Forum shopping disenfranchises smaller creditors by making it more difficult for them to participate in the filing process, ultimately reducing a trade creditor’s chances of recovering what they’re owed.
Columbia, MD (PRWEB) September 08, 2011
The National Association of Credit Management (NACM) offered its support to H.R. 2533, the Chapter 11 Bankruptcy Venue Reform Act, introduced in the House of Representatives by Reps. Lamar Smith (R-TX) and John Conyers, Jr. (D-MI).
NACM’s membership is specifically comprised of unsecured trade creditors, many of whom are smaller businesses with limited budgets for travel. It is these smaller firms that stand to benefit greatly from the provisions contained within the Chapter 11 Bankruptcy Venue Reform Act, which seeks to end the practice of “forum shopping,” whereby debtors can file in a district to which they have very little connection, far away from their headquarters or principal place of business. This practice disenfranchises smaller creditors by making it more difficult for them to participate in the filing process, ultimately reducing a trade creditor’s chances of recovering what they’re owed.
“H.R. 2533 is a solid bill that would correct a significant error in our nation’s Bankruptcy Code,” said NACM President Robin Schauseil, CAE. “By allowing debtor companies to ‘forum shop,’ as the Code currently does, small businesses are forced to choose between stretching their already-strained budgets to participate in a far away case that offers them no guarantee of return, or accept their position as unsecured and write off their losses.”
"Requiring debtors to file in the jurisdiction where they have their principal place of business, or principal assets, as H.R. 2533 would, will eliminate this issue and enhance unsecured trade creditors’ chances of having their voices heard and their needs met,” said Schauseil.
While NACM strongly voiced its support for the bill as it is, the association also suggested that the bill be changed in order to ensure that the legislation applies to both corporations and limited liability companies (LLCs). “Currently, the bill would only apply to corporations,” said Schauseil. “It should be altered to avoid creating a loophole that debtors could eventually exploit in order to bypass the bill’s important changes.”
NACM looks forward to working with lawmakers on ensuring that the Bankruptcy Code is constructed in the fairest, most economically-beneficial way, and applauds the House Committee on the Judiciary for taking the initiative on this matter.
About the National Association of Credit Management
NACM, headquartered in Columbia, Maryland, supports more than 15,000 business credit and financial professionals worldwide with premier industry services, tools and information. NACM and its network of affiliated associations are the leading resource for credit and financial management information, education, products and services designed to improve the management of business credit and accounts receivable. NACM’s collective voice has influenced federal legislative policy results concerning commercial business and trade credit to our nation’s policy makers for more than 100 years, and continues to play an active part in legislative issues pertaining to business credit and corporate bankruptcy. Its annual Credit Congress is the largest gathering of credit professionals in the world.
NACM has a wealth of member experts in the fields of business-to-business credit and law. Consider using NACM as a resource in the development of your next credit or finance story.
Source: National Association of Credit Management