President Trump signed legislation into law on August 23, 2019, that offers bankruptcy relief that will benefit veterans, small business owners and farmers. Now that these changes are being implemented, they will have long-lasting, positive effects when it comes to access to bankruptcy relief for these individuals.
The first piece of legislation is the Family Farmer Relief Act of 2019. It doubles the debt ceiling allowed under the Bankruptcy Code for a “family farmer.” This relief increases the number of farmers eligible to receive relief under Chapter 12 reorganization bankruptcy, which is a special form of bankruptcy that is designed to meet the needs of farmers facing financial difficulty.
Another piece of legislation titled Honoring American Veterans in Extreme Need Act of 2019, known as the HAVEN Act, expands access to Chapter 13 bankruptcy relief for veterans and their families. The HAVEN Act protects veteran disability payments from being lumped in with income that bankruptcy filers must use to pay creditors under a Chapter 13 bankruptcy reorganization plan. This new federal law aims to address the latter hardship, providing disabled military veterans with greater protections in bankruptcy proceedings.
The third piece of legislation is the Small Business Reorganization Act of 2019. This law goes into effect on February 19, 2020, and it makes Chapter 11 bankruptcy a more affordable option for small businesses struggling. Many individuals and small businessowners hold back from filing for Chapter 11 bankruptcy because of the costs associated with filing. Not all small business owners are eligible to reorganize their debt under Chapter 13 bankruptcy, leaving them with very few options. This new law allows individuals and businesses with approximately $2.5 million or less of business debt to reorganize under a new sub-chapter of Chapter 11 bankruptcy.
Another major change has to do with the elimination of debt under the absolute priority rule, which prohibits small business owners from keeping non-exempt assets, as well as keeping business owners from maintaining any equity, only until all creditors are paid in full. This new law makes the confirmation process easier for small business owners filing for bankruptcy by eliminating rules that require the approval of comprehensive disclosure statements prior to solicitation of votes for confirmation, as well as eliminating rules allowing creditors to form oversight committees whose administration expenses must also be paid at confirmation. Another rule that is being eliminated is the one that allowed creditors or any other interested party to propose a competing reorganization plan.
The legislation also has created a new exception to the rule that prohibited filers from modifying home mortgages in bankruptcy. This situation would arise when a small business owner must secure a small business loan by using his or her home as collateral with a second or third mortgage. It also helps real estate investors who were previously kept from small business bankruptcies by allowing them to receive the same benefits as an average small business debtor.
The hope behind these new laws is that more people will have greater access to bankruptcy relief. However, it is important that any prospective bankruptcy filer consult with an experienced bankruptcy attorney prior to deciding how to proceed.
If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.
Source: Orlando Business Journal