A Kinder Bankruptcy Law Is Sought as Filings Soar

[Purveyor]

By KRISTINA DOSS

As bankruptcy filings ramp up amid the world-wide financial crisis, companies are finding that changes made to the U.S. Bankruptcy Code three years ago have made it more difficult to restructure. But some experts believe relief could be on the way.

U.S. lawmakers are scrambling to find a way to revive the economy and the businesses that drive it amid the recession. Revamped laws designed to make the restructuring process kinder to struggling companies may be seen as part of the solution, bankruptcy experts say.

Such changes may provide "a mechanism by which people and businesses can begin economic life anew," said Jack Williams, resident scholar at the nonpartisan American Bankruptcy Institute. "Politically, the winds are right for revisiting bankruptcy law."

Changes to the Bankruptcy Code that took effect in late 2005 have made Chapter 11 a less hospitable shelter for struggling companies. Jay Westbrook, a law professor at the University of Texas, said lawmakers focused on changing the consumer provisions and didn't "carefully" work through the business amendments. As a result, provisions were added that gave companies less time and money to reorganize their businesses.

Some argue it is time to roll back those changes as more giant corporations that employ tens of thousands of people, including Lyondell Chemical Co. and Nortel Networks Corp., enter Chapter 11 protection.

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WSJ: http://online.wsj.com/article/SB123250034296300681.html

[atreides1]

1. Of Course

When the new law screwed the little guy no one seemed to have a problem with it! But now that it's having an affect on business, they want to make the restructuring process kinder to struggling companies.

Typical.

[ClarkUSA]

2. I predicted this, along with others. Biden should be ashamed he ever voted for it (and IWR).

President Obama will be able to do the right thing when others haven't.

[depakid]

3. Seems to have changed his mind about draconian sentencing laws

Not that his efforts haven't destroyed tens of thousands of lives....

In the event that a new bankruptcy bill comes up- the trouble businesses are in will come in handy- because mortgage afdusting power needs to be given to trustess- and individuals who file need to have their previous rights restored.

If the Dems have finally learned how to play realpolitik....

[ClarkUSA]

4. As we both know, President Barack Obama is a master of "realpolitik" & cares deeply about The People

Barack's no DLC shill nor is he in the pockets of credit card companies. Know hope.

[depakid]

6. Not talking about Obama necessarily

Congress has to pass the legislation- which, btw Harry Reid crossed over and voted with the Republicans for...

[ClarkUSA]

7. Pres. Obama will make sure Democrats toe the line... I have faith in his powers of persuasion.

Democratic Congress critters will look pretty bad if they block any reform in this economic climate.

[Romulox]

5. What is required is reform of Chapter 13 (personal reorganization) bankruptcy

Debtors need the ability to "cram down" their principle residences, as is allowed with virtually every other sort of secured debt in Chapter 11 and Chapter 13.

The fact that an obligation secured by a mortgage on a principle residence may not be modified in a Chapter 13 is a testament to the lobbying power of the mortgage companies.