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House Approves Small Business Reorganization Act of 2019 (H.R. 3311) and HAVEN Act (H.R. 2938)

Submitted by ckanon@abi.org on

Alexandria, Va. — The U.S. House of Representatives today passed the Small Business Reorganization Act of 2019 (H.R. 3311) and the HAVEN Act (H.R. 2938) by a voice vote. ABI testified in support of both bills.

Small businesses are a critical component of the U.S.’s overall economy, but find it extremely difficult to employ the tools of chapter 11 to successfully reorganize. The Small Business Reorganization Act of 2019 (SBRA), introduced by Reps. Ben Cline (R-Va.), David Cicilline (D-R.I.), Doug Collins (R-Ga.) and Steve Cohen (D-Tenn.), is inspired by the work of the National Bankruptcy Conference and ABI’s Commission to Study the Reform of Chapter 11.

“Chapter 11 doesn’t work for small and medium-sized businesses because the Bankruptcy Code (a) places unrealistic and artificial deadlines on [them], which do not give these companies an opportunity to restructure; (b) imposes substantial and costly disclosure and reporting requirements on these companies; (c) does not provide any tools that can help small businesses … create and implement an effective reorganization plan; and (d) makes it difficult for a small business owner to maintain an ownership interest in the business under the current Chapter 11,” ABI Commission Co-Chair Bob Keach (Bernstein Shur; Portland, Maine) testified before a House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law hearing on June 25, 2019.

The SBRA would add a new subchapter V to chapter 11 to address these problems, leading to more successful restructurings, reduced liquidations, saved jobs and increased recoveries to creditors. It adopts the current definition of a “small business debtor” as a person in commercial or business activity with an aggregate or noncontingent liquidated secured and unsecured debts as of its bankruptcy filing date of not more than $2,725,625.

A bipartisan companion bill is pending in the Senate.

The Honoring American Veterans in Extreme Need Act of 2019 (HAVEN Act) (H.R. 2938) was introduced in the House by Reps. Lucy McBath (D-Ga.) and Greg Steube (R-Fla.) and would exclude VA and DoD disability payments from the monthly income calculation used for bankruptcy means testing. The bill was included in the National Defense Authorization Act, which passed on June 27. ABI Veterans Affairs Task Force Member Holly Petraeus, a former assistant director of the Consumer Financial Protection Bureau, testified in favor of the bill on behalf of the Task Force before the House Judiciary Committee.

A bipartisan companion bill is pending in the Senate.

Since its inception, ABI’s Veterans’ Affairs Task Force has focused much of its attention on the Bankruptcy Code’s inequitable treatment of veterans’ benefits in consumer bankruptcy cases. While the Code excludes benefits received by individuals under the Social Security Act from the definition of “current monthly income” and thus from an individual’s “disposable income,” the Code provides no comparable exclusions for benefits received through the U.S. Department of Veterans Affairs or otherwise on account of a veteran’s service. This disparate treatment of veterans’ benefits presents significant hardship to some veterans, as explained in a July 2019 article in the ABI Journal.

“The Small Business Reorganization Act is a breakthrough for Main Street businesses to finally have the restructuring tools now available only to large companies,” said ABI Executive Director Samuel Gerdano. “With proper planning and execution, financially troubled small businesses can emerge from bankruptcy within months following a court-approved plan of reorganization. ABI applauds the House action today.”

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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 11,000 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. For additional conference information, visit http://www.abi.org/education-events.

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Equifax's $700M Data Breach Settlement Spurs Criticism, Calls for New Rules

Submitted by ckanon@abi.org on
Credit-reporting company Equifax Inc. will pay up to $700 million to settle claims it broke the law during a massive 2017 data breach and to repay harmed consumers, in a landmark settlement that was nonetheless criticized by consumer advocates and some lawmakers who called for stricter regulation, Reuters reported. While it was the largest-ever settlement for a data breach, they said that the amount was still too small for the millions of Americans affected, and worried it could prove difficult for consumers to be repaid. The agreement also spurred multiple lawmakers to renew calls for legislation giving consumers more control over their personal information. “This settlement is just a drop in the bucket of what Equifax’s disregard for privacy could cost American families,” Sen. Sherrod Brown said in a statement. The settlement concludes multiple probes into Equifax by the Federal Trade Commission, the Consumer Financial Protection Bureau and nearly all state attorneys general. It also resolves pending class-action lawsuits against the company. Shares in Equifax, which is one of three major credit reporting companies, closed up 0.4 percent at $137.84 a share in trading on the New York Stock Exchange on Monday. Roughly 147 million people had information, including Social Security numbers and driver’s license data, compromised by the breach. The hackers have never been identified. The company will establish a $300 million restitution fund which could climb to $425 million depending on how many people file claims. Only consumers who can show they suffered direct costs following the breach, either from identity theft or by purchasing credit-monitoring services, will be eligible for restitution, capped at $20,000 per person. In addition, the company will pay a $175 million fine to the states and $100 million to the CFPB.
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Chicago Mayor Outlines Plan to Ease Punitive Ticketing, Towing and Booting Policy

Submitted by ckanon@abi.org on
Mayor Lori Lightfoot campaigned on a promise to bring equity to an overly punitive ticketing, towing and booting policy that has unfairly targeted minorities and forced thousands into bankruptcy, The Chicago Sun-Times reported. On Tuesday, the new mayor will outline her plan to start delivering on those promises. The mayor’s ticket-debt relief plan would (1) reinstate the 15-day grace period to renew vehicle stickers; (2) cap the fine for not renewing at $200 (it now doubles after 83 days); (3) cease “same-day or consecutive day ticketing” for violators; (4) create a six-month, universal payment plan with lower down payments and, for motorists in financial distress, more time to pay; (5) end driver’s license suspensions for non-moving violations; and (6) empower scofflaws whose vehicles are booted to request a 24-hour extension to pay their fines in full or get on a payment plan. During the campaign, Lightfoot promised to dramatically curtail the use of that dreaded wheel-locking device to prevent hard-pressed motorists from losing their wheels and, therefore, their ability to get to work and earn a living. That could mean “stopping the practice of booting cars for non-moving tickets, raising the threshold of when a car should be booted or limiting the city’s ability to sell impounded cars,” she said then.
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Trump Administration Proposal Would Push 3 Million Americans Off Food Stamps

Submitted by ckanon@abi.org on
The U.S. Department of Agriculture proposed new rules to limit access to food stamps for households with savings and other assets, a measure that officials said would cut benefits to about 3 million people, The Washington Post reported. U.S. Secretary of Agriculture Sonny Perdue and Acting Deputy Under Secretary Brandon Lipps said that the proposed new rules for the Supplemental Nutritional Assistance Program (SNAP) were aimed at ending automatic eligibility for those who were already receiving federal and state assistance. “This proposal will save money and preserve the integrity of the program,” Perdue said. “SNAP should be a temporary safety net.” About 40 million low-income people received SNAP benefits in 2018. Forty-three states routinely grant eligibility to low-income people already receiving other government benefits, without undergoing income or asset tests. Lipps said the proposal would result in an annual budgetary savings of $2.5 billion and restrict less needy individuals from qualifying for benefits. USDA officials said that the proposal was aimed at closing a loophole that was famously exploited by a wealthy Minnesota man, Rob Undersander, who claims he received food stamps for 19 months despite owning significant assets such as property and bank accounts. Lipps said that the proposal aimed to make sure that beneficiaries are treated equally across all states, and that recipients’ geographic location should not dictate their benefit level. The USDA officials had no specifics on the financial cutoff for their proposal. Current rules give states latitude to raise SNAP income eligibility limits so that low-income families with housing and child care costs that consume a sizable share of their income can continue to receive help affording adequate food. This option also allows states to adopt less restrictive asset tests so that families, seniors and people with a disability can have modest savings or own their own home without losing SNAP benefits.
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Equifax to Pay Up to $700M in Data Breach Settlement

Submitted by ckanon@abi.org on
Equifax will pay up to $700 million to settle with the Federal Trade Commission and others over a 2017 data breach that exposed the Social Security numbers and other private information of nearly 150 million people, The Associated Press reported. The proposed settlement with the Consumer Financial Protection Bureau, if approved by the federal district court Northern District of Georgia, will provide up to $425 million in monetary relief to consumers, a $100 million civil money penalty and other relief. The bureau coordinated its investigation with the FTC and attorneys general from across the U.S. The announcement Monday confirms a report by The Wall Street Journal that the credit-reporting agency had reached a deal with the U.S.
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House Committee to Examine the Use of Alternative Data in Underwriting and Credit Scoring

Submitted by ckanon@abi.org on

The House Financial Services Committee's Task Force on Financial Technology will hold a hearing on Thursday at 10 a.m. EDT titled "Examining the Use of Alternative Data in Underwriting and Credit Scoring to Expand Access to Credit."

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Latest ABI Podcast Highlights Consumer Commission Recommendations on BAPCPA's Credit Counseling Requirement, Means Test Provisions

Submitted by jhartgen@abi.org on

Members of ABI's Commission on Consumer Bankruptcy recently discussed the recommendations in the Final Report focused on the Code's credit counseling and financial management course requirements, and means test provisions. The Commission's recommendations address provisions established by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) that made obtaining the financial fresh start of bankruptcy more challenging for consumer debtors. Retired Bankruptcy Judge Randall Dunn moderates the discussion with John Rao of the National Consumer Law Center, Ariane Holtschlag of the Law Office of William J. Factor, Ltd. and Wendell Sherk of SkerkLaw. Click here to listen. 

Click here to download your copy of the Final Report of the ABI Commission on Consumer Bankruptcy. 

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Court Administration
Consumer Bankruptcy
Consumer Debt
Discharge/Dischargeability

H.R. 3621, the "Student Borrower Credit Improvement Act"

Submitted by jhartgen@abi.org on

To amend the Fair Credit Reporting Act to remove adverse information for certain defaulted or delinquent private education loan borrowers who demonstrate a history of loan repayment, and for other purposes.

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