NACM Is Asked to Testify before House Judiciary Committee

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Editor's Note: During the 27th Annual NACM National Legislative & Critical Issues Conference, held in March, NACM was asked to testify before the House Judiciary Committee on HR 3150. What follows is NACM Corporate Counsel, Charles Tatelbaum's testimony.

I am Charles Tatelbaum, a practicing attorney with the Tampa/Clearwater law firm of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A., and I am pleased to appear before you in my capacity as general counsel to the National Association of Credit Management. NACM is celebrating its one hundred and second year as the largest non profit trade association representing the interests of more than 30,000 commercial credit granting businesses. NACM's membership is spread throughout the United States and is representative of businesses spanning every size and nature.

The NACM is very pleased to support HR 3150 because of the commercial laws it improves, and my comments will only focus on these issues raised in the proposed legislation. Sections 232 through 243 contain the provisions dealing with small business reorganizations. NACM supports the efforts to create substance and procedure to expedite the administration and conclusion of reorganization cases for small businesses. Considering the hundreds of billions of dollars of creditor claims that are tied up in business bankruptcies, the expeditious conclusion of a reorganization proceeding, whether by confirmation or dismissal, promotes the economic interests of all concerned. Studies and statistics have shown at many times there is a situation where small businesses which could successfully reorganize, fully or partially satisfy claims of creditors, continue in the economic stream, create employment and pay taxes but are unable to do so because of the pressures of the time and expense when languishing in Chapter 11. NACM has been a constant supporter of efforts to streamline the process for the prompt resolution of small business reorganizations.

NACM is equally supportive of the provisions contained in Sections 207 and 208 of the Bill to correct inequities which currently exist with respect to the avoidance of preferential transfers. While NACM supports the concept of the equality of treatment of creditors, the current statute creates an environment for the feeding frenzy of trustees and attorneys at the expense of vigilant trade creditors, with no ultimate benefit being derived by creditors of the bankruptcy estate. These changes, which are consistent with the recommendations of the National Bankruptcy Review Commission, will help to create an environment of an "even playing field" with respect to bankruptcy administration. Additionally, these provisions, if enacted, will eliminate unnecessary and unproductive litigation which can affect the already overburdened bankruptcy court system which, as I have noted, produces no real benefit to the creditors of the bankruptcy estate.

NACM further supports the provisions of Section 205 of the legislation. The current system of determining the composition of creditors' committees which does not permit court overview, supervision and intervention frustrates the check and balance system created by the U.S. Constitution. Although situations may only rarely occur, the current system permits the formation and continuance of creditors' committees that, while not reflecting the representative balance mandated by Congress, permits it to continue without the possibility of any judicial scrutiny. Unsecured creditors of all types must be able to insure that there is adequate and representative representation on all creditors' committees. This is what helps the system to work.

Section 402, in concept, contains provisions which are very much supported by NACM's constituency, but, as written, needs slight modification. Creditors' committees are the vehicle for creditor participation in the bankruptcy process. To permit local rule, state constitution or state statutory provision to mandate the representation of a creditor by an attorney is contrary to the nature of the process itself. …