Covid-19 Bankruptcy Relief Extension Act of 2021

Floor Speech

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Mr. CLINE. Madam Speaker, I thank the gentleman from California, my friend, for his work on this issue, and I thank the chairman for his work on this issue and their great leadership on this important initiative.

Madam Speaker, in 2010, the National Bankruptcy Conference Small Business Working Group released and presented to Congress a report that identified a problem regarding small businesses and the bankruptcy law, and recommended amendments to the code to add a new chapter for small business reorganizations.

As a result of this recommendation, I introduced the Small Business Reorganization Act, which was signed into law in August of 2019, and I am pleased to say it has been a great success for small businesses.

It is my understanding that 80 percent of small business debtors have chosen to proceed under subchapter V, and preliminary data indicates that these cases are achieving confirmation far more often than small businesses who filed prior to SBRA.

However, the Small Business Reorganization Act implemented only a month before the COVID-19 pandemic caused the State-mandated temporary closure of thousands of businesses.

Seeing the need to ensure that this new lifeline would be even more impactful, the CARES Act passed in March 2020 increased the amount of debt a business can have to be eligible for small business bankruptcy procedures from $2.7 million to $7.5 million and allowed debtors experiencing hardship because of COVID-19 to modify bankruptcy reorganization plans entered into before the law was enacted.

I have heard from bankruptcy judges and lawyers in the Western District of Virginia who have said that their experience with the Small Business Reorganization Act has been extremely positive. According to the American Bankruptcy Institute, as of last Sunday, 1,651 cases have been filed.

In addition, according to the Federal Judicial Center's Integrated Database, as of September 30, 2020, there were 759 subchapter V cases filed in the 6 months from the time the debt limit was raised to the end of fiscal year 2020, with information on liabilities available for 548 of these cases. Of those, 28 percent involved debtors whose liabilities exceeded the original limit of $2.7 million. These debtors would not have been eligible for subchapter V without the temporary increase provided by the CARES Act.

Without this bill to keep the debt limit at $7.5 million for another year while we continue to navigate this pandemic, about 30 percent of businesses that would choose to use it would no longer be eligible.

Preservation of the business benefits both the creditor, which should receive a higher recovery because of the debtor's restructuring than they would if the business liquidated, and the debtor, who will now be able to remain in business rather than liquidating.

Our districts depend on their small businesses. They are hotels, convenience stores, restaurants, and pharmacies. Those who endeavor to open and run a small business are proud of their work and their standing in our communities.

Unfortunately, they also take on a sometimes-insurmountable financial burden. As we have seen over the last year, when they are forced to close, it has a great impact on the rest of us. That is why the year- end spending and relief package omitted recovery rebate payments from bankruptcy estates and blocked utilities from stopping or denying service to some individuals in bankruptcy. This bill would extend those provisions by 3 months but wouldn't affect other provisions in that law that are already scheduled to expire later in 2022.

I am proud to have introduced this legislation along with Chairman Nadler to support our small businesses and our families, and I urge its passage.

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