 27, 2020, which increased the debt-eligibility limit from $2,725,625 to $7,500,000 for small businesses looking to file under the SBRA’s subchapter V. Congress extended the limit last year with the enactment of the “COVID-19 Bankruptcy Relief Extension Act of 2021,” but the threshold returned to $2,725,625 on March 27.
Sen. Grassley (R-Iowa) originally introduced the bipartisan S.3823 on March 14, aiming to make the subchapter V debt limit permanent at $7.5 million and index it to inflation, increase the chapter 13 debt limit to $2.75 million and remove the distinction between secured and unsecured debt in that calculation, make Small Business Reorganization Act technical amendments, and make Bankruptcy Administration Improvement Act technical amendments. Senate Judiciary Chair Richard Durbin (D-Ill.) and Sens. Sheldon Whitehouse (D-R.I.) and John Cornyn (R-Texas) co-sponsored both the legislation and the substitute.
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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org.
Student loan companies will face consequences if they mislead borrowers and collect on private debt that has been discharged by a bankruptcy court, according to a letter sent by the country’s top consumer watchdog to Sen. Dick Durbin (D-Ill.) that was obtained by Yahoo Finance. "I am deeply concerned that borrowers are burdened by decades-old private student loan debt and potentially unlawful collection efforts," Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra stated in the March 8 letter. "I have directed CFPB staff to closely scrutinize these issues, including whether companies are making false representations." Senators led by Durbin and Sherrod Brown (D-Ohio) previously raised concerns to the CFPB over a report from the Student Borrower Protection Center (SPBC) that found student loan servicers misrepresented the possibility of discharging certain private student loans through bankruptcy proceedings. While “qualified loans,” those used to finance higher education at an institution that qualifies for federal student aid, require borrowers to prove an "undue hardship" to discharge the debt in bankruptcy, roughly $50 billion in debt held by 2.6 million borrowers is considered “unqualified” and therefore doesn’t have this requirement. According to the SBPC, student loan servicers in some cases did not acknowledge discharge orders from bankruptcy proceedings and misled borrowers by telling them that their debt was not actually discharged.
An attorney who's admitted to a federal bribery charge for his role in the ongoing Los Angeles Department of Water and Power corruption investigation has asked a bankruptcy judge in Arizona for permission to take a deposition of LA City Attorney Mike Feuer, NBCLosAngeles.com reported. Paul O. Paradis, who entered a guilty plea in Los Angeles in January in the bribery case, made the request under a court rule that could allow Feuer's sworn testimony, and the discovery of a variety of records, to take place before it would typically be allowed in pretrial proceedings. The judge yesterday denied the special request, but said Feuer's testimony and documents would likely be relevant and part of regular discovery that takes place in the bankruptcy proceedings. Paradis filed for bankruptcy and the City of Los Angeles filed a related lawsuit seeking to recover millions of dollars paid to Paradis through an allegedly corrupt contract. Paradis' attorney, Alan Meda, told the court Tuesday that he and his client requested the special discovery procedure because they're focused on learning more about a Dec. 1, 2017 meeting, at which officials in the City Attorney's Office allegedly discussed how to cover up legal misconduct in the handling of the lawsuits that stemmed from the LA DWP's excessive billing debacle.
The total 36,049 bankruptcy filings for March represented a 34 percent increase over the 26,993 filings during the previous month of February, according to data provided by Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Similarly, the 34,244 total noncommercial filings for March represented a 34 percent increase from the February 2022 noncommercial filing total of 25,565. The 1,805 total commercial filings in March represented a 26 percent increase from the 1,428 total commercial filings during the previous month. Commercial chapter 11 filings increased 38 percent in March to 292 from the 203 commercial chapter 11 filings in February. Small business filings, captured as subchapter V elections within chapter 11, increased 51 percent to 178 in March from 118 in February.
April 5, 2022— The total 36,049 bankruptcy filings for March represented a 34 percent increase over the 26,993 filings during the previous month of February, according to data provided by Epiq Bankruptcy, the leading provider of U.S. bankruptcy filing data. Similarly, the 34,244 total noncommercial filings for March represented a 34 percent increase from the February 2022 noncommercial filing total of 25,565. The 1,805 total commercial filings in March represented a 26 percent increase from the 1,428 total commercial filings during the previous month. Commercial chapter 11 filings increased 38 percent in March to 292 from the 203 commercial chapter 11 filings in February. Small business filings, captured as subchapter V elections within chapter 11, increased 51 percent to 178 in March from 118 in February.
“March is typically the month with the largest number of new bankruptcy filings on an annual basis,” says Chris Kruse, senior vice president at Epiq. “We continue to watch closely the bankruptcy activity as we emerge from the global pandemic and expect a return to a more active market in the months to come.”
The 81 subchapter V elections filed during the week of March 21 represented the highest weekly total ever, eclipsing the previous record of 71 filed during the same week last year. The spike was in advance of the debt-eligibility limit returning from the expanded amount of $7.5 million first established under the CARES Act of 2020 to the original $2,725,625 threshold on March 28 established under the Small Business Reorganization Act of 2019. Due to priorities and procedural issues, the Senate was not able to address legislation prior to the March 27 sunset to permanently set the subchapter V eligibility limit at $7.5 million. Work on a substitute bill is underway on Capitol Hill to permanently restore the eligibility limit back to $7.5 million and cover any subchapter V cases that were pending at the time of the March 27 sunset. Consistent with the recommendations of ABI’s Commission on Consumer Bankruptcy, the substitute also continues to push for the debt limit for individual chapter 13 filings to be increased to $2.75 million and remove the distinction between secured and unsecured debt for that calculation.
“Amid rising interest rates, growing inflation concerns, worker shortages and supply chain challenges, access to bankruptcy is imperative for struggling consumers and businesses,” said ABI Executive Director Amy Quackenboss. “Congressional consideration of legislation permanently making both the expanded eligibility limits for small businesses electing to file for subchapter V under chapter 11, and consumers looking to access chapter 13, would give more families and small businesses the chance at a financial fresh start.”
For the first calendar quarter of 2022 (January 1-March 31), the 89,252 total bankruptcy filings represented a 17 percent decrease from the 107,043 total filings during the same period last year in the midst of the pandemic. Noncommercial filings also decreased 16 percent to 84,510 filings in the first quarter of 2022 from 100,682 noncommercial filings during the same period in 2021. Total overall commercial bankruptcies decreased 25 percent in the first quarter of 2022, as the 4,742 filings were down from the 6,361 commercial filings during the first quarter of 2021. Total commercial chapter 11 filings dipped 43 percent to 720 during the first calendar quarter of 2022 from the 1,272 total commercial chapter 11s during the same period in 2021. Subchapter V elections for small businesses increased slightly, as the 399 filings in Q1 2022 were up 8 percent from the 368 filed during Q1 2021.
ABI has partnered with Epiq Bankruptcy to provide the most current bankruptcy filing data for analysts, researchers, and members of the news media. Epiq Bankruptcy is the leading provider of data, technology, and services for companies operating in the business of bankruptcy. Its new Bankruptcy Analytics subscription service provides on-demand access to the industry’s most dynamic bankruptcy data, updated daily. Learn more at https://bankruptcy.epiqglobal.com/analytics.
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Epiq Bankruptcy is a division of Epiq, a global technology-enabled services leader to the legal services industry and corporations that takes on large-scale, increasingly complex tasks for corporate counsel, law firms, and business professionals with efficiency, clarity, and confidence. Clients rely on Epiq to streamline the administration of business operations, class action and mass tort, court reporting, eDiscovery, regulatory, compliance, restructuring, and bankruptcy matters. Epiq subject-matter experts and technologies create efficiency through expertise and deliver confidence to high-performing clients around the world. Learn more at https://www.epiqglobal.com.
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 10,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abi.org. For additional conference information, visit http://www.abi.org/calendar-of-events.
