House passes Cline’s Small Business Reorganization Act

The House voted Tuesday to pass H.R. 3311, the Small Business Reorganization Act. The bill, introduced by Congressman Ben Cline (VA-06), would simplify the process for small businesses to use bankruptcy as a means of reorganization.

Under the Small Business Reorganization Act, businesses with less than $2.5 million in debt would be able to file for bankruptcy in a timelier and more cost-effective manner. While in bankruptcy reorganization, a small business would be able to negotiate with creditors while keeping the doors open, employees on payroll, and suppliers and vendors paid.

“Chapter 11 of the Federal Bankruptcy Code has, for many years, been key to survival for firms needing to reorganize their debts so they can continue in business,” Cline said. “Reorganization preserves jobs, investments and valuable contributors to our economy, but for just as many years, Chapter 11’s terms have been poorly suited to allow small businesses and their creditors to take full advantage of the relief it promises.

“To solve this problem, the Small Business Reorganization Act takes the provisions of Chapter 12, which help small family farmers to reorganize their farming enterprises when needed, as a model for small businesses. Chapter 12 has long worked well for family farmers, and it is a terrific idea to weave terms modeled on it into chapter 11 for general use in small business cases.

“This bill promises to finally make our laws work better for the entrepreneurs whose small businesses are critical to life in communities across our nation.”

The bill next goes to the Senate for consideration.

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