Attorney General William Tong has taken a co-leadership role in a coalition of 43 attorneys general calling on Congress to pass the Bankruptcy Venue Reform Act of 2021.
According to a letter sent to congressional leaders, Tong and his fellow attorneys general stated the bipartisan legislation would end the concept of “forum shopping” that enables corporations to pick what they perceive as the most favorable district for bankruptcy filings.
Unlike individuals who can only file for bankruptcy in their residential district, corporations can file either in their district of incorporation, where they have their principal place of business or assets, or where an affiliate office has been created or located.
If passed, the Bankruptcy Venue Reform Act of 2021 would restrict corporate bankruptcy filings in the jurisdiction where their “principal assets” or their “principal place of business” are located.
The attorneys general added that the legislation would also help consumers and other parties to be represented in court without undue burden and would assist the states in guarding their financial interests and enforcing their consumer protection laws.
“Forum shopping undermines the integrity of our bankruptcy system and needs to end,” Tong said. “Corporations should file for bankruptcy wherever their principal assets or place of business is located, not wherever they hope to secure most favorable treatment.”
