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COPYRIGHT 2001 National Association of Credit Management
This past March 4-5, NACM members joined forces at the Crystal Gateway Marriott Hotel in Arlington, VA to learn how they could make a difference with regard to the growing trend towards consumer privacy. The first day of the Conference was filled with informative sessions about the Fair Credit Reporting Act (FCRA), the Equal Credit Opportunity Act (ECOA), a Bankruptcy Issues Update, and International Trade and Business Credit Issues. The second day of the conference afforded members the opportunity to visit with their representatives on Capitol Hill.
The opening session, "Looking Back at the 106th Congressional Session: What Happened to Bankruptcy--The Players, the Passage of the Bill and the Pocket Veto," detailed the current issues of interest to business creditors regarding the current bankruptcy legislation. Susan Jensen-Conklin, Counsel, House Judiciary Committee, Commercial and Administrative Law Sub-Committee, acknowledged "the important role that [NACM] has played in regards to bankruptcy reform -- and not just in regards to the pending bill--but [NACM's] efforts to take back to the National Bankruptcy Review Commission the small business and preference provisions that were very critical and were ultimately reflected in the Commission's report."
The National Bankruptcy Review Commission--appointed by Congress and the President--was created in 1994 to recommend bankruptcy legislation reform. NACM has participated very actively with regard to the small business reform and bankruptcy reform in general.
Jensen-Conklin went on to say that over the past three years, Congress has expended a lot of time concerning bankruptcy legislation reform. Her committee and subcommittee have held 17 hearings and have heard from more than 130 witnesses, including representatives from NACM.
She highlighted the small business provisions that could greatly improve small business bankruptcy provision. Both bills contain a provision that would create an expedited procedure to assist small businesses through a Chapter 11 reorganization process as expeditiously as possible. It is clear that the less time a small business spends in the reorganization process in the courts, the more assets are preserved in that estate for creditors and for the business itself.
Another important provision in the legislation has to do with preferences: the legislation creates a threshold of $5,000 before a preference action could be considered. A preference recovery action against a non-insider seeking less than $10,000 must be brought in the bankruptcy court in the district where the trade creditor has its principal place of business. The Judiciary Committee believes that this provision will force trustees to examine more carefully the merits of a preference case before they proceed with recovery actions. It attacks the practice of allowing the trustees for the debtor to issue blanket preference challenges.
The payment, under the preference defense provisions, must be made in the ordinary course of business according to ordinary business terms. The bills attempt to expand the definition of ordinary course of business to include: 1. Payment of a debt incurred by the debtor in the ordinary course of business between the debtor and creditor; 2. Payment made in the ordinary course of business or financial affairs between the debtor and creditor; or 3. Payment made according to ordinary business terms of the industry.
One of the more controversial provisions of the Bankruptcy Reform Bill concerns the topic of Non-residential Lease Assumptions. In such cases, the lease is the principal...
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