Magazine article Business Credit

Checking in on ABI's Chapter 11 Reform Commission-Part 1

Magazine article Business Credit

Checking in on ABI's Chapter 11 Reform Commission-Part 1

Article excerpt

An Introduction and Thoughts on Preferences

Geoff Berman, a commissioner on the American Bankruptcy Institute (ABI) Commission to Study the Reform of Chapter 11, warned attendees not to get their hopes up. "If someone wants to raise a hand and ask a question 'what is the Commission going to do about the burden of proof in preferences?' the answer is 'we don't know yet,"' Berman said, speaking to the attendees from his home, having Skyped in for the presentation. "We can't and won't answer that for you, because we don't know. It hasn't been decided."

It ended up being true that attendees of the ABI followup session, hosted at June's 118th NACM Credit Congress (see coverage starting on page 28) and presented by Berman, Bruce Nathan, Esq., Ronald Peterson and Commission Reporter Michelle Harner, would not leave with much in the way of extra, privileged knowledge of what the Commission will eventually recommend when it issues its final report by the end of the year. But what they got instead was perhaps even more valuable: an opportunity to understand the breadth and openness of the Commission's work and the chance to share their own experiences and continue to influence the Commission's thought process and, potentially, the future of Chapter 11.

Berman made it clear that the follow-up session, while not quite the same as the full formal Commission hearing held at 2013's Credit Congress in Las Vegas, was still part of an ongoing process, and attendees could still contribute to what will eventually become the Commission's final report, and to the life of the report's eventual policy suggestions beyond their issuance. "This is not a static project," he said. "This has a Ufe. It's not going to be over in December. It is the vehicle for discussion and change and many of the Commission committees have been tasked to do additional research and report back to the commission, I believe, including Ron and Bruce on the avoiding powers committee. So as things come up, the commissioners will look at them and try to take positions on them, but the end of a good two-plus-year project will be the release of the report in December."

The work going into that report began all the way back in 2011, and since then the Commission and its advisory committees have heard thousands of words of testimony and pored over just as many different issues and competing considerations. For example, the Commission hearing held at last year's Credit Congress was split into two panels on trade creditor-specific Bankruptcy Code problems, specifically one on preferences and the other on Section 503(b)(9) of the Bankruptcy Code, both issues that are covered by the Commission's Avoiding Powers Committee of which Nathan and Peterson are co-chairs. As the panelists noted over and over again throughout the session, however, the issues raised by last year's witnesses had threads in them that the Commission has been able to foUow to several different corners of the Chapter 11 process that stretched beyond the Emits of last year's two main panels.

It also became clear throughout the follow-up session that no possible policy change was considered out of bounds. The goal of the Commission has always been to make the Chapter 11 process work better; rather than removing and replacing the existing Bankruptcy Code, the idea has been to reorder the framework of reorganization to make it more beneficial to all parties and to recahbrate it to today's financial world. To some this might suggest minor, incremental changes to the existing Code, but as it became immediately clear to attendees, no remedy or suggestion would be too drastic to be off limits. …

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