Stockton Bankruptcy Lawyer

Bankruptcy Law Changes for 2025

As of January 2025, several significant developments in U.S. bankruptcy law have emerged, impacting both businesses and individuals.

Legislative Proposals

Protecting Employees and Retirees in Business Bankruptcies Act of 2024: Introduced by Senators Dick Durbin and Josh Hawley, this bipartisan bill aims to enhance protections for workers during corporate bankruptcies. Key provisions include:

• Increased Priority Claims: Doubling the maximum value of employee wage claims to $20,000 and introducing an additional priority claim of up to $20,000 per employee benefit plan.
• Severance Pay: Allowing severance pay to be treated as a priority claim.
• Pension Protections: Enabling retirees to claim pension plan shortfalls.
• Restrictions on Executive Bonuses: Limiting substantial bonuses to executives in bankrupt companies and ensuring equitable treatment in retirement and health benefits.

Ending Corporate Bankruptcy Abuse Act of 2024: Senators Sheldon Whitehouse and Josh Hawley introduced this bill to curb the “Texas two-step” bankruptcy strategy, where companies create a shell entity to offload liabilities and file for bankruptcy, thereby shielding the parent company from lawsuits. The legislation seeks to:

• Prevent Abuse: Stop financially healthy companies from evading responsibilities through strategic bankruptcies.
• Ensure Good Faith Filings: Mandate that bankruptcy cases are filed in good faith, preventing misuse of the system.

Judicial Developments

Supreme Court Ruling on Non-Consensual Third-Party Releases: In a landmark decision, the Supreme Court ruled that non-consensual releases by claimants of non-debtor entities in bankruptcy plans are not permitted, except in specific asbestos-related cases. This ruling impacts how mass tort liabilities are addressed in bankruptcies, limiting the ability of third parties to obtain such releases without consent.

Insurer Standing in Bankruptcy Cases: The Supreme Court also ruled that insurers have standing as parties-in-interest in Chapter 11 cases, allowing them to object to plan confirmations that might affect their interests. This decision emphasizes the need for debtors to engage with insurers during bankruptcy proceedings, especially in mass tort cases.

Policy Discussions

Bankruptcy Venue Reform: Concerns about “judge shopping” in large Chapter 11 cases have led to discussions on implementing random case assignments to ensure fairness. While some jurisdictions have adopted random assignments, broader implementation is under consideration.

Small Business Bankruptcy Thresholds: The expiration of increased debt thresholds for small-business bankruptcy filings has sparked debate on whether to renew or adjust these limits to provide continued support for small enterprises facing financial distress.

Procedural Updates

Amendments to Bankruptcy Rules and Forms: The Judicial Conference has proposed amendments to various bankruptcy rules and official forms, with some changes expected to take effect on December 1, 2025. These amendments aim to enhance procedural efficiency and clarity in bankruptcy proceedings.

Bankruptcy Law Changes for 2024

• Chapter 13 and Small Business Reorganization Act (SBRA) Adjustments: The Bankruptcy Threshold Adjustment and Technical Corrections Act has increased the debt limits for Chapter 13 bankruptcy filings and for small businesses under the SBRA (Subchapter V). For Chapter 13, the combined limit for noncontingent, liquidated secured and unsecured debt has been raised to $2,750,000. For the SBRA, the debt limit for qualifying debtors has been reinstated at $7,500,000. These changes aim to expand access to bankruptcy relief for individuals and small businesses, respectively. Both adjustments are set to sunset on June 21, 2024, which means they will revert to their original thresholds unless further legislative action is taken.
• Consumer Protection Enhancements: The beginning of 2024 will also see adjustments in consumer law rights, including:
  • Increases in exemption thresholds for special appraisal requirements and for escrow and balloon payment prohibitions in higher-priced mortgage loans under the Truth in Lending Act.
  • Adjustments in the maximum charge for file disclosures under the Fair Credit Reporting Act.
  • Changes to the Consumer Leasing Act exemption thresholds, and
  • Adjustments in the Home Mortgage Disclosure Act (HMDA) exemption thresholds, among others.
    These changes reflect adjustments for inflation and aim to protect consumers in various financial transactions​.
• VA, FHA, and Conforming Loan Limits: New loan limits have been announced for FHA, VA, Fannie Mae, and Freddie Mac loans, reflecting increases to accommodate the changing real estate market. For example, the single-family low-cost-area floor for FHA loans has been raised to $498,257, and the high-cost-area ceiling for VA, Fannie Mae, and Freddie Mac loans has been increased to $1,149,825 for most of the United States​.
• State-Level Changes: Various states are introducing changes that further protect consumers. These include adjustments to minimum wage laws, homestead exemptions, and specific consumer protection laws like California’s regulations on arbitration and the right to repair for electronic and appliance products​.

These updates represent a broad effort to adjust bankruptcy and consumer protection laws to current economic realities and consumer needs. For individuals and small businesses considering bankruptcy, these changes could provide more flexibility and options for managing and discharging debts.

If you’re facing the stress of potential foreclosure, vehicle repossession, or wage garnishment, seeking professional legal assistance is a critical step. At the Law Office of Robert W. Fong, experienced bankruptcy attorneys are available to help you navigate these challenges. They offer a free consultation to discuss your options and provide guidance specific to the context of Stockton bankruptcy law. To take advantage of this opportunity and gain clarity on your financial situation, you can contact them at (209) 475-0499 for a free consultation with a Stockton bankruptcy lawyer.

Bankruptcy Law Changes for 2023

The amendments included changes to Bankruptcy Rules 3011, 8003, 9006, and 9038, which introduced a new rule. Official Forms 410A and 417A were also amended, along with the introduction of Director’s Form 1340. These amendments aimed to refine the bankruptcy process and address various procedural aspects of bankruptcy filings.

Additionally, the Judicial Conference of the United States approved inflationary adjustments to the Bankruptcy Court Miscellaneous Fee Schedule, which also became effective from December 1, 2023. These adjustments are part of the ongoing efforts to keep the bankruptcy system efficient and up to date with the current economic conditions.

Furthermore, specific changes were made to discourage fraudulent applications for unclaimed funds in bankruptcy cases. This was reflected in the changes to Form 1340, which is used for the application of payment of unclaimed funds. The aim was to enhance the integrity of the process and protect legitimate claimants.

These amendments are part of a continuous effort to adapt the bankruptcy legal framework to changing economic and social circumstances, ensuring that the system remains fair, efficient, and responsive to the needs of all stakeholders involved in the bankruptcy process​​​​​​.

Navigating the complexities of bankruptcy can be a daunting and emotional journey. It’s typically considered a last resort for those overwhelmed by debt. To make an informed decision, it’s crucial to consult a qualified attorney or financial advisor. They can provide guidance tailored to your unique situation and help explore all potential avenues before deciding to file for bankruptcy. Keep in mind that bankruptcy laws and rules differ across various jurisdictions, underscoring the importance of receiving advice specific to your location and circumstances.

If you’re facing the stress of potential foreclosure, vehicle repossession, or wage garnishment, seeking professional legal assistance is a critical step. At the Law Office of Robert W. Fong, experienced bankruptcy attorneys are available to help you navigate these challenges. They offer a free consultation to discuss your options and provide guidance specific to the context of Stockton bankruptcy law. To take advantage of this opportunity and gain clarity on your financial situation, you can contact them at (209) 475-0499 for a free consultation with a Stockton bankruptcy lawyer.