[Congressional Record Volume 143, Number 159 (Wednesday, November 12, 1997)]
[House]
[Pages H10660-H10663]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY AMENDMENTS OF 1997
Mr. GEKAS. Mr. Speaker, I move to suspend the rules and pass the bill
(H.R. 764) to make technical corrections to title 11, United States
Code, and for other purposes, as amended.
The Clerk read as follows:
H.R. 764
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 ``Bankruptcy Amendments of
1997''.
SEC. 2. 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 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 ``$4,000,000'' and inserting ``$15,000,000
as of the date of the filing of the petition'',
(6) by amending paragraph (54) to read as follows:
``(54) The term `transfer' means--
``(A) creation of a lien;
``(B) retention of title as a security interest;
``(C) foreclosure of the debtor's equity of redemption; or
``(D) every 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 paragraphs (1) through (35), in paragraphs (36) and
(37), and in paragraphs (40) through (55), including
paragraph (54) as added by this section, by striking the
semicolon at the end and inserting a period, and
(8) by redesignating paragraphs (4) through (55), including
paragraph (54) as added by this section, in entirely
numerical sequence.
SEC. 3. 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. 4. 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. 5. 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. 6. 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. 7. COMPENSATION TO OFFICERS.
Section 330(a) of title 11, United States Code, is
amended--
(1) in paragraph (1) by inserting ``, or the debtor's
attorney'' after ``1103'', and
(2) in paragraph (3) by striking ``(3)(A) In'' and
inserting ``(3) In''.
SEC. 8. 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. 9. 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. 10. 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 not
avoidable under section 549.''.
SEC. 11. DEFAULTS BASED ON NONMONETARY OBLIGATIONS.
(a) Executory Contracts and Unexpired Leases.--Section 365
of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (1)(A) by striking the semicolon at the
end and inserting the following:
``other than a default that is a breach of a provision
relating to--
``(i) 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
``(ii) 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 this
subparagraph should not apply with respect to such
default;'', and
(B) by amending paragraph (2)(D) to read as follows:
``(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.'',
(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).
(4) in subsection (f)(1) by striking ``; except that'' and
all that follows through the end of the paragraph and
inserting a period.
(b) Impairment of Claims or Interests.--Section 1124(2) of
title 11, United States Code, is amended--
(1) in subparagraph (A) by inserting ``or of a kind that
section 365(b)(1)(A) of this title expressly does not require
to be cured'' before the semicolon at the end,
(2) in subparagraph (C) by striking ``and'' at the end,
(3) by redesignating subparagraph (D) as subparagraph (E),
and
(4) by inserting after subparagraph (C) the following:
``(D) if such claim or such interest arises from any
failure to perform a nonmonetary obligation, compensates the
holder of such claim or such interest (other than the debtor
or an insider) for any actual pecuniary loss incurred by such
holder as a result of such failure; and''.
SEC. 12. 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. 13. 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. 14. 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. 15. EXEMPTIONS.
Section 522 of title 11, United States Code, is amended--
[[Page H10661]]
(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. 16. 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) 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 operation
of paragraph (2), 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. 17. 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. 18. 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''.
SEC. 19. PROPERTY OF THE ESTATE.
Section 541(b)(4)(B)(ii) of title 11, United States Code is
amended by inserting ``365 or'' before ``542''.
SEC. 20. LIMITATIONS ON AVOIDING POWERS.
Section 546 of title 11, United States Code, is amended by
redesignating the second subsection (g) as subsection (h).
SEC. 21. PREFERENCES.
Section 547 of title 11, United States Code, is amended--
(1) in subsection (b) by striking ``subsection (c)'' and
inserting ``subsections (c) and (h)'', and
(2) by adding at the end the following:
``(h) 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, then such security interest shall be considered to
be avoided under this section only with respect to the
creditor that is an insider.''.
SEC. 22. 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. 23. SETOFF.
Section 553(b)(1) of title 11, United States Code, is
amended by striking ``362(b)(14)'' and inserting
``362(b)(17)''.
SEC. 24. DISPOSITION OF PROPERTY OF THE ESTATE.
Section 726(b) of title 11, United States Code, is amended
by striking ``1009,''.
SEC. 25. GENERAL PROVISIONS.
Section 901(a) of title 11, United States Code, is amended
by inserting ``1123(d),'' after ``1123(b),''.
SEC. 26. 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. 27. 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. 28. 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. 29. DISCHARGE.
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. 30. 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. 31. DISCHARGE.
Paragraphs (1), (2), and (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. 32. 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. 33. 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. 34. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date.--Except as provided in subsection (b),
this Act and the amendments made by this Act shall take
effect on the date of the enactment of this Act.
(b) Application of Amendments.--The amendments made by this
Act shall apply only with respect to cases commenced under
title 11 of the United States Code on or after the date of
the enactment of this Act.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Pennsylvania [Mr. Gekas] and the gentleman from Michigan [Mr. Conyers]
each will control 20 minutes.
The Chair recognizes the gentleman from Pennsylvania [Mr. Gekas].
General Leave
Mr. GEKAS. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
on the bill now under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Pennsylvania?
There was no objection.
Mr. GEKAS. Mr. Speaker, I yield myself such time as I may consume.
The current bill, H.R. 764, the Bankruptcy Amendments of 1997,
consists primarily of technical corrections which are intended to
clarify original intent, correct drafting defects, and improve grammar
and cross-references in the Bankruptcy Code. Many of these changes are
occasioned by minor problems with the language in the Bankruptcy Reform
Act of 1994, and will not change the results in future cases.
There are also several more substantive provisions, limited in scope,
designed to rectify shortcomings in current law. They are fully
discussed in the committee report, and I will only briefly describe
four provisions here.
By amendment to section 101(51B) of the Bankruptcy Code, renumbered
section 101(57), the present $4 million cap on single asset real estate
is raised to $15 million. This will enable creditors in more cases to
obtain expedited relief from the automatic stay's bar to foreclosure.
This is provided for under section 362(d)(3) of the Bankruptcy Code.
Section 101(54) of the Bankruptcy Code, renumbered section 101(66),
is amended to define ``transfer'' as including the ``creation of a
lien,'' which is in accord with a widely held understanding. This will
protect a purchase money lender, who has recorded a deed of trust
without knowledge of a bankruptcy filing, from the trustee's power to
avoid certain post-petition property transfers.
And, section 365(b) of the Bankruptcy Code is amended to give
recognition to different policy considerations that are implicated,
when there are incurable nonmonetary defaults, in the trustee's power
to assume executory contracts and unexpired leases of the debtor.
The Code is amended in section 523(a)(9) to provide, as is now the
case with motor vehicles, that any debt for death or personal injury
arising from a debtor's unlawful operation of a watercraft or aircraft
while intoxicated is nondischargeable in bankruptcy.
Mr. Speaker, it has been necessary to proceed with a manager's
amendment to the bill as reported from the Committee on the Judiciary,
primarily in
[[Page H10662]]
order to further clarify the amendment to section 365(b). This has been
agreed to by both sides. The manager's amendment substitutes new
language for section 11 of the bill as reported. The other 33 sections
of the bill remain unchanged.
Section 11(a) modifies the language of section 11, as reported, to
clarify that when a trustee or debtor-in-possession is excused from
curing a nonmonetary default under a real estate lease or executory
contract as a condition to the assumption of the contract or lease, the
creditor remains entitled to compensation for actual pecuniary loss
resulting from the default and to adequate assurance of future
performance.
Section 11(b) amends section 1124(2) of the Bankruptcy Code to modify
a cross-reference to reflect the clarification made by section 11(a),
and to provide that the creditor remains entitled to compensation for
actual pecuniary loss resulting from the default for purposes of
determining when the creditor's claim or interest arising from the
default is not impaired.
Does the Speaker understand fully what I have just described here in
the last 5 minutes? If not, Mr. Speaker, I urge the House to pass H.R.
764, the Bankruptcy Amendments of 1997.
Mr. Speaker, I reserve the balance of my time.
Mr. CONYERS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I want to commend the subcommittee Chairman, the
gentleman from Pennsylvania [Mr. Gekas], and the ranking member, the
gentleman from New York [Mr. Nadler], for working on this measure that
was introduced by myself, and the gentleman from Illinois [Mr. Hyde],
on the first day of the session, and they have been at it for quite a
while.
The long and short of the bankruptcy laws are that there are about 29
technical corrections and about 5 substantive corrections. The
gentleman from Pennsylvania [Mr. Gekas] has mentioned 4 of the 5, and I
am in perfect agreement with him.
We are now hopeful that the Senate will be able to meet with us as
early as they can in the year and that we can work this to a favorable
resolution, because there are more and more bankruptcy issues coming
forward in the next year, the last term of this Congress.
Now, I would like to raise to the Members' attention the fact that
our colleague from Michigan [Mr. Ehlers] did us a singular honor by
tracking a fifth circuit case that required amending, in which one
distinguished judge was not able to distinguish that motor boats and
airplanes are in the same category as automobiles, and we talk about
nondischargeability, and he weighed in in a very important way to bring
about the changes that the gentleman from Pennsylvania [Mr. Gekas] has
referred to.
All in all, this bill clarifies many outstanding issues that those
who end up in bankruptcy matters, the judges, the trustees-in-
bankruptcy, and the whole bankruptcy bar has been looking to have
resolved for many years. So I am pleased on behalf of the Democrats on
the committee to join with the gentleman from Pennsylvania [Mr. Gekas]
in urging that this measure, H.R. 764, be reported.
Mr. Speaker, I reserve the balance of my time.
Mr. GEKAS. Mr. Speaker, I yield 3 minutes to the gentleman from
Michigan [Mr. Ehlers].
Mr. EHLERS. Mr. Speaker, first I want to thank the gentleman for
yielding me this time to speak regarding section 10(2)(B) of this bill.
This section would make nondischargeable through bankruptcy a debt
incurred as a result of the operation of a boat or airplane while under
the influence of alcohol.
This section is taken from a bill I sponsored for several years and
which the House passed unanimously last year, but which unfortunately
did not receive action in the Senate. My bill, and this section of H.R.
764, seeks to correct what I believe was a bill-drafting oversight
involving our bankruptcy laws.
Current law states that if an individual incurs a debt as a result of
the operation of a motor vehicle under the influence of alcohol, they
cannot have that debt discharged through a declaration of bankruptcy.
Since this law was originally enacted, the courts have generally
interpreted the statute's use of the term ``motor vehicle'' as meaning
``automobile,'' although some courts have differed with that.
Mr. Speaker, as we know, my home State of Michigan has an
extraordinarily robust boating industry. Over the years we have worked
hard on the State level, as have many other States, to make it
perfectly clear that drunk boating is as serious a crime as drunk
driving, and we have consistently written Michigan drunk driving laws
to explicitly include drunk boating.
The language in this section simply seeks to extend this notion of
equal treatment of drunk driving and drunk boating to the Federal
level, as it concerns our bankruptcy laws. Since the courts have ruled
that the Bankruptcy Code, as it is currently written, may only refer to
automobiles, we seek to specifically add watercraft to this section of
the Bankruptcy Code.
In addition, while it does not have the public profile of drunk
driving and drunk boating, the operation of aircraft under the
influence of alcohol and drugs has also been a problem, with far higher
potential for injury and death. I might just mention parenthetically
the airplane that crashed into the White House a few years ago when
someone was flying under the influence of alcohol and drugs. This
bill's language recognizes this and includes the drunk operation of
aircraft as well.
I want to note here that it is not my intention, nor do I believe
that it is the intention of this committee presenting this bill, to
include ``watercraft'' and ``aircraft'' in the definition of ``motor
vehicle,'' but rather it is the intention to add ``watercraft'' and
``aircraft'' to this section of the Bankruptcy Code exclusive of
``motor vehicle,'' and I want the record to reflect this.
Again, Mr. Speaker, while this issue may not garner a great deal of
public attention, those that have been negatively impacted by the lack
of clarity in this section of the Bankruptcy Code have suffered
significantly by not being able to collect judgments that have been
given them, and we ought to protect future victims of drunk boating and
drunk flying by adopting the simple correction called for in this bill.
Mr. CONYERS. Mr. Speaker, I have no further requests for time, and I
yield back the balance of my time.
Mr. GEKAS. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from
Michigan [Mr. Knollenberg].
Mr. KNOLLENBERG. Mr. Speaker, I want to thank the chairman of the
subcommittee, the gentleman from Pennsylvania [Mr. Gekas], for the work
that he has done on this bill in fashioning it as he did and allowing
my inclusion. What I would like to speak about is that H.R. 764
includes a provision, and by the way, I do support this bill, includes
a provision that addresses an injustice that exists within Title XI of
the United States Code regarding single asset bankruptcies. This
provision is similar to legislation that I introduced in H.R. 73, and I
thank the entire committee again for bringing this bill to the floor
today.
The injustice within Title XI stems from an eleventh hour action,
call it 11:59, during the 103d Congress that placed an arbitrary $4
million ceiling on single asset provisions in the bill. The affect has
been to render investors helpless in foreclosures on single assets that
were valued over $4 million. H.R. 764 will provide some relief to
victims of this arbitrary $4 million ceiling by raising the ceiling to
$15 million.
While I am glad to see we are moving in the right direction, I
frankly believe we should eliminate the arbitrary ceiling altogether.
Under this law, Chapter XI of the Bankruptcy Code serves as a legal
shield for the debtor.
{time} 2145
While in Chapter 11, the debtor will continue to collect the rents on
this commercial asset. There is a problem. The problem is that the
commercial property will typically be left to deteriorate and the
property taxes go unpaid. When the investor finally recovers the
property through the delayed foreclosure, they owe an enormous amount
of back taxes, they receive a commercial property left in deterioration
which has lower rent value and lower resale value, and, meanwhile, the
rent for all the months or years they were trying to retain the
property went to an uncollectable debtor.
It is also worth noting that H.R. 764 does not leave the debtor
without protection. First, the investor brings a
[[Page H10663]]
foreclosure against a debtor only as a last resort; and, second, the
debtor has up to 90 days to reorganize under Chapter 11.
Mr. Speaker, I urge my colleagues to support H.R. 764. While I feel
that we should eliminate the arbitrary ceiling on single-asset
bankruptcies, this bill moves us in the right direction by making it
harder for individuals to game the system.
Mr. GEKAS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I thank our colleague, the gentleman from Michigan, for
adding to the impetus of this legislation, and I thank the gentleman
from Michigan and the gentleman from New York [Mr. Nadler] for their
cooperation.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore [Mr. Calvert]. The question is on the motion
offered by the gentleman from Pennsylvania [Mr. Gekas] that the House
suspend the rules and pass the bill, H.R. 764, as amended.
The question was taken; and (two-thirds having voted in favor
thereof) the rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
____________________