ABI Supports Passage of Three New Bankruptcy Bills

Petition to file for bankruptcy

Photo by Melinda Gimpel on Unsplash

For more than three decades, Norman Kinel has practiced bankruptcy law in the Greater New York City area. He is currently a partner at Squire Patton Boggs, LLP, handling bankruptcy, and restructuring cases. Active in his professional community, Norman Kinel belongs to the American Bankruptcy Institute (ABI).

Since 1982, ABI has provided bankruptcy attorneys, judges, lenders, and other professionals with continuing education opportunities, legal research information, and networking events. Recently, the organization announced that the United States Senate passed three new bills that will modernize bankruptcy code in the country. These three bills are the HAVEN Act, the Small Business Reorganization Act of 2019, and the Family Farmer Relief Act of 2019. ABI testified in support of these bills and regards the Senate’s decision to pass them as a positive potential change in bankruptcy law.

The HAVEN Act affects veterans and injured individuals in the United States. According to this new bill, which was included in June’s National Defense Authorization Act, disability payments from the Department of Defense and Department of Veterans Affairs are to be excluded from income calculations used during bankruptcy filings. 

Meanwhile, the Family Farmer Relief Act of 2019 makes changes to Chapter 12 of the US Bankruptcy Code to reflect the financial challenges facing distressed farmers and fishers today.

Finally, the Smaller Business Reorganization Act of 2019 adds a subchapter to Chapter 11 that provides small businesses a better way to solve debt problems by reducing liquidations, increasing creditor recoveries, and saving jobs.

A Look at the Lehman Brothers Case

An alumnus of the American University, Washington College of Law, Norman Kinel has pursued a distinguished career in bankruptcy law spanning more than three decades. Over the years, Norman Kinel has worked on many major bankruptcy cases, including the Lehman Brothers case, where he represented individual clients and was also later selected to serve as a court-approved mediator.

The largest bankruptcy case in American history, the 2008 collapse of Lehman Brothers sent shockwaves through the financial markets and helped to precipitate a global financial crisis that devastated world economies and led to substantial regulatory and market reforms. This collapse was due in part to Lehman Brothers’ rapid acquisition of mortgage lenders in previous years and a reliance on subprime mortgage securities, which left the financial giant exposed to the housing collapse that began in earnest in 2007.

Now, 10 years after Lehman Brothers filed for bankruptcy, the trustee in charge of the proceedings has stated that the case is winding down. According to a court filing by James Giddens, only a few hundred of the more than 140,000 initial claims against Lehman Brothers remain open. According to the filing, secured creditors were repaid in full, while unsecured creditors received nearly 40 cents on the dollar for their claims.

Court Rules Bankruptcy Courts Are Not Debt Collection Agencies

New York attorney Norman Kinel is a partner at Squire Patton Boggs LLP. Before joining this firm, Mr. Kinel worked as an associate at Cadwalader, Wickersham & Taft and later was a partner at Whitman Breed Abbott & Morgan; Sidley Austin; and Lowenstein Sandler. In his current position, Norman Kinel is a member of his firm’s restructuring and insolvency practice, is head of the firm's creditors' committee practice and represents numerous clients in bankruptcy cases nationwide.

Many times bankruptcy attorneys are approached by creditors who want to claim debts or enforce judgments against debtors. These creditors are often frustrated and eager to commence involuntary bankruptcy proceedings to force the debtor into bankruptcy. However, bankruptcy courts have shown reluctance to be treated as collection agencies. 

In the case of In re Mathew M. Murray, the creditor, a law firm, wanted to enforce a $19 million judgment against the debtor, Murray, by initiating involuntary bankruptcy proceedings. The law firm sought an order for the sale of real property that the debtor held jointly with his wife. 

While the petition did meet the minimum filing requirements, the bankruptcy court ruled that the case was commenced in bad faith to either enhance its rights against the debtor or obtain leverage in negotiations. The court held that courts are not to be misused as collection agencies, and bankruptcy proceedings are not judgment enforcement tools.