American Bankruptcy Institute issues proposed reforms to Chapter 11

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “What is Chapter 11 Bankruptcy?”


The unveiling of the American Bankruptcy Institute’s proposed Chapter 11 bankruptcy reforms has been “long-awaited,” reports Katy Stech in the Wall Street Journal.

Old Bankruptcy Ad Charlotte Mecklenburg Bankruptcy Lawyer North Carolina Chapter 11 AttorneyIf you have been waiting for the Institute’s proposals, wait you will no more. It unveiled its recommended changes to Chapter 11 bankruptcies on Monday morning. Some of the proposals might someday become law.

The Institute’s proposed changes would streamline the Chapter 11 bankruptcy process for small businesses, or private companies with less than $10 million in assets or debts. The process would be cheaper as well, eliminating the automatic appointment of an unsecured creditors committee. The Institute also proposed to allow business owners to retain their ownership interest by repaying creditors based on their companies’ market value, as opposed to having to repay all their debts in full, as required under current rules.

Retailing businesses would be given additional time under the proposed changes to decide which store leases to continue and which ones to break. Current rules provide that tenants have 210 days after filing a bankruptcy petition to decide whether to assume or reject a lease. Stech reports that professionals who assist retailers in restructuring business operations have said the 210-day deadline leaves little time to renegotiate leases. Under the Institute’s plan, retailers would have one year to assume or reject leases.

The Institute’s proposal increases the amount that employees who are owed wages, back pay or benefits can recover ahead of other creditors from the current limit of $11,725 to $25,000. The proposal would also allow damages to be paid to workers ahead of other creditors for any violations of the Worker Adjustment and Retraining Notification Act. That Act requires companies to provide notice to workers of impending mass layoffs.

Stech wrote that “A big chunk” of the report addressed ways to reduce the costs of Chapter 11 bankruptcies to small businesses. The Institute suggested that bankruptcy lawyers use ways other than hourly billing to establish how much to charge clients for their services. The Institute suggested charging flat fees, task-specific fees and, where appropriate, contingent fees. Bankruptcy lawyers would have less things to fight about—and therefore less time to spend billing small business clients—if the Chapter 11 rules were made more clear, the report said.

Some of the most important changes to Chapter 11 proposed by the Institute concerned the relationship between small businesses and lenders. In general, the Institute’s recommendations “would shift power away from a company’s creditors in order to give a reorganizing company a better shot at survival.” The proposed changes would make it easier to force lenders to accept reorganization plans, and companies could accept a bankruptcy loan from a junior lender without having to obtain a senior lender’s consent.

If you find yourself needing the services of a Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.



About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.






Image Credit:



See Our Related Video from our YouTube channel:



See Our Related Blog Posts:

Bankruptcy discharge ends company’s lawsuit against plumber for shoddy work

Reversal shows that not all bankruptcies go to heaven

Contact Information