Mr. Chairman, I’m pleased to have worked with Sen. Whitehouse on S.2370, the Small Business Reorganization Efficiency and Clarity Act. We worked hard on this language over the past year. The bill we put together eases some of the problems we heard about in small business bankruptcy cases. Judges, attorneys and businesses raised concerns and we listened.
The bill is a step in the right direction as we continue work going forward.
Congress has created a system for small business debtors to expedite their cases so making them less costly and more efficient. But for various reasons, not all small businesses are taking the path required in the Bankruptcy Code. This bill clarifies current requirements and provides a more efficient and workable process to help small businesses reorganize.
First, the bill increases the deadline for confirming a plan after filing. This means the burden on courts and small businesses, facing constrained time frames, will be eased. Second, this bill creates greater efficiencies for a small business debtor with regard to reporting requirements. The bill removes an ambiguous “catch-all” reporting requirement. Doing this provides greater certainty and clarity to the debtors, who otherwise would just “dump” paper on the court to ensure compliance. Third, the bill allows a small business debtor to retain professionals with claims of less than $5,000, for example their pre-petition attorney or accountant, after filing their petition. This will allow for more efficiencies and cost savings for small businesses that otherwise would have to hire new accountants or attorneys.
Finally, the bill gives courts clear authority to compel small business debtors to self-designate as a small business debtor. Congress removed the voluntary election in 2005. We made it mandatory for small businesses to apply the small business procedures. We’ve been told that in many instances, this isn’t the case. One bankruptcy expert, Professor Bob Lawless, has found that only about 37 percent of small business debtors use the small business procedures. These procedures are not supposed to be optional. Debtors and creditors know what the law says, but unfortunately, people aren’t following the law. This new provision in our bill provides clarity and certainty to the small business process. When Congress passes a law, we expect it to be followed. This bill ensures this will be the case going forward. Making debtors follow the law is not penalizing. Instead, we’re ensuring that all parties involved will know what procedures will apply when a case is filed.
Additionally, as Sen. Whitehouse has stated, our bill requires the GAO to report to Congress how the small business procedures work. This will be helpful to us as we continue to examine this issue going forward.
Again, I’m appreciative of the hard work Sen. Whitehouse and his staff have put into this bill. It’s a good, common sense approach that helps small businesses in bankruptcy. It will also help us, the Congress, in determining whether future changes are needed.