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In 2008, the large ethanol producer, VeraSun Energy, filed for Chapter 11 bankruptcy. This petition for bankruptcy received significant focus by lawmakers in Washington who are in the process of introducing a bankruptcy bill that prohibits companies from filing bankruptcy in states of their incorporation. While VeraSun Energy had filed for bankruptcy in Delaware, none of the company’s plants nor the company’s headquarters were located in the state. The bill in question is the Bankruptcy Venue Reform Act of 2018. It is important for companies that are considering filing for bankruptcy to understand the elements of the Bankruptcy Reform Act, which has made some significant changes about where entities are allow to file for Chapter 11 bankruptcy.
Details of the Bankruptcy Venue Reform Act of 2018
The Bankruptcy Reform Act of 2018 contains three sections. The first section notes some elements about bankruptcy law which include the following:
- Bankruptcy law offers a number of locations where a company can file for Chapter 11 bankruptcy.
- The large number of venue options has resulted in more companies filing for bankruptcy outside of their home state. The process of selecting the best possible location to file for bankruptcy is also referred to as “forum shopping.”
- Forum shopping makes it difficult for small companies to fully participate in bankruptcy cases that can significantly disrupt their lives.
The Bankruptcy Reform Act of 2018 also replaces two sections of bankruptcy law. First, the Act states that a Chapter 11 bankruptcy case can only be initiated in the district courts where the company’s domicile, residence, or principal assets are located for 180 days before commencing a bankruptcy action, the principal assets or principal place of business has been located for 180 days before filing for bankruptcy, or where there is already a pending bankruptcy action involving an affiliate company that directly or indirectly owns, controls, is the general partner, or holds 50 or or more of the outstanding voting securities of the entity that is filing for bankruptcy. These determinations are not affected by changes made within one year before the date the case is commence or for the purpose of only establishing venue.
The second reform created by the Bankruptcy Reform Act of 2018 notes that a district court is prohibited from transferring a Chapter 11 bankruptcy case to one of the prohibited district court locations for convenience or to achieve justice. Instead, in these situations, the district court can dismiss the Chapter 11 bankruptcy or transfer the case to a proper venue location.
Obtain the Services of an Oklahoma Bankruptcy Attorney
This change in venue laws for Chapter 11 bankruptcies is just one of the recent revisions that has occurred to bankruptcy. Given the complicated and evolving nature of bankruptcy, it is important to obtain the services of a seasoned attorney. A knowledgeable bankruptcy lawyer is able to help individuals as well as companies proceed through the many obstacles that can arise in filing a Chapter 11 bankruptcy. Contact attorney Jim A Lyon today for assistance.
