The recent U.S. government shutdown ended up costing the American economy billions, according to a report from CNN.com, which was published on March 27, 2019. This shutdown began in December of 2018 and ended in January of 2019. President Trump wanted $5.7 billion in government funds to be earmarked for the construction of a southern border wall and the Senate failed to initiate a final vote that would add those funds to a CR (continuing resolution). A CR is a stopgap measure for funding. The result of this political impasse was a 35-day shutdown which caused a lot of hardship and impacted a lot of different industries. How did it impact bankruptcy law? This news roundup will give you an overview.
The U.S. Department of Justice was impacted
When the lapse in federal funding went into effect during late December of 2018, a partial shutdown started. During the shutdown, The U.S. Department of Justice, including USTP (U.S. Trustee Program) was impacted. USTP plays a prominent oversight role in many bankruptcy cases. USTP was founded via the Bankruptcy Reform Act of 1978. It was a pilot project which was initiated in eighteen judicial districts. Since USTP has broad administrative, enforcement, litigation and regulatory powers, which are designed to boost the bankruptcy system’s efficiency and integrity, slashing of staff during the shutdown triggered delays.
Judges were also under pressure
With a skeleton crew consisting of one-third of the regular staffing level, the pace of processing some types of bankruptcy cases slowed down. Judges who presided over bankruptcy cases were negatively impacted, as they had to operate with smaller numbers of employees. The negative impact on consumers and Chapter 13 and Chapter 7 trustees was not significant. Bankruptcy filings were still accepted in most districts during the shutdown. Delays were largely centered on bankruptcy litigation cases.
New legislation is in the offing
In early March of this year, Representative Tim Ryan (Democrat – Ohio) moved to protect workers from the brutal financial impact of corporate bankruptcy claims. He announced plans to reintroduce a piece of legislation from two years ago, which would clearly define employee claims during bankruptcy as administrative costs. This means that these costs would be covered in full. If Ryan’s plans are successful, workers will receive all payments, just as others who earn money taking apart dwindling companies do. He was strongly influenced by tales of woe from government workers, many of whom suffered serious financial problems due to the government shutdown.
Other factors also inspired Tim Ryan. Ryan’s new initiative was presented after a group of Democrats (Tim Ryan, Tulsi Gabbard and Bernie Sanders included) got together during mid-summer to ask Toy “R” Us owners for answers, following the toy shore chain’s bankruptcy. Many Toys”R”Us workers struggled to make ends meet after they were paid off. Elizabeth Warren, who is a Senator, asked for the same answers from the former head of the Sears department store chain, which had also filed for bankruptcy in October of 2018.
Government agencies and courts are back up and running
While the American economy has taken heavy hits due to the shutdown, the courts are up and running, and bankruptcy laws haven’t changed as a result, although they might in the future, if Tim Ryan has his way. The shutdown did lead to lower staffing levels at government agencies and courts. Skeleton crews coped as well as possible, but there were delays, primarily for bankruptcy litigation. Now that government agencies and courts have full staffing levels, everything has normalized. Any person or company that is considering bankruptcy should seek out legal counsel. A good attorney will make the process as streamlined and stress-free as it can be.
Edward Lott, Ph.D., M.B.A.
President and Managing Partner
ForLawFirmsOnly Marketing, Inc.