Trump Extends 25 Temporary Bankruptcy Court Judgeships

By Elise Hansen
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Law360 (January 13, 2021, 5:13 PM EST) -- President Donald Trump on Tuesday signed into law a bipartisan bill extending 25 temporary judgeships on the bankruptcy bench, including in Delaware, and changing the bankruptcy fee system.

The Bankruptcy Administration Improvement Act of 2020 cleared Congress in a matter of 12 days and was presented to the president at the end of December. The bill extends 25 temporary bankruptcy court judgeships for a further five years in an effort to ensure the effectiveness of the country's insolvency system during a period of increased filings by large corporations in the wake of the COVID-19 pandemic.

Among others, the extensions apply to all seven temporary seats on the Delaware bankruptcy bench, one of the busiest jurisdictions in the country for complex Chapter 11 cases and which has only a single permanent seat.

Sens. Lindsey Graham, R-S.C., and Chris Coons, D-Del., introduced S. 4996 in the Senate on Dec. 9, where it passed that same day. It was agreed to in the House of Representatives without objection on Dec. 21. The bill was co-sponsored by Sens. Tom Carper, D-Del., Marco Rubio, R-Fla., Ben Cardin, D-Md., and Marsha Blackburn, R-Tenn.

"Businesses and individuals are facing profound financial stress as a result of the COVID-19 pandemic. With this bill now signed into law, Congress is ensuring that those who need to utilize the bankruptcy system can do so efficiently," Coons said in a statement Wednesday. "Delaware has earned its reputation for having one of the most highly regarded bankruptcy courts in the country, and now we can be confident that our court will have the resources it will need to manage pressing caseloads and provide relief to businesses and employees."

The law also replaces the current structure for fees payable to the U.S. Trustee program with a simplified and lower fee structure that will sunset in five years. The new structure reduces quarterly fees paid by nearly all Chapter 11 debtors by 18% to 75% based on disbursements made by debtors, with the maximum fee amount staying at $250,000 per quarter.

The increase, adopted in 2018 was intended to bolster the funding of the program and have debtors bear the burden of that funding.

Industry group the American Bankruptcy Institute praised the law's signing in a statement published Wednesday.

"ABI commends Congress and the president for their work to have the Bankruptcy Administration Improvement Act signed into law," ABI Executive Director Amy Quackenboss said in a statement. "Amid the economic challenges brought on by the COVID-19 pandemic, this law will ensure that the court system is sufficiently equipped to help struggling consumers and businesses achieve a financial fresh start through bankruptcy."

--Additional reporting by Vince Sullivan. Editing by Alanna Weissman.

For a reprint of this article, please contact reprints@law360.com.

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