[Congressional Record Volume 143, Number 142 (Tuesday, October 21, 1997)]
[Senate]
[Pages S10884-S10891]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Durbin):
  S. 1301. A bill to amend title 11, United States Code, to provide for 
consumer bankruptcy protection, and for other purposes; to the 
Committee on the Judiciary.


             The ``Consumer Bankruptcy Reform Act of 1997''

  Mr. GRASSLEY. Mr. President, I rise today to introduce the Consumer 
Bankruptcy Reform Act of 1997. This bill, which I am introducing with 
Senator Durbin, will tighten bankruptcy laws and do much to stem the 
tide of casual bankruptcies. With bankruptcy filings at all time record 
highs, it's imperative that Congress enact serious and tough reforms of 
the consumer bankruptcy chapters.
  By far, the most pressing bankruptcy policy question facing America 
today relates to the explosion of consumer bankruptcies. Last April, I 
chaired a hearing on the crisis in consumer bankruptcies. While there's 
not much agreement about the root causes of the

[[Page S10885]]

rise in consumer bankruptcies, it's obvious that Congress needs to do 
something now--before the economy takes a downturn--to reverse this 
trend. At the present time, the economy is doing well and unemployment 
is low. Inflation is under control.
  But we know there are always potholes on the road to economic 
prosperity. And we know that when the economy declines, bankruptcies 
increase. With so many bankruptcies now, when times are good, I shudder 
to think of the strains we will face if we hit a recession. Clearly, 
Congress needs to act while the economy is still in good shape.
  The Consumer Bankruptcy Reform Act will discourage casual 
bankruptcies by sending a clear signal that you can't file for 
bankruptcy and walk away from your debts if you have the ability to re-
pay some portion of those debts. This is a simple and straightforward 
idea whose time has come. According to my research, Congress considered 
reserving bankruptcy relief for only those Americans who can't re-pay 
their debts as far back as 1932. So, what we're proposing is not based 
on some unprecedented concept, but instead has a long and distinguished 
history.
  The bill I'm introducing today amends section 707(b) of the 
bankruptcy code to permit bankruptcy judges to transfer debtors to 
chapter 13, or dismiss a case outright, if the debtor could re-pay 20 
percent or more of their nonpriority unsecured debts. And the bill 
changes current law to let creditors bring motions to bankruptcy judges 
to have debtors moved to chapter 13 or have their cases dismissed. This 
means that creditors can be the masters of their own destiny. The 
bankruptcy code should not prevent creditors from even presenting 
evidence that debtors who could repay their debts are abusing the 
bankruptcy code and walking away scott-free.

  The bill also allows private chapter 7 trustees to bring motions 
under the new section 707(b). And if they win on their motion, and the 
debtor is either dismissed or transferred to chapter 13, the private 
trustee will be reimbursed for attorney's fees. As an added incentive 
for the private trustees, if they win on a section 707(b) motion, the 
court can order the debtor's attorney fined and make that fine payable 
to the trustee. Thus, there will be a army of trustees looking for 
debtors who shouldn't be in bankruptcy. This will cause people to think 
twice before rushing to declare bankruptcy. And that's a very positive 
reform.
  However, in order to forge a bipartisan compromise, the bill doesn't 
make ability to repay the only factor in determining whether to 
transfer or dismiss a case. Instead, each debtor's individual 
circumstances will be examined. In this way, our bill avoids the 
injustice which can accompany a crude formula with practically no 
exceptions.
  I'm also very aware that there have been abuses by creditors using 
harsh and abusive tactics to collect debts from people who have 
declared bankruptcy. So, the Consumer Bankruptcy Reform Act contains an 
entire title--title II--dedicated to enhancing consumer protections by 
requiring judges to impose stiff penalties for abusive conduct and 
frivolous court filings. As a strong supporter of rule 11 reform, I 
believe that Congress should crack down on groundless court filings 
which some creditors have used to harass and intimidate debtors.
  I also believe that the Grassley-Durbin bill will encourage 
alternative dispute resolution and out-of-court settlements under the 
new section 707(b), if a creditor refuses to attempt ADR, then a debtor 
who could otherwise be transferred from chapter 7 to chapter 13 can 
raise this noncooperation as a defense. This will encourage creditors 
to negotiate out-of-court settlements. And that will save court time 
and resources--a goal which I am strongly committed to. I think that 
bringing Bureau of Labor statistics numbers into the bankruptcy code 
for the first time, as the House bill does, is unprecedented and will 
breed new and costly litigation. The Grassley-Durbin bill avoids this 
problem by relying on time-tested bankruptcy provisions to identify 
chapter 7 filers who really need to be in chapter 13 or out of the 
bankruptcy system altogether.
  This bill is fair and balanced and will implement needed changes 
efficiently and without the uncertainty and new litigation associated 
with statistical formulas which are completely foreign to the 
bankruptcy code. It will crack down on bankruptcy abuses on both sides 
of the equation. And it will tell those who don't want to take personal 
responsibility for their debts that the free-ride is over.
  Finally, the bill also strikes the cap on single asset real estate, a 
goal which I have long supported. I'm very grateful to Senator Durbin 
for working with me on this matter, since it really is so important to 
the health of the commercial banking industry.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1301

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Consumer Bankruptcy Reform 
     Act of 1997''.
                    TITLE I--NEEDS BASED BANKRUPTCY

     SEC. 101. CONVERSION.

       Section 706(c) of title 11, United States Code, is amended 
     by striking ``13''.

     SEC. 102. DISMISSAL OR CONVERSION.

       (a) In General.--Section 707 of title 11, United States 
     Code, is amended--
       (1) by striking the section heading and inserting the 
     following:

     ``Sec. 707. Dismissal of a case or conversion to a case under 
       chapter 13'';

     and
       (2) in subsection (b)--
       (A) by inserting ``(1)'' after ``(b)''; and
       (B) in paragraph (1), as redesignated by subparagraph (A) 
     of this paragraph--
       (i) in the first sentence--

       (I) by striking ``, but not at the request or suggestion of 
     a party in interest,'';
       (II) by inserting ``, or, with the debtor's consent, 
     convert such a case to a case under chapter 13 of this 
     title,'' after ``consumer debts''; and
       (III) by striking ``substantial abuse'' and inserting 
     ``abuse''; and

       (ii) by striking the last sentence and inserting the 
     following:
       ``(2) In considering under paragraph (1) whether the 
     granting of relief would be an abuse of the provisions of 
     this chapter, the court shall consider whether--
       ``(A) under section 1325(b)(1) of this title, on the basis 
     of the current income of the debtor, the debtor could pay an 
     amount greater than or equal to 20 percent of unsecured 
     claims that are not considered to be priority claims (as 
     determined under subchapter I of chapter 5 of this title);
       ``(B) the debtor filed a petition for the relief in bad 
     faith; and
       ``(C)(i) the debtor made good-faith efforts, before the 
     filing of the petition, to negotiate an alternative repayment 
     schedule or to use alternative methods of dispute resolution; 
     and
       ``(ii) if the debtor made efforts described in clause (i), 
     the creditors of that debtor unreasonably refused to engage 
     in the alternative methods of dispute resolution or to 
     negotiate an alternative repayment schedule.
       ``(3)(A) If a panel trustee appointed under section 
     586(a)(1) of title 28 brings a motion for dismissal or 
     conversion under this subsection and the court grants that 
     motion, the court shall order the counsel for the debtor, if 
     the debtor is represented by counsel, to reimburse the 
     trustee for all reasonable costs in prosecuting the motion, 
     including reasonable attorneys' fees.
       ``(B) If the court finds that the attorney for the debtor 
     violated Rule 9011, at a minimum, the court shall order--
       ``(i) the assessment of an appropriate civil penalty 
     against the counsel for the debtor; and
       ``(ii) the payment of the civil penalty to the panel 
     trustee or the United States trustee.
       ``(C) In the case of a petition referred to in subparagraph 
     (B), the signature of an attorney shall constitute a 
     certificate that the attorney has--
       ``(i) performed a reasonable investigation into the 
     circumstances that gave rise to the petition; and
       ``(ii) determined that the petition--
       ``(I) is well grounded in fact; and
       ``(II) is warranted by existing law or a good faith 
     argument for the extension, modification, or reversal of 
     existing law and does not constitute an abuse under paragraph 
     (1) of this subsection.
       ``(4) The court shall award a debtor all reasonable costs 
     in contesting a motion brought by a party in interest under 
     this subsection (including reasonable attorneys' fees and 
     actual damages in an amount not less than $5,000) if--
       ``(A) the court does not grant the motion; and
       ``(B) the court finds that--
       ``(i) the position of the party that brought the motion was 
     not substantially justified; or
       ``(ii) the party brought the motion solely for the purpose 
     of coercing a debtor into waiving a right guaranteed to the 
     debtor under this title.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 7 of title

[[Page S10886]]

     11, United States Code, is amended by striking the item 
     relating to section 707 and inserting the following:

``707. Dismissal of a case or conversion to a case under chapter 13.''.
        TITLE II--ENHANCED PROCEDURAL PROTECTIONS FOR CONSUMERS

     SEC. 201. ALLOWANCE OF CLAIMS OR INTERESTS.

       Section 502 of title 11, United States Code, is amended by 
     adding at the end the following:
       ``(k)(1) The court shall award the debtor reasonable 
     attorneys' fees and costs if, after an objection is filed by 
     a debtor, the court--
       ``(A) disallows the claim; or
       ``(B) reduces the claim by an amount greater than 5 percent 
     of the amount of the initial claim filed by a party in 
     interest.
       ``(2) If the court finds that the position of a claimant 
     under this section is not substantially justified, the court 
     shall, in addition to awarding a debtor reasonable attorneys' 
     fees and costs under paragraph (1), award additional punitive 
     damages in the amount of $5,000.''.

     SEC. 202. EXCEPTIONS TO DISCHARGE.

       Section 523 of title 11, United States Code, is amended to 
     read as follows:
       ``(d)(1) If a creditor requests a determination of 
     dischargeability of a consumer debt under this section and 
     that debt is discharged, the court shall award the debtor 
     reasonable attorneys' fees and costs.
       ``(2) In addition to making an award to a debtor under 
     paragraph (1), if the court finds that the position of a 
     creditor in a proceeding covered under this section is not 
     substantially justified, the court shall, in addition to 
     making an award of reasonable attorneys' fees and costs under 
     paragraph (1), award an amount equal to the greater of--
       ``(A)(i) the amount of actual damages; multiplied by
       ``(ii) 3; or
       ``(B) $5,000.''.

     SEC. 203. EFFECT OF DISCHARGE.

       Section 524 of title 11, United States Code, is amended by 
     adding at the end the following:
       ``(i) The failure of a creditor to credit payments received 
     under a plan confirmed under this title (including a plan of 
     reorganization confirmed under chapter 11 of this title) in 
     the manner required by the plan (including crediting the 
     amounts required under the plan) shall constitute a violation 
     of an injunction under subsection (a)(2).
       ``(j)(1) Except as provided in paragraph (2), a creditor 
     may not charge a debtor, or the account of a debtor, for 
     attorneys' fees or costs for work performed in connection 
     with a case brought under this title.
       ``(2) Any charge made by a creditor in violation of this 
     subsection shall constitute a violation of an injunction 
     under subsection (a)(2).
       ``(k) An individual who is injured by the failure of a 
     creditor to comply with the requirements for a reaffirmation 
     agreement under subsections (c) and (d), or by any willful 
     violation of the injunction under subsection (a)(2), shall be 
     entitled to recover--
       ``(1) the greater of--
       ``(A)(i) the amount of actual damages; multiplied by
       ``(ii) 3; or
       ``(B) $5,000; and
       ``(2) costs and attorneys' fees.''.

     SEC. 204. AUTOMATIC STAY.

       Section 362(h) of title 11, United States Code, is amended 
     to read as follows:
       ``(h)(1) An individual who is injured by any willful 
     violation of a stay provided in this section shall be 
     entitled to recover--
       ``(A) the greater of--
       ``(i)(I) the amount of actual damages; multiplied by
       ``(II) 3; or
       ``(ii) $5,000; and
       ``(B) costs and attorneys' fees.
       ``(2) In addition to recovering actual damages, costs, and 
     attorneys' fees under paragraph (1), an individual described 
     in paragraph (1) may recover punitive damages in appropriate 
     circumstances.''.

     SEC. 205. WHO MAY BE A DEBTOR.

       Section 727 of title 11, United States Code, is amended by 
     adding at the end the following:
       ``(f)(1) In any case in which a creditor files a motion to 
     deny relief to a debtor under this section and that motion is 
     denied or withdrawn, the court shall award the debtor 
     reasonable attorneys' fees and costs.
       ``(2) If the court finds that the position of a party 
     filing a motion under this section is not substantially 
     justified, the court shall assess against the creditor for 
     payment to the debtor a payment in an amount equal to the 
     greater of--
       ``(A)(i) the amount of actual damages; multiplied by
       ``(ii) 3; or
       ``(B) $5,000.''.
  TITLE III--IMPROVED PROCEDURES FOR EFFICIENT ADMINISTRATION OF THE 
                           BANKRUPTCY SYSTEM

     SEC. 301. NOTICE OF ALTERNATIVES.

       (a) In General.--Section 342 of title 11, United States 
     Code, is amended by striking subsection (b) and inserting the 
     following:
       ``(b) Before the commencement of a case under this title by 
     an individual whose debts are primarily consumer debts, that 
     individual shall be given or obtain (as required in section 
     521(a)(1), as part of the certification process under 
     subchapter 1 of chapter 5 of this title) a written notice 
     prescribed by the United States trustee for the district in 
     which the petition is filed pursuant to section 586 of title 
     28. The notice shall contain the following:
       ``(1) A brief description of chapters 7, 11, 12, and 13 of 
     this title and the general purpose, benefits, and costs of 
     proceeding under each of those chapters.
       ``(2) A brief description of services that may be available 
     to that individual from an independent nonprofit debt 
     counseling service.
       ``(3)(A) The name, address, and telephone number of each 
     nonprofit debt counseling service with an office located in 
     the district in which the petition is filed, if any.
       ``(B) Any nonprofit debt counseling service described in 
     subparagraph (A) that has registered with the clerk of the 
     bankruptcy court on or before December 10 of the preceding 
     year shall be included in the list referred to in that 
     clause, unless the chief bankruptcy judge of the district 
     involved, after giving notice to the debt counseling service 
     and the United States trustee and opportunity for a hearing, 
     orders, for good cause, that a particular debt counseling 
     service shall not be so listed.''; and
       (b) Debtor's Duties.--Section 521 of title 11, United 
     States Code, is amended--
       (1) by inserting ``(a)'' before ``The debtor shall--'';
       (2) by striking paragraph (1) and inserting the following:
       ``(1) file--
       ``(A) a list of creditors; and
       ``(B) unless the court orders otherwise--
       ``(i) a schedule of assets and liabilities;
       ``(ii) a schedule of current income and current 
     expenditures;
       ``(iii) a statement of the debtor's financial affairs and, 
     if applicable, a certificate--

       ``(I) of an attorney whose name is on the petition as the 
     attorney for the debtor or any bankruptcy petition preparer 
     signing the petition pursuant to section 110(b)(1) of this 
     title indicating that such attorney or bankruptcy petition 
     preparer delivered to the debtor any notice required by 
     section 342(b) of this title; or
       ``(II) if no attorney for the debtor is indicated and no 
     bankruptcy petition preparer signed the petition, of the 
     debtor that such notice was obtained and read by the debtor;

       ``(iv) copies of any Federal tax returns, including any 
     schedules or attachments, filed by the debtor for the 3-year 
     period preceding the order for relief;
       ``(v) copies of all payment advices or other evidence of 
     payment, if any, received by the debtor from any employer of 
     the debtor in the period 60 days prior to the filing of the 
     petition;
       ``(vi) a statement of the amount of projected monthly net 
     income, itemized to show how calculated;
       ``(vii) if applicable, any statement under paragraphs (3) 
     and (4) of section 109(h); and
       ``(viii) a statement disclosing any reasonably anticipated 
     increase in income or expenditures over the 12-month period 
     following the date of filing;''; and
       (3) by adding at the end the following:
       ``(b)(1) At any time, a creditor, in the case of an 
     individual under chapter 7 or 13, may file with the court 
     notice that the creditor requests the petition, schedules, 
     and a statement of affairs filed by the debtor in the case 
     and the court shall make those documents available to the 
     creditor who requests those documents.
       ``(2) At any time, a creditor, in a case under chapter 13, 
     may file with the court notice that the creditor requests the 
     plan filed by the debtor in the case and the court shall make 
     that plan available to the creditor who requests that plan.
       ``(c) An individual debtor in a case under chapter 7 or 13 
     shall file with the court--
       ``(1) at the time filed with the taxing authority, all tax 
     returns, including any schedules or attachments, with respect 
     to the period from the commencement of the case until such 
     time as the case is closed;
       ``(2) at the time filed with the taxing authority, all tax 
     returns, including any schedules or attachments, that were 
     not filed with the taxing authority when the schedules under 
     subsection (a)(1) were filed with respect to the period that 
     is 3 years before the order for relief;
       ``(3) any amendments to any of the tax returns, including 
     schedules or attachments, described in paragraph (1) or (2); 
     and
       ``(4) in a case under chapter 13, a statement subject to 
     the penalties of perjury by the debtor of the debtor's income 
     and expenditures in the preceding tax year and monthly 
     income, that shows how the amounts are calculated--
       ``(A) beginning on the date that is the later of 90 days 
     after the close of the debtor's tax year or 1 year after the 
     order for relief, unless a plan has been confirmed; and
       ``(B) thereafter on or before the date that is 45 days 
     before each anniversary of the confirmation of the plan until 
     the case is closed.
       ``(d)(1) A statement referred to in subsection (c)(4) shall 
     disclose--
       ``(A) the amount and sources of income of the debtor;
       ``(B) the identity of any persons responsible with the 
     debtor for the support of any dependents of the debtor; and
       ``(C) any persons who contributed and the amount 
     contributed to the household in which the debtor resides.
       ``(2) The tax returns, amendments, and statement of income 
     and expenditures described in paragraph (1) shall be 
     available to the United States trustee, any bankruptcy 
     administrator, any trustee, and any party in interest for 
     inspection and copying.''.
       (c) Title 28.--Section 586(a) of title 28, United States 
     Code, is amended--

[[Page S10887]]

       (1) in paragraph (5) by striking ``and'' at the end;
       (2) in paragraph (6) by striking the period at the end and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(7) on or before January 1 of each calendar year, and 
     also not later than 30 days after any change in the nonprofit 
     debt counseling services registered with the bankruptcy 
     court, prescribe and make available on request the notice 
     described in section 342(b)(3) of title 11 for each district 
     included in the region.''.

     SEC. 302. FAIR TREATMENT OF SECURED CREDITORS UNDER CHAPTER 
                   13.

       Section 1325(a)(5)(B)(i) of title 11, United States Code, 
     is amended to read as follows:
       ``(B)(i) the plan provides that the holder of such claim 
     retain the lien securing such claim until the debt that is 
     the subject of the claim is fully paid for, as provided under 
     the plan; and''.

     SEC. 303. DISCOURAGEMENT OF BAD FAITH REPEAT FILINGS.

       Section 362 of title 11, United States Code, is amended--
       (1) in subsection (c)--
       (A) by inserting ``(1)'' before ``Except as'';
       (B) by striking ``(1) the stay'' and inserting ``(A) the 
     stay'';
       (C) by striking ``(2) the stay'' and inserting ``(B) the 
     stay'';
       (D) by striking ``(A) the time'' and inserting ``(i) the 
     time''; and
       (E) by striking ``(B) the time'' and inserting ``(ii) the 
     time''; and
       (2) by adding at the end the following:
       ``(2) Except as provided in subsections (d) through (f), 
     the stay under subsection (a) with respect to any action 
     taken with respect to a debt or property securing such debt 
     or with respect to any lease shall terminate with respect to 
     the debtor on the 30th day after the filing of the later case 
     if--
       ``(A) a single or joint case is filed by or against an 
     individual debtor under chapter 7, 11, or 13; and
       ``(B) a single or joint case of that debtor (other than a 
     case refiled under a chapter other than chapter 7 after 
     dismissal under section 707(b) of this title) was pending 
     during the preceding year but was dismissed.
       ``(3) If a party in interest so requests, the court may 
     extend the stay in a particular case with respect to 1 or 
     more creditors (subject to such conditions or limitations as 
     the court may impose) after providing notice and a hearing 
     completed before the expiration of the 30-day period 
     described in paragraph (2) only if the party in interest 
     demonstrates that the filing of the later case is in good 
     faith with respect to the creditors to be stayed.
       ``(4) A case shall be presumed to have not been filed in 
     good faith (except that such presumption may be rebutted by 
     clear and convincing evidence to the contrary)--
       ``(A) with respect to the creditors involved, if--
       ``(i) more than 1 previous case under any of chapters 7, 
     11, or 13 of this title in which the individual was a debtor 
     was pending during the 1-year period described in paragraph 
     (1);
       ``(ii) a previous case under any of chapters 7, 11, or 13 
     of this title in which the individual was a debtor was 
     dismissed within the period specified in paragraph (2) 
     after--
       ``(I) the debtor, after having received from the court a 
     request to do so, failed to file or amend the petition or 
     other documents as required by this title; or
       ``(II) the debtor, without substantial excuse, failed to 
     perform the terms of a plan that was confirmed by the court; 
     or
       ``(iii)(I) during the period commencing with the dismissal 
     of the next most previous case under chapter 7, 11, or 13 
     there has not been a substantial change in the financial or 
     personal affairs of the debtor;
       ``(II) if the case is a chapter 7 case, there is no other 
     reason to conclude that the later case will be concluded with 
     a discharge; or
       ``(III) if the case is a chapter 11 or 13 case, there is 
     not a confirmed plan that will be fully performed; and
       ``(B) with respect to any creditor that commenced an action 
     under subsection (d) in a previous case in which the 
     individual was a debtor, if, as of the date of dismissal of 
     that case, that action was still pending or had been resolved 
     by terminating, conditioning, or limiting the stay with 
     respect to actions of that creditor.
       ``(5)(A) If a request is made for relief from the stay 
     under subsection (a) with respect to real or personal 
     property of any kind, and the request is granted in whole or 
     in part, the court may, in addition to making any other order 
     under this subsection, order that the relief so granted shall 
     be in rem either--
       ``(i) for a definite period of not less than 1 year; or
       ``(ii) indefinitely.
       ``(B)(i) After an order is issued under subparagraph (A), 
     the stay under subsection (a) shall not apply to any property 
     subject to such an in rem order in any case of the debtor.
       ``(ii) If an in rem order issued under subparagraph (A) so 
     provides, the stay shall, in addition to being inapplicable 
     to the debtor involved, not apply with respect to an entity 
     under this title if--
       ``(I) the entity had reason to know of the order at the 
     time that the entity obtained an interest in the property 
     affected; or
       ``(II) the entity was notified of the commencement of the 
     proceeding for relief from the stay, and at the time of the 
     notification, no case in which the entity was a debtor was 
     pending.
       ``(6) For purposes of this section, a case is pending 
     during the period beginning with the issuance of the order 
     for relief and ending at such time as the case involved is 
     closed.''.

     SEC. 304. TIMELY FILING AND CONFIRMATION OF PLANS UNDER 
                   CHAPTER 13.

       (a) Filing of Plan.--Section 1321 of title 11, United 
     States Code, is amended to read as follows:

     ``Sec. 1321. Filing of plan

       ``The debtor shall file a plan not later than 90 days after 
     the order for relief under this chapter, except that the 
     court may extend such period if the need for an extension is 
     attributable to circumstances for which the debtor should not 
     justly be held accountable.''.
       (b) Confirmation of Hearing.--Section 1324 of title 11, 
     United States Code, is amended by adding at the end the 
     following: ``That hearing shall be held not later than 45 
     days after the filing of the plan, unless the court, after 
     providing notice and a hearing, orders otherwise.''.

     SEC. 305. APPLICATION OF THE CODEBTOR STAY ONLY WHEN THE STAY 
                   PROTECTS THE DEBTOR.

       Section 1301(b) of title 11, United States Code, is 
     amended--
       (1) by inserting ``(1)'' after ``(b)''; and
       (2) by adding at the end the following:
       ``(2)(A) Notwithstanding subsection (c) and except as 
     provided in subparagraph (B), in any case in which the debtor 
     did not receive the consideration for the claim held by a 
     creditor, the stay provided by subsection (a) shall apply to 
     that creditor for a period not to exceed 30 days beginning on 
     the date of the order for relief, to the extent the creditor 
     proceeds against--
       ``(i) the individual that received that consideration; or
       ``(ii) property not in the possession of the debtor that 
     secures that claim.
       ``(B) In any case described in subparagraph (A), a creditor 
     may not proceed against an individual described in 
     subparagraph (A)(i) or property described in subparagraph 
     (A)(ii), if the debtor who did not receive consideration for 
     the property that is the subject of the claim is able to 
     demonstrate that the receipt of the property was not part of 
     a scheme to defraud or hinder any creditor.
       ``(3) Notwithstanding subsection (c), the stay provided by 
     subsection (a) shall terminate as of the date of confirmation 
     of the plan, in any case in which the plan of the debtor 
     provides that the debtor's interest in personal property 
     subject to a lease with respect to which the debtor is the 
     lessee will be surrendered or abandoned or no payments will 
     be made under the plan on account of the debtor's obligations 
     under the lease.''.

     SEC. 307. IMPROVED BANKRUPTCY STATISTICS.

       (a) Amendment.--Chapter 6 of part I of title 28, United 
     States Code, is amended by adding at the end the following:

     ``Sec. 159. Bankruptcy statistics

       ``(a) The clerk of each district shall compile statistics 
     regarding individual debtors with primarily consumer debts 
     seeking relief under chapters 7, 11, and 13 of title 11. 
     Those statistics shall be in a form prescribed by the 
     Director of the Administrative Office of the United States 
     Courts (referred to in this section as the `Office').
       ``(b) The Director shall--
       ``(1) compile the statistics referred to in subsection (a);
       ``(2) make the statistics available to the public; and
       ``(3) not later than October 31, 1998, and annually 
     thereafter, prepare, and submit to Congress a report 
     concerning the information collected under subsection (a) 
     that contains an analysis of the information.
       ``(c) The compilation required under subsection (b) shall--
       ``(1) be itemized, by chapter, with respect to title 11;
       ``(2) be presented in the aggregate and for each district; 
     and
       ``(3) include information concerning--
       ``(A) the total assets and total liabilities of the debtors 
     described in subsection (a), and in each category of assets 
     and liabilities, as reported in the schedules prescribed 
     pursuant to section 2075 of this title and filed by those 
     debtors;
       ``(B) the current total monthly income, projected monthly 
     net income, and average income and average expenses of those 
     debtors as reported on the schedules and statements that each 
     such debtor files under sections 111, 521, and 1322 of title 
     11;
       ``(C) the aggregate amount of debt discharged in the 
     reporting period, determined as the difference between the 
     total amount of debt and obligations of a debtor reported on 
     the schedules and the amount of such debt reported in 
     categories which are predominantly nondischargeable;
       ``(D) the average period of time between the filing of the 
     petition and the closing of the case;
       ``(E) for the reporting period--
       ``(i) the number of cases in which a reaffirmation was 
     filed; and
       ``(ii)(I) the total number of reaffirmations filed;
       ``(II) of those cases in which a reaffirmation was filed, 
     the number in which the debtor was not represented by an 
     attorney; and
       ``(III) of those cases, the number of cases in which the 
     reaffirmation was approved by the court;
       ``(F) with respect to cases filed under chapter 13 of title 
     11, for the reporting period--
       ``(i)(I) the number of cases in which a final order was 
     entered determining the value of property securing a claim in 
     an amount less than the amount of the claim; and

[[Page S10888]]

       ``(II) the number of final orders determining the value of 
     property securing a claim issued;
       ``(ii) the number of cases dismissed for failure to make 
     payments under the plan; and
       ``(iii) the number of cases in which the debtor filed 
     another case within the 6 years previous to the filing; and
       ``(G) the extent of creditor misconduct and any amount of 
     punitive damages awarded by the court for creditor 
     misconduct.''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of chapter 6 of title 28, United States Code, is 
     amended by adding at the end the following:

``159. Bankruptcy statistics.''.

       (c) Effective Date.--The amendments made by this section 
     shall take effect 18 months after the date of enactment of 
     this Act.

     SEC. 308. AUDIT PROCEDURES.

       (a) Amendment.--Section 586 of title 28, United States 
     Code, is amended--
       (1) in subsection (a), as amended by section 301 of this 
     Act, by striking paragraph (6) and inserting the following:
       ``(6) make such reports as the Attorney General directs, 
     including the results of audits performed under subsection 
     (f); and''; and
       (2) by adding at the end the following:
       ``(f)(1)(A) The Attorney General shall establish procedures 
     for the auditing of the accuracy and completeness of 
     petitions, schedules, and other information which the debtor 
     is required to provide under sections 521 and 1322 of title 
     11, and, if applicable, section 111 of title 11, in 
     individual cases filed under chapter 7 or 13 of such title.
       ``(B) The audits described in subparagraph (A) shall be 
     made in accordance with generally accepted auditing standards 
     and performed by independent certified public accountants or 
     independent licensed public accountants. Those procedures 
     shall--
       ``(i) establish a method of selecting appropriate qualified 
     persons to contract with the United States trustee to perform 
     those audits;
       ``(ii) establish a method of randomly selecting cases to be 
     audited according to generally accepted auditing standards, 
     except that not less than 1 out of every 50 cases in each 
     Federal judicial district shall be selected for audit;
       ``(iii) require audits for schedules of income and expenses 
     which reflect greater than average variances from the 
     statistical norm of the district in which the schedules were 
     filed; and
       ``(iv) establish procedures for--
       ``(I) reporting the results of those audits and any 
     material misstatement of income, expenditures, or assets of a 
     debtor to the Attorney General, the United States Attorney 
     and the court, as appropriate;
       ``(II) providing, not less frequently than annually, public 
     information concerning the aggregate results of such audits 
     including the percentage of cases, by district, in which a 
     material misstatement of income or expenditures is reported; 
     and
       ``(III) fully funding those audits, including procedures 
     requiring each debtor with sufficient available income or 
     assets to contribute to the payment for those audits, as an 
     administrative expense or otherwise.
       ``(2) The United States trustee for each district is 
     authorized to contract with auditors to perform audits in 
     cases designated by the United States trustee according to 
     the procedures established under paragraph (1) of this 
     subsection.
       ``(3) According to procedures established under paragraph 
     (1), upon request of a duly appointed auditor, the debtor 
     shall cause the accounts, papers, documents, financial 
     records, files and all other papers, things, or property 
     belonging to the debtor as the auditor requests and that are 
     reasonably necessary to facilitate the audit to be made 
     available for inspection and copying.
       ``(4)(A) The report of each audit conducted under this 
     subsection shall be filed with the court, the Attorney 
     General, and the United States Attorney, as required under 
     procedures established by the Attorney General under 
     paragraph (1).
       ``(B) If a material misstatement of income or expenditures 
     or of assets is reported under subparagraph (A), a statement 
     specifying that misstatement shall be filed with the court 
     and the United States trustee shall--
       ``(i) give notice thereof to the creditors in the case; and
       ``(ii) in an appropriate case, in the opinion of the United 
     States trustee, that requires investigation with respect to 
     possible criminal violations, the United States Attorney for 
     the district.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect 18 months after the date of enactment of 
     this Act.

     SEC. 309. CREDITOR REPRESENTATION AT FIRST MEETING OF 
                   CREDITORS.

       Section 341(c) of title 11, United States Code, is amended 
     by inserting after the first sentence the following: 
     ``Notwithstanding any local court rule, provision of a State 
     constitution, any other Federal or State law that is not a 
     bankruptcy law, or other requirement that representation at 
     the meeting of creditors under subsection (a) be by an 
     attorney, a creditor holding a consumer debt or any 
     representative of the creditor (which may include an entity 
     or an employee of an entity and may be a representative for 
     more than one creditor) shall be permitted to appear at and 
     participate in the meeting of creditors in a case under 
     chapter 7 or 13, either alone or in conjunction with an 
     attorney for the creditor. Nothing in this subsection shall 
     be construed to require any creditor to be represented by an 
     attorney at any meeting of creditors.''.

     SEC. 310. FAIR NOTICE FOR CREDITORS IN CHAPTER 7 AND 13 
                   CASES.

       Section 342 of title 11, United States Code, is amended--
       (1) in subsection (c)--
       (A) by striking ``, but the failure of such notice to 
     contain such information shall not invalidate the legal 
     effect of such notice''; and
       (B) by adding at the end the following:
       ``(d)(1) If the credit agreement between the debtor and the 
     creditor or the last communication before the filing of the 
     petition in a voluntary case from the creditor to a debtor 
     who is an individual states an account number of the debtor 
     that is the current account number of the debtor with respect 
     to any debt held by the creditor against the debtor, the 
     debtor shall include that account number in any notice to the 
     creditor required to be given under this title.
       ``(2) If the creditor has specified to the debtor, in the 
     last communication before the filing of the petition, an 
     address at which the creditor wishes to receive 
     correspondence regarding the debtor's account, any notice to 
     the creditor required to be given by the debtor under this 
     title shall be given at such address.
       ``(3) For purposes of this section, the term `notice' shall 
     include--
       ``(A) any correspondence from the debtor to the creditor 
     after the commencement of the case;
       ``(B) any statement of the debtor's intention under section 
     521(a)(2) of this title;
       ``(C) notice of the commencement of any proceeding in the 
     case to which the creditor is a party; and
       ``(D) any notice of a hearing under section 1324 of this 
     title.
       ``(e)(1) At any time, a creditor, in a case of an 
     individual under chapter 7 or 13, may file with the court and 
     serve on the debtor a notice of the address to be used to 
     notify the creditor in that case.
       ``(2) If the court or the debtor is required to give the 
     creditor notice, 5 days after receipt of the notice under 
     paragraph (1), that notice shall be given at that address.
       ``(f) An entity may file with the court a notice stating 
     its address for notice in cases under chapter 7 or 13. After 
     the date that is 30 days following the filing of that notice, 
     any notice in any case filed under chapter 7 or 13 given by 
     the court shall be to that address unless specific notice is 
     given under subsection (e) with respect to a particular case.
       ``(g)(1) Notice given to a creditor other than as provided 
     in this section shall not be effective notice until that 
     notice has been brought to the attention of the creditor.
       ``(2) If the creditor has designated a person or department 
     to be responsible for receiving notices concerning bankruptcy 
     cases and has established reasonable procedures so that 
     bankruptcy notices received by the creditor will be delivered 
     to that department or person, notice shall not be brought to 
     the attention of the creditor until that notice is received 
     by that person or department.''.

     SEC. 311. STOPPING ABUSIVE CONVERSIONS FROM CHAPTER 13.

       Section 348(f)(1) of title 11, United States Code, is 
     amended--
       (1) in subparagraph (A), by striking ``and'' at the end;
       (2) in subparagraph (B)--
       (A) by striking ``in the converted case, with allowed 
     secured claims'' and inserting ``only in a case converted to 
     chapter 11 or 12 but not in a case converted to chapter 7, 
     with allowed secured claims in cases under chapters 11 and 
     12''; and
       (B) by striking the period and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(C) with respect to cases converted from chapter 13, the 
     claim of any creditor holding security as of the date of the 
     petition shall continue to be secured by that security unless 
     the full amount of that claim determined under applicable 
     nonbankruptcy law has been paid in full as of the date of 
     conversion, notwithstanding any valuation or determination of 
     the amount of an allowed secured claim made for the purposes 
     of the chapter 13 proceeding.''.

     SEC. 312. PROMPT RELIEF FROM STAY IN INDIVIDUAL CASES.

       Section 362(e) of title 11, United States Code, is 
     amended--
       (1) by inserting ``(1)'' after ``(e); and
       (2) by adding at the end the following:
       ``(2) Notwithstanding paragraph (1), in the case of an 
     individual filing under chapter 7, 11, or 13, the stay under 
     subsection (a) shall terminate on the date that is 60 days 
     after a request is made by a party in interest under 
     subsection (d), unless--
       ``(A) a final decision is rendered by the court during the 
     60-day period beginning on the date of the request; or
       ``(B) that 60-day period is extended--
       ``(i) by agreement of all parties in interest; or
       ``(ii) by the court for such specific period of time as the 
     court finds is required for good cause.''.

     SEC. 313. DISMISSAL FOR FAILURE TO FILE SCHEDULES TIMELY OR 
                   PROVIDE REQUIRED INFORMATION.

       Section 707 of title 11, United States Code, as amended by 
     section 102 of this Act, is further amended by adding at the 
     end the following:

[[Page S10889]]

       ``(c)(1) Notwithstanding subsection (a), and subject to 
     paragraph (2), if an individual debtor in a voluntary case 
     under chapter 7 or 13 fails to file all of the information 
     required under section 521(a)(1) of this title within 45 days 
     after the filing of the petition commencing the case, the 
     case shall be automatically dismissed effective on the 46th 
     day after the filing of the petition.
       ``(2) With respect to a case described in paragraph (1), 
     any party in interest may request the court to enter an order 
     dismissing the case. The court shall, if so requested, enter 
     an order of dismissal not later than 5 days after that 
     request.
       ``(3) Upon request of the debtor made within 45 days after 
     the filing of the petition commencing a case described in 
     paragraph (1), the court may allow the debtor an additional 
     period of not to exceed 20 days to file the information 
     required under section 521(a)(1) of this title if the court 
     finds justification for extending the period for the 
     filing.''.

     SEC. 314. ADEQUATE TIME FOR PREPARATION FOR A HEARING ON 
                   CONFIRMATION OF THE PLAN.

       Section 1324 of title 11, United States Code, is amended--
       (1) by striking ``After'' and inserting the following:
       ``(a) Except as provided in subsection (b) and after''; and
       (2) by adding at the end the following:
       ``(b) If not later than 5 days after receiving notice of a 
     hearing on confirmation of the plan, a creditor objects to 
     the confirmation of the plan, the hearing on confirmation of 
     the plan may be held no earlier than 20 days after the first 
     meeting of creditors under section 341(a) of this title.''.
                    TITLE IV--TECHNICAL CORRECTIONS

     SEC. 401. DEFINITIONS.

       Section 101 of title 11, United States Code, is amended--
       (1) by striking ``In this title--'' and inserting ``In this 
     title:'';
       (2) in each paragraph, by inserting ``The term'' after the 
     paragraph designation;
       (3) in paragraph (35)(B), by striking ``paragraphs (21B) 
     and (33)(A)'' and inserting ``paragraphs (23) and (35)'';
       (4) in each of paragraphs (35A) and (38), by striking ``; 
     and'' at the end and inserting a period;
       (5) in paragraph (51B)--
       (A) by inserting ``who is not a family farmer'' after 
     ``debtor'' the first place it appears; and
       (B) by striking ``thereto having aggregate'' and all that 
     follows through the end of the paragraph;
       (6) by amending paragraph (54) to read as follows:
       ``(54) The term `transfer' means--
       ``(A) the creation of a lien;
       ``(B) the retention of title as a security interest;
       ``(C) the foreclosure of a debtor's equity of redemption; 
     or
       ``(D) each mode, direct or indirect absolute or 
     conditional, voluntary or involuntary, of disposing of or 
     parting with property or with an interest in property;'';
       (7) in each of paragraphs (1) through (35), in each of 
     paragraphs (36) and (37), and in each of paragraphs (40) 
     through (55) (including paragraph (54), as added by paragraph 
     (6) of this section), by striking the semicolon at the end 
     and inserting a period; and
       (8) by redesignating paragraphs (4) through (55) in 
     entirely numerical sequence, so as to result in numerical 
     paragraph designations of (4) through (68).

     SEC. 402. ADJUSTMENT OF DOLLAR AMOUNTS.

       Section 104 of title 11, United States Code, is amended by 
     inserting ``522(f)(3),'' after ``522(d),'' each place it 
     appears.

     SEC. 403. EXTENSION OF TIME.

       Section 108(c)(2) of title 11, United States Code, is 
     amended by striking ``922'' and all that follows through 
     ``or'', and inserting ``922, 1201, or''.

     SEC. 404. WHO MAY BE A DEBTOR.

       Section 109(b)(2) of title 11, United States Code, is 
     amended by striking ``subsection (c) or (d) of''.

     SEC. 405. PENALTY FOR PERSONS WHO NEGLIGENTLY OR FRAUDULENTLY 
                   PREPARE BANKRUPTCY PETITIONS.

       Section 110(j)(3) of title 11, United States Code, is 
     amended by striking ``attorney's'' and inserting ``attorneys' 
     ''.

     SEC. 406. LIMITATION ON COMPENSATION OF PROFESSIONAL PERSONS.

       Section 328(a) of title 11, United States Code, is amended 
     by inserting ``on a fixed or percentage fee basis,'' after 
     ``hourly basis,''.

     SEC. 407. SPECIAL TAX PROVISIONS.

       Section 346(g)(1)(C) of title 11, United States Code, is 
     amended by striking ``, except'' and all that follows through 
     ``1986''.

     SEC. 408. EFFECT OF CONVERSION.

       Section 348(f)(2) of title 11, United States Code, is 
     amended by inserting ``of the estate'' after ``property'' the 
     first place it appears.

     SEC. 409. AUTOMATIC STAY.

       Section 362(b) of title 11, United States Code, is 
     amended--
       (1) in paragraph (17), by striking ``or'' at the end;
       (2) in paragraph (18), by striking the period at the end 
     and inserting ``; or''; and
       (3) by adding at the end the following:
       ``(19) under subsection (a) of this section of any transfer 
     that is not avoidable under section 544 and that is not 
     avoidable under section 549.''.

     SEC. 410. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.

       Section 365 of title 11, United States Code, is amended--
       (1) in subsection (b)(2)--
       (A) in subparagraph (C), by striking ``or'' at the end; and
       (B) by striking subparagraph (D) and inserting the 
     following:
       ``(D) the satisfaction of any penalty rate or penalty 
     provision relating to a default arising from a failure to 
     perform nonmonetary obligations under an executory contract 
     or under an unexpired lease of real or personal property;
       ``(E) the satisfaction of any provision (other than a 
     penalty rate or penalty provision) relating to a default 
     arising from any failure to perform nonmonetary obligations 
     under an unexpired lease of real property, if it is 
     impossible for the trustee to cure such default by performing 
     nonmonetary acts at and after the time of assumption; or
       ``(F) the satisfaction of any provision (other than a 
     penalty rate or penalty provision) relating to a default 
     arising from any failure to perform nonmonetary obligations 
     under an executory contract, if it is impossible for the 
     trustee to cure such default by performing nonmonetary acts 
     at and after the time of assumption and if the court 
     determines, based on the equities of the case, that paragraph 
     (1) should not apply with respect to such default.'';
       (2) in subsection (c)--
       (A) in paragraph (2), by adding ``or'' at the end;
       (B) in paragraph (3), by striking ``or'' at the end and 
     inserting a period; and
       (C) by striking paragraph (4);
       (3) in subsection (d)--
       (A) by striking paragraphs (5) through (9); and
       (B) by redesignating paragraph (10) as paragraph (5); and
       (4) in subsection (f)(1), by striking ``; except that'' and 
     all that follows through the end of the paragraph and 
     inserting a period.

     SEC. 411. AMENDMENT TO TABLE OF SECTIONS.

       The table of sections for chapter 5 of title 11, United 
     States Code, is amended by striking the item relating to 
     section 556 and inserting the following:

``556. Contractual right to liquidate a commodities contract or forward 
              contract.''.

     SEC. 412. ALLOWANCE OF ADMINISTRATIVE EXPENSES.

       Section 503(b)(4) of title 11, United States Code, is 
     amended by inserting ``subparagraph (A), (B), (C), (D), or 
     (E) of'' before ``paragraph (3)''.

     SEC. 413. PRIORITIES.

       Section 507(a) of title 11, United States Code, is 
     amended--
       (1) in paragraph (3)(B), by striking the semicolon at the 
     end and inserting a period; and
       (2) in paragraph (7), by inserting ``unsecured'' after 
     ``allowed''.

     SEC. 414. EXEMPTIONS.

       Section 522 of title 11, United States Code, is amended--
       (1) in subsection (f)(1)(A)(ii)(II)--
       (A) by striking ``includes a liability designated as'' and 
     inserting ``is for a liability that is designated as, and is 
     actually in the nature of,''; and
       (B) by striking ``, unless'' and all that follows through 
     ``support,''; and
       (2) in subsection (g)(2), by striking ``subsection (f)(2)'' 
     and inserting ``subsection (f)(1)(B)''.

     SEC. 415. EXCEPTIONS TO DISCHARGE.

       Section 523 of title 11, United States Code, is amended--
       (1) in subsection (a)(3), by striking ``or (6)'' each place 
     it appears and inserting ``(6), or (15)'';
       (2) as amended by section 304(e) of Public Law 103-394 (108 
     Stat. 4133), in paragraph (15)--
       (A) by inserting ``or'' after the semicolon at the end; and
       (B) by transferring such paragraph so as to insert it after 
     paragraph (14) of subsection (a);
       (3) in paragraph (9), by inserting ``, watercraft, or 
     aircraft'' after ``motor vehicle'';
       (4) in subsection (a)(15), as so redesignated by paragraph 
     (2) of this subsection, by inserting ``to a spouse, former 
     spouse, or child of the debtor and'' after ``(15)'';
       (5) in subsection (a)(17)--
       (A) by striking ``by a court'' and inserting ``on a 
     prisoner by any court'';
       (B) by striking ``section 1915 (b) or (f)'' and inserting 
     ``subsection (b) or (f)(2) of section 1915''; and
       (C) by inserting ``(or a similar non-Federal law)'' after 
     ``title 28'' each place it appears; and
       (6) in subsection (e), by striking ``a insured'' and 
     inserting ``an insured''.

     SEC. 416. EFFECT OF DISCHARGE.

       Section 524(a)(3) of title 11, United States Code, is 
     amended by striking ``section 523'' and all that follows 
     through ``or that'' and inserting ``section 523, 1228(a)(1), 
     or 1328(a)(1) of this title, or that''.

     SEC. 417. PROTECTION AGAINST DISCRIMINATORY TREATMENT.

       Section 525(c) of title 11, United States Code, is 
     amended--
       (1) in paragraph (1), by inserting ``student'' before 
     ``grant'' the second place it appears; and
       (2) in paragraph (2), by striking ``the program operated 
     under part B, D, or E of'' and inserting ``any program 
     operated under''.

[[Page S10890]]

     SEC. 418. PROPERTY OF THE ESTATE.

       Section 541(b) of title 11, United States Code, is 
     amended--
       (1) in paragraph (4)--
       (A) in subparagraph (B)(ii), by inserting ``365 or'' before 
     ``542''; and
       (B) by adding ``or'' at the end.

     SEC. 419. LIMITATIONS ON AVOIDING POWERS.

       Section 546 of title 11, United States Code, is amended by 
     redesignating the second subsection (g) (as added by section 
     222(a) of the Bankruptcy Reform Act of 1994; 108 Stat. 4129) 
     as subsection (h).

     SEC. 420. PREFERENCES.

       Section 547 of title 11, United States Code, is amended--
       (1) in subsection (b), by striking ``subsection (c)'' and 
     inserting ``subsections (c) and (i)''; and
       (2) by adding at the end the following:
       ``(i) If the trustee avoids under subsection (b) a security 
     interest given between 90 days and 1 year before the date of 
     the filing of the petition, by the debtor to an entity that 
     is not an insider for the benefit of a creditor that is an 
     insider, such security interest shall be considered to be 
     avoided under this section only with respect to the creditor 
     that is an insider.''.

     SEC. 421. POSTPETITION TRANSACTIONS.

       Section 549(c) of title 11, United States Code, is 
     amended--
       (1) by inserting ``an interest in'' after ``transfer of'';
       (2) by striking ``such property'' and inserting ``such real 
     property''; and
       (3) by striking ``the interest'' and inserting ``such 
     interest''.

     SEC. 422. TECHNICAL AMENDMENT.

       Section 552(b)(1) of title 11, United States Code, is 
     amended by striking ``product'' each place it appears and 
     inserting ``products''.

     SEC. 423. SETOFF.

       Section 553(b)(1) of title 11, United States Code, is 
     amended by striking ``362(b)(14)'' and inserting 
     ``362(b)(17)''.

     SEC. 424. DISPOSITION OF PROPERTY OF THE ESTATE.

       Section 726(b) of title 11, United States Code, is amended 
     by striking ``1009,''.

     SEC. 425. GENERAL PROVISIONS.

       Section 901(a) of title 11, United States Code, is amended 
     by inserting ``1123(d),'' after ``1123(b),''.

     SEC. 426. APPOINTMENT OF ELECTED TRUSTEE.

       Section 1104(b) of title 11, United States Code, is 
     amended--
       (1) by inserting ``(1)'' after ``(b)''; and
       (2) by adding at the end the following new paragraph:
       ``(2)(A) If an eligible, disinterested trustee is elected 
     at a meeting of creditors under paragraph (1), the United 
     States trustee shall file a report certifying that election. 
     Upon the filing of a report under the preceding sentence--
       ``(i) the trustee elected under paragraph (1) shall be 
     considered to have been selected and appointed for purposes 
     of this section; and
       ``(ii) the service of any trustee appointed under 
     subsection (d) shall terminate.
       ``(B) In the case of any dispute arising out of an election 
     under subparagraph (A), the court shall resolve the 
     dispute.''.

     SEC. 427. ABANDONMENT OF RAILROAD LINE.

       Section 1170(e)(1) of title 11, United States Code, is 
     amended by striking ``section 11347'' and inserting ``section 
     11326(a)''.

     SEC. 428. CONTENTS OF PLAN.

       Section 1172(c)(1) of title 11, United States Code, is 
     amended by striking ``section 11347'' and inserting ``section 
     11326(a)''.

     SEC. 429. DISCHARGE UNDER CHAPTER 12.

       Subsections (a) and (c) of section 1228 of title 11, United 
     States Code, are amended by striking ``1222(b)(10)'' each 
     place it appears and inserting ``1222(b)(9)''.

     SEC. 430. CONTENTS OF PLAN.

       Section 1322 of title 11, United States Code, is amended--
       (1) in subsection (b), by striking ``(c)'' and inserting 
     ``(d)''; and
       (2) in subsection (e), by striking ``default, shall'' and 
     inserting ``default shall''.

     SEC. 431. DISCHARGE UNDER CHAPTER 13.

       Paragraphs (1) through (3) of section 1328(a) of title 11, 
     United States Code, are amended to read as follows:
       ``(1) provided for under section 1322(b)(5) of this title;
       ``(2) of the kind specified in paragraph (5), (8), or (9) 
     of section 523(a) of this title; or
       ``(3) for restitution, or a criminal fine, included in a 
     sentence on the debtor's conviction of a crime.''.

     SEC. 432. EXTENSIONS.

       Section 302(d)(3) of the Bankruptcy, Judges, United States 
     Trustees, and Family Farmer Bankruptcy Act of 1986 (28 U.S.C. 
     581 note) is amended--
       (1) in subparagraph (A), in the matter following clause 
     (ii), by striking ``October 1, 2002'' and inserting ``October 
     1, 2012''; and
       (2) in subparagraph (F)--
       (A) in clause (i)--
       (i) in subclause (II), by striking ``October 1, 2002'' and 
     inserting ``October 1, 2012''; and
       (ii) in the matter following subclause (II), by striking 
     ``October 1, 2003'' and inserting ``October 1, 2013''; and
       (B) in clause (ii), in the matter following subclause (II), 
     by striking ``October 1, 2003'' and inserting ``October 1, 
     2013''.

     SEC. 433. BANKRUPTCY CASES AND PROCEEDINGS.

       Section 1334(d) of title 28, United States Code, is 
     amended--
       (1) by striking ``made under this subsection'' and 
     inserting ``made under subsection (c)''; and
       (2) by striking ``This subsection'' and inserting 
     ``Subsection (c) and this subsection''.

     SEC. 434. KNOWING DISREGARD OF BANKRUPTCY LAW OR RULE.

       Section 156(a) of title 18, United States Code, is 
     amended--
       (1) in the first undesignated paragraph--
       (A) by inserting ``(1) the term'' before `` `bankruptcy''; 
     and
       (B) by striking the period at the end and inserting ``; 
     and''; and
       (2) in the second undesignated paragraph--
       (A) by inserting ``(2) the term'' before `` `document''; 
     and
       (B) by striking ``this title'' and inserting ``title 11''.

     SEC. 435. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

       (a) Effective Date.--Except as provided in subsection (b), 
     this title and the amendments made by this title shall take 
     effect on the date of enactment of this Act.
       (b) Application of Amendments.--The amendments made by this 
     title shall apply only with respect to cases commenced under 
     title 11, United States Code, on or after the date of 
     enactment of this Act.

  Mr. DURBIN. Mr. President, I rise today with my distinguished 
colleague, Senator Grassley, to introduce the Consumer Bankruptcy 
Reform Act of 1997. This sensible and bipartisan piece of legislation 
is designed to check many of the serious abuses in the Bankruptcy Code 
while maintaining a workable system.
  Neither Senator Grassley nor I can ignore the evidence that there are 
some people who are taking advantage of the Bankruptcy Code. Their 
numbers may not be great, but every abuse undermines confidence in the 
code. As with all systems, the Bankruptcy Code is subject to abuse. 
People can and will manipulate it. Senator Grassley and I have 
introduced this legislation to attempt to curb many of these abuses. We 
have worked hard to craft a bill that is balanced--that corrects 
creditor and debtor abuses. It also attempts to catch abuses without 
being so harsh that it makes the system unworkable and without turning 
its back on the fundamental principles and good of the Bankruptcy Code.
  Hovering in the background of all that we attempt to do in this 
legislation is the persistent news that personal bankruptcy filings are 
steadily increasing. Last year, personal bankruptcies broke the 1 
million barrier. And this year will be worse. No one sitting in this 
room today can help but shudder at the prospect of 1.3 million personal 
bankruptcies this year.
  The odds are that almost every American knows at least one person who 
has declared bankruptcy. Both Senator Grassley and I vividly remember 
the farm crises of the 1980's when good, hard-working people came to 
the end of the line and were desperately trying to save their homes and 
their children's future. So they declared bankruptcy. We also remember 
the floods that swept through our States not too long ago that left a 
financial catastrophe as deep as the natural catastrophe. We must not 
lose sight of these people.
  This jump in personal bankruptcies in good economic times is 
distressing, in large measure because it is a sign that many people--
people we know--are in trouble.
  As distasteful as bankruptcy is, the fact remains that we need the 
system. We cannot dismantle or radically alter it without doing serious 
damage to our economy, to creditors, and to millions of individuals. 
The cold hard fact is that the bankruptcy system does not just help 
individual debtors. It helps the creditors too. And by and large, it 
works.
  To see how, imagine a world where people could not declare bankruptcy 
when they were in financial straits. In this world, each individual 
creditor would have to file suit in State court when the debtor 
defaulted. Only the first unsecured creditor to the courthouse door 
could get garnished wages to pay off the debt. The secured creditors 
could repossess all of the secured property. Meanwhile, all of the 
remaining creditors would get nothing, and the debtor would be left 
without an automobile, a home, or any assets and with next to no money 
after wage garnishment. There would be very few winners in that 
situation.
  In stark contrast, the Federal bankruptcy system offers creditors and 
debtors a comprehensive system--paid for at public expense--which 
attempts to protect the creditors while also giving the debtor a chance 
to restart his

[[Page S10891]]

life. Without our system, each creditor would be clawing his way 
through the State court system, racking up legal costs, achieving 
virtually nothing, and turning millions of debtors into financial 
outcasts.
  Some people credit our voluntary individual bankruptcy system to the 
English author Daniel Defoe, who in 1697 proposed something akin to our 
current chapter 7. Defoe made some very wise distinctions. He felt 
there was a difference between the ``honest debtor, who fails by 
visible necessity, losses, sickness, decay of trade, or the like'' and 
the ``knavish, designing, or idle, extravagant debtor, who fails 
because wither he has run out his estate in excess, or on purpose to 
cheat and abuse his creditors.''
  He also had something to say about creditors, praising the ``moderate 
creditor, who * * * will hear reasonable and just arguments and 
proposals'' while warning against the ``rigorous severe creditor * * * 
without compassion, full of ill language, passion, and revenge.''
  It took almost 150 years for the American Congress to implement 
Defoe's suggestion, although many individual States had acted before 
then. In 1841, having experienced the Panic of 1837, Daniel Webster 
introduced and passed a bill that allowed individuals to voluntarily 
file for bankruptcy and discharge their debts. It is not surprising 
that the central subject of debate 156 years ago was whether debtors 
who could actually pay their debts would nevertheless try to avoid them 
by declaring bankruptcy. Some things never change.
  Even as we focus on the Bankruptcy Code and its possible abuses, 
however, we should be very careful that we do not obscure a far more 
important and dangerous feature of our consumer economy--the 
proliferation of risky credit. Merely making bankruptcy abuse harder to 
get away with is only a small part of the equation. Another part is 
preventing bankruptcies in the first place by encouraging more 
responsibility from banks as well as consumers.
  Let me make this clear, I am happy to root out abuses in bankruptcy 
and to encourage people to repay as much as possible within the 
bankruptcy system. But I insist that I be met half way--that banks and 
consumers do all they can to encourage healthy lending patterns and 
responsible money management.
  Mr. President, we may never be able to fully understand why 
bankruptcies have jumped so much. But a few things are clear. First, 
personal bankruptcy rates are tied to increased consumer debt burdens. 
The higher the level of credit card debt a person has, the greater the 
chance that the person will declare bankruptcy. And individual consumer 
debt is very high. In 1996, consumers charged more than $1 trillion on 
credit cards. According to the Consumer Federation of America, an 
estimated $374 to $396 billion in debt was being revolved or incurring 
interest obligations.
  To most people, accumulating credit cards seems easy and problem 
free. The waters look awfully enticing when someone sends you a credit 
card. But there is a dangerous undertow. And as people move further 
from the shore, they risk getting caught by the undertow. Essentially 
people are placing themselves on the edge and not leaving enough of a 
margin for dealing with an unexpected fiscal calamity.
  Yet rather than trying to blame anyone for bankruptcies, let us try 
to find a way to avert future bankruptcies. Both halves of the 
bankruptcy equation can and should act more responsibly. For creditors, 
that means providing consumers with enough information to assess the 
risks. For debtors, that means taking a hard look at what they can and 
can't afford.
  People need to know about the deadly undertow associated with credit 
card solicitations. Right now people know more about what is in a box 
of cookies by looking at the nutritional label than they know about 
their credit cards. We need something like nutritional labels for 
credit cards.
  I have previously proposed four important changes to the way people 
get and use credit.
  First, companies should include in each bill to current cardholders 
information that details how long it will take that person paying only 
the minimum to pay off the credit card debt. In addition, the 
information should indicate how much of the overall payment would be 
interest.
  Second, companies soliciting customers should provide the potential 
cardholders with an easy-to-understand worksheet to help them determine 
whether they really can afford more debt. Such a worksheet might 
include calculations of a person's expenses--current unsecured debt, 
home mortgage, rent, and other costs--and a simple formula to help 
people see whether they can or can't afford another card.
  Third, companies should tell people the basis of the offer of more 
credit. When a person gets a preapproved credit card, he or she should 
know that the credit card company has not fully evaluated how more 
consumer debt could affect their overall financial health.
  Finally, credit card companies should provide people who accept their 
card a free copy of their credit report.
  These simple things might help quite a bit. Too many people are 
walking into consumer credit counseling bureaus, bankruptcy lawyers' 
offices, and bankruptcy court without any real understanding of their 
financial situation.
  Mr. President, let me conclude on this note: I am proud to join 
Senator Grassley in introducing this bill and in trying to prevent 
abuses of the Bankruptcy Code. But I believe that we must also work on 
something infinitely more constructive--we must try to help prevent 
financial catastrophes. What I propose is a small step in that 
direction which works on the principle that a well informed consumer is 
best able to protect himself.
                                 ______