Title: Small Business Reorganization Act of 2019
Policy area: Finance and Financial Sector

Summary:
Small Business Reorganization Act of 2019
This bill creates new bankruptcy procedures for small businesses filing under Chapter 11 and otherwise revises provisions related to venue and trustee responsibilities in Chapter 11 bankruptcies.
For small businesses filing under these new procedures, the bill provides for the appointment of a trustee, sets forth requirements regarding the filing, contents, and confirmation of a plan of reorganization, and establishes the conditions of a discharge.
Among other things, the bill provides authority to the bankruptcy court to approve a reorganization plan for these small businesses over the objections of the creditors. Currently, creditors must generally vote to approve such a plan. Additionally, only a debtor is allowed to file a plan. Under current law, creditors may also submit plans for court approval. The bill also generally reduces the required disclosures for these small businesses.
The bill also provides additional standards a trustee must meet in order to void a preferential transfer for all Chapter 11 filers. (Preferential transfers generally occur when a debtor transfers property before filing bankruptcy that is beneficial to one creditor to the detriment of others.) Specifically, a trustee may only void such a transfer based on reasonable due diligence and must take into account a party's known or reasonably knowable affirmative defenses.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3311 Introduced in House (IH)]

<DOC>






116th CONGRESS
  1st Session
                                H. R. 3311

    To amend chapter 11 of title 11, United States Code, to address 
      reorganization of small businesses, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 18, 2019

Mr. Cline (for himself, Mr. Cicilline, Mr. Collins of Georgia, and Mr. 
    Cohen) introduced the following bill; which was referred to the 
                       Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
    To amend chapter 11 of title 11, United States Code, to address 
      reorganization of small businesses, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Reorganization Act of 
2019''.

SEC. 2. REORGANIZATION OF SMALL BUSINESS DEBTORS.

    (a) In General.--Chapter 11 of title 11, United States Code, is 
amended by adding at the end the following:

          ``SUBCHAPTER V--SMALL BUSINESS DEBTOR REORGANIZATION

``Sec. 1181. Inapplicability of other sections
    ``(a) In General.--Sections 105(d), 1101(1), 1104, 1105, 1106, 
1107, 1108, 1115, 1116, 1121, 1123(a)(8), 1123(c), 1127, 1129(a)(15), 
1129(b), 1129(c), 1129(e), and 1141(d)(5) of this title do not apply in 
a case under this subchapter.
    ``(b) Court Authority.--Unless the court for cause orders 
otherwise, paragraphs (1), (2), and (4) of section 1102(a) and sections 
1102(b), 1103, and 1125 of this title do not apply in a case under this 
subchapter.
    ``(c) Special Rule for Discharge.--If a plan is confirmed under 
section 1191(b) of this title, section 1141(d) of this title shall not 
apply, except as provided in section 1192 of this title.
``Sec. 1182. Definitions
    ``In this subchapter:
            ``(1) Debtor.--The term `debtor' means a small business 
        debtor.
            ``(2) Debtor in possession.--The term `debtor in 
        possession' means the debtor, unless removed as debtor in 
        possession under section 1185(a) of this title.
``Sec. 1183. Trustee
    ``(a) In General.--If the United States trustee has appointed an 
individual under section 586(b) of title 28 to serve as standing 
trustee in cases under this subchapter, and if such individual 
qualifies as a trustee under section 322 of this title, then that 
individual shall serve as trustee in any case under this subchapter. 
Otherwise, the United States trustee shall appoint 1 disinterested 
person to serve as trustee in the case or the United States trustee may 
serve as trustee in the case, as necessary.
    ``(b) Duties.--The trustee shall--
            ``(1) perform the duties specified in paragraphs (2), (5), 
        (6), (7), and (9) of section 704(a) of this title;
            ``(2) perform the duties specified in paragraphs (3), (4), 
        and (7) of section 1106(a) of this title, if the court, for 
        cause and on request of a party in interest, the trustee, or 
        the United States trustee, so orders;
            ``(3) appear and be heard at the status conference under 
        section 1188 of this title and any hearing that concerns--
                    ``(A) the value of property subject to a lien;
                    ``(B) confirmation of a plan filed under this 
                subchapter;
                    ``(C) modification of the plan after confirmation; 
                or
                    ``(D) the sale of property of the estate;
            ``(4) ensure that the debtor commences making timely 
        payments required by a plan confirmed under this subchapter;
            ``(5) if the debtor ceases to be a debtor in possession, 
        perform the duties specified in section 704(a)(8) and 
        paragraphs (1), (2), and (6) of section 1106(a) of this title, 
        including operating the business of the debtor;
            ``(6) if there is a claim for a domestic support obligation 
        with respect to the debtor, perform the duties specified in 
        section 704(c) of this title; and
            ``(7) facilitate the development of a consensual plan of 
        reorganization.
    ``(c) Termination of Trustee Service.--
            ``(1) In general.--If the plan of the debtor is confirmed 
        under section 1191(a) of this title, the service of the trustee 
        in the case shall terminate when the plan has been 
        substantially consummated, except that the United States 
        trustee may reappoint a trustee as needed for performance of 
        duties under subsection (b)(3)(C) of this section and section 
        1185(a) of this title.
            ``(2) Service of notice of substantial consummation.--Not 
        later than 14 days after the plan of the debtor is 
        substantially consummated, the debtor shall file with the court 
        and serve on the trustee, the United States trustee, and all 
        parties in interest notice of such substantial consummation.
``Sec. 1184. Rights and powers of a debtor in possession
    ``Subject to such limitations or conditions as the court may 
prescribe, a debtor in possession shall have all the rights, other than 
the right to compensation under section 330 of this title, and powers, 
and shall perform all functions and duties, except the duties specified 
in paragraphs (2), (3), and (4) of section 1106(a) of this title, of a 
trustee serving in a case under this chapter, including operating the 
business of the debtor.
``Sec. 1185. Removal of debtor in possession
    ``(a) In General.--On request of a party in interest, and after 
notice and a hearing, the court shall order that the debtor shall not 
be a debtor in possession for cause, including fraud, dishonesty, 
incompetence, or gross mismanagement of the affairs of the debtor, 
either before or after the date of commencement of the case, or for 
failure to perform the obligations of the debtor under a plan confirmed 
under this subchapter.
    ``(b) Reinstatement.--On request of a party in interest, and after 
notice and a hearing, the court may reinstate the debtor in possession.
``Sec. 1186. Property of the estate
    ``(a) Inclusions.--If a plan is confirmed under section 1191(b) of 
this title, property of the estate includes, in addition to the 
property specified in section 541 of this title--
            ``(1) all property of the kind specified in that section 
        that the debtor acquires after the date of commencement of the 
        case but before the case is closed, dismissed, or converted to 
        a case under chapter 7, 12, or 13 of this title, whichever 
        occurs first; and
            ``(2) earnings from services performed by the debtor after 
        the date of commencement of the case but before the case is 
        closed, dismissed, or converted to a case under chapter 7, 12, 
        or 13 of this title, whichever occurs first.
    ``(b) Debtor Remaining in Possession.--Except as provided in 
section 1185 of this title, a plan confirmed under this subchapter, or 
an order confirming a plan under this subchapter, the debtor shall 
remain in possession of all property of the estate.
``Sec. 1187. Duties and reporting requirements of debtors
    ``(a) Filing Requirements.--Upon electing to be a debtor under this 
subchapter, the debtor shall file the documents required by 
subparagraphs (A) and (B) of section 1116(1) of this title.
    ``(b) Other Applicable Provisions.--A debtor, in addition to the 
duties provided in this title and as otherwise required by law, shall 
comply with the requirements of section 308 and paragraphs (2), (3), 
(4), (5), (6), and (7) of section 1116 of this title.
    ``(c) Separate Disclosure Statement Exemption.--If the court orders 
under section 1181(b) of this title that section 1125 of this title 
applies, section 1125(f) of this title shall apply.
``Sec. 1188. Status conference
    ``(a) In General.--Except as provided in subsection (b), not later 
than 60 days after the entry of the order for relief under this 
chapter, the court shall hold a status conference to further the 
expeditious and economical resolution of a case under this subchapter.
    ``(b) Exception.--The court may extend the period of time for 
holding a status conference under subsection (a) if the need for an 
extension is attributable to circumstances for which the debtor should 
not justly be held accountable.
    ``(c) Report.--Not later than 14 days before the date of the status 
conference under subsection (a), the debtor shall file with the court 
and serve on the trustee and all parties in interest a report that 
details the efforts the debtor has undertaken and will undertake to 
attain a consensual plan of reorganization.
``Sec. 1189. Filing of the plan
    ``(a) Who May File a Plan.--Only the debtor may file a plan under 
this subchapter.
    ``(b) Deadline.--The debtor shall file a plan not later than 90 
days after the order for relief under this chapter, except that the 
court may extend the period if the need for the extension is 
attributable to circumstances for which the debtor should not justly be 
held accountable.
``Sec. 1190. Contents of plan
    ``A plan filed under this subchapter--
            ``(1) shall include--
                    ``(A) a brief history of the business operations of 
                the debtor;
                    ``(B) a liquidation analysis; and
                    ``(C) projections with respect to the ability of 
                the debtor to make payments under the proposed plan of 
                reorganization;
            ``(2) shall provide for the submission of all or such 
        portion of the future earnings or other future income of the 
        debtor to the supervision and control of the trustee as is 
        necessary for the execution of the plan; and
            ``(3) notwithstanding section 1123(b)(5) of this title, may 
        modify the rights of the holder of a claim secured only by a 
        security interest in real property that is the principal 
        residence of the debtor if the new value received in connection 
        with the granting of the security interest was--
                    ``(A) not used primarily to acquire the real 
                property; and
                    ``(B) used primarily in connection with the small 
                business of the debtor.
``Sec. 1191. Confirmation of plan
    ``(a) Terms.--The court shall confirm a plan under this subchapter 
only if all of the requirements of section 1129(a), other than 
paragraph (15) of that section, of this title are met.
    ``(b) Exception.--Notwithstanding section 510(a) of this title, if 
all of the applicable requirements of section 1129(a) of this title, 
other than paragraphs (8), (10), and (15) of that section, are met with 
respect to a plan, the court, on request of the debtor, shall confirm 
the plan notwithstanding the requirements of such paragraphs if the 
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.
    ``(c) Rule of Construction.--For purposes of this section, the 
condition that a plan be fair and equitable with respect to each class 
of claims or interests includes the following requirements:
            ``(1) With respect to a class of secured claims, the plan 
        meets the requirements of section 1129(b)(2)(A) of this title.
            ``(2) As of the effective date of the plan--
                    ``(A) the plan provides that all of the projected 
                disposable income of the debtor to be received in the 
                3-year period, or such longer period not to exceed 5 
                years as the court may fix, beginning on the date that 
                the first payment is due under the plan will be applied 
                to make payments under the plan; or
                    ``(B) the value of the property to be distributed 
                under the plan in the 3-year period, or such longer 
                period not to exceed 5 years as the court may fix, 
                beginning on the date on which the first distribution 
                is due under the plan is not less than the projected 
                disposable income of the debtor.
            ``(3)(A)(i) The debtor will be able to make all payments 
        under the plan; or
            ``(ii) there is a reasonable likelihood that the debtor 
        will be able to make all payments under the plan; and
            ``(B) the plan provides appropriate remedies, which may 
        include the liquidation of nonexempt assets, to protect the 
        holders of claims or interests in the event that the payments 
        are not made.
    ``(d) Disposable Income.--For purposes of this section, the term 
`disposable income' means the income that is received by the debtor and 
that is not reasonably necessary to be expended--
            ``(1) for--
                    ``(A) the maintenance or support of the debtor or a 
                dependent of the debtor; or
                    ``(B) a domestic support obligation that first 
                becomes payable after the date of the filing of the 
                petition; or
            ``(2) for the payment of expenditures necessary for the 
        continuation, preservation, or operation of the business of the 
        debtor.
    ``(e) Special Rule.--Notwithstanding section 1129(a)(9)(A) of this 
title, a plan that provides for the payment through the plan of a claim 
of a kind specified in paragraph (2) or (3) of section 507(a) of this 
title may be confirmed under subsection (b) of this section.
``Sec. 1192. Discharge
    ``If the plan of the debtor is confirmed under section 1191(b) of 
this title, as soon as practicable after completion by the debtor of 
all payments due within the first 3 years of the plan, or such longer 
period not to exceed 5 years as the court may fix, unless the court 
approves a written waiver of discharge executed by the debtor after the 
order for relief under this chapter, the court shall grant the debtor a 
discharge of all debts provided in section 1141(d)(1)(A) of this title, 
and all other debts allowed under section 503 of this title and 
provided for in the plan, except any debt--
            ``(1) on which the last payment is due after the first 3 
        years of the plan, or such other time not to exceed 5 years 
        fixed by the court; or
            ``(2) of the kind specified in section 523(a) of this 
        title.
``Sec. 1193. Modification of plan
    ``(a) Modification Before Confirmation.--The debtor may modify a 
plan at any time before confirmation, but may not modify the plan so 
that the plan as modified fails to meet the requirements of sections 
1122 and 1123 of this title, with the exception of subsection (a)(8) of 
such section 1123. After the modification is filed with the court, the 
plan as modified becomes the plan.
    ``(b) Modification After Confirmation.--If a plan has been 
confirmed under section 1191(a) of this title, the debtor may modify 
the plan at any time after confirmation of the plan and before 
substantial consummation of the plan, but may not modify the plan so 
that the plan as modified fails to meet the requirements of sections 
1122 and 1123 of this title, with the exception of subsection (a)(8) of 
such section 1123. The plan, as modified under this subsection, becomes 
the plan only if circumstances warrant the modification and the court, 
after notice and a hearing, confirms the plan as modified under section 
1191(a) of this title.
    ``(c) Certain Other Modifications.--If a plan has been confirmed 
under section 1191(b) of this title, the debtor may modify the plan at 
any time within 3 years, or such longer time not to exceed 5 years, as 
fixed by the court, but may not modify the plan so that the plan as 
modified fails to meet the requirements of section 1191(b) of this 
title. The plan as modified under this subsection becomes the plan only 
if circumstances warrant such modification and the court, after notice 
and a hearing, confirms such plan, as modified, under section 1191(b) 
of this title.
    ``(d) Holders of a Claim or Interest.--If a plan has been confirmed 
under section 1191(a) of this title, any holder of a claim or interest 
that has accepted or rejected the plan is deemed to have accepted or 
rejected, as the case may be, the plan as modified, unless, within the 
time fixed by the court, such holder changes the previous acceptance or 
rejection of the holder.
``Sec. 1194. Payments
    ``(a) Retention and Distribution by Trustee.--Payments and funds 
received by the trustee shall be retained by the trustee until 
confirmation or denial of confirmation of a plan. If a plan is 
confirmed, the trustee shall distribute any such payment in accordance 
with the plan. If a plan is not confirmed, the trustee shall return any 
such payments to the debtor after deducting--
            ``(1) any unpaid claim allowed under section 503(b) of this 
        title;
            ``(2) any payment made for the purpose of providing 
        adequate protection of an interest in property due to the 
        holder of a secured claim; and
            ``(3) any fee owing to the trustee.
    ``(b) Other Plans.--If a plan is confirmed under section 1191(b) of 
this title, except as otherwise provided in the plan or in the order 
confirming the plan, the trustee shall make payments to creditors under 
the plan.
    ``(c) Payments Prior to Confirmation.--Prior to confirmation of a 
plan, the court, after notice and a hearing, may authorize the trustee 
to make payments to the holder of a secured claim for the purpose of 
providing adequate protection of an interest in property.
``Sec. 1195. Transactions with professionals
    ``Notwithstanding section 327(a) of this title, a person is not 
disqualified for employment under section 327 of this title, by a 
debtor solely because that person holds a claim of less than $10,000 
that arose prior to commencement of the case.''.
    (b) Clerical Amendment.--The table of subchapters at the beginning 
of chapter 11 of title 11, United States Code, is amended by adding at 
the end the following:

          ``subchapter v--small business debtor reorganization

``1181. Inapplicability of other sections.
``1182. Definitions.
``1183. Trustee.
``1184. Rights and powers of a debtor in possession.
``1185. Removal of debtor in possession.
``1186. Property of the estate.
``1187. Duties and reporting requirements of debtors.
``1188. Status conference.
``1189. Filing of the plan.
``1190. Contents of plan.
``1191. Confirmation of plan.
``1192. Discharge.
``1193. Modification of plan.
``1194. Payments.
``1195. Transactions with professionals.''.

SEC. 3. PREFERENCES; VENUE OF CERTAIN PROCEEDINGS.

    (a) Preferences.--Section 547(b) of title 11, United States Code, 
is amended by inserting ``, based on reasonable due diligence in the 
circumstances of the case and taking into account a party's known or 
reasonably knowable affirmative defenses under subsection (c),'' after 
``may''.
    (b) Venue of Certain Proceedings.--Section 1409(b) of title 28, 
United States Code, is amended by striking ``$10,000'' and inserting 
``$25,000''.

SEC. 4. CONFORMING AMENDMENTS.

    (a) Title 11.--Title 11, United States Code, is amended--
            (1) in section 101--
                    (A) in paragraph (51C), by inserting ``and has not 
                elected that subchapter V of chapter 11 of this title 
                shall apply'' after ``is a small business debtor''; and
                    (B) in paragraph (51D)--
                            (i) in subparagraph (A)--
                                    (I) by striking ``or operating real 
                                property or activities incidental 
                                thereto'' and inserting ``single asset 
                                real estate''; and
                                    (II) by striking ``for a case in 
                                which'' and all that follows and 
                                inserting ``not less than 50 percent of 
                                which arose from the commercial or 
                                business activities of the debtor; 
                                and''; and
                            (ii) in subparagraph (B)--
                                    (I) by striking the period at the 
                                end and inserting a semicolon;
                                    (II) by striking ``does not include 
                                any member'' and inserting the 
                                following: ``does not include--
                            ``(i) any member''; and
                                    (III) by adding at the end the 
                                following:
                            ``(ii) any debtor that is a corporation 
                        subject to the reporting requirements under 
                        section 13 or 15(d) of the Securities Exchange 
                        Act of 1934 (15 U.S.C. 78m, 78o(d)); or
                            ``(iii) any corporation that--
                                    ``(I) is subject to the reporting 
                                requirements under section 13 or 15(d) 
                                of the Securities Exchange Act of 1934 
                                (15 U.S.C. 78m, 78o(d)); and
                                    ``(II) is an affiliate of a 
                                debtor.'';
            (2) in section 103--
                    (A) by redesignating subsections (i) through (k) as 
                subsections (j) through (l), respectively; and
                    (B) by inserting after subsection (h) the 
                following:
    ``(i) Subchapter V of chapter 11 of this title applies only in a 
case under chapter 11 in which a small business debtor elects that 
subchapter V of chapter 11 shall apply.'';
            (3) in section 322(a), by inserting ``1183,'' after 
        ``1163,'';
            (4) in section 326--
                    (A) in subsection (a), by inserting ``, other than 
                a case under subchapter V of chapter 11,'' after ``7 or 
                11''; and
                    (B) in subsection (b), by inserting ``subchapter V 
                of chapter 11 or'' after ``In a case under'';
            (5) in section 347--
                    (A) in subsection (a)--
                            (i) by inserting ``1194,'' after ``726,''; 
                        and
                            (ii) by inserting ``subchapter V of chapter 
                        11,'' after ``chapter 7,''; and
                    (B) in subsection (b), by inserting ``1194,'' after 
                ``1173,'';
            (6) in section 363(c)(1), by inserting ``1183, 1184,'' 
        after ``1108,'';
            (7) in section 364(a), by inserting ``1183, 1184,'' after 
        ``1108,'';
            (8) in section 523(a), in the matter preceding paragraph 
        (1), by inserting ``1192,'' after ``1141,'';
            (9) in section 524--
                    (A) in subsection (a)--
                            (i) in paragraph (1), by inserting 
                        ``1192,'' after ``1141,''; and
                            (ii) in paragraph (3), by inserting 
                        ``1192,'' after ``523,'';
                    (B) in subsection (c)(1), by inserting ``1192,'' 
                after ``1141,''; and
                    (C) in subsection (d), by inserting ``1192,'' after 
                ``1141,'';
            (10) in section 557(d)(3), by inserting ``1183,'' after 
        ``1104,'';
            (11) in section 1102(a), by striking paragraph (3) and 
        inserting the following:
            ``(3) Unless the court for cause orders otherwise, a 
        committee of creditors may not be appointed in a small business 
        case or a case under subchapter V of this chapter.''; and
            (12) in section 1146(a), by inserting ``or 1191'' after 
        ``1129''.
    (b) Title 28.--Title 28 United States Code, is amended--
            (1) in section 586--
                    (A) in subsection (a)(3), by inserting ``(including 
                subchapter V of chapter 11)'' after ``7, 11'';
                    (B) in subsection (b), by inserting ``subchapter V 
                of chapter 11 or'' after ``cases under'';
                    (C) in subsection (d)(1), by inserting ``subchapter 
                V of chapter 11 or'' after ``cases under'' each place 
                that term appears; and
                    (D) in subsection (e)--
                            (i) in paragraph (1), by inserting 
                        ``subchapter V of chapter 11 or'' after ``cases 
                        under'';
                            (ii) in paragraph (2), by inserting 
                        ``subchapter V of chapter 11 or'' after ``cases 
                        under'' each place that term appears; and
                            (iii) by adding at the end the following:
    ``(5) In the event that the services of the trustee in a case under 
subchapter V of chapter 11 of title 11 are terminated by dismissal or 
conversion of the case, or upon substantial consummation of a plan 
under section 1183(c)(1) of that title, the court shall award 
compensation to the trustee consistent with services performed by the 
trustee and the limits on the compensation of the trustee established 
pursuant to paragraph (1) of this subsection.'';
            (2) in section 589b--
                    (A) in subsection (a)(1), by inserting ``subchapter 
                V of chapter 11 and'' after ``cases under''; and
                    (B) in subsection (d)--
                            (i) in the matter preceding paragraph (1), 
                        by inserting ``subchapter V of chapter 11 and'' 
                        after ``trustees under''; and
                            (ii) in the undesignated matter following 
                        paragraph (8), by inserting ``subchapter V of 
                        chapter 11 and'' after ``cases under''; and
            (3) in section 1930(a)(6)(A), by inserting ``, other than 
        under subchapter V,'' after ``chapter 11 of title 11''.

SEC. 5. EFFECTIVE DATE.

    This Act and the amendments made by this Act shall take effect 180 
days after the date of enactment of this Act.
                                 <all>