Bill Overview
Title: Bankruptcy Threshold Adjustment and Technical Corrections Act
Description: This bill modifies provisions related to small business reorganization bankruptcies and wage earner's bankruptcies. Specifically, the bill extends for two years the increase of the amount of debt allowed to be carried by debtors to qualify for small business reorganization bankruptcy and provides that this debt limit is subject to adjustment for inflation. Additionally, it provides that a small business debtor includes a debtor that is an affiliate of certain publicly traded companies. Further, it authorizes the bankruptcy trustee to operate the business of the debtor if the debtor ceases to be a debtor in possession. The bill also increases for two years the debt limit for individuals filing for bankruptcy under Chapter 13 (i.e., the wage earner's plan) and allows both secured and unsecured debt to count towards this single limit. (Currently, separate limits apply to secured and unsecured debt.)
Sponsors: Rep. Neguse, Joe [D-CO-2]
Target Audience
Population: People and small business entities involved in bankruptcy proceedings
Estimated Size: 1030000
- The bill affects individuals and small businesses undergoing bankruptcy processes.
- Roughly 0.4% of American adults file for bankruptcy each year. With around 257 million adults in the US, this is about 1.03 million people annually.
- Chapter 13 bankruptcies, also known as wage earner's plans, constitute approximately 40% of all nonbusiness bankruptcies in the U.S.
- Small businesses, especially those approaching the current debt limits for bankruptcy eligibility, will benefit from the increased debt thresholds in the bill.
- The UN estimates about 4 bankruptcies per 1,000 people globally per year, which translates to 32 million people filing for bankruptcy globally each year.
Reasoning
- The policy targets a specific group - individuals and small business entities involved in bankruptcy proceedings, especially those approaching debt limits for eligibility and restructuring.
- The Cantril wellbeing score can vary based on how personal financial stress or relief is perceived due to the policy changes.
- Some individuals or entities will feel significant impact, especially if they're on the cusp of debt limits changes, while others not involved in or close to the bankruptcy process will be unaffected.
- Given the high number of bankruptcy filings annually, those impacted have varied socio-economic backgrounds, including wage earners and small business owners.
- Individuals with lower wellbeing scores before the policy due to high financial stress may show substantial improvement if the policy provides relief for their financial situations.
Simulated Interviews
Auto mechanic (Detroit, MI)
Age: 45 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 15/20
Statement of Opinion:
- I was very stressed about my financial situation as my debt was nearing the limit for Chapter 13.
- With this policy allowing more debt under Chapter 13, there's more flexibility for me to manage my finances and focus on the business.
- I welcome the change, it seems like it gives some breathing room to people like me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 5 |
| Year 2 | 7 | 4 |
| Year 3 | 6 | 4 |
| Year 5 | 6 | 3 |
| Year 10 | 6 | 3 |
| Year 20 | 5 | 3 |
Tech startup founder (San Francisco, CA)
Age: 32 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 3.0 years
Commonness: 8/20
Statement of Opinion:
- This change might actually allow my business to reorganize without going under.
- I think the provision for affiliates could really help - it opens up new options for handling our financial troubles.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 7 | 3 |
| Year 3 | 8 | 3 |
| Year 5 | 8 | 2 |
| Year 10 | 7 | 2 |
| Year 20 | 6 | 2 |
Farmer (Rural Kansas)
Age: 60 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 1.0 years
Commonness: 10/20
Statement of Opinion:
- I've never wanted to consider bankruptcy, but with more financial tools available, I might be able to keep the farm afloat longer.
- I'm unsure how Chapter 13 provisions work, but an increased debt limit is likely helpful if it comes to that.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 5 | 4 |
| Year 5 | 5 | 3 |
| Year 10 | 4 | 3 |
| Year 20 | 4 | 3 |
Corporate attorney (New York, NY)
Age: 52 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 20/20
Statement of Opinion:
- Professionally, I think this policy could affect some of my clients who approach bankruptcy.
- Overall, it won't affect my personal wellbeing tremendously as I'm financially stable.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Freelance graphic designer (Austin, TX)
Age: 27 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.5 years
Commonness: 18/20
Statement of Opinion:
- I just completed a bankruptcy process, so this bill doesn't impact me directly but it might have been helpful a few years ago.
- Knowing there are more debtor-friendly options helps me feel more secure in case I ever face financial hardship again.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 5 | 4 |
Restaurant owner (Miami, FL)
Age: 40 | Gender: other
Wellbeing Before Policy: 3
Duration of Impact: 4.0 years
Commonness: 12/20
Statement of Opinion:
- Right now, any increase in debt limit is exactly what I need.
- If it means I can continue to operate while restructuring, that's a lifeline for my restaurant.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 3 |
| Year 2 | 6 | 3 |
| Year 3 | 7 | 2 |
| Year 5 | 7 | 2 |
| Year 10 | 6 | 2 |
| Year 20 | 5 | 1 |
Retired teacher (Phoenix, AZ)
Age: 68 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 0.0 years
Commonness: 14/20
Statement of Opinion:
- It's good there's support for those struggling financially.
- For someone in my situation, these changes won't directly impact me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 8 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 8 | 8 |
Nurse (Chicago, IL)
Age: 37 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 1.0 years
Commonness: 16/20
Statement of Opinion:
- I'm not sure if I will need bankruptcy, but knowing the limits are slightly higher is comforting.
- It might not change my situation immediately but makes future financial planning feel slightly more secure.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 4 | 3 |
| Year 10 | 4 | 3 |
| Year 20 | 3 | 2 |
Software engineer (Seattle, WA)
Age: 29 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 0.0 years
Commonness: 17/20
Statement of Opinion:
- Financially, this policy doesn't impact me directly.
- It's targeted for people in need, which I support in principle.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Real estate agent (Atlanta, GA)
Age: 46 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 2.0 years
Commonness: 9/20
Statement of Opinion:
- Increased thresholds may give me some room to negotiate and manage debts without immediate bankruptcy.
- I'm cautiously optimistic this might help turn things around for me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 4 |
| Year 5 | 6 | 3 |
| Year 10 | 5 | 3 |
| Year 20 | 4 | 3 |
Cost Estimates
Year 1: $15000000 (Low: $10000000, High: $20000000)
Year 2: $15000000 (Low: $10000000, High: $20000000)
Year 3: $0 (Low: $0, High: $0)
Year 5: $0 (Low: $0, High: $0)
Year 10: $0 (Low: $0, High: $0)
Year 100: $0 (Low: $0, High: $0)
Key Considerations
- Administrative and legal adjustments necessary for the new thresholds and trustee powers.
- Potential short-term cost increase for managing an increased caseload.
- Long-term gains if businesses are better supported through reorganization.