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BANKRUPTCY VENUE REFORM POSSIBLE

One of the idiosyncrasies of the current bankruptcy system is that many companies file for bankruptcy protection in Delaware or New York, even if their primary business operations are here in the Midwest. This can create significant hardship for customers, vendors and employees of the bankrupt companies. For example, if an Indiana company was nothing more than a vendor to another company headquartered here in Indiana (or Kentucky or Illinois, for that matter) that filed bankruptcy in Delaware, the Indiana vendor can and often will be sued, in Delaware, by the debtor to attempt to recover money the vendor received within the 90 days prior to the filing of the bankruptcy.

While there are readily available defenses to such lawsuits, they have to be raised in Delaware.  It seems that part of the calculus in bringing these cases is a hope to force some kind of settlement payment out of an innocent Indiana company just because it will be too expensive for many Indiana businesses to hire Delaware counsel and to travel to Delaware to testify and attend hearings. By keeping cases in Delaware and New York, not only are midwestern businesses hurt, but New York and Delaware profit by millions of dollars in increased hotel, restaurant and other expenses paid by business that do have to travel there to get their rights protected. 

To combat abuses like this, Senators John Cornyn (R., Texas) and Elizabeth Warren (D., Mass.) have introduced a bipartisan Bill, S.2282, to force companies to file bankruptcy where they actually do business instead of a remote forum.  Without the support of businesses, lenders and individuals here in the heartland, this Bill may fail since Delaware and New York will obviously put immense pressure on Congress to maintain the very profitable (for Delaware and New York) status quo. As of this writing, Senators Cornyn and Warren are still looking for additional co-sponsors. Contacting your senators to encourage them to do so will help.