BANKRUPTCY AMENDMENTS OF 1999 -- HON. JOE KNOLLENBERG (Extensions of Remarks - February 08, 1999)

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HON. JOE KNOLLENBERG OF MICHIGAN IN THE HOUSE OF REPRESENTATIVES MONDAY, FEBRUARY 8, 1999

Mr. KNOLLENBERG. Mr. Speaker, I rise today to introduce a bill to address an injustice that exists within Title 11 of the United States Code regarding single asset bankruptcies.

The injustice within Title 11 stems from an 11th hour decision made during the 103rd Congress, which placed an arbitrary $4 million ceiling on the single asset provisions of the bankruptcy reform bill. The effect has been to render investors helpless in foreclosures on single assets valued over $4 million.

To rectify this problem, my bill eliminates the $4 million ceiling, thereby allowing creditors the ability to recover their losses. Under
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the current law, Chapter 11 of the Bankruptcy Code becomes a legal shield for the debtor. Upon the investor's filing to foreclose, the debtor preemptively files for Chapter 11 protection which postpones foreclosure indefinitely.

While in Chapter 11, the debtor continues to collect the rents on the commercial asset. However, the commercial property is typically left to deteriorate and the property taxes go unpaid. When the investor finally recovers the property through the delayed foreclosure, they owe an enormous amount in back taxes, they receive a commercial property left in deterioration which has a lower rent value and resale value, and meanwhile, the rent for all the months or years they were trying to retain the property went to an uncollectible debtor.

My bill does not leave the debtor without protection. First, the investor brings a foreclosure against a debtor only as a last resort. This usually comes after all other efforts to reconcile delinquent mortgage payments have failed. Second, the debtor has up to ninety days to reorganize under Chapter 11. It should be noted, however, that single asset reorganizations are typically a false hope since the owner of a single asset does not have other properties from which he can recapitalize his business.

Finally, Mr. Speaker, my bill helps all American families by making their investments more secure and more valuable. The hardworking American families who depend on their life insurance policies and who have paid for years into their pensions will save millions in reduced costs. My bill protects the ``little guy'' from being plagued with years of litigation while a few unscrupulous commercial property owners continue to colllect the rent to line their own pockets.
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