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U.S. Trustee Program Making Adjustments to Implement HAVEN Act and Small Business Reorganization Act, According to October ABI Journal Article

Alexandria, Va. — The U.S. Trustee Program (USTP) is adjusting its responsibilities to implement the Helping American Veterans in Extreme Need (HAVEN) Act and Small Business Reorganization Act (SBRA), according to an article in the October ABI Journal. Both statutes were signed into law by President Donald Trump on Aug. 23, 2019, with the HAVEN Act becoming effective immediately and the SBRA effective Feb. 19, 2020. “The HAVEN Act and SBRA represent efforts to expand the availability of bankruptcy relief to different populations of debtors,” write Adam D. Herring and Walter W. Theus of the Executive Office for U.S. Trustees (Washington, D.C.) in their article “New Laws, New Duties.” “Along with that expansion, the USTP will continue to uphold its statutory duties to prevent abuse and provide effective oversight across the bankruptcy system.”

The HAVEN Act excludes certain disability and death-related benefits payable to service members, veterans and their survivors from the Bankruptcy Code's definition of "current monthly income," or CMI. This treatment mirrors the Code's exclusion from CMI of benefits under the Social Security Act. “The USTP will limit its requests for documents related to income excluded from CMI under the HAVEN Act to avoid unduly burdening debtors,” Herring and Theus write. They added that the USTP will advise chapter 7 and 13 trustees, as a best practice, to similarly limit their HAVEN Act-related document requests to what is necessary for proper administration of the case. 

The SBRA creates a new subchapter V of chapter 11 for "small business debtors" as currently defined in the Bankruptcy Code, according to Herring and Theus. Under the SBRA, a small business debtor may elect to have its case administered under subchapter V. “Absent such an election, the small business case will be administered under the small business provisions of chapter 11 that have been in effect since 2005,” they write. 

One of the principal changes of a new subchapter V case highlighted by Herring and Theus is that a trustee will be appointed in every case to perform a variety of duties ranging from facilitating the development of a consensual reorganization plan to appearing in court at status conferences and hearings on major issues (e.g., property valuation, plan confirmation and plan modification).

Although the SBRA authorizes the U.S. Trustee to appoint standing trustees to serve in all subchapter V cases in their judicial districts, the SBRA does not require it, according to the authors. “If the U.S. Trustee does not appoint a standing trustee, the U.S. Trustee will appoint a disinterested individual in each particular subchapter V case to serve as trustee (a "case-by-case trustee"),” Herring and Theus write.

Between now and the SBRA's effective date, the USTP must identify a pool of individuals, likely at least 200, who have the interest and the qualifications to serve as subchapter V trustees, according to Herring and Theus. “These individuals must have skills beyond those of an asset liquidator or disbursing agent,” they write.

Herring and Theus said that the USTP will soon solicit applications from the bankruptcy community and others who might be qualified to serve as subchapter V trustees. “While currently serving private trustees — many of whom are likely well qualified — are eligible to apply, the USTP urges all qualified and interested individuals to apply for consideration as subchapter V trustee candidates as soon as possible in response to the advertisements the USTP will soon issue,” according to the authors.

To obtain your copy of “New Laws, New Duties,” please click here.

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.