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Bankruptcy reform and venue shopping

If a business owner has to file bankruptcy, he or she would likely prefer to go to court in a venue friendly to the industry and to companies in financial trouble. Florida entrepreneurs have not had to worry too much about this in recent years because Congress has, since 1987, allowed them to file bankruptcy where they first incorporated their businesses. 

That means, even if a company currently only has offices in Florida but originally incorporated in New York, executives could file their case in New York rather than Florida. While this practice has appealed to many corporations, local communities have not been as happy with the arrangement.

Bankruptcy Venue Shopping

According to ABF Journal, one of the many reasons localities feel jilted by out-of-town venues is the economic benefit they lose when a case goes elsewhere. Simply put, hotels, restaurants and others miss out on business generated when the city hosts cases. Other reasons include the "unnatural distribution of cases among the courts and underutilization of experienced judges" who live in the locale and are more familiar with local and state laws.

Bankruptcy Venue Reform Act of 2018

The arguments have been ongoing for years, but in 2018, Congress considered a bipartisan bill called the Bankruptcy Venue Reform Act of 2018. The Law Journal Newsletter says the bill intended to "prevent forum shopping in Chapter 11 bankruptcy cases...and force individual debtors and corporations to file Chapter 11 petitions in their true home districts..." 

The hope was filing at home would allow all stakeholders to participate in the proceedings. The bill did not pass, but advocates remain hopeful that bankruptcy venue reform is in the future.

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