Venue Reform Likely a ‘NonStarter’ in 115th U.S. Congress

Overshadowed on Election Day was that fact that, with the Republican Party maintaining of the majority in both houses of the U.S. Congress, committees responsible for potential changes to the U.S. Bankruptcy Reform will be essentially unchanged. This renders venue reform a virtual impossibility in 2017.

“Targeted, surgical, noncontroversial” federal bankruptcy changes appear very much in play, according to NACM Lobbyist Jim Wise, co-founder of Pace LLC in Washington, D.C. The areas of preferences and 503(b)(9) are the most likely to change to the benefit of unsecured creditors in the likelihood that such legislation catches on.

Grand-scale code changes, however, should also not be expected. The appetite to “crack open a complicated Bankruptcy Code” or take on something controversial is simply not apparent, Wise says. Among the more controversial changes would be limitations to venue shopping on the part of debtors in Chapter 11 cases. NACM recommended in its most recent Legislative Brief that Congress "require the debtor to file in the jurisdiction of its primary place of business or its principal assets within 180 days of a bankruptcy filing,” as it would allow more access to cases by businesses, employees and local vendors who are owed money, as well as have the case administered by a court that is familiar with the company and its operations.

Venue reform has garnered support from some federal lawmakers as recently as this spring, notably from those representing Texas and Iowa. However, significant change to venue language would divert many cases (re: revenue) from the areas with the two busiest and experienced (also most debtor-friendly in the minds of creditors) bankruptcy courts in the country: Delaware and the Southern District of New York. Discussions between lobbyists and congressional staffers from these areas on the topic did not prove fruitful this year, and no lawmakers from these areas with previous and continuing Judiciary Committee assignments of note lost seats on Nov. 8.

- Brian Shappell, CBF, CICP managing editor

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