PHOTO COURTESY OF INGHAM COUNTY BAR ASSOCIATION
by Patricia J. Scott, Ingham County Bar Association,
with notes by Cynthia Price
At the Ingham County Bar Association’s Bankruptcy Section’s January Meeting, Chief Bankruptcy Judge Scott Dales from the Western District of Michigan provided an in-depth analysis of the “Small Business Reorganization Act of 2019” (“Small Business Chapter 11”).
Judge Dales informed those present that the Small Business Chapter 11 provisions were scheduled to take effect on February 19, 2020, after going through a three-year process of enactment. The new “subchapter” has similar features to Chapters 12 and 13, but it also still tracks a typical Chapter 11 in many ways, while serving as a cost effective means for reorganization.
According to Iowa Senator Chuck Grassley, one of the sponsors of the bill, “The Small Business Reorganization Act (SBRA) will streamline existing bankruptcy procedures and provide new tools to increase a small [business’s] ability to achieve a successful restructuring.”
Judge Dales was appointed as a judge for the Western District of Michigan bankruptcy court in 2007, and named chief judge in 2013. His current term expires in October of 2021.
After graduating from the University of Michigan with his Bachelors degree, Judge Dales served as a legislative analyst for the Federal Home Loan Mortgage Corporation (Freddie Mac) and attended George Washington University Law School, from which he obtained his Juris Doctor.
Dales then served as a law clerk for the Honorable Con. G. Cholakis, U.S. District Judge for the Northern District of New York. Following that, he practiced law for several years in Albany, N.Y., with Barrett, Gravante, Carpinello, and Stern. In 1998 he moved to West Michigan to clerk for the Honorable James D. Gregg, then chief judge of the Western District bankruptcy court.
Judge Dales practiced law with Dykema in Grand Rapids, and then served as in-house counsel to National City Corporation and its bank and non-bank subsidiaries until 2007. As a member of National City's insolvency practice group, he worked primarily with distressed commercial transactions, including National City's aircraft lease portfolio and troubled automotive supplier loans.
In 2016, Judge Dales was appointed to serve on the Information Technology Committee of the Judicial Conference of the United States. He is an author of several articles on bankruptcy-related issues.
The Ingham County Bar Association was founded in 1895, with the purpose of “bringing lawyers together to join in a strong organization that works to achieve objectives that transcend the individual.
The ICBA provides programs and services designed to improve the local judicial system, fosters and enhances the quality of legal services in the greater Lansing community, and also provides educational and professional programs for members.
The major components of the Small Business Chapter 11 which Judge Dales highlighted to the ICBA Bankruptcy Section include: the debtor must make an election to qualify (not automatic); a trustee is appointed in every case; there will not be any committees; no U.S. Trustee fees; allows for modification of residential mortgage if debt is primarily for business purposes; no absolute priority rule; and maximum debt in the aggregate is $2,725,625. There, various procedural differences were also discussed. As time progresses, the application of the new Small Business Chapter 11 will evolve, Judge Dales said.
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