Bill Text
111th Congress (2009-2010)
S.3675.IS

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S 3675 IS

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

July 29, 2010

Mr. WHITEHOUSE introduced the following bill; which was read twice and referred to the Committee on the Judiciary

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

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 Jobs Preservation Act of 2010'.

SEC. 2. SMALL BUSINESS REORGANIZATION.

Chapter 11 of title 11, United States Code, is amended by adding at the end the following:

`SUBCHAPTER V--REORGANIZATION OF A SMALL BUSINESS ENTERPRISE DEBTOR

`Sec. 1181 Applicability of subchapter

`This subchapter shall apply only in those cases arising under this chapter in which a small business enterprise debtor elects that this subchapter shall apply.

`Sec. 1182. Inapplicability of other sections

`(a) In General- Sections 105(d), 1101(1), 1104, 1105, 1106, 1107, 1108, 1115, 1116, 1121, 1123(a)(8), 1123(b)(5), 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, sections 1102, 1103, 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 1193(b), section 1141(d) of this title shall not apply, except as provided in section 1194.

`Sec. 1183. Definitions

`In this subchapter--

`(1) the term `small business enterprise debtor' means a debtor--

`(A) that is engaged in commercial or business activities; and

`(B) that has aggregate noncontingent, liquidated, secured, and unsecured debts as of the date of the order for relief--

`(i) in an amount equal to not more than $7,500,000 (excluding debts owed to 1 or more affiliates or insiders); and

`(ii) not less than 50 percent of which arose from the commercial or business activities of the debtor; and

`(2) the term `debtor in possession' means the small business enterprise debtor, unless removed as debtor in possession under section 1186(a).

`Sec. 1184. 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, then such individual shall serve as trustee in any case under this subchapter. Otherwise, the United States trustee shall appoint one 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 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 small business enterprise debtor commences making timely payments required by a plan confirmed under this subchapter;

`(5) if the small business enterprise debtor ceases to be a debtor in possession, perform the duties specified in section 704(a)(8), paragraphs (1), (2), and (6) of section 1106(a) of this title, including operating the business of the small business enterprise debtor;

`(6) if there is a claim for a domestic support obligation with respect to the small business enterprise debtor, perform the duties specified in section 704(c); and

`(7) facilitate the development of a consensual plan of reorganization.

`(c) Termination of Trustee Service- If the plan of the small business enterprise debtor is confirmed under section 1193(a), the service of the trustee in the case shall terminate when the plan has been substantially consummated.

`Sec. 1185. 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), (4), and (6) of section 1106(a) of this title, of a trustee serving in a case under this chapter, including operating the business of the small business enterprise debtor.

`Sec. 1186. 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 confirmed plan.

`(b) Reinstatement- On request of a party in interest, and after notice and a hearing, the court may reinstate the debtor in possession.

`Sec. 1187. Property of the estate

`(a) Inclusions- If a plan is confirmed under section 1193(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 such 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 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 of this title, whichever occurs first.

`(b) Debtor Remaining in Possession- Except as provided in section 1186 of this title, a confirmed plan, or an order confirming a plan, the small business enterprise debtor shall remain in possession of all property of the estate.

`Sec. 1188. Duties and reporting requirements of small business enterprise debtor

`(a) Filing Requirements- Upon electing to be a debtor under this subchapter, the small business enterprise debtor shall file the documents required by subparagraphs (A) and (B) of section 1116(1) of this title, whether or not such debtor is a small business debtor.

`(b) Other Applicable Provisions- A small business enterprise debtor, in addition to the duties provided in this title and as otherwise required by law, shall comply with the requirements of sections 308 and paragraphs (2), (3), (4), (5), (6), and (7) of section 1116 of this title, whether or not such debtor is a small business debtor.

`(c) Separate Disclosure Statement Exemption- If the court orders under section 1182(b) that section 1125 of this title applies, section 1125(f) of this title shall apply whether or not such debtor is a small business debtor.

`Sec. 1189. Filing of the plan

`(a) Who May File a Plan- Only the small business enterprise debtor may file a plan under this subchapter.

`(b) Deadline- The small business enterprise debtor shall file a plan not later than 90 days after the order for relief under this chapter, except that the court may extend that period if the need for an extension is attributable to circumstances for which the small business enterprise debtor should not justly be held accountable.

`Sec. 1190. Contents of plan

`A plan filed under this subchapter shall include a brief history of the business operations of the small business enterprise debtor, a liquidation analysis, and projections with respect to the ability of the small business enterprise debtor to make payments under the proposed plan of reorganization.

`Sec. 1191. Deemed acceptance of plan

`For purposes of subsection (c) or (d) of section 1126 of this title, a holder of a claim or interest shall be deemed to have accepted a plan, if the holder fails to file a timely ballot after being notified by the small business enterprise debtor of--

`(1) the treatment that such holder will receive under the proposed plan; and

`(2) the consequence under this section of the failure by the holder to file a timely ballot.

`Sec. 1192. Status conference

`The court shall hold a status conference to further the expeditious and economical resolution of a case under this subchapter, and to encourage and facilitate the attainment of a consensual plan of reorganization.

`Sec. 1193. 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 section 1129(a)(15), of this title are met.

`(b) Exception- Notwithstanding section 510(a) of this title, if all of the applicable requirements of section 1129(a), other than paragraphs (8), (10), and (15) thereof, are met with respect to a plan, the court, on request of the small business enterprise 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 subsection, 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).

`(2) As of the effective date of the plan--

`(A) the plan provides that all of the debtor's projected disposable income 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 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) The small business enterprise debtor will be able to make all payments under the plan, or there is a reasonable likelihood that the small business enterprise debtor will be able to make all payments under the plan, and the plan provides appropriate remedies, that 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) Definition of Disposable Income- For purposes of this subsection, the term `disposable income' means the income which is received by the small business enterprise debtor and which is not reasonably necessary to be expended--

`(1) for the maintenance or support of the debtor or a dependent of the debtor or for 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 section 1193(b) of this title.

`Sec. 1194. Discharge

`If the plan of the small business enterprise debtor is confirmed under section 1193(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 small business enterprise 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. 1195. Modification of plan

`(a) Modification Before Confirmation- The small business enterprise debtor may modify a plan at any time before confirmation of the plan, but may not modify such plan so that such plan as modified fails to meet the requirements of section 1122 and section 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 1193(a), the small business enterprise debtor may modify such plan at any time after confirmation of such plan and before substantial consummation of such plan, but may not modify such plan so that such plan as modified fails to meet the requirements of section 1122 and section 1123 of this title, with the exception of subsection (a)(8) of such section 1123. Such 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 1193(a) of this title.

`(c) Certain Other Modifications- If a plan has been confirmed under section 1193(b), the small business enterprise debtor may modify such 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 such plan so that such plan as modified fails to meet the requirements of section 1193(b) of this title. Such 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 1193(b) of this title.

`(d) Holders of a Claim or Interest- If a plan has been confirmed under section 1193(a), any holder of a claim or interest that has accepted or rejected such plan is deemed to have accepted or rejected, as the case may be, such plan as modified, unless, within the time fixed by the court, such holder changes the previous acceptance or rejection of such holder.

`Sec. 1196. 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 small business enterprise 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 1193(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. 1197. 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 small business enterprise debtor solely because such person holds a claim of less than $5,000 that arose prior to commencement of the case.'.

SEC. 3. CONFORMING AMENDMENTS.

(a) Title 11- Title 11, United States Code, is amended--

(1) in section 103(h)--

(A) by striking `Subchapter IV of' and inserting the following: `Subchapter--

`(1) IV of'; and

(B) by striking the period at the end and inserting the following: `; and

`(2) V of chapter 11 of this title applies only in a case under chapter 11 concerning a small business enterprise debtor (as defined in section 1183) in which such debtor elects that subchapter V of chapter 11 shall apply.';

(2) in section 322(a), by inserting `1184,' after `1163,';

(3) in section 326(a) insert `, other than a case under subchapter V of chapter 11' after `7 or 11';

(4) in section 326(b) insert `subchapter V of chapter 11 or under' after `In a case under';

(5) in section 347--

(A) in subsection (a)--

(i) by inserting `1196,' after `726,'; and

(ii) by inserting `subchapter V of chapter 11,' after `chapter 7,'; and

(B) in subsection (b), by inserting `1196,' after `1173,';

(6) in section 363(c)(1), by inserting `1184, 1185,' after `1108,';

(7) in section 364(a), by inserting `1184, 1185' after `1108,';

(8) in section 523(a), by inserting `1194,' after `1141,';

(9) in section 524--

(A) in subsection (a)--

(i) in paragraph (1), by inserting `1194,' after `1141,'; and

(ii) in paragraph (3), by inserting `1194' after `523,';

(B) in subsection (c)(1), by inserting `1194,' after `1141,'; and

(C) in subsection (d), by inserting `1194,' after `1141,';

(10) in section 557(d)(3), by inserting `1184,' after `1104,'; and

(11) in section 1146(a), by inserting `or 1193' after `1129'.

(b) Title 28- Title 28 United States Code, is amended--

(1) in section 586(a)(3), by inserting `(including subchapter V of chapter 11)' after `7, 11';

(2) in section 586(b), by inserting `subchapter V of chapter 11 or under' after `cases under';

(3) in section 586(d)(1), by inserting `subchapter V of chapter 11 or under' after `cases under' each place that term appears;

(4) in section 586(e)--

(A) in paragraph (1), by inserting `subchapter V of chapter 11 or under' after `cases under';

(B) in paragraph (2), by inserting `subchapter V of chapter 11 or under' after `cases under' each place that term appears; and

(C) by adding at the end the following:

`(5) In the event that the services of the trustee are terminated upon substantial consummation under section 1184(c) of title 11, 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 section 586(e)(1) of this title.';

(5) in section 589b--

(A) in subsection (a)(1), by inserting `subchapter V of chapter 11 or under' after `cases under'; and

(B) in subsection (d)--

(i) by inserting `subchapter V of chapter 11 or under' after `trustees under'; and

(ii) in the undesignated matter following paragraph (8), by inserting `subchapter V of chapter 11 or under' after `cases under'; and

(6) in section 1930(a)(6), by inserting `, other than under subchapter V of that chapter 11,' after `chapter 11 of title 11'.

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