What This Bill Does
This bill changes the rules for where bankruptcy cases can be filed in federal court. It aims to stop companies from filing bankruptcy in distant districts far from where they actually do business, a practice called "forum shopping." The bill narrows the choices of which court can hear a bankruptcy case.
Who It Affects
Companies and individuals filing for bankruptcy, small businesses, employees, retirees, creditors, federal district courts, bankruptcy courts, attorneys representing the government, and other stakeholders in bankruptcy cases.
Key Provisions
• Companies subject to federal stock market reporting requirements must use the address from their last annual report as their principal place of business when filing for bankruptcy. (Sec. 3(a))
• Bankruptcy cases can only be filed in a district where the person or company filing has lived, worked, or kept their main assets for at least 180 days before filing, or longer than in any other district. (Sec. 3(b))
• Companies can file in a district where an affiliate (a related company) already has a pending bankruptcy case, but only if that earlier case was properly filed. (Sec. 3(b)(3))
• The company filing for bankruptcy must prove by clear evidence that the court location is proper if someone challenges it. (Sec. 3(d))
• Courts must decide within 14 days whether to allow a request to move a bankruptcy case to a different court. (Sec. 3(b))
What Changes
If this bill becomes law, companies lose several options for choosing where to file bankruptcy. They cannot use their incorporation location or an affiliate's bankruptcy location as freely as before. Changes in company ownership or location made within one year before filing or made specifically to choose a court will not be allowed. Courts must immediately dismiss or transfer cases filed in the wrong location.
Important Definitions
• "Principal place of business" means the address of the main executive office listed in a company's last annual report, unless clear evidence shows otherwise. (Sec. 3(a))
• "Principal assets" do not include cash or money equivalents. (Sec. 3(c)(2))
• "Affiliate" means a company that another company directly or indirectly owns, controls, or holds 50 percent or more of the voting stock in, or is the general partner of. (Sec. 3(b)(3))
I
118TH CONGRESS
1ST SESSION H. R. 1017
To amend title 28, United States Code, to modify venue requirements relating
to bankruptcy proceedings.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 14, 2023
Ms. LOFGREN (for herself and Mr. BUCK) introduced the following bill; which
was referred to the Committee on the Judiciary
A BILL
To amend title 28, United States Code, to modify venue
requirements relating to bankruptcy proceedings.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. SHORT TITLE.
3
This Act may be cited as the ‘‘Bankruptcy Venue Re-
4
form Act’’.
5
SEC. 2. FINDINGS AND PURPOSE.
6
(a) FINDINGS.—Congress finds that—
7
(1) bankruptcy law provides a number of venue
8
options for filing bankruptcy under chapter 11 of
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•HR 1017 IH
title 11, United States Code, including, with respect
1
to the entity filing bankruptcy—
2
(A) any district in which the place of in-
3
corporation of the entity is located;
4
(B) any district in which the principal
5
place of business or principal assets of the enti-
6
ty are located; and
7
(C) any district in which an affiliate of the
8
entity has filed a pending case under title 11,
9
United States Code;
10
(2) the wide range of permissible bankruptcy
11
venue options has led to an increase in companies
12
filing for bankruptcy outside of their home States—
13
the district in which the principal place of business
14
or principal assets of the company is located;
15
(3) the practice described in paragraph (2) is
16
known as ‘‘forum shopping’’;
17
(4) forum shopping has resulted in a concentra-
18
tion of bankruptcy cases in a limited number of dis-
19
tricts;
20
(5) forum shopping—
21
(A) prevents small businesses, employees,
22
retirees, creditors, and other important stake-
23
holders from fully participating in bankruptcy
24
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cases that have tremendous impacts on their
1
lives, communities, and local economies; and
2
(B) deprives district courts of the United
3
States of the opportunity to contribute to the
4
development of bankruptcy law in the jurisdic-
5
tions of those district courts; and
6
(6) reducing forum shopping in the bankruptcy
7
system will strengthen the integrity of, and build
8
public confidence and ensure fairness in, the bank-
9
ruptcy system.
10
(b) PURPOSE.—The purpose of this Act is to prevent
11
the practice of forum shopping in cases filed under chapter
12
11 of title 11, United States Code.
13
SEC. 3. VENUE OF CASES UNDER TITLE 11.
14
Title 28, United States Code, is amended—
15
(1) by striking section 1408 and inserting the
16
following:
17
‘‘§ 1408. Venue of cases under title 11
18
‘‘(a) PRINCIPAL PLACE
OF BUSINESS WITH RE-
19
SPECT TO CERTAIN ENTITIES.—
20
‘‘(1) IN GENERAL.—Except as provided in para-
21
graph (2), for the purposes of this section, if an en-
22
tity is subject to the reporting requirements of sec-
23
tion 13 or 15(d) of the Securities Exchange clause
24
1934 (15 U.S.C. 78m, 78o(d)), the term ‘principal
25
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•HR 1017 IH
place of business’, with respect to the entity, means
1
the address of the principal executive office of the
2
entity as stated in the last annual report filed under
3
that Act before the commencement of a case under
4
title 11 of which the entity is the subject.
5
‘‘(2) EXCEPTION.—With respect to an entity
6
described in paragraph (1), the definition of the
7
‘principal place of business’ under that paragraph
8
shall apply for purposes of this section unless an-
9
other address is shown to be the principal place of
10
business of the entity by clear and convincing evi-
11
dence.
12
‘‘(b) VENUE.—Except as provided in section 1410,
13
a case under title 11 may be commenced only in the dis-
14
trict court for the district—
15
‘‘(1) in which the domicile, residence, or prin-
16
cipal assets in the United States of an individual
17
who is the subject of the case have been located—
18
‘‘(A) for the 180 days immediately pre-
19
ceding such commencement; or
20
‘‘(B) for a longer portion of the 180-day
21
period immediately preceding such commence-
22
ment than the domicile, residence, or principal
23
assets in the United States of the individual
24
were located in any other district;
25
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•HR 1017 IH
‘‘(2) in which the principal place of business or
1
principal assets in the United States of an entity,
2
other than an individual, that is the subject of the
3
case have been located—
4
‘‘(A) for the 180 days immediately pre-
5
ceding such commencement; or
6
‘‘(B) for a longer portion of the 180-day
7
period immediately preceding such commence-
8
ment than the principal place of business or
9
principal assets in the United States of the en-
10
tity were located in any other district; or
11
‘‘(3) in which there is pending a case under
12
title 11 concerning an affiliate that directly or indi-
13
rectly owns, controls, or holds 50 percent or more of
14
the outstanding voting securities of, or is the general
15
partner of, the entity that is the subject of the later
16
filed case, but only if the pending case was properly
17
filed in that district in accordance with this section.
18
‘‘(c) LIMITATIONS.—
19
‘‘(1) IN GENERAL.—For the purposes of para-
20
graphs (2) and (3) of subsection (b), no effect shall
21
be given to a change in the ownership or control of
22
an entity that is the subject of the case, or of an af-
23
filiate of the entity, or to a transfer of the principal
24
place of business or principal assets in the United
25
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States of an entity that is the subject of the case,
1
or of an affiliate of the person entity, to another dis-
2
trict, that takes place—
3
‘‘(A) within 1 year before the date on
4
which the case is commenced; or
5
‘‘(B) for the purpose of establishing venue.
6
‘‘(2) PRINCIPAL ASSETS.—
7
‘‘(A) PRINCIPAL
ASSETS
OF
AN
ENTITY
8
OTHER THAN AN INDIVIDUAL.—For the pur-
9
poses of subsection (b)(2) and paragraph (1) of
10
this subsection—
11
‘‘(i) the term ‘principal assets’ does
12
not include cash or cash equivalents; and
13
‘‘(ii) any equity interest in an affiliate
14
is located in the district in which the hold-
15
er of the equity interest has its principal
16
place of business in the United States, as
17
determined in accordance with subsection
18
(b)(2).
19
‘‘(B) EQUITY
INTERESTS
OF
INDIVID-
20
UALS.—For the purposes of subsection (b)(1),
21
if the holder of any equity interest in an affil-
22
iate is an individual, the equity interest is lo-
23
cated in the district in which the domicile or
24
residence in the United States of the holder of
25
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•HR 1017 IH
the equity interest is located, as determined in
1
accordance with subsection (b)(1).
2
‘‘(d) BURDEN.—On any objection to, or request to
3
change, venue under paragraph (2) or (3) of subsection
4
(b) of a case under title 11, the entity that commences
5
the case shall bear the burden of establishing by clear and
6
convincing evidence that venue is proper under this sec-
7
tion.
8
‘‘(e) OUT-OF-STATE ADMISSION FOR GOVERNMENT
9
ATTORNEYS.—The Supreme Court shall prescribe rules,
10
in accordance with section 2075, for cases or proceedings
11
arising under title 11, or arising in or related to cases
12
under title 11, to allow any attorney representing a gov-
13
ernmental unit to be permitted to appear on behalf of the
14
governmental unit and intervene without charge, and with-
15
out meeting any requirement under any local court rule
16
relating to attorney appearances or the use of local coun-
17
sel, before any bankruptcy court, district court, or bank-
18
ruptcy appellate panel.’’; and
19
(2) by striking section 1412 and inserting the
20
following:
21
‘‘§ 1412. Change of venue
22
‘‘(a) IN GENERAL.—Notwithstanding that a case or
23
proceeding under title 11, or arising in or related to a case
24
under title 11, is filed in the correct division or district,
25
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•HR 1017 IH
a district court may transfer the case or proceeding to a
1
district court for another district or division—
2
‘‘(1) in the interest of justice; or
3
‘‘(2) for the convenience of the parties.
4
‘‘(b)
INCORRECTLY
FILED
CASES
OR
PRO-
5
CEEDINGS.—If a case or proceeding under title 11, or aris-
6
ing in or related to a case under title 11, is filed in a
7
division or district that is improper under section 1408(b),
8
the district court shall—
9
‘‘(1) immediately dismiss the case or pro-
10
ceeding; or
11
‘‘(2) if it is in the interest of justice, imme-
12
diately transfer the case or proceeding to any dis-
13
trict court for any district or division in which the
14
case or proceeding could have been brought.
15
‘‘(c) OBJECTIONS
AND REQUESTS RELATING
TO
16
CHANGES IN VENUE.—Not later than 14 days after the
17
filing of an objection to, or a request to change, venue
18
of a case or proceeding under title 11, or arising in or
19
related to a case under title 11, the court shall enter an
20
order granting or denying the objection or request.’’.
21
Æ
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