Bankruptcy Amendments

By Los Angeles Bankruptcy Attorney on July 13, 2019

Three narrow in scope bankruptcy amendments have been passed by both the US House of Representatives, and the US Senate, and are awaiting President Trump signing these 3 amendments into law. Bankruptcy press reports that President Trump is expected to sign these 3 bills into law, as the 3 bills had little to no opposition, in Congress:

1. H.R. 2938: Excludes VA and Department of Defense disability payments from the monthly income calculation used for bankruptcy means testing.
2. H.R. 2336: “H.R. 2336, the “Family Farmer Relief Act of 2019,” would increase the current debt limit used to determine whether a family farmer is eligible for relief under chapter 12 of the Bankruptcy Code from $4,411,400 to $10,000,000.”
3. H.R. 3311: “The principal features of H.R. 3311 consist of the following: (1) requiring the appointment of an individual to serve as the trustee in a chapter 11 case filed by a small business debtor, who would perform many of the same duties required of a chapter 12 trustee; (2) requiring such private trustee to monitor the debtor’s progress toward confirmation of a reorganization plan; and (3) authorizing the court to confirm a plan over the objection of the debtor’s creditors, providing such plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.

The bill also includes two provisions, not limited to small business chapter 11 cases, pertaining to preferential transfers. In sum, it specifies an additional criterion that a trustee must consider before commencing an action to recover a preferential transfer (i.e., a transfer of property by the debtor made before the filing of the bankruptcy case preferential to a creditor and to the detriment of creditors). The first provision would require the trustee to determine whether to exercise such authority based on reasonable due diligence in the circumstances of the case and take into account a party’s known or reasonably knowable affirmative defenses.

The second provision concerns the venue where such preferential transfer actions may be commenced. Current law requires this type of action to be commenced in the district where the defendant resides if the amount sought to be recovered by the action is less than $13,650.19 H.R. 3311 would increase this monetary limit to $25,000.”