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: Sen. Grassley, Chuck [R-IA]
Target Audience
Population: People and small business owners affected by bankruptcy law changes
Estimated Size: 4000000
- The bill deals with bankruptcy, which can affect both individual wage earners and small businesses.
- By increasing the debt limits for small business reorganization bankruptcy and Chapter 13 bankruptcy, the bill could potentially affect more individuals and businesses who might surpass previous limits.
- The bill also makes adjustment provisions for inflation, suggesting that the number of affected individuals could grow over time as inflation is accounted for.
- Small business owners who are in financial distress and considering bankruptcy are notably mentioned as potential beneficiaries of the bill.
- The bill allows for a broader range of small businesses to qualify by including affiliates of publicly traded companies, thus increasing the impacted population.
- Chapter 13 changes suggest wage earners struggling with debt may be affected, as it changes how secured and unsecured debts are calculated.
Reasoning
- The bill primarily impacts two groups: small business owners who might need to reorganize their businesses through bankruptcy, and individual wage earners who might benefit from higher Chapter 13 bankruptcy debt limits.
- A significant number of individuals and businesses could be affected due to the increased debt limits and conditions that allow more entities to qualify for restructuring and bankruptcy protections.
- As the policy includes provisions that adjust for inflation, the long-term applicability and potential increase in the affected population should be considered.
- The largest impact will likely be on those living in areas with inconsistent or stagnant economic growth, where financial distress is more prevalent.
- We should ensure diversity in interviewees in terms of geography, economic status, and business size to accurately simulate a representative sample.
Simulated Interviews
Small Business Owner - Cafe (Chicago, IL)
Age: 45 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- This adjustment could be a lifeline for keeping my business operational.
- I might finally have a realistic chance at reorganizing my debts without shutting down.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 4 |
| Year 2 | 7 | 3 |
| Year 3 | 8 | 3 |
| Year 5 | 8 | 2 |
| Year 10 | 9 | 2 |
| Year 20 | 7 | 1 |
Construction Worker (Houston, TX)
Age: 38 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- This policy might finally give me some room to breathe and plan my payments better.
- It's a relief to know I can include all my debt under one limit.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 3 |
| Year 2 | 6 | 2 |
| Year 3 | 6 | 2 |
| Year 5 | 7 | 1 |
| Year 10 | 5 | 1 |
| Year 20 | 4 | 0 |
Startup Founder - Tech (San Francisco, CA)
Age: 29 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 5/20
Statement of Opinion:
- Having this policy means our business might actually make it past the development stage.
- Affiliation with larger investors won't disqualify us from necessary protections.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 6 | 3 |
| Year 3 | 7 | 2 |
| Year 5 | 6 | 2 |
| Year 10 | 5 | 1 |
| Year 20 | 4 | 0 |
Freelance Graphic Designer (New York, NY)
Age: 50 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 6.0 years
Commonness: 12/20
Statement of Opinion:
- I'm relieved that debts won't be split into types anymore, which confused and burdened me before.
- This could simplify managing my financial obligations significantly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 5 |
| Year 2 | 7 | 4 |
| Year 3 | 8 | 4 |
| Year 5 | 8 | 3 |
| Year 10 | 6 | 2 |
| Year 20 | 5 | 1 |
Restaurant Owner (Columbus, OH)
Age: 42 | Gender: male
Wellbeing Before Policy: 3
Duration of Impact: 8.0 years
Commonness: 8/20
Statement of Opinion:
- The updated thresholds mean that hopefully I can keep the business running instead of closing down.
- This policy seems like a necessary update given how much economic conditions have changed.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 3 |
| Year 2 | 7 | 3 |
| Year 3 | 7 | 2 |
| Year 5 | 8 | 1 |
| Year 10 | 7 | 1 |
| Year 20 | 6 | 0 |
Real Estate Agent (Denver, CO)
Age: 32 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 4.0 years
Commonness: 9/20
Statement of Opinion:
- Counting all my debt together means I might get new opportunities to manage them better.
- As someone in a volatile market, this policy could be a stabilizing factor.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 4 |
| Year 3 | 8 | 3 |
| Year 5 | 7 | 2 |
| Year 10 | 5 | 2 |
| Year 20 | 4 | 1 |
Grocery Store Manager (Phoenix, AZ)
Age: 27 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 14/20
Statement of Opinion:
- If this policy eases debt qualification, my stress would decrease significantly.
- It's promising to know that changes are being made to adapt to financial realities faced by wage earners.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 7 | 3 |
| Year 3 | 6 | 3 |
| Year 5 | 5 | 2 |
| Year 10 | 4 | 2 |
| Year 20 | 3 | 1 |
Retail Business Owner (Atlanta, GA)
Age: 55 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- The chance to reorganize without the typical constraints is an opportunity I didn't expect.
- With this policy, I might actually have a shot at surviving the downturn in retail.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 3 |
| Year 2 | 8 | 2 |
| Year 3 | 7 | 2 |
| Year 5 | 9 | 1 |
| Year 10 | 8 | 1 |
| Year 20 | 6 | 1 |
Retired (Miami, FL)
Age: 60 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 6/20
Statement of Opinion:
- It's good to know there are measures being taken to recognize inflation.
- If it makes managing debts while on fixed income easier, I'm all for it.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 4 |
| Year 3 | 5 | 3 |
| Year 5 | 5 | 2 |
| Year 10 | 4 | 2 |
| Year 20 | 3 | 1 |
Independent Contractor (Seattle, WA)
Age: 40 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 11/20
Statement of Opinion:
- If this policy simplifies debt restructuring, I may avoid financial ruin.
- Updating limits to reflect present economic realities is overdue and potentially life-changing.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 4 |
| Year 2 | 6 | 3 |
| Year 3 | 7 | 2 |
| Year 5 | 7 | 2 |
| Year 10 | 6 | 1 |
| Year 20 | 5 | 1 |
Cost Estimates
Year 1: $10000000 (Low: $8000000, High: $12000000)
Year 2: $10200000 (Low: $8200000, High: $12200000)
Year 3: $10400000 (Low: $8400000, High: $12400000)
Year 5: $10800000 (Low: $8800000, High: $12800000)
Year 10: $11800000 (Low: $9800000, High: $13800000)
Year 100: $20000000 (Low: $16000000, High: $24000000)
Key Considerations
- The permanent nature of the increased debt limits means ongoing impacts on court systems will persist indefinitely.
- Operational costs for maintaining these changes need to account for inflation annually.
- Shift in characteristics of typical bankruptcy cases might result in varying types of administrative requirements and costs.