Bankruptcy Industry Group, Illinois Senator Call for Reform

November 30, 2012 (Press-News.org) Bankruptcy Industry Group, Illinois Senator Call for Reform

For over 32 years, the federal bankruptcy code has given businesses and individuals opportunities to get rid of debt or restructure it to bring them relief. The bankruptcy code is not going away, but it could go through some changes soon if lawmakers and bankruptcy attorneys have their way. Specifically, they want to see changes made to Chapter 11 bankruptcy, according to The Wall Street Journal.

As with many older laws, experts believe that bankruptcy laws are outdated and out of touch with today's business climate. The American Bankruptcy Institute, or ABI, a trade group comprised of bankruptcy attorneys and professionals in the financial industry, recently assembled a commission to discuss what it will take to modernize Chapter 11 bankruptcy and propose changes.

Chapter 11 Bankruptcy

Supporters of bankruptcy reform believe that the current system is problematic for both large and small businesses. For example, the Chapter 11 process can be expensive -- a burden that smaller, struggling companies have a harder time shouldering, according to WSJ. Importantly, however, Chapter 11 often allows businesses to reorganize in a way that ensures the company's operations will continue into the future.

Illinois Senator Speaks on Bankruptcy Reform

The ABI recently held a hearing in Washington, D.C., which was attended by Sen. Richard Durbin (D-Ill.). Sen. Durbin spoke to the attendees about the need to create more debt relief options for individuals as well as for businesses. He believes that people need relief from the growing problem of student debt, and that homeowners should be able to get mortgage debt reduced in bankruptcy, WSJ reported.

In Chapter 11 bankruptcy, the debtor files a bankruptcy petition, followed by a debt reorganization plan. If the creditors agree to the plan and the bankruptcy court approves of it, the plan will be confirmed. At this point, most prior debts will be wiped away and replaced by the plan, which includes payments to the creditors in a smaller amount or over a longer period of time.

Individuals and businesses struggling to pay creditors should talk to an experienced bankruptcy attorney who can recommend whether to go into bankruptcy protection or take other action for relief from their debts.

Article provided by William Factor Bankruptcy & Commercial Law
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