Chapter 11: Eligibility

Web posted and Copyright © 1/12/98, American Bankruptcy Institute.

The following abstract summarizes the text of submissions made to the National Bankruptcy Review Commission. The abstract is organized by NBRC working group and topic.

The Final Report of the NBRC can be viewed on-line. To obtain a copy of any document shown below, contact the Center for Legislative Archives, Room 205, National Archives Building, Washington, D.C. 20408. The telephone number is 202/501-5350. Mr. R. Michael McReynolds, Deputy Director, will be able to assist with specific inquiries. (The NBRC documents will be housed at this location until June, 1999. Thereafter, the records will be transferred to the Center's archives in College Park, MD.)
 

ID Name Group Other Code
Sec
Cross
Ref
Problem Referenced Proposed Solutions
NBRC-0007 Leon S. Foreman Scholar-in-Residence - American College of Bankruptcy - Selective Professional Association of 7, 13 & 11 Attys; Accts; Professors; Judges * Gov't Officials (Approx. 300 Fellows).
109(d)
Should the eligibility requirements for filing a chapter 11 petition be changed No. Focus groups were unanimous in opposing any change in the eligibility requirements. Ample justification for bankr. filings involving mass tort, single asset real estate, and other special situations. No one favors insolvency prerequisite for Ch. 11. Eligibility of insurance companies requires further study.
NBRC-0265 Bert Ely Ely & Company, Inc. - Financial Institutions Consulting Copy of proposed legislation, two articles discussing the cross-guarantee concept, synopsis of the proposed legislation, and the author's vitae/resume 109
Author presents a proposal, called the cross-guarantee concept, that would privatize the regulation, insolvency risk, and insolvency proceedings of banks and thrifts. This proposal has been transformed into legislation introduced by Rep. Tom Petri in the House of Representatives in 1994 as H.R. 5227. Mr. Petri will reintroduce this legislation in September 1996 and again in the next Congress. This proposal is based on the premise that privitization of banking regulation, which in effect shifts these institutions to contractual, market-driven regulation, has become imperative because electronic technology (computers and telecommunications) is destroying the efficacy of traditional government regulation of banks and thrifts. Under this proposal, the Bankruptcy Courts and Code would be utilized in resolving insolvent depository institutions now insured by FDIC. Presently, §§ 109(b)(2) and (d) bar depository instutions , including those insured by the FDIC, from being debtors under the Code. NBRC should recommend that Congress look favorably upon the cross-guarantee concept with regard to bankruptcy provisions.
NBRC-0604 Richard H. Walker General Counsel, Securities and Exchange Commission Document entitled "Issues Identified by Division of Enforcement and Office of General Counsel of Securities and Exchange Commission for Consideration by Bankruptcy Review Commission.

Many of the reorganization provisions of Chapter 11 are not really applicable to individuals, and so there is a clear lack of standards for such cases. Further, in the case of corporate debtors, even the most hopeless debtor usually is given at least one chance, and often more, to reorganize before the case is converted to Chapter 7, causing the estate to be consumed by administrative expenses and leaving creditors worse off. The commission should study whether individuals should be elibible to file chapter 11, and if so, whether eligibility standards should be promulgated for them. The commission should also examine whether it is time to adopt eligibility standards for corporate chapter 11s.
NBRC-1147 Carolyn O'Connor Credit Manager, Beeswax Designs
109
"Under the current law a company can have equity in their business and still file Bankruptcy. This makes extending open credit extremely difficult as we depend on the customer's financial to establish their credit line." "We would suggest that a company be pprohibited from filing for Bankruptcy without first using the equity of the business to get outside financing or if a company files with equity a certain part of that equity be set aside for the unsecured creditors as some form of certain repayment."