Following consultation with an assembled team of experienced credit professionals and bankruptcy practitioners, NACM's Bankruptcy Work Group recently submitted its suggested changes to the U.S. Bankruptcy Code to staff members at the House Judiciary Committee.
Following the introduction of a bill to alter Title 11 of the Bankruptcy Code by Rep. Jerrold Nadler (D-NY) and at the request of Judiciary Committee counsel, NACM set to work on making suggestions how to make the Code more conducive to economic recovery. Nadler's bill is called the Business Reorganization and Job Preservation Act of 2009, H.R. 1942, and would eliminate a trade creditor's right to a 20-day administrative priority claim under Section 503(b)(9) of the Code, alter Section 366 on Utility Service, amend Section 365(d)(4) on the deadline to assume or reject nonresidential leases to favor retail debtors and reduce trade creditor reclamation rights by restoring Section 546(c) to the form it was in prior to the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005.
The Bankruptcy Work Group found several of these changes objectionable and, in its suggested language, improves administrative claim rights by providing for immediate payment of administrative claims filed under Section 503(b)(9), maintains current reclamation rights and preserves the BAPCPA's previous language on utility service rights. The suggested language also shifts the burden of proof in a preference claim from a creditor to a trustee, alters Section 366 on executory contracts to make it more favorable to unsecured creditors and changes sections dealing with venue to be more favorable to unsecured creditors in both preference cases and bankruptcy filings.
Overall, the new language submitted by the Bankruptcy Work Group aims to restore the balance between debtors and creditors as well as the balance between unsecured and secured creditors, which has been unfairly tipped toward secured debtors. Inclusion of this language in the Bankruptcy Code would also aim to make unsecured creditors more likely to extend financing to struggling businesses in their hour of need, hopefully enabling ailing debtors to maintain jobs and reorganize properly.
Stay tuned to NACM's eNews and Business Credit magazine for more updates!
Jacob Barron, NACM staff writer