Government Looks at Bankruptcy Code: A Call to Action!

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Recent hearings in the House Judiciary Committee have indicated that Congress may be willing to open up the Bankruptcy Code in their efforts to shorten the current economic crisis. With the recent passage of "cram down" mortgage provisions that place more power in the hands of bankruptcy judges, as well as a recent hearing in the House Judiciary's Subcommittee on Commercial and Administrative Law regarding the role of Chapter 11 filings in an economic downturn, the time for action in the interest of trade creditors everywhere is now. 

In order to get a better idea of how the Bankruptcy Code affects a company's ability to lend credit, NACM is seeking comments from you, the trade credit professional, about any experiences you've had in dealing with a customer's Chapter 11 filing and its effect on your business. We're looking at how some of the code's provisions enhance or inhibit your company's willingness and ability to extend credit, with specific reference to preference claims. 

Much has been made of a debtor's right to collect preference claims on payments made to their vendors 90 days prior to their bankruptcy filing and many articles in NACM's eNews and Business Credit magazine have offered trade creditors advice on how to defend themselves from these claims. The House Judiciary Committee would certainly be interested in hearing about how preferences affect credit extension, specifically in our current economic downturn. Do you believe that the risk of preference claims diminishes your willingness to lend credit? The goal of the Bankruptcy Code is to provide for the orderly liquidation or reorganization of an insolvent debtor's estate, but it was also designed to aid economic growth, so if you think preferences or other provisions in the code are hindering your business' ability to extend credit, make your voice heard! 

As legislators look at the code and aim to make it more conducive to economic recovery, it would be dangerous for them not to consider the interests of trade creditors, who provide the lifeblood of the nation's economy. If you have a story about preferences and how they affect your company's ability to lend credit to keep your customers in business, or experiences with other parts of the code, share them with us! Send all your comments, data or stories to jakeb@nacm.org and don't forget to share this email address with your colleagues as well. Every bit of information will help us provide committee members with an accurate depiction of whether the Bankruptcy Code is helping or hurting our country's economic recovery. 

Jacob Barron, NACM staff writer

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