Small Business Reorganization Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1091 To amend chapter 11 of title 11, United States Code, to address reorganization of small businesses, and for other purposes. IN THE SENATE OF THE UNITED STATES APRIL 9, 2019 Mr. GRASSLEY (for himself, Mr. WHITEHOUSE, Mr. TILLIS, Ms. KLOBUCHAR, Ms. ERNST, and Mr. BLUMENTHAL) introduced the following bill; which was read twice and 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 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 ‘‘Small Business Reor- 4 ganization Act of 2019’’. 5 SEC. 2. REORGANIZATION OF SMALL BUSINESS DEBTORS. 6 (a) IN GENERAL.—Chapter 11 of title 11, United 7 States Code, is amended by adding at the end the fol- 8 lowing: 9 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 2 •S 1091 IS ‘‘SUBCHAPTER V—SMALL BUSINESS DEBTOR 1 REORGANIZATION 2 ‘‘§ 1181. Inapplicability of other sections 3 ‘‘(a) IN GENERAL.—Sections 105(d), 1101(1), 1104, 4 1105, 1106, 1107, 1108, 1115, 1116, 1121, 1123(a)(8), 5 1123(c), 1127, 1129(a)(15), 1129(b), 1129(c), 1129(e) 6 and 1141(d)(5) of this title do not apply in a case under 7 this subchapter. 8 ‘‘(b) COURT AUTHORITY.—Unless the court for cause 9 orders otherwise, paragraphs (1), (2), and (4) of section 10 1102(a) and sections 1102(b), 1103, and 1125 of this title 11 do not apply in a case under this subchapter. 12 ‘‘(c) SPECIAL RULE FOR DISCHARGE.—If a plan is 13 confirmed under section 1191(b) of this title, section 14 1141(d) of this title shall not apply, except as provided 15 in section 1192 of this title. 16 ‘‘§ 1182. Definitions 17 ‘‘In this subchapter: 18 ‘‘(1) DEBTOR.—The term ‘debtor’ means a 19 small business debtor. 20 ‘‘(2) DEBTOR IN POSSESSION.—The term ‘debt- 21 or in possession’ means the debtor, unless removed 22 as debtor in possession under section 1185(a) of this 23 title. 24 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 3 •S 1091 IS ‘‘§ 1183. Trustee 1 ‘‘(a) IN GENERAL.—If the United States trustee has 2 appointed an individual under section 586(b) of title 28 3 to serve as standing trustee in cases under this sub- 4 chapter, and if such individual qualifies as a trustee under 5 section 322 of this title, then that individual shall serve 6 as trustee in any case under this subchapter. Otherwise, 7 the United States trustee shall appoint 1 disinterested 8 person to serve as trustee in the case or the United States 9 trustee may serve as trustee in the case, as necessary. 10 ‘‘(b) DUTIES.—The trustee shall— 11 ‘‘(1) perform the duties specified in paragraphs 12 (2), (5), (6), (7), and (9) of section 704(a) of this 13 title; 14 ‘‘(2) perform the duties specified in paragraphs 15 (3), (4), and (7) of section 1106(a) of this title, if 16 the court, for cause and on request of a party in in- 17 terest, the trustee, or the United States trustee, so 18 orders; 19 ‘‘(3) appear and be heard at the status con- 20 ference under section 1188 of this title and any 21 hearing that concerns— 22 ‘‘(A) the value of property subject to a 23 lien; 24 ‘‘(B) confirmation of a plan filed under 25 this subchapter; 26 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 4 •S 1091 IS ‘‘(C) modification of the plan after con- 1 firmation; or 2 ‘‘(D) the sale of property of the estate; 3 ‘‘(4) ensure that the debtor commences making 4 timely payments required by a plan confirmed under 5 this subchapter; 6 ‘‘(5) if the debtor ceases to be a debtor in pos- 7 session, perform the duties specified in section 8 704(a)(8) and paragraphs (1), (2), and (6) of sec- 9 tion 1106(a) of this title, including operating the 10 business of the debtor; 11 ‘‘(6) if there is a claim for a domestic support 12 obligation with respect to the debtor, perform the 13 duties specified in section 704(c) of this title; and 14 ‘‘(7) facilitate the development of a consensual 15 plan of reorganization. 16 ‘‘(c) TERMINATION OF TRUSTEE SERVICE.— 17 ‘‘(1) IN GENERAL.—If the plan of the debtor is 18 confirmed under section 1191(a) of this title, the 19 service of the trustee in the case shall terminate 20 when the plan has been substantially consummated, 21 except that the United States trustee may reappoint 22 a trustee as needed for performance of duties under 23 subsection (b)(3)(C) of this section and section 24 1185(a) of this title. 25 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 5 •S 1091 IS ‘‘(2) SERVICE OF NOTICE OF SUBSTANTIAL 1 CONSUMMATION.—Not later than 14 days after the 2 plan of the debtor is substantially consummated, the 3 debtor shall file with the court and serve on the 4 trustee, the United States trustee, and all parties in 5 interest notice of such substantial consummation. 6 ‘‘§ 1184. Rights and powers of a debtor in possession 7 ‘‘Subject to such limitations or conditions as the 8 court may prescribe, a debtor in possession shall have all 9 the rights, other than the right to compensation under sec- 10 tion 330 of this title, and powers, and shall perform all 11 functions and duties, except the duties specified in para- 12 graphs (2), (3), and (4) of section 1106(a) of this title, 13 of a trustee serving in a case under this chapter, including 14 operating the business of the debtor. 15 ‘‘§ 1185. Removal of debtor in possession 16 ‘‘(a) IN GENERAL.—On request of a party in interest, 17 and after notice and a hearing, the court shall order that 18 the debtor shall not be a debtor in possession for cause, 19 including fraud, dishonesty, incompetence, or gross mis- 20 management of the affairs of the debtor, either before or 21 after the date of commencement of the case, or for failure 22 to perform the obligations of the debtor under a plan con- 23 firmed under this subchapter. 24 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 6 •S 1091 IS ‘‘(b) REINSTATEMENT.—On request of a party in in- 1 terest, and after notice and a hearing, the court may rein- 2 state the debtor in possession. 3 ‘‘§ 1186. Property of the estate 4 ‘‘(a) INCLUSIONS.—If a plan is confirmed under sec- 5 tion 1191(b) of this title, property of the estate includes, 6 in addition to the property specified in section 541 of this 7 title— 8 ‘‘(1) all property of the kind specified in that 9 section that the debtor acquires after the date of 10 commencement of the case but before the case is 11 closed, dismissed, or converted to a case under chap- 12 ter 7, 12, or 13 of this title, whichever occurs first; 13 and 14 ‘‘(2) earnings from services performed by the 15 debtor after the date of commencement of the case 16 but before the case is closed, dismissed, or converted 17 to a case under chapter 7, 12, or 13 of this title, 18 whichever occurs first. 19 ‘‘(b) DEBTOR REMAINING IN POSSESSION.—Except 20 as provided in section 1185 of this title, a plan confirmed 21 under this subchapter, or an order confirming a plan 22 under this subchapter, the debtor shall remain in posses- 23 sion of all property of the estate. 24 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 7 •S 1091 IS ‘‘§ 1187. Duties and reporting requirements of debt- 1 ors 2 ‘‘(a) FILING REQUIREMENTS.—Upon electing to be 3 a debtor under this subchapter, the debtor shall file the 4 documents required by subparagraphs (A) and (B) of sec- 5 tion 1116(1) of this title. 6 ‘‘(b) OTHER APPLICABLE PROVISIONS.—A debtor, in 7 addition to the duties provided in this title and as other- 8 wise required by law, shall comply with the requirements 9 of section 308 and paragraphs (2), (3), (4), (5), (6), and 10 (7) of section 1116 of this title. 11 ‘‘(c) SEPARATE DISCLOSURE STATEMENT EXEMP- 12 TION.—If the court orders under section 1181(b) of this 13 title that section 1125 of this title applies, section 1125(f) 14 of this title shall apply. 15 ‘‘§ 1188. Status conference 16 ‘‘(a) IN GENERAL.—Except as provided in subsection 17 (b), not later than 60 days after the entry of the order 18 for relief under this chapter, the court shall hold a status 19 conference to further the expeditious and economical reso- 20 lution of a case under this subchapter. 21 ‘‘(b) EXCEPTION.—The court may extend the period 22 of time for holding a status conference under subsection 23 (a) if the need for an extension is attributable to cir- 24 cumstances for which the debtor should not justly be held 25 accountable. 26 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 8 •S 1091 IS ‘‘(c) REPORT.—Not later than 14 days before the 1 date of the status conference under subsection (a), the 2 debtor shall file with the court and serve on the trustee 3 and all parties in interest a report that details the efforts 4 the debtor has undertaken and will undertake to attain 5 a consensual plan of reorganization. 6 ‘‘§ 1189. Filing of the plan 7 ‘‘(a) WHO MAY FILE A PLAN.—Only the debtor may 8 file a plan under this subchapter. 9 ‘‘(b) DEADLINE.—The debtor shall file a plan not 10 later than 90 days after the order for relief under this 11 chapter, except that the court may extend the period if 12 the need for the extension is attributable to circumstances 13 for which the debtor should not justly be held accountable. 14 ‘‘§ 1190. Contents of plan 15 ‘‘A plan filed under this subchapter— 16 ‘‘(1) shall include— 17 ‘‘(A) a brief history of the business oper- 18 ations of the debtor; 19 ‘‘(B) a liquidation analysis; and 20 ‘‘(C) projections with respect to the ability 21 of the debtor to make payments under the pro- 22 posed plan of reorganization; 23 ‘‘(2) shall provide for the submission of all or 24 such portion of the future earnings or other future 25 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 9 •S 1091 IS income of the debtor to the supervision and control 1 of the trustee as is necessary for the execution of the 2 plan; and 3 ‘‘(3) notwithstanding section 1123(b)(5) of this 4 title, may modify the rights of the holder of a claim 5 secured only by a security interest in real property 6 that is the principal residence of the debtor if the 7 new value received in connection with the granting 8 of the security interest was— 9 ‘‘(A) not used primarily to acquire the real 10 property; and 11 ‘‘(B) used primarily in connection with the 12 small business of the debtor. 13 ‘‘§ 1191. Confirmation of plan 14 ‘‘(a) TERMS.—The court shall confirm a plan under 15 this subchapter only if all of the requirements of section 16 1129(a), other than paragraph (15) of that section, of this 17 title are met. 18 ‘‘(b) EXCEPTION.—Notwithstanding section 510(a) 19 of this title, if all of the applicable requirements of section 20 1129(a) of this title, other than paragraphs (8), (10), and 21 (15) of that section, are met with respect to a plan, the 22 court, on request of the debtor, shall confirm the plan not- 23 withstanding the requirements of such paragraphs if the 24 plan does not discriminate unfairly, and is fair and equi- 25 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 10 •S 1091 IS table, with respect to each class of claims or interests that 1 is impaired under, and has not accepted, the plan. 2 ‘‘(c) RULE OF CONSTRUCTION.—For purposes of this 3 section, the condition that a plan be fair and equitable 4 with respect to each class of claims or interests includes 5 the following requirements: 6 ‘‘(1) With respect to a class of secured claims, 7 the plan meets the requirements of section 8 1129(b)(2)(A) of this title. 9 ‘‘(2) As of the effective date of the plan— 10 ‘‘(A) the plan provides that all of the pro- 11 jected disposable income of the debtor to be re- 12 ceived in the 3-year period, or such longer pe- 13 riod not to exceed 5 years as the court may fix, 14 beginning on the date that the first payment is 15 due under the plan will be applied to make pay- 16 ments under the plan; or 17 ‘‘(B) the value of the property to be dis- 18 tributed under the plan in the 3-year period, or 19 such longer period not to exceed 5 years as the 20 court may fix, beginning on the date on which 21 the first distribution is due under the plan is 22 not less than the projected disposable income of 23 the debtor. 24 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 11 •S 1091 IS ‘‘(3)(A)(i) The debtor will be able to make all 1 payments under the plan; or 2 ‘‘(ii) there is a reasonable likelihood that the 3 debtor will be able to make all payments under the 4 plan; and 5 ‘‘(B) the plan provides appropriate remedies, 6 which may include the liquidation of nonexempt as- 7 sets, to protect the holders of claims or interests in 8 the event that the payments are not made. 9 ‘‘(d) DISPOSABLE INCOME.—For purposes of this 10 section, the term ‘disposable income’ means the income 11 that is received by the debtor and that is not reasonably 12 necessary to be expended— 13 ‘‘(1) for— 14 ‘‘(A) the maintenance or support of the 15 debtor or a dependent of the debtor; or 16 ‘‘(B) a domestic support obligation that 17 first becomes payable after the date of the filing 18 of the petition; or 19 ‘‘(2) for the payment of expenditures necessary 20 for the continuation, preservation, or operation of 21 the business of the debtor. 22 ‘‘(e) SPECIAL RULE.—Notwithstanding section 23 1129(a)(9)(A) of this title, a plan that provides for the 24 payment through the plan of a claim of a kind specified 25 VerDate Sep 11 2014 04:04 Apr 16, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1091.IS S1091 kjohnson on DSK79L0C42 with BILLS 12 •S 1091 IS in paragraph (2) or (3) of section 507(a) of this title may 1 be confirmed under subsection (b) of this section. 2 ‘‘§ 1192. Discharge 3 ‘‘If the plan of the debtor is confirmed under section 4 119 [Text truncated for display. Full text available on Congress.gov.]