Bankruptcy Venue Reform Legislation Reintroduced in Congress

A bill requiring Chapter 11 bankruptcy cases be filed in states where the principal place of business or principal assets of the debtor are located was introduced into Congress on Feb. 14. Co-sponsors and U.S. Representatives Zoe Lofgren (D-CA) and Ken Buck (R-CO) reintroduced the Bankruptcy Venue Reform Act; legislation that was originally introduced in 2018 and later reintroduced in 2021.

The bill seeks to amend Title 28 of the U.S. Code to modify venue requirements relating to bankruptcy proceedings. The co-sponsors believe the bill will ensure that employees, small businesses, and local communities that are most impacted by a Chapter 11 bankruptcy have a full opportunity to participate in the proceedings. No vote took place for the last iteration of the legislation in 2021.

“Rep. Buck and I are reintroducing this commonsense legislation because we know that it is simply unfair that corporations can game the bankruptcy system by choosing a distant court where there is a cottage industry to advantage their interests,” said Rep. Lofgren. “Justice is best served when corporate bankruptcies are adjudicated locally, with convenient court access for employees, retirees, and local creditors, as well as a judge who knows the affected community.”

“Under current U.S. law, corporations filing Chapter 11 bankruptcy have the ability to ‘venue shop’ and potentially choose a court that has issued lenient rulings in similar cases. Our bill will require corporations filing Chapter 11 bankruptcy to go through those proceedings in the forum they are primarily located rather than running off to a court across the country. This will eliminate companies’ ability to tilt the scale of justice and ensure the case is heard in a court familiar with all the affected stakeholders,” said Rep. Buck in a statement.

The bill has been referred to the U.S. House Committee on the Judiciary. More information about the legislation can be found here.