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House leaders were scrambling to bring back enough legislators to form a quorum to pass a $2 trillion economic rescue package after a Republican lawmaker suggested he might object to holding the vote using a procedure that avoids putting members on the record, the Wall Street Journal reported. Rep. Thomas Massie (R., Ky.) told a local radio station that he would vote against the bill, and suggested that he might object to allowing the bill to pass by voice vote. If Massie forced a roll-call vote, the House would need a majority of the chamber — 216 votes — in order to proceed with a vote. Otherwise, voting would be delayed until enough lawmakers could return to Washington, D.C. “We have notified our Members of the possibility that the bill may not pass by voice vote,” the press office for House Majority Leader Steny Hoyer (D., Md.) said in a statement. “The Majority Leader’s Office has sent a notice to Members that if they are able and willing to be in Washington, DC by 10:00 a.m. tomorrow, they are encouraged to do so, while exercising all due caution.” House Minority Whip Steve Scalise (R., La.) echoed that sentiment. Many lawmakers had planned to stay away from the Capitol because of the risks of traveling during the coronavirus pandemic.

Congress’s federal aid package aimed at weakening the coronavirus pandemic’s economic sting has several features to help financially struggling individuals who turn to bankruptcy for relief, including a guarantee they won’t have to give up stimulus checks to pay off overdue bills, the Wall Street Journal reported. Most of the provisions in the stimulus bill brokered by Senate leaders this week are designed to prevent Americans from filing for bankruptcy protection. But the legislation, which was approved by the Senate on Wednesday and will be considered by the House today, also contains measures to protect struggling people and small businesses that do. One provision prevents people who file for bankruptcy protection from needing to turn over any federal money they receive from the stimulus package to cover past debts. The bankruptcy process requires borrowers to either turn over valuable possessions or pledge to repay a portion of their debt for several years before they can cancel the debt that remains.Nonpublic businesses with less than $7.5 million in debt can use the expedited process under the Senate legislation, up from the current threshold of about $2.8 million in debt. More than half of businesses that filed for chapter 11 protection between 2013 and 2017 had debt below $7.5 million and would benefit from the changes, according to University of Illinois Law Prof. Robert Lawless. Read more. (Subscription required.) 

Click here to read ABI’s press release on the CARES Act. 

The Senate included key provisions in the “Coronavirus Aid, Relief and Economic Security Act” (CARES Act) to provide financially distressed consumers and small businesses greater access to bankruptcy relief. The legislative package, which yesterday passed the Senate 96-0, provides a $2 trillion economic stimulus for U.S. industries and citizens faced with the challenges of the COVID-19 coronavirus. The legislation now goes to the House, where it is anticipated to be considered on Friday and signed shortly after by President Trump.

“Consumers and small businesses in dire need of financial relief due to the COVID-19 coronavirus pandemic will have greater access to the financial fresh start of bankruptcy thanks to this important legislation,” said ABI Executive Director Amy Quackenboss. “ABI commends the Senate’s expedited work, and we look forward to swift enactment of this important bipartisan legislation.”

Key bankruptcy provisions within Sect. 1113 of the CARES Act include:

• Amending the Small Business Reorganization Act of 2019 (SBRA) to increase the eligibility threshold for businesses filing under new subchapter V of chapter 11 of the U.S. Bankruptcy Code from $2,725,625 of debt to $7,500,000. The eligibility threshold will return to $2,725,625 after one year. The increased debt limit for struggling small businesses to access subchapter V reflects recommendations of ABI’s Commission to Study the Reform of Chapter 11.
• Amending the definition of “income” in the Bankruptcy Code for chapters 7 and 13 to exclude coronavirus-related payments from the federal government from being treated as “income” for purposes of filing bankruptcy.
• Clarifying that the calculation of disposable income for purposes of confirming a chapter 13 plan shall not include coronavirus-related payments.
• Explicitly permitting individuals and families currently in chapter 13 to seek payment plan modifications if they are experiencing a material financial hardship due to the coronavirus pandemic, including extending their payments for up to seven years after their initial plan payment was due.

The bankruptcy provisions of the CARES Act listed above sunset within a year of the legislation being enacted.

Additionally, Sect. 3513 of the legislative package provides temporary relief for federal student loan borrowers by requiring the Secretary of Education to defer student loan payments, principal, and interest for 6 months, through September 30, 2020, without penalty to the borrower for all federally owned loans. This provides relief for over 95 percent of student loan borrowers.

“ABI members are ready to utilize these tools to help consumers and small businesses struggling with overwhelming debts due to the economic fallout of the pandemic,” Quackenboss said.

SBRA became effective on Feb. 19, adding a new section to chapter 11, subchapter V, to provide a better path for small businesses to successfully restructure, reduce liquidations, save jobs and increase recoveries to creditors. Subchapter V of the new law is based on the recommendations contained in the Final Report of ABI’s Commission to Study the Reform of Chapter 11, a project that was funded by ABI’s Anthony H.N. Schnelling Endowment Fund. The provision of the CARES Act to temporarily increase to the debt limit set forth in SBRA aligns closely with the recommendation of ABI’s Chapter 11 Reform Commission to permanently increase the debt eligibility limit to $10 million. For more information and resources on SBRA, please visit www.abi.org/sbra.

Chapter 7 bankruptcy relief, available to consumers and business debtors, involves the sale of a debtor’s nonexempt assets by a chapter 7 trustee, who uses the proceeds of the sales to pay creditors in accordance with the rules outlined in the Bankruptcy Code.

Chapter 13 bankruptcy relief, available only to consumer debtors, enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.

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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.

Senate leaders and the Trump administration reached agreement today on a $2 trillion stimulus package to rescue the economy from the coronavirus assault, setting the stage for swift passage of the massive legislation through both chambers of Congress, the Washington Post reported. The legislation, unprecedented in its size and scope, aims to flood the economy with capital by sending $1,200 checks to many Americans, creating a $367 billion loan program for small businesses and setting up a $500 billion fund for industries, cities and states. Other provisions include a massive boost to unemployment insurance, $150 billion for state and local stimulus funds and $130 billion for hospitals. Senate Majority Leader Mitch McConnell (R., Ky.) said that the Senate would move to vote on the massive bill later today, setting up a rapid approval of legislation that dwarfs the annual discretionary budget Congress spends much of the year crafting and approving, according to the Wall Street Journal. House Speaker Nancy Pelosi (D., Calif.) said yesterday that she hoped to quickly approve the eventual Senate agreement, though objections from lawmakers could slow the process in that chamber.

The National Bankruptcy Conference (NBC) said that bankruptcy protections should be broadened for consumers and businesses to help ameliorate the financial damage stemming from the coronavirus, WSJ Pro Bankruptcy reported. To blunt the economic fallout from the pandemic, special bankruptcy protections should be made available to more small businesses and bankruptcy courts should have more leeway to aid struggling consumers, according to the NBC, an advisory body made up of scholars, lawyers and judges. The NBC’s recommendations, made in a letter on Sunday to top congressional leaders, is an acknowledgment from leading bankruptcy professionals that current restructuring laws aren’t equipped to handle the current pandemic. The letter comes as the Senate debates a rescue package of at least $1.6 trillion to help businesses and the public. A version of the legislation that failed on Sunday would provide $350 billion for small business loans that may be forgiven if companies use the money to keep workers on payroll, as well as direct payments to households that an outside group has estimated could cost $300 billion. The letter conceded that “even at its best,” U.S. bankruptcy law won’t prevent the loss of jobs and investments for borrowers and creditors stemming from the Covid-19 disease. The pandemic inevitably “will cause many bankruptcies,” despite extraordinary government measures, the letter said. The NBC recommended that Congress provide individuals and small businesses relief from financial obligations, at least temporarily, “to avoid massive numbers of both bankruptcies and economically untenable foreclosures.” A streamlined reorganization process designed to make bankruptcy easier and quicker for small businesses went into effect last month but only covers companies with no more than $2,725,625 in debt. The NBC recommended that increasing the debt threshold to $7.5 million or higher would bring relief to the “many thousands” of small businesses that will likely seek to reorganize and their owners, suppliers, employees and lenders. The NBC said the bankruptcy code’s chapter 13, which applies to individuals, should be modified to provide more than just allowing consumers to save their homes and motor vehicles from foreclosure. Consumer bankruptcy laws should allow for repayment plans to be modified “if a Covid-19 dislocation affects their income and ability to perform,” according to the letter. Read more.

Click here to view a full copy of the NBC letter. 

Senate leaders and the Trump administration neared bipartisan agreement Monday night on a massive stimulus bill that could inject $2 trillion into the economy to blunt the impacts of the coronavirus, the Washington Post reported. After hours of negotiations that wrapped up shortly before midnight, Senate Minority Leader Charles E. Schumer (D-N.Y.) and Treasury Secretary Steve Mnuchin prepared to leave the Capitol without a deal in hand, but optimistic they could announce one today. Mnuchin said that there are “still documents that are going to be reviewed tonight and are going to be turned around,” but added that he was “very hopeful” of a deal Tuesday morning. Overall, the legislation is aimed at flooding the economy with capital to revive businesses and households that have been knocked off course by fears about the virus’s rapid spread. Though details remained fluid, the legislation would include direct payments of $1,200 to many American adults and $500 to children, and would create roughly $850 billion in loan and assistance programs for businesses, states and cities. There would also be large spending increases for the unemployment insurance program, as well as hospitals and health-care providers that are being overwhelmed by the crisis. Democratic concerns have focused on a $500 billion funding program Republicans want to create for loans and loan guarantees, with some Democrats calling it a “slush fund” that lacks any oversight because the Treasury Department would have broad discretion over who receives the money. Asked about this yesterday, Trump responded, “I’ll be the oversight.”

Congressional lawmakers are feuding over a central component of the massive economic relief package being debated by the Senate, a battle that may threaten the enormous emergency aid package while reprising one of the most bitter political fights of the last decade, the Washington Post reported. The Trump administration and Senate Republicans have called for giving the Treasury Department the authority to disburse hundreds of billions of dollars in emergency federal loans to firms hurt by the economic impact of the coronavirus. Their initial proposals called for the fund to be worth $208 billion. But after a flurry of lobbying over the weekend, Senate Republicans’ legislation now calls for a $500 billion program that would award loans to states and cities as well as businesses, according to a copy of the most recent GOP proposal. Congressional Democrats have demanded the legislation include guardrails to prevent firms that receive the emergency aid from firing their workers or stripping them of their health care, among other asks by labor groups. They also are balking at giving Treasury Secretary Steven Mnuchin so much authority to determine which firms receive the assistance.