September 9, 2019
On Friday, August 23, 2019, the President signed into law the first major amendments to the United States Bankruptcy Code since 2005. These promise to change the legal landscape for creditors.
H.R. 2336, the “Family Farmer Relief Act of 2019,” which is effective immediately, updates chapter 12 of the Bankruptcy Code to increase the debt limit used to determine whether a family farmer is eligible for relief under chapter 12 from $4.4 million (current adjusted amount) to $10 million. It is anticipated this amendment will increase substantially the number of family farmers seeking chapter 12 relief, especially given the current distressed status of the agricultural economy.
H.R. 3311, the “Small Business Reorganization Act of 2019 ” (“SBRA”), which is effective February 19, 2020, establishes a new subchapter within chapter 11 of the Bankruptcy Code under which small business debtors (defined as a person in commercial or business activity with aggregate or noncontingent liquidated secured and unsecured debts as of its bankruptcy filing date of not more than $2,725,625, and excluding a person whose primary business is the owning or operating of real property) can reorganize using more simplified and expedited procedures. SBRA’s innovations include:
SBRA’s touted benefits are efficiency, low-cost, and the ability to confirm a plan over the objections of creditors so long as SBRA’s statutory requirements are met. It is anticipated that when SBRA becomes effective February 19, 2020, it may be selected by as many as half of debtors which previously would have filed “regular” chapter 11 cases. It is not anticipated that SBRA will significantly affect the interests of secured creditors.
H.R. 2938, the “Honoring American Veterans in Extreme Need Act of 2019” (“HAVEN Act”), which is effective immediately, excludes from the calculation of monthly income, for purposes of the Bankruptcy Code’s means test in consumer bankruptcy cases, Department of Veterans Affairs and the Department of Defense disability payments, thereby bringing the treatment of these payment in line with the Bankruptcy Code’s current exclusion of social security payments from means testing.
H.R. 3304, the “National Guard and Reservists Debt Relief Extension Act of 2019,” which is effective immediately, extends for 4 years, through December 18, 2023, the exemption from certain bankruptcy means-testing in consumer bankruptcy cases for qualifying members of reserve components of the Armed Forces and members of the National Guard who, after September 11, 2001, are called to active duty or to perform a homeland defense activity for not less than 90 days.
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