[Congressional Record Volume 147, Number 26 (Thursday, March 1, 2001)]
[House]
[Pages H517-H601]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2001
The SPEAKER pro tempore (Mr. Walden of Oregon). Pursuant to House
Resolution 71 and rule XVIII, the Chair declares the House in the
Committee of the Whole House on the State of the Union for the
consideration of the bill, H.R. 333.
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In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the State of the Union for the consideration of the bill
(H.R. 333) to amend title 11, United States Code, and for other
purposes, with Mr. Quinn in the chair.
The Clerk read the title of the bill.
The CHAIRMAN. Pursuant to the rule, the bill is considered as having
been read the first time.
Under the rule, the gentleman from Wisconsin (Mr. Sensenbrenner) and
the gentleman from Michigan (Mr. Conyers) each will control 30 minutes.
The Chair recognizes the gentleman from Wisconsin (Mr.
Sensenbrenner).
Mr. SENSENBRENNER. Mr. Chairman, I yield myself 6 minutes.
Mr. Chairman, I rise in support of H.R. 333, the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2001.
Mr. Chairman, this bill is a bipartisan, balanced, and comprehensive
package of reform measures pertaining to both consumer and business
bankruptcy cases. The purpose of the bill is to improve bankruptcy law
and practice by restoring personal responsibility and integrity in the
bankruptcy system, and to ensure that the system is fair to both
debtors and creditors.
With respect to its consumer provisions, H.R. 333 responds to several
significant developments. One of these developments was the dramatic
increase in consumer bankruptcy filings during the 1990s and the losses
associated with those filings. Based on data released by the
Administrative Office of the United States Courts, bankruptcy filings
increased by more than 72 percent between 1994 and 1998. Mr. Chairman,
for the first time in our Nation's history, bankruptcy filings exceeded
1 million in 1996. In calendar year 1997 alone, bankruptcy filings
increased by more than 19 percent over the prior year. By 1998, the
number of bankruptcy filings, according to the AO, reached an all-time
high of more than 1.4 million cases. Although the most recent reporting
periods indicate the filings have somewhat decreased, the
Administrative Office states they remain well above the 1 million mark.
Paradoxically, this dramatic increase in bankruptcy filing rates has
occurred during a period when the economy was generally robust, with
relatively low unemployment and high consumer confidence.
Coupled with this development was the release of a study estimating
that financial losses attributable to bankruptcy filings in 1997
exceeded $44 billion. The committee received testimony in the last
Congress stating that this figure, when amortized on a daily basis,
amounts to a loss of at least $110 million a day.
Please note, those of us who pay our bills as we have agreed end up
having to absorb these losses through higher costs and bank fees and
interest rates.
Various other studies which thereafter became available concluded
that some bankruptcy debtors can in fact repay a significant portion of
their debts.
The heart of H.R. 333's consumer bankruptcy provisions is the
implementation of an income-expense screening mechanism, usually
referred to as a means-based or means test reform.
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These provisions are designed to ensure that debtors repay creditors
the maximum they can afford.
In addition, the bill institutes significant consumer protection
reforms, including mandatory credit counseling requirements and
specific disclosures in connection with certain credit transactions.
The reforms are aimed to help debtors understand their rights and
obligations with respect to reaffirmation agreements are also included
in the legislation.
In addition, the legislation substantially expands the debtor's
ability to exempt certain tax-qualified retirement accounts and
pensions. It also creates a new provision that allows a consumer debtor
to exempt certain education IRA and State tuition plans for his or her
child's postsecondary education from the claims of creditors.
Most importantly, H.R. 333 requires debtors to participate in credit
counseling programs before they file for bankruptcy relief, unless
special circumstances do not permit such participation. The
legislation's credit counseling provisions are intended to educate
consumers about the consequences of bankruptcy, such as the potentially
devastating effect it could have on their credit rating, and to provide
them with guidance about how to manage their finances so that they can
avoid future financial difficulties.
Mr. Chairman, the bill also makes extensive reforms pertinent to
business bankruptcies. Many of these provisions are intended to
heighten administrative scrutiny and judicial oversight of small
business bankruptcy cases. In addition, the bill includes provisions
designed to reduce systemic risk in the financial marketplace and to
clarify the treatment of tax claims in bankruptcy cases. H.R. 333 also
creates a new form of bankruptcy relief for transnational insolvencies
and includes provisions regarding family farmer debtors and health care
providers.
It should be noted that this bill is a product of more than 3 years
of congressional consideration of bankruptcy reform legislation. As
reported, H.R. 333 is virtually identical to the conference report on
H.R. 2415, the Gekas-Grassley Bankruptcy Reform Act of
[[Page H518]]
2000, which passed the House by a voice vote last October 12 and passed
the other body on December 7 by a vote of 70 to 28. But for former
President Clinton's December 19 pocket veto, this legislation would
have been become law.
It should also be noted that support for bankruptcy reform
legislation in the last two Congresses has been overwhelming and
bipartisan. In the 105th Congress, for example, the House passed both
H.R. 3150, the Bankruptcy Reform Act of 1998, and the conference report
on that bill by veto proof margins. In the last Congress, the House
passed H.R. 833, which is the successor to H.R. 2415, by a veto-proof
margin of 313-108.
This bill is the product of extensive negotiation and compromise, as
well as an exhaustive and amendatory process. In the last Congress
alone, the House and Senate engaged in nearly 7 months of negotiations
to reconcile the differences between their respective bills. The
product of these exhaustive efforts was the conference report on H.R.
2415, which is virtually identical to this bill.
Mr. Chairman, this is a balanced, bipartisan and comprehensive reform
measure, which will prevent the costly exploitation of our bankruptcy
system, while protecting those debtors truly in need of bankruptcy
protection.
Mr. Chairman, I urge my colleagues to support this important
legislation.
Mr. Chairman, I reserve the balance of my time.
Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, at a time when our electoral system is in tatters,
voter reform ignored, our campaign finance laws riddled with loopholes,
our seniors in desperate need of prescription drug coverage, our
minimum wage laws unadjusted for 6 years, the first major bill the
Republican majority brings to this floor is bankruptcy. Not just any
bankruptcy bill, a bill that massively tilts the playing field in favor
of creditors and against the interests of ordinary consumers and
workers. A bill opposed by every consumer group, by the bankruptcy
judges and trustees themselves, by organized labor, by every major
group concerned about seniors, women, children, victims of crime, this
is the first bill we bring to the floor in the 107th Congress.
To all of my friends on both sides of the aisle who tell me that this
bill is balanced and fair, I have one response, read the bill and
understand it.
To those who argue the bill only punishes wealthy debtors or
fraudulent debtors, check out how the bill give creditors massive new
rights to bring threatening court motions against low-income debtors.
Read how the bill permits credit card companies to reclaim common
household goods which are of little value to them, but of every value
to the debtor's family. Read how the bill makes it more difficult for
people below the poverty line to keep their house or their car in
bankruptcy.
To those who allege the bill protects alimony and child support, I
would ask them if they know that the bill creates major new categories
of nondischargeable debt that compete directly against the collection
of child support and alimony payments, Mr. Chairman; whether they are
aware that the bill allows landlords to evict battered women without
bankruptcy child support approval, even if the eviction poses a threat
to the women's physical well-being; whether they are aware that the
bill forces women and children involved in bankruptcy to file personal
information with the court, which is then placed on-line where the
whole world has direct access to it.
To my modest efforts to correct the bill and the problems, we were
ruled out of order. It was considered to be unworthy of debate in the
House.
To those who assert the bill cracks down on credit card abuse, I
would ask them to look at the meaningless boilerplate requirements
included in the bill to realize that the bill does absolutely nothing
to discourage abusive underaged lending, nothing to discourage reckless
lending to the developmentally disabled, yes, and nothing to regulate
the practice of so-called subprime lending to persons with no means or
little ability to repay their debts.
Then some suggest the bill fixes the problem of homestead exemption
abuse, I would suggest that rather than repeal or even cap the
homestead exemption, the bill places only weak obstacles in its place.
The bill does nothing to prevent the very worst abuses in the
Bankruptcy Code, such as when financiers and criminals void tens of
millions of dollars in debt, while they live high on the hog in their
multimillion dollar mansions. They can still do it under this bill.
Again, the majority would not even allow us an amendment to try to
eliminate the abuse.
To those who believe this bill streamlines and expedites business
bankruptcies, look at title 4, which adds numerous new paperwork
burdens, imposes arbitrary deadlines, and makes it far more likely that
struggling businesses, especially small ones, will be forced to
liquidate and terminate workers.
And so it is amazing that Congress is taking these actions at a time
when we are in the middle of an economic slowdown. It is like pouring
gasoline on a fire of economic uncertainty.
I am ashamed of this legislation.
Mr. Chairman, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Chairman, I yield 2 minutes to the gentleman
from Texas (Mr. Armey), the distinguished majority leader.
Mr. ARMEY. Mr. Chairman, let me open my remarks by thanking the
Committee on the Judiciary for bringing this bill to the floor early.
I must say, Mr. Chairman, from me personally, I take it as a matter
of enormous pride that this is the first significant bill we bring to
the floor in this Congress. This Congress represents a new beginning, I
hope, for the government of the United States.
Mr. Chairman, I believe that the law of this land should always be a
complement to and encouragement for those lessons in life that we as
parents invest most heartfelt in the instruction of our children.
Every mom and dad in America today that has that precious baby as
their charge, realizing the responsibility that I am this child's first
and most important teacher, tries to teach the child those lessons of
life that will endure and, if observed and followed, will make it
possible for that child to be happy and successful in their own life
and a blessing in the lives of the others. That is all we want for our
children.
This is a wonderful ability, the ability of adults to hold their head
high and know their duty and do their duty.
One of the things that we have already worked so hard with our
children is to be so, so careful how we accept obligations in our lives
and be judicious in that manner, but once we accept an obligation to
understand the need as a matter of personal pride and honor to fulfill
that obligation, the law of the land should complement that lesson on
behalf of every child in America and on behalf of every parent that
passes that lesson down to yet another generation.
Bankruptcy laws in America have not done that. Bankruptcy laws in
America have put a lie to one of the most important lessons we teach
our children. Bankruptcy laws in America have said to our children, you
are a fool if you do not file. That is not right. Yes, this is a right
step for us to take, a good step for us to take. It is not about the
money. Anybody who thinks this bill is about who gets the money is
missing the point, Mr. Chairman.
This bill is about the character of a Nation and will the Nation's
laws have a character of the Nation's people.
Again, let me thank the gentleman from Wisconsin (Mr. Sensenbrenner)
for bringing this opportunity for me as one Member to vote for the
character of this great Nation, because, Mr. Chairman, we are a
wonderful people. We deserve this bill.
Mr. CONYERS. Mr. Chairman, I yield 4 minutes to the gentlewoman from
Texas (Ms. Jackson-Lee).
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Chairman, I thank the distinguished
gentleman from Missouri (Mr. Conyers), the ranking member, for yielding
me the time, and I thank him for his leadership.
Mr. Chairman, I thank the gentleman from Wisconsin (Mr.
Sensenbrenner), the chairman of the Committee on the Judiciary, for the
time we will have to work together.
It is for that reason that I rise to the floor with a great deal of
disappointment, disappointment because this
[[Page H519]]
would have been a very simple and gracious way to begin the
collaborative uniting that has been so eloquently spoken to by many in
this country; but, yet, we took the ice skating rinks of the Nation and
we got on some ice-skates and we called it bankruptcy.
Before we could even hear the state of the budget, almost before the
inauguration, this bill was skidding to victory, a bill that brakes the
backs of working women, disappoints children and discourages people who
are truly trying to work and do the right thing from getting their life
back in order.
Let me simply suggest to you that this is what we are confronting.
``Debt smothers young Americans,'' the USA Today article says. ``As a
freshman at the University of Houston in 1995, Jennifer signed up for a
credit card and got a free T-shirt. A year later, she had piled up
about $20,000 in debt and 14 credit cards. Jennifer is not a deadbeat.
She is a young women in college, seeking an opportunity and responding
to the abusive solicitation by our credit card companies.''
One mode of collaboration could have been that in this bill we would
have had responsible restrictions and requirements on our credit card
companies to educate those who utilize credit. Yes, I think it is good
that mom and dad can train a young child and get them to be responsible
and pay their debts. It is great. How many of us have tried that?
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Mr. Chairman, I have a young 21-year-old in college in America, and
the T-shirts are just flowing there from credit card companies
attempting to sign up students, and the T-shirts look pretty. They look
like the one I am holding. Some are blue and pink, and they come in all
colors.
This is a bad bill because it has a means test that says we are going
to be guided by the IRS standards. We are going to test you and give
you a SAT and LSAT before you go into bankruptcy court. They say we
know the difference when there is frivolous lawsuit. We know when
deadbeats are trying to get out of paying their debts.
What about Jennifer. Her parents may not have known she was signing
up. What about women and children and dads who have custody of children
and need alimony and need child support. This is a horrible bill.
What this bill does is it presents a competition, a world boxing
match between the credit card companies and those who are trying to get
alimony and child support from the bankrupt debtor. It says you have
got to get out and fight with a lawyer before you can get
prioritization. It does not prioritize alimony and child support. It is
a misrepresentation to that. This hurts women and children.
Mr. Chairman, I include for the Record an article and a letter signed
by the American Association of University Women, Children NOW,
Children's Defense Fund, Center for Law and Social Policy, among
others, that says we cannot survive. This is a bad bill. This is not a
uniting bill. This is bad for America.
The material referred to is as follows:
[From USA Today, Feb. 13, 2001]
Debt Smothers Young Americans
(By Christine Dugas)
As a freshman at the University of Houston in 1995,
Jennifer Massey signed up for a credit card and got a free T-
shirt. A year later, she had piled up about $20,000 in debt
on 14 credit cards.
Paige Hall, 34, returned from her honeymoon in 1997 to find
herself laid off from her job at a mortgage company in
Atlanta. She was out of work for 4 months. She and her
husband, Kevin, soon were trying to figure out how to pay
$18,200 in bills from their wedding, honeymoon and
furnishings for their new home.
By the time Mistie Medendorp was 29, she had $10,000 in
credit card debt and $12,000 in student loans.
Like no other generation, today's 18- to 35-year-olds have
grown up with a culture of debt--a product of easy credit, a
booming economy and expensive lifestyles.
They often live paycheck to paycheck and use credit cards
and loans to finance restaurant meals, high-tech toys and new
cars that they couldn't otherwise afford, according to market
researchers, debt counselors and consumer advocates.
``Lenders are much more willing to take a risk on people
under 25 than they were 15 years ago,'' says Nina Prikazsky,
a vice president at student loan corporation Nellie Mae.
``They will give our credit cards based on a college
student's expected ability to repay the bills.''
Young people are taking advantage of the offers. A study
out today from Nellie Mae shows that the average credit card
debt among undergraduate students increased by nearly $1,000
in the past two years. On average, they owed $2,748 last
year, up from $1,879 in 1998.
At a time when they could be setting aside money for a down
payment on a home, many young people are mortgaging their
financial future. Instead of getting a head start on saving
for retirement, they are spending years digging themselves
out of debt.
``I knew for a while that I had a problem. I wouldn't say I
was living high on the hog, but when I wanted clothes, I'd
buy a new outfit,'' says Medendorp, an Atlanta resident.
``I'd go out to eat and charge it on my cards. There were a
bunch of small expenses that added up and got out of
control.''
Massey, Hall and Medendorp each ended up seeking help from
a local consumer credit counseling service. Hundreds of
thousands more young people like them are turning to credit
counseling or bankruptcy because they can no longer juggle
their bills.
In 1999 alone, an estimated 461,000 Americans younger than
35 sought protection from their creditors in bankruptcy, up
from about 380,000 in 1991, according to Harvard Law School
professor Elizabeth Warren, principal researcher in a
national survey of debtors who filed for bankruptcy.
At the Consumer Credit Counseling Service of Greater
Denver, more than half of all the clients are 18 to 35 years
old, says Darrin Sandoval, director of operations. On
average, they have 30% more debt than all other age groups,
he says.
``By the time they begin to settle into a suburban
lifestyle, they are barely able to meet their debt
obligations,'' Sandoval says. ``If there is a job loss, an
unexpected medical expense or the birth of a child, they
supplement their income with credit cards. Soon they are
being financially crushed.''
debt heads
Unlike the baby boom generation--raised by Depression-era
parents--young Americans today are often unfazed by the
amount of debt they carry.
``This generation has lived through a time when everything
was on the upswing,'' says J. Walker Smith, president of
Yankelovich Partners, a market research firm. ``There is no
sense of worry about being over-leveraged. It all seems to
work out.''
Kevin Jackson, a 32-year-old software engineer in Denver,
has about $8,000 in credit card debt and a $20,000 home-
equity loan. He doesn't believe he has a debt problem, though
his goal is to reduce his credit card balance to $2,000.
``You learn to live with a certain amount of debt,'' he
says. ``It's a means to an end. There is something to be said
for paying for everything and something to be said for
enjoying life, as long as you do it responsibly.''
Unfortunately, enjoying life can be expensive, especially
for many young Americans who feel it is essential to have the
latest high-tech products and services, such as a cellphone,
pager, voice mail, a computer with a second phone line or a
DSL connection, an Internet service provider and a Palm
Pilot.
Jackson just bought a DVD player and a big-screen TV. ``I
try to control costs,'' he says. ``I easily could have spent
$5,000 on the TV, but instead I paid $2,000 and I got a one-
year, no-interest deal.''
Movies, TV shows and advertising only reinforce the idea
that young people are entitled to have an affluent lifestyle.
``We're encouraged to overspend,'' says Jason Anthony, 31,
co-author of Debt-free by 30, a book he wrote with a friend
after they found themselves drowning in debt.
``We all see shows like Melrose Place and Beverly Hills
90210. It creates tremendous pressure to keep up. I'm one of
the few persons who think a recession will be good for my
generation. Our expectations are so elevated. In the frenzy
to keep up, we've gotten into financial trouble,'' he says.
The perils of plastic
Consumers like Massey, who get bogged down in credit card
debt before they even graduate from college, learn the hard
way about managing money. Now, 24 and married, Massey has a
good job in marketing. She has cut up her credit cards and is
gradually repaying her debt. However, there have been
consequences: She had to explain to her boss that because she
no longer has a credit card, she cannot travel for work if it
involves renting a car or booking a hotel reservation on her
own. She had to tell her husband about her debt problems
before they were married.
``I lack confidence now,'' Massey says. ``I'm hard on
myself because of my mistakes. But I blame the credit card
companies and the university for allowing them to promote the
cards on campus without educating students about credit.''
The percentage of undergraduate college students with a
credit card jumped from 67% in 1998 to 78% last year,
according to the Nellie Mae study. And many of them are
filling their wallets with cards. Last year, 32% said they
had four or more cards, up from 27% two years earlier.
Although graduate students have an even bigger appetite for
credit, they are starting to show signs of restraint. Their
average debt declined slightly from $4,925 in 1998 to $4,776
last year, Nellie Mae says.
Many young people will be saddled with credit card debts
for years, experts say. Among all age groups, credit
cardholders
[[Page H520]]
younger than 35 are least likely to pay their bills in full
each month, according to Robert Manning, author of Credit
Card Nation.
Though credit cards and uncontrolled spending are a
combustible combination, many young people are pushed to the
financial edge by the staggering cost of college. The average
annual tuition at a four-year private university jumped to
$16,332 last year from $7,207 in 1980, according to the
College Board. Between 1991 and 2000, the average student
loan burden among households under 35 increased nearly 142%
to $15,700, according to an exclusive analysis of the
finances of 18- to 34-year-olds for USA TODAY by Claritas, a
market research firm based in San Diego.
Those who choose to go on and get a graduate degree pay an
even higher price. Another Nellie Mae study found that those
who borrow for graduate work, and specifically those in
expensive professional programs in law and medicine, are
likely to have unusually high debt burdens that are not
always offset by comparably high salaries.
Karen Mann didn't need a survey to come to that conclusion.
Her husband, Michael, is about to start his career as an
orthopedic surgeon after racking up $400,000 in loans during
four years of undergraduate school, four years of medical
school, one year in an MBA program and a 5-year residency
program.
During his residency and a subsequent fellowship, payments
and some of the interest on his student loans have been
deferred. Soon they'll have to begin paying them off.
The interest payment alone is $20,000 a year.
The Manns are not extravagant. ``I've always saved, and I
have a budget,'' says Karen, 31. ``I'd love to buy a house,
but there's no way. We haven't been able to afford kids yet.
The loans are so awesome that you do get crazy.''
paying for everything with cash
The Manns are not alone in having to defer important goals
because of heavy debt loads. Medendorp, a social worker in
Decatur, Ga., lives on a budget and is diligently paying her
bills with the help of a Consumer Credit Counseling Service
debt-management plan. She pays for everything with cash.
There are many things she'd like to do but can't afford, such
as having laser eye surgery, going back to school and buying
a home.
``When you get in a tar pit, forget about buying a home,''
author Anthony says. ``Instead of saving for a down payment,
you're making credit card payments.''
At a time when the overall U.S. homeownership rate has
risen to historic highs, young Americans are less likely than
people their age 10 years ago to buy a home. The
homeownership rate for heads of households younger than 35
has declined from 41.2% in 1982 to 39.7% in 1999, according
to the Census Bureau. And if they own a home, young people
tend to make smaller down payments or borrow against what
equity they have. As a result, the average amount of equity
accumulated by homeowners younger than 35 has shrunk to about
$49,200 in 1999, from $57,100 10 years earlier, according to
a study from the Consumer Federation of America.
``For middle-income Americans, the most important form of
private savings is home equity,'' says Stephen Brobeck,
executive director of the Consumer Federation of America.
``It's essential to have paid off a mortgage by retirement so
that living expenses are lower and one has an asset that can
be borrowed on or sold if necessary.''
By almost every measure, young people are falling behind.
Between 1995 and 1998, the median net worth of families rose
for all age groups except for the under 35 group. Their
median net worth declined from $12,700 to $9,000, according
to the Federal Reserve.
That is not to say that young people today are slackers and
deadbeats, as they have sometimes been characterized. Many
work hard and often make good incomes. Although they may have
a lot of debt, they also are very focused on saving and
investing, especially through 401(k)-type retirement
accounts. Jackson, for example, contributes the maximum to
his 401(k) plan.
``They want to protect themselves against future
uncertainty,'' Smith says. ``They absolutely don't expect
that Social Security will be around for them.''
But it's hard to save money if you are head over heels in
debt. Massey earns $32,000 a year. With her husband, their
annual income is more than $100,000. ``But we're still broke
trying to pay our bills,'' she says.
____
February 26, 2001.
Dear Representative: The undersigned organizations write to
urge you to stand with America's women, children, and working
families and oppose H.R. 333, the bankruptcy act of 2001.
If it becomes law, this bill will inflict greater pain on
the hundreds of thousands of economically vulnerable women
and families who are affected by the bankruptcy system each
year. Over 150,000 women owed child support or alimony by men
who file for bankruptcy become bankruptcy creditors. An even
larger number of women owed child support or alimony--over
200,000--will be forced into bankruptcy themselves. Indeed,
women are the largest and fastest growing group in
bankruptcy.
H.R. 333 puts both women and children owed support who are
bankruptcy creditors and those who must file for bankruptcy
at greater risk. By increasing the rights of many other
creditors, including credit card companies, finance
companies, auto lenders and others, the bill would set up a
competition for scarce resources between parents and children
owed child support and these commercial creditors both during
and after bankruptcy. And single parents facing financial
crises--often caused by divorce, nonpayment of support, loss
of a job, uninsured medical expenses, or domestic violence--
would find it harder to regain their economic stability
through the bankruptcy process. The bill would make it harder
for these parents to meet the filing requirements; harder, if
they got there, to save their homes, cars, and essential
household items; and harder to meet their children's needs
after bankruptcy because many more debts would survive.
Contrary to the claims of some, the domestic support
provisions included in the bill would not solve these
problems. The provisions only relate to the collection of
support during bankruptcy from a bankruptcy filer; they do
nothing to alleviate the additional hardships the bill would
create for the hundreds of thousands of women forced into
bankruptcy themselves. And even for women who are owed
support by men who file for bankruptcy, the domestic support
provisions fail to ensure that, in this intensified
competition for the debtor's limited resources before and
after bankruptcy, parents and children owed support will
prevail over the sophisticated collection departments of
these powerful interests.
This bankruptcy bill takes a harsh approach toward working
families who fall on hard times. At the same time, it does
little to curb real abuses of the bankruptcy system, such as
concerted efforts by those convicted of violence, vandalism,
and harassment against reproductive health clinics to use the
bankruptcy system to avoid paying the judgments and penalties
resulting from their illegal acts.
We urge you to vote against H.R. 333, and to insist on
bankruptcy reform that is truly fair and balanced.
Very truly yours,
American Association of University Women; Children NOW;
Children's Defense Fund; Center for Law and Social
Policy (CLASP); Feminist Majority Foundation; National
Association of Commissions for Women (NACW); National
Center for Youth Law; National Organization for Women;
National Partnership for Women & Families; National
Youth Law Center; National Women's Conference; National
Women's Law Center; NOW Legal Defense and Education
Fund; OWL; The Women Activist Fund, Inc.; Wider
Opportunities for Women; Women Employed; Women Work!;
Women's Law Center of Maryland, Inc.; YWCA of the
U.S.A.
Mr. Chairman, the issue of bankruptcy reform has been a heated topic
of debate in this body since the first session of the 105th Congress,
when shortly before the National Bankruptcy Review Commission issued
its report recommending changes to the current bankruptcy laws;
legislation was introduced to dramatically change the way in which
consumer bankruptcies are administered under the U.S. Code, 11 U.S.C.
sec. 101 et seq. Both the House and Senate enacted different versions
of the bill in the second session of the 105th Congress and a
conference report was filed shortly after. The House agreed to the
conference report version of the bill by a vote of 300 to 25 on October
9, 1998, but this bill which then President Clinton threatened to veto,
was not brought before the Senate for a vote prior to adjournment.
This legislation was again reintroduced in the 106th Congress and was
passed by voice vote in the House and passed in the Senate by a vote of
70 to 28. Then President Clinton withheld his approval, Congress
adjourned sine die, and the bill was ``pocket'' vetoed.
Mr. Chairman, in yesterday's hearing, I questioned Philip J. Strauss
who was representing the California District Attorney's Association and
the California Family Support Council on the fact that H.R. 333 places
economically vulnerable women and children who are forced into
bankruptcy, and those who are owed support by men who file for
bankruptcy at greater risk by increasing the rights of many creditors,
including credit card companies, finance companies, auto lenders, and
others over that of the women and children. Mr. Strauss, however,
appeared shocked at these facts and affirmatively stated that women and
children's child support payments for former spouses are protected
because the States collect money from people who owe child support and
make payments to mothers.
Mr. Chairman, I was not able to finish my point yesterday, however,
in the interest of justice for the thousands of women and children who
will be held hostage by H.R. 333. However, I will correct this gross
misrepresentation today. While it is true that States collect money
from people who owe child support to make payments to mothers, H.R. 333
would effectively bottle this money in the coffers of the State because
it increases the rights of creditors over these vulnerable women and
children, and sets up a competition for scarce resources between
parents and children owed support and commercial creditors both during
and after bankruptcy. Therefore, single parents facing financial crises
often caused by divorce, nonpayment of support, loss of a job,
[[Page H521]]
uninsured medical expenses, or domestic violence would find it harder
to regain their economic stability through the bankruptcy process.
Mr. Chairman, this fact is not something new whose light has recently
been cast over the dark future of bankruptcy reform that would follow
H.R. 333. The fact that H.R. 333 would effectively place women and
children in a gladiator's arena with creditors to do battle for child
support money owed by former spouses who file bankruptcy has been
articulated by national organizations such as the National Women's Law
Center, the National Association of Consumer Bankruptcy Attorney's, the
National Organization for Women, a coalition of bankruptcy professors
and bankruptcy judges, and the National Association of Attorney's
General's to name but a few. How, anyone could argue against the
drastic effects and hardships that the language in this bill will cause
on the vulnerable women and children in this country is beyond me.
I have consistently said that the greatest challenge before us in the
bankruptcy reform efforts is solving the widely recognized inadequacies
of the law in the area of consumer bankruptcy. As it has always been in
the Congress, the key to this process, is, of course, successfully
balancing the priorities of creditors, who desire a general reduction
in the amount of debtor filing fraud, and debtors, who desire fair and
simple access to bankruptcy protection when they need them. H.R. 333
does not accomplish this goal.
Once again, however, the bankruptcy reform bill has been introduced,
now in the 107th Congress. As with the bills introduced in the 105th
and 106th Congress's, I cannot in good faith support H.R. 333
introduced in the 107th Congress, because it:
Will weaken important credit card disclosure provisions that will
help ensure consumers understand the debt they are incurring;
Will eliminate protections for reasonable retirement pensions that
reflect years of contributions by workers and their employers; and
Will include an anticonsumer provision eliminating existing law
protections against inappropriate collection practices when collecting
from people who bounce checks.
For H.R. 333 to accomplish its intended goals, I believe that it must
include provisions that will:
Ensure families who need chapter 7 relief are able to get it,
including the preservation of appropriate judicial discretion;
Ensure women and children seeking to collect child support from a
debtor do not have to compete with other creditors;
Contain adequate protection for families against abusive
reaffirmation practices of creditors;
Enhance, not detract from, the viability of Chapter 13 plans; and
Require adequate and accurate disclosure of credit repayment terms.
In addition, given the recent turn in the economy, resulting in major
corporations laying off workers by the thousands, it is even more
important for Congress to carefully consider the impact of H.R. 333.
Mr. Chairman, I am for bankruptcy reform, but I believe that it must
be equitable and fair to all interested parties. I am for bankruptcy
reform that recognizes the financial interest at stake for the debtor,
his or her family, and the creditors.
As I have already mentioned, in assessing bankruptcy reform we must
balance two key principles. First, debtors must not be allowed to use
the law to avoid repaying loans when they can actually afford to do so;
and second, debtors should not be forced into serious hardship. Efforts
to implement these two ideas have been made for a long time. The
statute of Anne, enacted in 1705, was the first such effort. It
introduced the idea of the fresh start into our law and punished those
who abused the bankruptcy with death by hanging. In the bill before us
today, the sponsors sought to draw the line by separating those who are
worthy of a fresh start from those who abuse the system, but it is this
very goal that they have failed to accomplish.
In reviewing H.R. 333, I was reminded of a hypothetical given by
Douglas Baird, a law professor at the University of Chicago on H.R.
333's predecessors in the 105th and 106th Congresses stating that those
bankruptcy reform bills would fail to balance the two competing goals
that are the base of bankruptcy reform. The same is the case with H.R.
333 today.
Professor Baird's hypothetical considers an elderly woman living in
Florida who returned to the workforce several years after her husband
became ill and died. She makes $30,000 annually as a secretary and she
has not taken a vacation in several years. She rents a one-bedroom
apartment and owes $60,000, much of which stems from medical bills for
the care of her late husband. Most of the remaining debt consists of
unpaid credit card bills, most of it spent on household goods and
groceries. Interest runs at 15 percent. The widow is behind in her
payments, collection agencies call at home and at work, and they are
threatening to garnish her wages.
The hypothetical then considers a 45-year-old businessman, also
living in Florida. He works for a large corporation and makes $95,000 a
year. He previously had his own business but it failed. Though single,
he lives in a 5-bedroom house worth $500,000. He owes $60,000 in debt
from his 10 credit cards, which he used to pay for vacations, clothes,
and meals in restaurants. In addition, he is personally liable for
$200,000 in debt from his failed business venture.
The current bankruptcy law would allow both the elderly widow and the
businessman to file chapter 7 bankruptcy petitions and receive a fresh
start. However, under H.R. 333, only the businessman would be allowed a
fresh start because the widow's use of chapter 7 would be presumed
abusive. The widow might be eligible for relief under chapter 13 but
only if she commits all of her income for the next 5 years to the
repayment of her debts, apart from monthly living expenses.
In contrast, under H.R. 333, the businessman will be eligible for
chapter 7 relief, and be able to discharge all of his debt and keep his
house.
The reform laid out in H.R. 333, will also increase hardship on
debtors because it toughens the rules for ordinary debtors, most of
whom declare bankruptcy not out of irresponsibility but because of
catastrophic medical bills, unemployment, or divorce.
Mr. Chairman, women are the fastest growing and largest group filing
bankruptcy today. In 1999, over half a million women filed for
bankruptcy by themselves--more than men filing by themselves or married
couples. Of this number, over 200,000 women who filed for bankruptcy,
in 1999, tried to collect child support or alimony. The domestic
support provisions of H.R. 333 does not solve the problems faced by
women in bankruptcy and does nothing to address the additional problems
it would cause to the hundreds of thousands of women forced into
bankruptcy each year, including the single mothers forced into
bankruptcy because they are unable to collect child support.
Furthermore, the National Association of Attorneys General has
already warned that increasing the claims of partially secured
creditors as H.R. 333 would do would make it more difficult to collect
child support because credit card companies would treat all debts as
secured, resulting in credit card debt being elevated to the same or a
higher level than domestic support claims, and thus, make it more
difficult to ensure that debtors are able to satisfy their obligations
to their spouses and children.
H.R. 333 also creates a new priority for support debts owed to
government units over that of a spouse, former spouse, or child, which
must be paid in full in a chapter 13 plan. Mr. Speaker, this bill does
not provide further protections to vulnerable women and children facing
creditors, instead, the points I have outlined today show that H.R. 333
gives priority in many cases to the creditors over the vulnerable women
and children.
H.R. 333 also fails in its attempt to encourage chapter 13 filings by
debtors, resulting in many families who currently save their homes and
cars through chapter 13 being no longer able to do so. Under current
law, a chapter 13 case can be filed after a chapter 7 or 13 discharge,
or after a dismissed case. This is important to families who might
incur large medical expenses a few years after a prior discharge or
whose chapter 13 plans fail for circumstances beyond their control.
H.R. 333, however, prohibits a new chapter 7 case within 8 years,
rather than the current 6 years, after a petition resulting in a prior
chapter 7 discharge, and a new chapter 13 case within 5 years.
Furthermore, it is unclear whether the 5 years runs from the prior
petition or the discharge. If the 5 years begin to run from the prior
petition, it would mean that a chapter 13 case could be prohibited for
up to 10 years after a prior chapter 13 petition.
H.R. 333 will also place many new obstacles in the path of bankruptcy
debtors, which would decrease access to the system, especially for
those with the least income, primarily by raising costs for filing
motions, defending dischargeability litigation, obtaining stays in
repeat filing, and other added administrative costs in the area of
several hundred dollars which could be prohibitive for many families.
This will greatly increase the already significant number of consumers
who cannot afford attorney representation in bankruptcy and who would
therefore have only the choices of filing pro se, going to an
unqualified nonattorney petition preparer, or not filing at all.
In addition, H.R. 333 not only restricts the circumstances that
families can file for chapter 13, it also significantly reduces the
scope of the chapter 13 discharge making many of the debts that are
currently dischargeable, nondischargeable under the full compliance
discharge. This would effectively hurt debtors who can presently pay
all they can afford.
Mr. Chairman, many of the provisions that are the base of H.R. 333
were designed for
[[Page H522]]
the sole purpose of reducing bankruptcy debtor filing fraud. As I
stated at the out-set of my statement, I applaud and support this goal.
However, the facts at hand tell us decisively that this goal will not
be achieved under H.R. 333 because it is not narrowly tailored and does
not provide fair and equal treatment in cases like homestead exemption.
Furthermore, the goal of curbing bankruptcy debtor filing fraud is in
serious question due to the sharp decline in bankruptcy filings
overall. Statistics provided by the VISA Bankruptcy Notification
Service, which compiles weekly reports on bankruptcy filings show a
continued sharp decline in the bankruptcy rate which dropped by more
than 9 percent in 1999, continuing to decline at an 8 percent annual
rate in the first 5 months of the year 2000. Bankruptcies are now
running at a lower level than in 1997, 1998, or 1999. The per capital
growth rate in personal bankruptcies was up to 25.2 percent in 1997, up
by 3.1 percent in 1998, down by 7.9 percent in 1999, and down by 7.7
percent in 2000. In addition, the growth rate in personal bankruptcies
was up by 26.1 percent in 1997, up by 4.0 percent in 1998, down by 7.0
percent in 1999, and down by 6.8 percent in 2000. In addition to the
VISA Bankruptcy Notification Services, these numbers are also
consistent with those compiled by the Chicago Mercantile Exchange in
connection with the Quarterly Bankruptcy Index contract. These numbers
that show a continuing decline in bankruptcies supports the view that
many of the provisions provided in H.R. 333 are unnecessary and
counterproductive.
Mr. Chairman, as elected officials for the American people we must
protect America's families. Most individuals who file petitions in the
bankruptcy courts are usually experiencing turbulent times. Financial
hardship is a serious matter that deserves legislative reform that is
the product of a deliberative process. This bill, is an extreme bill
undertaken at the direction of special interest groups. We must protect
working-class families. We must work to find a viable solution that
deters abuse of the bankruptcy system while preserving the fresh start
for discharged debtors. It is ironic that the consumer lending industry
actively solicits unsuspecting consumers through the mail with terms of
easy credit, buy-now, pay-later rhetoric. After addicting debtors to
this ``financial crack'' lenders are advocating for reform. Of course
debtors are responsible for financial obligations that they incur;
however, lenders must assume responsibility for their actions in
creating the precarious financial crisis we are discussing.
In the 105th Congress, I served as a member of the Subcommittee on
Commercial and Administrative law and as a conferee on H.R. 3150, the
precursor to the bill before us today. As a member of that subcommittee
in the 105th Congress, I signed onto the dissenting views of the
accompanied the report from the committee. The dissents' conclusion is
appropriate in this context.
For nearly 100 years, Congress has carefully considered the
bankruptcy laws and legislated on a deliberate and bipartisan basis. In
the past, Congress has elected also to carefully preserve an insolvency
system, that provides for a fresh start for honest, hard-working
debtors, protects ongoing businesses and jobs, and balances the rights
of and between debtors and creditors.
Because H.R. 333 departs from these historical principles, and
tramples on the preservation of the American people, I oppose this
legislation in the interest of all that is just and fair.
Mr. SENSENBRENNER. Mr. Chairman, I yield 4 minutes to the
distinguished gentleman from Pennsylvania (Mr. Gekas), the principal
author of the bill.
(Mr. GEKAS asked and was given permission to revise and extend his
remarks.)
Mr. GEKAS. Mr. Chairman, to the Members we state and restate the two
principal themes that, from the very beginning of this crusade to bring
about bankruptcy reform, have remained the truths of the entire debate.
Number one, in bankruptcy those who become so overburdened by debt,
so crushed by the overweaning forces of finances that they no longer
can meet and handle, to those people we guarantee a fresh start. That
is what bankruptcy is all about, to allow and to foster a fresh start
once this circumstance occurs. That we have never at all wavered in
bringing about even to this moment.
The second truth is that in those circumstances where it is
determined that a person filing for bankruptcy does indeed have the
ability to repay some of the debt over a period of time, that
individual should be compelled through a proper mechanism that we have
in the bill to repay that portion of the debt. And so the purposes of
bankruptcy envisioned by our forefathers have been met and yet we bring
about some reform measures that guarantee or reguarantee the arena of
personal responsibility on the part of the American citizen, the
American worker and at the same time, to give relief where it is
merited.
Mr. Chairman, what is never stated by the opponents of this bill and
by the people who would criticize what we have attempted to do here is
that most of the provisions of this bill have come about through
testimony offered by our fellow citizens from every corner of American
life, including women and children to which reference has been made
many, many times; by the credit unions; by the taxing authorities; and
they bring out two other truths that are part of the debate in this
venture of ours here today.
One is this: Every time someone does file bankruptcy, it costs the
consumer. All of the other consumers, the ones that the gentleman from
Michigan says are opposed to this bill. Consumers are hurt by
bankruptcy. Why? Because every time something like that occurs, the
price of goods creeps up. Perhaps not envisioned immediately or seen,
but they do creep up. So the consumer has to pay more at the
supermarket because of bankruptcies.
Secondly, interest rates, because of the cost of credit, the cost of
lending money goes up every time somebody files for bankruptcy, hits
the consumer who is interested in borrowing money for a refrigerator or
an automobile.
Third, I did not realize until we began investigating this whole area
of concern, bankruptcy, even our taxes increase as a result of someone
filing bankruptcy. I did not realize that the taxing authorities, until
we were able to craft this particular piece of legislation, sometimes
did not even know that a person owing back taxes or eventual taxes to
be paid did not even know that those moneys were due them. We learned
from the City of New York and the State of New York and other taxing
authorities, municipal and county and state organizations, that for the
first time they have in our bill a methodology for being notified that
someone is going bankrupt and have an even chance of retrieving some of
the back taxes. Why is that important? Because the consumers, the
taxpayers are hurt every single time a bankruptcy is filed. The
consumers, the taxpayers of our country, citizens of personal
responsibility are supporting this legislation.
Mr. Chairman, I include for the Record a letter from the U.S. Chamber
of Commerce.
U.S. Chamber of Commerce,
Washington, DC., February 28, 2001.
To Members of the U.S. House of Representatives:
The U.S. Chamber of Commerce, the world's largest business
federation, with more than three million businesses and
organizations of every size, sector and region, strongly
urges you to vote for the Bankruptcy Reform Act of 2001.
This balanced, bipartisan bill is identical to the bill
which last year passed the House by voice vote and was
overwhelmingly approved by the Senate by a 70-28 vote. An
earlier version passed the House by a strong 313-108 vote.
There are two pillars upon which bankruptcy reform rests:
debtors must not have their access to bankruptcy protection
restricted, while those who can afford to pay a significant
portion of their debts must be required to do so.
This balanced, bipartisan legislation will accomplish these
goals:
Access to bankruptcy will unquestionably remain available
for all Americans, regardless of income.
More than 100,000 bankruptcy filers are abusing the system
every year by discharging debts that they have the ability to
repay.
Abusers of the bankruptcy system, those who earn more than
the median income and can afford to repay a signficiant
portion of their debts, will be required to pay back what
they can afford.
The bill provides substantial new protections for women and
children trying to collect their child support and alimony,
for example, by moving child support to first priority. Child
support collection authorities describe the bill as a
``veritable wish list'' of provisions to assist them in their
child support collection efforts.
The safe harbor provisions will protect lower income
Americans by ensuring that they will have access to Chapter 7
relief without qualification.
The bill imposes significant new responsibilities and
disclosures on lenders, and particularly credit card lenders.
The bill is fair to debtors, while it also stops the very
rich from exploiting the system to discharge their debts,
leaving everyone else holding the bag.
The U.S. Chamber of Commerce will consider Scoring this
vote in its annual ``How They Voted'' Guide.
[[Page H523]]
Mr. NADLER. Mr. Chairman, I yield 2 minutes to the gentleman from
Virginia (Mr. Boucher).
Mr. BOUCHER. Mr. Chairman, I thank the gentleman very much for
yielding me this time.
Mr. Chairman, I ask the gentleman from Wisconsin (Mr. Sensenbrenner)
if he would be willing to yield 1 additional minute to me.
Mr. SENSENBRENNER. Mr. Chairman, I yield 1 additional minute to the
gentleman from Virginia (Mr. Boucher).
Mr. BOUCHER. Mr. Chairman, I thank the gentleman from Wisconsin for
yielding that additional 1 minute.
Mr. Chairman, I rise in support of the bankruptcy reform legislation
and urge its approval in the House. With this measure, we bring to
conclusion a process that was launched 4 years ago to bring a much-
needed reform to the Nation's bankruptcy laws.
During the time of the generally strong economy, consumer bankruptcy
filings should be rare. Contrary, however, to this expectation, there
are now more than 1.2 million annual bankruptcy filings, representing a
five-fold increase since the last major bankruptcy law revision that
took place in 1978.
The current level of annual filings is more than 90 percent greater
than the number of 1 decade ago. Bankruptcies of convenience are
driving these increased filings.
Bankruptcy was never meant to be a financial planning tool, but it is
increasingly becoming a first stop rather than a last resort, as many
filers who can repay a substantial part of their debt use the complete
liquidation provisions of chapter 7 of the Bankruptcy Code rather than
the court supervised repayment plans that are contained in chapter 13.
Our legislation will direct more filers into chapter 13 plans. Those
who can afford to make payments will be required to do so.
This is a consumer protection measure. The typical American family
pays a hidden tax of $550 each year arising from the increased cost of
credit and the increases in prices for goods and services occasioned by
the discharge of $50 billion annually in consumer bankruptcy debt. By
requiring that people who can repay a substantial part of their debt do
so in chapter 13 plans, we will lessen substantially that hidden tax.
Another key point should be made about the provisions of the bill.
The alimony or child support recipient is clearly better off under our
bill than she is under current law. At the present time, she stands
seventh in the rank of priority for the payment of claims in bankruptcy
proceedings.
Under the legislation we are putting forward, the child support or
alimony recipient will have priority number one. Her claim will be
first in line for payment. Other provisions of the bill also make it
easier for her to execute against the assets of the bankruptcy state.
For this reason, our bill has been endorsed by the child support
enforcement agencies of a number of States because of the better
ability to collect child support payments which this bill provides. I
will say again that the child support recipient is clearly better off
under this bill than she is under current law.
This is a balanced bipartisan measure which contains new consumer
protections and requires greater debt repayment by those who can afford
to make the payments. Responsible borrowers and all consumers will
benefit from its passage.
I want to commend the gentleman from Pennsylvania (Mr. Gekas), the
sponsor of this measure, for the leadership he has provided over the
last 4 years as we have sought to make this important reform. The
measure he brings to the floor today deserves the endorsement of this
House.
Mr. SENSENBRENNER. Mr. Chairman, I yield 2 minutes to the gentlewoman
from New Jersey (Mrs. Roukema).
(Mrs. ROUKEMA asked and was given permission to revise and extend her
remarks.)
Mrs. ROUKEMA. Mr. Chairman, I rise in strong support of this
legislation and associate my remarks with the gentleman from
Pennsylvania (Mr. Gekas) and the gentleman from Wisconsin (Mr.
Sensenbrenner).
This is a significant and substantial reform. It improves bankruptcy
law and restores personal responsibility and integrity to our system.
It does not diminish anything. It, at the same time, is a safety net
for those who need it most.
I would like to refer to the child support component of this
specifically because I was a pioneer in child support legislation,
going back to the mid-1980s; and I served on the Commission for
Interstate Child Support Enforcement. I want to make it clear that this
is a giant step in terms of protecting child support. It has made those
payments number one. Let there not be any misunderstanding about that.
The gentleman from Virginia (Mr. Boucher), the previous speaker, made
reference to the State situation; and I would specifically like to
reference that it does not, the automatic stay does not apply to State
child-support collection agencies. I know from speaking with child-
support advocates in New Jersey, in my State that has been a leader in
this respect, that this change is a top priority for them to ensure the
continued payment of child support.
Mr. Chairman, I want to again thank the leaders here and also
acknowledge that there are components of this that the Committee on
Financial Services has always agreed to.
Let me focus with more explicit details to the key elements of the
bill as follows:
Mr. Chairman, I rise today in strong support of H.R. 333, the
Bankruptcy Reform Act of 2001.
Introduction
Consumer bankruptcy reform is an important issue that needs to be
addressed now. In 1998 Americans filed a record of 1.4 million consumer
bankruptcy petitions representing an over 650 percent increase since
1978. Those who entered into bankruptcy erased an estimated $44 billion
in consumer debt. This resulted in a hidden tax of almost $400 per
household for families who have to pay monthly bills including
mortgages, student loans, and insurance. It is important to note that
this surge in bankruptcies in the last few years occurred at a time
when the national economy has grown at a strong rate. In fact, between
1986 and 1996, real per capita annual disposable income grew by over 13
percent while personal bankruptcies more than doubled.
Bankruptcy is fast becoming the first stop financial planning tool
rather than a last resort. The purpose of reform is to improve
bankruptcy law and practice by restoring personal responsibility and
integrity in the bankruptcy system but also ensuring that the safety
net of the Bankruptcy code is intact for those who need it most. I am a
strong supporter of the consumer bankruptcy reforms contained in the
bill and I will continue to work hard for bankruptcy reform
legislation.
financial services
Included in this bill are important provisions from H.R. 1161, the
Financial Contract Netting Improvement Act of 2000 passed by the House
last year. The netting provisions have one primary purpose: to minimize
the systemic risk evident in our nation's financial system.
Specifically, to minimize risk that could occur when a counterpart to a
derivative contract becomes insolvent. It amends our banking and
bankruptcy insolvency laws to require netting of the financial and
over-the-counter derivatives instruments that are often traded among
large financial institutions. It is a common-sense approach that should
be enacted this Congress.
These same provisions were part of last year's Working Group
recommendations on the netting of derivatives and other financial
contracts. The House passed similar netting provisions on three
separate occasions in the last Congress--as a stand-alone bill, as part
of last year's comprehensive Bankruptcy Reform bill and as part of H.R.
4541, the Commodity Futures Modernization Act of 2000 which
reauthorized the Commodities Exchange Act.
child support
I would like to thank the Committee for the child support provisions
in the Bankruptcy Reform Bill.
I have a long history of standing up for child support enforcement,
having been a pioneer on child support reforms and having served on the
U.S. Commission for Inter-State Child Support Enforcement. It's a
national disgrace that our child support enforcement system continues
to allow so many parents who can afford to pay for their children's
support to shirk these obligations. The so-called ``enforcement gap''
the difference between how much child support could be collected and
how much child support is collected--has been estimated at $34 billion.
[[Page H524]]
This legal abuse is a criminal violation as well as neglect of our
children's most basic needs. In addition, the taxpayers are abused
because billions of tax dollars are paid out because these families are
falling onto the welfare roles at alarming rates.
H.R. 333 strengthens Child Support Enforcement by:
Child support payments are moved to Number one when determining which
debts are paid first in a bankruptcy case. Currently, child support
payments rank seventh behind such priorities as attorney's fees.
Confirmation and discharge of chapter 13 plans are made conditional
upon the debtor's complete payment of child support. This will help
further ensure that child support receives the priority it deserves.
Providing that the automatic stay does not apply to a state child
support collection agency that is trying to recover child support
payments. I know from speaking with child support advocates in New
Jersey, that this change is a top priority for them to ensure continued
payment of important child support.
The bill requires the GAO to study the feasibility of requiring all
pertinent information about debtors to be collected by the Office of
Child Support for the purpose to determine whether the debtor has
outstanding child support payments. Chairman Gekas and the committee at
my request included the study so we can better enforce the law and make
sure that dependent families get every penny they deserve.
These are important and real reforms that are supported by the Child
Support Enforcement Services of New Jersey. The child support
obligation for last year in New Jersey was $767 million. The total
child support payments in arrears is $1.3 billion. Yes, I said $1.3
billion, of which about $800 million is still collectible. Bergen
County in my district, along with six other New Jersey counties, makes
up 53 percent of the total collections. The reforms in this bill will
help us get that outstanding money to the families that need it most.
In conclusion, I strongly support this comprehensive bankruptcy bill
and urge my colleagues support.
Mr. NADLER. Mr. Chairman, I yield 2 minutes to the distinguished
gentleman from Maine (Mr. Baldacci).
Mr. BALDACCI. Mr. Chairman, I thank the gentleman for yielding me
this time.
Mr. Chairman, I rise today in opposition to the Bankruptcy Abuse
Prevention and Consumer Protection Act. I do not oppose bankruptcy
reform. Rather, I oppose this particular legislation in the manner in
which it is being considered.
We have all heard the statistics concerning the alarming increase in
bankruptcy filing over the past 2 decades. Consumer bankruptcy filings
have reached record highs and our community banks and credit unions
continue to suffer the burdens of their members' financial
difficulties.
Does abuse of the bankruptcy system exist? Yes. Is reform needed?
Certainly. Should those consumers with the means available to pay back
some of their debt be required to do so? Absolutely. Does this bill
provide the solution that is needed? No.
What is needed, Mr. Chairman, is balanced reform. We need reform that
provides an adequate cap on homestead exemptions. We need reform that
addresses the source of many recent personal bankruptcy filings,
credit-card debt, in a proactive manner.
As our Nation's economy slows down, we need reform that strikes a
better balance between meeting the needs of lenders and the needs of
families who are in good faith turning to bankruptcy for a fresh start.
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Had this legislation been considered in a fair and open manner, we
would have been given the opportunity to address those flaws.
I am disappointed in the insistence the legislation be rushed to the
floor for a vote without a serious opportunity for the committee or
here on the floor to bring the bill into balance and achieve true
bipartisan support. This is too important an issue to be rushed through
the process as if we were merely naming a post office instead of
sealing the economic fate of families and small businesses.
This bill does not strike an appropriate balance between families and
lenders. It does not address the proliferation of credit card companies
that are extending credit far too easily. It imposes too stringent a
means test that takes discretion away from the bankruptcy judges and
prevents them from applying their good judgment in a particular case
before them.
Bankruptcy reform is clearly needed, but this bill is not the right
solution. Once again I urge my colleagues to vote against this bill.
Mr. SENSENBRENNER. Mr. Chairman, I yield 2 minutes to the gentleman
from Ohio (Mr. Chabot).
Mr. CHABOT. Mr. Chairman, I thank the gentleman for yielding me this
time, and I rise in support of the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2001. I would also like to thank the
chairman of the Committee on the Judiciary, the gentleman from
Wisconsin (Mr. Sensenbrenner), for his leadership in this area and for
moving the bill so expeditiously through the Committee on the Judiciary
to the House floor for debate. It has been debated and debated; and we
have had many, many hearings on this bill, so it is clearly not being
rushed.
I want to also thank the gentleman from Pennsylvania (Mr. Gekas) for
his tireless commitment to securing meaningful bankruptcy reform.
The text of H.R. 333, the bill we are considering today, is the
result of last spring's conference committee between the House and
Senate on which I served as a conferee. This vital piece of legislation
protects individuals and businesses from having to pick up the tab for
irresponsible debtors, debtors who are capable of paying off a
significant portion of their debts. It protects responsible consumers
and requires those who can afford to pay their debts to honor their
commitments.
Mr. Chairman, there are people who truly have a legitimate need to
declare bankruptcy. No one is denying this. At times, hard-working
Americans come up against special circumstances that are beyond their
control. Family illness, disability, or the loss of a spouse may
necessitate the need to seek relief. This legislation effectively
protects these individuals. Too frequently, however, people who have
the financial ability or earnings potential to repay their debts are
simply seeking an easy way out of making good on their debts. While
this may prove convenient for the debtor, it is not fair to their
friends and neighbors who are ultimately stuck with the bill.
As has been correctly stated by previous speakers, estimates show
that the average American pays as much as $550 per year as a bad debt
tax in the form of higher prices and increased consumer credit interest
rates to cover the economic costs associated with excessive bankruptcy
filings of others.
Mr. Chairman, I urge support of the bill.
Mr. NADLER. Mr. Chairman, I yield 5 minutes to the gentleman from
North Carolina (Mr. Watt).
Mr. WATT of North Carolina. Mr. Chairman, I thank the gentleman for
yielding me this time.
Mr. Chairman, in the 13 or so blocks from my residence to my office
this morning I promised myself that I was going to be calm and
unemotional in this debate, despite the fact that I think the process
in the committee was a charade and I think this is going to be a
charade. At the end of the day this bill will not be amended because it
is about making a political statement that our Republican leadership
can get the bill that they passed last time and it can be signed.
This bill is an unfortunate convergence of expediency and politics.
Nobody is likely to like what I say on either side of this issue
because what I perceive has happened is that the people who wanted this
bill knew that politically they could not get it unless they exempted
the poorest people in the country from the provisions of this bill. And
for those of us who start with the position that there is abuse in the
bankruptcy system and have witnessed that abuse, we know that the abuse
not only exists among high-income people but the abuse exists among
low-income people also. But basically the same people who a couple of
years ago were telling us that we need to make poor people responsible
for their actions in the welfare reform context now say, for political
expediency, we will accept a means test in the bankruptcy laws that
basically sets up two classes of citizens for bankruptcy in this
country, and that, Mr. Chairman, will be the legacy of this bill.
I know there are people who have kind of walked away from the debate
because they said, well, this does not
[[Page H525]]
impact my constituency any more because my constituency is poor and
poor people are exempted from this bill. However, it is irrational to
set up a pauper's bankruptcy court system and a higher-income court
system in this country for bankruptcies, and that will be the worst
legacy, I believe, that this bill will carry forward as we go on.
Now, once that unholy coalition got formed and the expediency and
politics got together and the agreement was cut, then the people who
wanted this bill from the beginning started to pile on additional
provisions, because there really was not an effective coalition out
there fighting the bill. So now we end up with all kinds of provisions
in this bill that are special interest provisions that really have no
rational basis.
There was no demonstration of abuse by small businesses of the
bankruptcy code. It was about individual abuse. Yet we have a whole
body of provisions in this bill now making it more difficult for small
businesses to reorganize under the bankruptcy laws. And I tell my
colleagues that the impact of that ultimately will be that person after
person after person will lose their jobs because small businesses will
not be able to reorganize and continue in business to continue the jobs
for those people.
So I do not know. It is difficult for me to even grab ahold of one or
two or three provisions. The whole concept of this bill, the whole
theory that divides poor people and rich people and says we are going
to set up separate systems of bankruptcy for us, one, a pauper's court,
in effect, and another a richer people's court, in effect, is just
alien to anything I can come to grips with and is bad public policy.
I understand why it was expedient, I understand the politics of it,
but it is sorry public policy. And that will be the most devastating
legacy of this bill.
Mr. SENSENBRENNER. Mr. Chairman, I yield 1 minute to the gentleman
from Arizona (Mr. Flake).
Mr. FLAKE. Mr. Chairman, I thank the gentleman for yielding me this
time.
I rise in strong support of the bankruptcy reform legislation before
us today. Many of the bankruptcy filings that do occur do originate
from consumers who have been struck by sudden or unexpected financial
hardship. No one wants to deny bankruptcy relief to those who truly
deserve it. However, there are also consumers contributing to the
upward trend in bankruptcy filing who could, with thoughtful planning
and dedication, recommit themselves to repaying some of the debts they
have incurred. These consumers, if permitted to simply walk away from
their debts, will pass along their cost to others in the form of higher
credit or tighter credit availability, increased tax burdens and higher
prices for goods and services.
Now, the average American household pays about $400 a year in hidden
costs associated with consumer bankruptcy. The abusers of this system,
it is important to note, are not simply low-income families. In fact,
many of the bankruptcy filers actually earn more than $100,000 in the
year they file for bankruptcy. While this legislation has been depicted
as a one-size-fits-all approach, it is highly flexible.
Mr. NADLER. Mr. Chairman, how much time is remaining?
The CHAIRMAN pro tempore (Mr. LaHood). The gentleman from New York
(Mr. Nadler) has 11 minutes remaining.
Mr. NADLER. Mr. Chairman, I yield 2\1/2\ minutes to the gentleman
from Massachusetts (Mr. Delahunt).
Mr. DELAHUNT. Mr. Chairman, I thank the gentleman for yielding me
this time.
Mr. Chairman, I want to pose the question of why did we see the spike
in bankruptcy filings up until 1998 and then saw a dramatic decline of
some 15 percent in the last 2 years? Well, in 1998, the FDIC, the
government agency, found that as a result of interest rate
deregulation, credit card companies had become more profitable and were
able to extend more unsecured credit to less creditworthy borrowers.
In other words, credit card issuers were handing money out to just
about everyone. Anyone with teenagers knows that because they receive
bundles of credit card solicitations. In other words, people who should
not have been extended credit were getting it.
This conclusion, I suggest, is supported by an astonishing fact. The
median family income of filers has dropped from $23,250 in 1981 to
$17,650 in 1997. And we wonder why we have a crisis. But, as the
filings peaked in 1998, the credit card companies saw their profits
stall and began to tighten their underwriting requirements. In the last
2 years, we have seen this decline. In other words, the invisible hands
of the marketplace are working.
As a University of Maryland study has concluded, the bankruptcy
crisis is self-correcting. The reason is that lenders are profit-
maximizing institutions that select their own credit criteria and they
responded to this unexpected increase in personal bankruptcy. I find it
rather ironic that proponents who usually proclaim the benefits of the
free market would seek government intervention, a remedy, by the way,
which will only impact the debtors and not impose any responsibility or
accountability on creditors who behave irresponsibly.
Let the market work and reject this bill.
Mr. SENSENBRENNER. Mr. Chairman, I yield 3 minutes to the gentleman
from Iowa (Mr. Leach), the distinguished former chairman of the
Committee on Banking and Financial Services.
Mr. LEACH. Mr. Chairman, I thank the distinguished chairman for
yielding this time to me.
Bankruptcy is an extraordinarily sensitive subject. The issue here,
we must bear in mind, is balance, rather than the need for a bankruptcy
law itself. After all, one of the first laws of the first Congress was
a bankruptcy law, which was passed because we had debtors prisons in
the United States. We ended debtors prisons, which were part of our
experience as well as the European experience. We never had the pound-
for-the-pound experience that was in Merchant of Venice in the European
experience, but we had debtors prisons.
This bill is about balance, that is, who bears the cost, not about
the principle of bankruptcy itself. I do not know if the balance is
exactly right, but I am convinced its thrust is and that it is a better
circumstance than current law.
I rise to stress one provision in this bill which I do not believe is
controversial and was strongly supported by the Clinton administration
Treasury as well as this Treasury and by the Federal Reserve, and that
is the provision that relates to netting. We have a circumstance in
international trade where the new phenomenon in international finance
is a multi-trillion dollar trade in derivatives contracts, now over $30
trillion. These are the notional values of derivatives contracts. If
they are allowed to net out, they come to less than a trillion dollars
and can be managed.
So what this bill does is call for the automatic netting of
derivatives contracts in the event of a bankruptcy circumstance. What
this does is protect the international financial system and the
domestic economy from true calamity in the event of a major derivatives
party declaring bankruptcy.
{time} 1215
In essence, in awkward economic times, this is the overwhelmingly
most important provision of the bill. On its basis alone, this bill
should be adopted.
I thank the distinguished chairman of the Committee on the Judiciary
for putting this provision in his bill. I am very appreciative that
this step will become one of stabilizing rather than destabilizing the
international economy. I urge my colleagues to support the bill.
Mr. NADLER. Mr. Chairman, I yield myself 4 minutes.
Mr. Chairman, I rise in opposition to this bill which will harm
American families, American businesses, especially small businesses,
harm children of divorce and open the door to even greater predatory
practices by lenders. It is a wish list of every big money special
interest group. It does not protect debtors, and that should be no
surprise, because families in bankruptcy cannot make large campaign
contributions, cannot buy ads in the paper, cannot hire fancy K Street
lobbyists. This bill is the poster child for the need for campaign
finance reform, the ugly result of much too much special interest money
in politics.
[[Page H526]]
Why is this bill being rushed through? Is it because there is a
crisis in bankruptcy? No, there is not. Chapter 7 filings have declined
by almost 20 percent in the last 2 years. Declined. Although studies
bought and paid for by the credit card industry a few years ago told us
that up to 25 percent of chapter 7 debtors could repay a substantial
portion of their debts, the only independent study, sponsored by the
American Bankruptcy Institute, found that only 3 percent could do so.
There is no crisis warranting the most radical rewrite of the
Bankruptcy Code in a quarter century.
The bill does not protect debtors and families. If it does, ask
yourself why every consumer organization, every organization
representing debtors, women's groups, children's advocacy groups, civil
rights groups, seniors groups, bankruptcy judges, trustees and
bankruptcy professionals have consistently criticized this bill for the
last 4 years? How dare the sponsors of this bill tell us that it will
improve the custodial mother's ability to collect child support because
they make child support a priority when they know perfectly well that
the priority expires with the bankruptcy discharge and Mom will then
have to compete with the bank's collection department in State court
with no priority. Why do the agencies that collect child support for
State tax departments support this bill while those agencies who try to
help mothers collect child support all uniformly oppose this bill? If
this bill is good for business, why have some of the top judges and big
business reorganization specialists all told us that this bill will
make it harder to reorganize a business under chapter 11 and force more
viable businesses into chapter 7 liquidation? As the economy slows
down, is this any time to make business survival more difficult?
If this bill is about personal responsibility, why have so many
consumer protection amendments been rejected, watered down and ruled
out of order so we cannot even debate these issues? Why does the bill
contain a special interest provision to allow a small group of wealthy
investors to avoid having a legal judgment against them enforced in our
courts as required by international law? Why does the bill let anti-
abortion terrorists abuse the Bankruptcy Code to evade lawful court
judgments through costly and lengthy litigation? Why does the bill fail
to place a real cap on the millionaire's loophole, the unlimited
homestead exemption? Why were we not even allowed to offer amendments
and debate these issues on the floor?
If this bill is so pro-family, why was an amendment by the gentleman
from California (Mr. Schiff) which would have corrected the bill so
that a battered, legally separated spouse would not have to count the
income of her husband as her own even if she never saw a nickel of it
taken out of the bill? Why would the bill require that she use this
phantom income to repay her creditors and deny her relief when she
cannot? Why should a landlord be allowed to evict tenants despite the
normal bankruptcy stay? Will homelessness make people better able to
repay their debts?
Does any Member think that credit card companies will really return
the extra profits this bill will give them over to consumers in the
form of lower interest rates? How much of the profits that the credit
card companies realized from interest rate deregulation have been
passed on to consumers in lower interest rates? Have credit card
interest rates gone down with mortgage rates and car rates?
Why have the conferences been held in secret? Why have industry
lobbyists had more access to the deliberations than most members of the
Committee on the Judiciary, even those appointed as conferees?
This bill is rotten and, like the bipartisan Garn-St Germain bill of
a decade and a half ago that caused the savings and loan crisis and
cost the taxpayers half a trillion dollars, this bill will come back to
haunt every Member who votes for it when people lose their jobs, lose
their families and are crushed under mountains of debt.
I urge rejection of this bill.
Mr. Chairman, I yield 1 minute to the distinguished gentleman from
Virginia (Mr. Scott).
Mr. SCOTT. Mr. Chairman, there are a number of reasons that have not
been pointed out why this bill is a bad bill, the reasons of why we
have a fresh start, a tradition that if someone is inundated by debts
so that they can cash in all they have and get a fresh start. Some
people incur debts through no fault of their own, a business reversal,
illness, loss of a job. There is no balance in this bill.
We have heard if you can pay a substantial portion of your bills, you
ought to pay those. There is nothing in this bill that limits it to a
substantial portion. If you can pay $167 a month out of whatever your
bills are, millions of dollars, you have got to pay that $167 for the
next 5 years. This will lead to frustration and desperation suffered by
many Americans. If our goal were to increase the number of people that
go berserk and shoot their colleagues, this is the kind of frustration
and desperation that would lead to that kind of result.
I would hope that we would keep our traditional bankruptcy laws so
that those who are totally inundated with debts and can never get out
can get a fresh start.
Mr. CONYERS. Mr. Chairman, I am delighted to yield 2 minutes to the
gentlewoman from California (Ms. Lee).
Ms. LEE. Mr. Chairman, I thank the gentleman from Michigan for
yielding me this time and also for his lifetime work on behalf of
people in our country.
I rise today in strong opposition to this anticonsumer, antiworking
family, antiwoman, anti-low income, antichild bankruptcy legislation
and to support the Democratic alternative which provides for true
bankruptcy reform. Many Americans, as we know, were left out of the
economic boom of the past decade. They are saving less and accumulating
more debt. To add insult to injury, the credit card companies are using
aggressive, unsolicited marketing techniques to offer huge lines of
credit to consumers who cannot afford it, including college students
who have no income. All of these factors contribute to a system where
more and more Americans are struggling just to get by, and some need to
rely on bankruptcy as a safety net. This has nothing to do with being
irresponsible or not wanting to pay one's bills.
Many working families are forced into bankruptcy when emergencies
arise, including loss of a job, the loss of a spouse or long-term
illness. Instead of helping families get back on their feet in these
cases, the Republican reform bill would make declaring bankruptcy under
chapter 7 or 13 much more difficult. This is just plain wrong.
The domestic support provisions in H.R. 333 are inadequate. Hundreds
of thousands of women who are owed child support or alimony would be
harmed financially under the Republican bill. The bill does nothing to
protect women owed child support by men who declare bankruptcy or those
who need to declare bankruptcy themselves due to financial hardship
when their former spouse or noncustodial parent fails to pay child
support. Additionally, this bill fails to ensure that parents and
children will have first claim on the bankruptcy filer's funds rather
than big business collection departments. This bill says to the
majority of ordinary Americans that we are abandoning them on behalf of
big-time corporations. It is wrong.
The Democratic alternative is sensible and is fair. The Republican
bankruptcy reform bill is punitive.
Mr. CONYERS. Mr. Chairman, I proudly yield the balance of my time to
the gentleman from Ohio (Mr. Kucinich).
The CHAIRMAN pro tempore (Mr. LaHood). The gentleman from Ohio is
recognized for 1 minute.
Mr. KUCINICH. Mr. Chairman, this bill is bad for consumers and bad
for business. Recently in Cleveland, the district I represent, a major
American company sought to reorganize under chapter 11 of the
bankruptcy laws. LTV, one of the most important employers in Ohio, one
of the most strategically important companies in the country, was
compelled to seek bankruptcy protection because of factors beyond their
control, unfair and illegal dumping of cheap foreign steel and
inadequate Federal enforcement of antidumping laws.
But if H.R. 333 had been law, LTV would not have been able to
reorganize under chapter 11. Instead, the company would have been
dissolved and the assets liquidated. Thousands of jobs
[[Page H527]]
would have been lost. H.R. 333 makes a change to existing law reducing
the assets available to a debtor company for funding operations during
a reorganization. H.R. 333, had it been in effect, would have affected
LTV's ability to obtain credit, thus keeping the plants open during
bankruptcy proceedings.
This is only one of the many extreme changes in the law that H.R. 333
would make. It is a bad bill, but especially as we may be on the verge
of a recession at a time when more businesses will need to reorganize
or else face layoffs and liquidation, this bill closes the door to
reorganization. It virtually guarantees more layoffs, more liquidation,
and more ruin for entrepreneurs, both large and small. Defeat H.R. 333.
Mrs. MALONEY of New York. Mr. Chairman, it is with great regret that
I come to the floor in opposition to this bankruptcy bill.
Mr. Chairman, I supported this legislation when the House last took a
recorded vote on bill.
Unfortunately, the bill that we are voting today lacks a critically
important amendment that has been added in the Senate.
In the Senate, Judiciary Chairman Hatch and Senator Schumer of New
York have agreed to a compromise amendment that resolves the issue of
the treatment of perpetrators of abortion clinic violence who declare
bankruptcy.
Bankruptcy reform is important but clinic bombers should not be
allowed to excuse penalties assessed on them by the courts through
bankruptcy.
This is growing problem that the majority is ignoring.
More than 2,400 acts of violence have been reported at family
planning clinics since 1997. These include bombings, arsons, death
threats, kidnapings, asaults, and other acts of harassment.
I will carefully follow the progress of this issue in conference and
I strongly urge my colleagues to add the Hatch-Schumer compromise.
Mr. DINGELL. Mr. Chairman, I rise today in opposition to H.R. 333,
the Bankruptcy Abuse Prevention and Consumer Protection Act of 2001.
H.R. 333 will neither prevent more bankruptcies from occurring, nor
protect consumers. It will, however, sanction the continued predatory
and abusive practices of the credit card industry.
There is no bankruptcy crisis in America. Despite the rascality
perpetrated by the credit card industry, including the solicitation of
our minors, seniors and pets, personal bankruptcies are not increasing.
In fact, even as the average household debt burden has continued to
climb, over the past two years personal bankruptcies have dropped by
more than 15 percent.
Studies show that irresponsible and overly aggressive lending
practices were behind the high level of bankruptcies in the mid 1990's.
However, the industry has not learned its lesson. Even as the industry
enjoys its highest profit level in five years, it refuses to take
responsibility for its poor lending practices and continues to increase
its marketing and credit extension. Last year, the credit card industry
increased its mail solicitations by about 14 percent. Additionally,
total credit extended, which included unused credit lines and debt
incurred by consumers, approached three trillion dollars for the first
time ever.
This is outrageous behavior and it should not be rewarded.
Unfortunately, the Republican leadership feels differently and has
crafted a bill which encourages this despicable behavior at the expense
of our most at risk citizens. Americans deserve better, especially at a
time when the economy is slowing and more jobs are in jeopardy. As
such, I urge all of my colleagues to oppose this wrongheaded piece of
legislation.
Mr. LaFALCE. Mr. Chairman, this is the wrong bill at the wrong time.
It is unfair and unreasonable to consider bankruptcy reform without
focusing attention on the practices of the credit card issuers that
directly contribute to consumer bankruptcies. Unfortunately, the bill
being considered today will only encourage credit card companies to be
more aggressive in exacerbating the problem of consumer debt.
The timing of this bill could hardly be worse. By all accounts, we
are in the midst of a significant economic slowdown, which will
undoubtedly put a strain on many families' budgets in the coming
months. Bankruptcy acts as a safety valve during economic slowdowns,
providing relief to families that have reached a financial crisis point
in the midst of difficult economic times. Yet, Congress is moving full
steam ahead to pass a bill that will shut off the safety valve for many
families that have reached a financial crisis point, most often through
job loss, a medical problem, or divorce.
Moreover, many families face these financial crises as the direct
result of the practices of companies assisted by this legislation.
The credit card industry is before Congress asking for relief from
allegedly inadequate bankruptcy statutes. Yet, these same companies
continue to aggressively market credit cards to some of our most
financially vulnerable citizens--students, seniors and the working
poor. Credit card companies issued 3.3 billion credit card
solicitations last year, many of which have been targeted at these
vulnerable groups. Is it any wonder that young people in their twenties
and older Americans are the fastest growing groups filing for
bankruptcy?
The credit card industry continues to aggressively market to these
groups because it's good business for them. Profits for the industry
are up, despite higher overall bankruptcies during the past decade.
Nothing boosts the bottom line better than a growing number of families
who can do no more than pay the monthly minimum on their credit card
bills. If too many customers ultimately default, the companies simply
make up for it by raising fees still higher.
But now they come to Congress asking for relief from the burden of
so-called ``irresponsible'' customers who default on their debts. I
would suggest that some of these companies only have themselves to
blame for much of the bankruptcy problem. No less a pro-business source
than the Wall Street Journal recently had this to say on the issue:
``America isn't a nation of deadbeats. By one estimate, at least 15% of
families could benefit financially by filing for bankruptcy. Many more
could do so with a little strategic planning beforehand. Yet fewer than
2% do.''
On this point, I would urge my Republican colleagues to consider
letting the free market do its job. If credit card companies have
issued too much bad credit, then it is up to these same companies to
correct their mistakes. They should not expect any help from the
government in avoiding the results of their own bad decisions.
In sum, the current bankruptcy bill is out of balance. The bill
increases the burden of families who find themselves unable to repay
heavy loads of consumer debt because of job loss, medical illness or
the failure of an ex-spouse to pay child support. But, it does not
adequately address one of the principal causes of burdensome consumer
debt--misleading and deceptive practices of the credit card companies
who often aggressively induce the debt.
Congress has failed to act responsibly in its consideration of this
legislation. The proponents of the bill have rushed this bill through
without full Congressional deliberations, where issues important to
consumers and working families could be considered. The Committee
process has been circumvented. The bill makes significant changes to
the Truth-In-Lending Act, but the Financial Services Committee has
passed up the opportunity to review the legislation. We have ignored
the advice of the National Bankruptcy Conference, a balanced group of
bankruptcy experts that Congress has listened to in every bankruptcy
reform effort for the last forty years, until this one.
I had hoped to introduce an amendment to the bankruptcy bill in order
to address these unfair and deceptive credit card practices.
Unfortunately, in their haste to rush the bankruptcy bill through the
Congress, the Republican Leadership has blocked my amendment from being
considered during today's Floor debate.
I feel strongly that Congress must address these abusive practices,
and that is why I am joining with the Gentleman from Michigan, Mr.
Conyers, in a motion to recommit that will address concerns of
populations which have proven to be most vulnerable--student and young
people. People in their twenties are the fastest growing group filing
for bankruptcy. To a large degree, that is the result of aggressive
targeting of students and young people just starting out in life by
credit card companies that trap them into a cycle of debt before they
have adequate income to sustain it.
Mr. ISRAEL. Mr. Chairman, I rise in support of H.R. 333, the
Bankruptcy Abuse Prevention and Consumer Protection Act. At its core,
this bill responsibly ensures that those who can afford to repay their
debts do so, while protecting important priorities such as child
support, alimony, and education savings.
Last year, over $40 billion was lost through bankruptcy filings. This
not only affects businesses, but families as well. Bankruptcy costs are
passed on to consumers in the forms of higher interest rates and
restricted access for lower and middle-income taxpayers to affordable
mortgages. Indeed, bankruptices cost each American household about $400
last year. It is fundamentally unfair that equal access to credit is
threatened by those who abuse the system--irresponsible filings by
people who can repay their debts.
H.R. 333 provides a mechanism to distinguish between those who can
repay their debt from those who cannot. If a filer earns more than the
median income and can afford to repay either $6,000 or 25 percent of
non-priority debt over five years (after taking into account living
expenses and priority expenses
[[Page H528]]
such as child support), then the debt should be repaid over time. This
bill insists on personal responsibility for repaying obligations while
providing bankruptcy protection for special situations such as
declining income and unexpected family and medical expenses.
Mr. Chairman, according to a recent study 15 percent of people
claiming Chapter 7 bankruptcy relief have the ability to repay 64
percent of their debt. Bankruptcy reform recognizes that when you have
the means to repay your debt, you should do so. It restores personal
responsibility. It compassionately recognizes that some unique and
special circumstances should be considered when ordering a repayment of
debt. It will increase access to credit and home mortgages for middle
and low-income families.
That is why I support H.R. 333 today.
Mr. KIND. Mr. Chairman, I rise to share my support for H.R. 333--the
Bankruptcy Abuse Prevention and Consumer Protection Act. This measure,
though not perfect, ensures debtors who can afford to repay their debt
do so, while at the same time protecting consumers.
Bankruptcies negatively affect people in the form of higher prices
and tightened credit access for lower-and middle-income taxpayers. It
is estimated that over $40 billion was discharged through bankruptcies
last years. As we all know, money lost to bankruptcies is passed on to
consumers in the form of higher prices for goods and services.
H.R. 333 also ensures that those individuals with the ability to
repay their debts do so while protecting those truly in need. This
legislation creates a needs based system and assures that those who can
afford to pay are required to do so. A recent study determined that 15
percent of Chapter 7 filers could repay an average of 64 percent of
their debt.
Most importantly, H.R. 333 makes all marital and parental obligations
to children the first priority for payment in bankruptcy proceedings.
It is for this reason a number legal and child support enforcement
organizations strongly support the bill.
While H.R. 333 is a good bill that could get better. It is my hope
that House and Senate negotiators, during conference committee
discussion, will work to eliminate current homestead exemption
loopholes and seek to protect families from abusive reaffirmation
practices of creditors.
Mrs. KELLY. Mr. Chairman, I rise today in strong support for H.R.
333, the Bankruptcy Reform Act, because it boils down to two words:
personal responsibility. If one assumes a debt, they should do
everything in their power to pay it off. However, a safety net has to
remain for those who legitimately cannot pay their debts. Creditors
should be made whole, if possible.
Some of my colleagues here today are trying to paint the word
creditors to mean faceless financial institutions who are tricking
consumers into assuming debt. They specifically speak of credit card
debt. They unfortunately failed to note that credit card debt in the
United States amounts to only 3.7 percent of all consumer debt.
Furthermore, only 1 percent of credit card accounts end up in
bankruptcy. Of that 1 percent it is estimated that 15 percent of those
accounts can afford to repay some or all of their debt.
The people who are truly being hurt by our current bankruptcy system
are Americans who play by the rules and pay their debts. Bankruptcy
costs the average American family an average per year of $400.
Needs-based bankruptcy reform is well overdue, and that is what H.R.
833 delivers. It is the people who game the system that we have to
stop.
I heard from my colleagues from Virginia (Mr. Moran). He stated last
year more people filed for bankruptcy than graduated from college. That
is a staggering fact. I am pleased to support H.R. 333's provisions
which strengthen the Bankruptcy Code protections for ex-spouses and
children. They have to be supported.
In the current bankruptcy law, child support and alimony are placed
seventh behind attorney fees as debt obligations. If enacted, this bill
would move child support and alimony payments to first on the list of
debt obligations.
Also under current law, some debtors use the automatic stay to avoid
paying child support payments after they file for bankruptcy. H.R. 333
exempts State child support authorities from the automatic stay, thus
insuring less delay in the proper payment of child support. I
vehemently oppose any legislation that would reduce the ability of
women and children to receive support payments.
H.R. 333 is a good bill that moves us in the right direction, and I
ask my colleagues from both sides of the aisle to join me in support of
this reasonable reform.
Ms. ROYBAL-ALLARD. Mr. Chairman, I rise in opposition to H.R. 333,
the Bankruptcy Abuse Prevention and Consumer Protection Act, that we
will be voting on later today. We all agree that bankruptcy reform is
necessary. However, the bill clearly puts creditors ahead of families.
A fair bankruptcy reform bill would balance important obligations, like
child support, with a creditor's right to receive payment. It would
take into account the fact that most of the people who declare
bankruptcy have been through trying ordeals such as divorce,
unemployment, and illness resulting in exorbitant medical bills they
can't afford to pay.
In addition, a truly effective bill would address a major cause of
bankruptcy: predatory lending. But H.R. 333 remains silent on these and
other critical issues. This bill is a missed opportunity to incorporate
some real protections for American families.
Simply stated, it is good for credit care companies and bad for
consumers. I urge my colleagues to oppose this bill.
Mr. BEREUTER. Mr. Chairman, this Member wishes today to express his
support for the Bankruptcy Abuse Prevention and Consumer Protection
Act, H.R. 333. It is important to note that this Member is an original
cosponsor of H.R. 333.
First, this Member would thank the distinguished gentleman from
Pennsylvania (Mr. Gekas), for introducing the House bankruptcy
legislation, H.R. 333. This Member would also like to express his
appreciation to the distinguished gentleman from Wisconsin (Mr.
Sensenbrenner), the Chairman of the Judiciary Committee, for his
efforts in getting this measure to the House Floor for consideration.
This Member supports the Bankruptcy Reform Act for numerous reasons;
however, the most important reasons include the following:
First, this Member supports the provision in H.R. 333 which provides
for a means testing--needs-based--formula when determining whether an
individual should file for Chapter 7 or Chapter 13 bankruptcy. Chapter
7 bankruptcy allows a debtor to be discharged of his or her personal
liability for many unsecured debts. In addition, there is no
requirement that a Chapter 7 filer repay many of his or her debts.
However, Chapter 13 bankruptcy filers commit to repay some portion of
his or her debts under a repayment plan.
Some Chapter 7 filers actually have the capacity to repay some of
what they owe, but they choose Chapter 7 bankruptcy and are able to
walk away from these debts. For example, the stories in which an
individual filed for Chapter 7 bankruptcy and then proceeds to take a
nice vacation and/or buys a new car are too common. Moreover, the
status quo is costing the average American individual and family
increased costs for consumer goods and credit because of the amount of
debt which is never repaid to creditors.
As a response to these concerns, the needs-based test of H.R. 333
will help ensure that high income filers, who could repay some of what
they owe, are required to file Chapter 13 bankruptcy as compared to
Chapter 7. This needs-based system takes a debtor's income, expenses,
obligations and any special circumstances into account to determine
whether he or she has the capacity to repay a portion of their debts.
Second, this Member supports the additional monthly expense items
that are exempted from consideration under the needs-based test which
determines, under H.R. 333, whether a person can file either a Chapter
7 or 13 version of bankruptcy. These expenses include the following:
reasonable expenses incurred to maintain the safety of the debtor and
debtor's family from domestic violence; an additional food and clothing
allowance if demonstrated to be reasonable and necessary; and
reasonable and necessary expenses for the care and support of an
elderly, chronically ill, or disabled member of the debtor's household
or immediate family.
Lastly, this Member supports the permanent extension of Chapter 12
bankruptcy in H.R. 333 since it allows family farmers to reorganize
their debts as compared to liquidating their assets. Using the Chapter
12 bankruptcy provision has been an important and necessary option for
family farmers throughout the nation. It has allowed family farmers to
reorganize their assets in a manner which balances the interests of
creditors and the future success of the involved farmer.
If Chapter 12 bankruptcy provisions are not permanently extended for
family farmers, its expiration would be another very painful blow to an
agricultural sector already reeling from low commodity prices. Not only
will many family farmers have no viable option but to end their
operations, it likely will also cause land values to plunge. Such a
decrease in value of farmland will affect the ability of family farmers
to obtain adequate credit to maintain a viable farm operation. It will
impact the manner in which banks conduct their agricultural lending
activities. Furthermore, this Member has received many contacts from
his constituents supporting the extension of Chapter 12 bankruptcy
because of the situation now being faced by our nation's farm families.
It is clear that the agricultural sector is hurting and by a permanent
extension of the Chapter 12 authorization, Congress can avoid one more
negative possibility.
In closing, for these aforementioned reasons and many others, this
Member urges his colleagues to support H.R. 333.
[[Page H529]]
Ms. SLAUGHTER. Mr. Chairman, I offered with my colleague, the
distinguished ranking member of the Judiciary Committee (Mr. Conyers),
an amendment in the Rules Committee that would have specified that
creditors would not be able to collect the money owed them by a debtor,
if that action would prevent the debtor from making family payments,
like alimony and child support.
Our amendment was not made in order. However, that does not mean I
will remain silent on this issue. In 1994, I introduced the Spousal
Equity in Bankruptcy Amendments to give priority to child and spousal
support payments in bankruptcy proceedings, so that debtors'
obligations to their children could not be discharged. That legislation
became law as part of the Bankruptcy Reform Act of 1994.
Due to these and other child support enforcement reforms, child
support collections have increased by 123 percent since 1992. But we
have further to go, as American children in fiscal year 1999 were still
owed $76.9 billion in child support. The supporters of this bill argue
that since the bill creates a new priority in bankruptcy proceedings
for child support and alimony payments, it provides far greater
protections from bankruptcy for such payments than current law. They
are wrong. Do not just take my word for it. Twenty women's and
children's organizations and more than 100 professors of bankruptcy and
commercial law have expressed their grave concerns about some of the
provisions of the bankruptcy reform bill, particularly the effects of
the bill on women and children.
This bill forces women and children as creditors to compete with
powerful creditors, such as credit card issuers, to collect their
claims after bankruptcy. In other words, the bill divides the pie into
more pieces, leaving less for women and children who are owed child
support and alimony. I urge all my colleagues to oppose H.R. 333 for
this reason.
Mr. SMITH of Michigan. Mr. Chairman, my amendment is a simple one. It
would raise the aggregate debt level a family farmer could have and
qualify for Chapter 12 bankruptcy. Currently, the limit is set at
$1,500,000, which was the original limit set in 1986 when Chapter 12
was created. It has not been raised since then although CPI-U has
increased approximately 43 percent. With the increase in land and
equipment values the debt level needs to be increased to accommodate
family farmers.
It's important for farmers to be able to qualify for Chapter 12.
Chapter 11 is for larger corporations and is very costly and requires
that all creditors be paid off, which is typically impossible for a
farmer. Chapter 13, on the other hand, can't be used by corporate
entities, has low debt levels and doesn't provide for rewrites of debt,
which is typical in a farm bankruptcy.
H.R. 333 does provide that Chapter 12's aggregate debt limit will be
indexed starting this year. But this ignores the deterioration of the
debt level's value from 1986 through 2001. My amendment takes into
account this change in the CPI since then and adjusts the debt limit
accordingly. The Senate has included this provisions in their bill and
I am assured the increase will be in the final version we send to the
President.
Mr. CROWLEY. Mr. Chairman, I rise in strong support for H.R. 333, The
Bankruptcy Abuse Prevention and Consumer Protection Act of 2001. This
legislation represents a good, commonsense approach towards tackling
the important yet complicated issues surrounding the issue of
bankruptcy.
While the United States has undergone the greatest period of economic
expansion in American history, in contrast, our nation has also
witnessed over 1 million bankruptcy filings in each of the past five
years. The facts show that in 1997 the consumer bankruptcy rate filing
hit a record level of 1.3 million with $40 billion in consumer debt
discharged. It is estimated that bankruptcy discharges cost each
American household $400 a year and cost retailers billions. And recent
trends demonstrate that our Nation--and our economy--can expect even
more bankruptcies in the coming years. Ultimately, consumers pay the
price for the surge in bankruptcy filings.
Last year, working in a bipartisan fashion, the House of
Representatives passed basically this same legislation on an
overwhelming vote of 318 to 108. The fundamental issue that drove
Congress to pass this bill in the 106th Congress, and hopefully again
today is--Why should consumers who work hard and pay their bills on
time be forced to pick up the check for those who can afford to repay
their debts, but instead choose to walk away and burden others with
their responsibilities?
A few days ago, representatives from a number of credit unions came
to my office, including Alan Kaufmann of the Melrose Credit Union in
Woodside, Queens in my Congressional District. He detailed about how
the hard working, middle class people of his credit union--and of my
district--continually have to pick up the tab for those who file
bankruptcy--whether legitimately, as many do, or irresponsibly, as far
too many do.
In advocating for this legislation, I stress several key components
of this bill: This legislation places child and family support first in
bankruptcy--above all other claims. Let me repeat, this bankruptcy
reform legislation recognizes that no obligation is more important than
that of a parent to his or her children. This bill includes 9
provisions designed to strengthen protections for child support and
alimony payments. Family and child support obligations come first--no
ifs, ands or buts.
Second, this legislation will assist those that have filed for
bankruptcy by assisting those people to pay their bills on time as well
as create a new program about financial education. In fact, this bill
creates a Debtors Bill of Rights. Specifically, H.R. 333 provides for
new disclosures which bankruptcy petition preparers and attorneys who
represent debtors must provide their customers or clients. This ensures
that debtors are better informed about the nature and scope of
bankruptcy, the different remedies available, and the significance of
bankruptcy on an individual's personal financial affairs. The intent is
also to allow debtors to better negotiate with their attorneys about
fees and services provided.
Most importantly, this bill mandates personal responsibility. As I
stated earlier, even in the booming economy of the mid and late
1990's--America saw record numbers of new bankruptcy filers. All of
this costs tens of billions of dollars, and these losses by companies
are passed directly onto Americans--Americans who pay their debts, use
their credit cards responsibly and balance their checkbooks. These
people should not be held responsible for bad debtors--but they are
currently, and this is wrong.
As a believer in personal responsibility and working to protect the
working and middle class residents I represent in Queens and the Bronx,
I support this legislation. Responsible borrowers should not be paying
the price for bankruptcy abuse--and too many of my constituents--hard
working, middle class people--are paying for the sins of others.
I believe that individuals with the means to repay some or all of
their debt should be required to meet their financial obligations and
not pass their debts onto society. Only those who truly cannot repay
their debts should be bale to immediately discharge all of their debts
under Chapter 7--and this bill protects those people who are in
greatest need of bankruptcy protection.
This is a good bill, it promotes personal responsibility and tightens
up our current laws. Families and children are protected; consumers are
protected; our local credit unions are protected and most important,
hard working Americans who pay their bills and balance their household
budgets are protected.
I ask for the support of all of my colleagues for this commonsense
legislation.
Mr. BENTSEN. Mr. Chairman, I rise today in support of H.R. 333, the
``Bankruptcy Abuse Prevention and Consumer Protection Act of 2001.''
Mr. Chairman, for most people, the decision to file for bankruptcy
protection is made with a heavy heart when all hope of managing one's
personal finances has disappeared. Most consumers who file for
bankruptcy are working families who have experienced a catastrophic
event such as illness, job loss, or a recent divorce. The decision to
file for bankruptcy is not one easily reached. It is the ultimate
public statement of financial failure and a cry for help.
However, there are some with average or higher incomes who have
exploited our bankruptcy laws to walk away from debt that they have the
means to repay. H.R. 333 is virtually identical to H.R. 2415,
legislation that passed both Houses in the 106th Congress. The main
feature of this bill is the application of a means test to bar such
individuals from filing for bankruptcy under Chapter 7--a section of
the bankruptcy code that allows the debtor to escape liability for
unsecured debts, such as credit card bills.
Though the number of personal bankruptcy filings skyrocketed in the
past two decades, reaching a record of 1.44 million in 1998, recent
statistics tell another story. However, in the past two years,
bankruptcy filings have declined. Total filings first dropped 8.5
percent, to 1.32 million in 1999 and then another 5 percent, in 2000,
to 1.25 million. With the number of consumer filings falling, the
question emerges, is bankruptcy reform still necessary? I believe it
is.
While most people treat bankruptcy as a last resort, there are some
debtors that seek to exploit our current bankruptcy laws to simply walk
away from consumer debt. This even-handed measure establishes a means
test for debtors to determine their eligibility for bankruptcy relief,
based on the ability to repay debt under Chapter 13. Moreover, this
legislation protects those low-income consumers who need a fresh start
by allowing them to discharge their debts and rebuild their lives.
Additionally, under H.R. 333, creditors also would receive
unprecedented fair treatment. Under H.R. 333, all debts, secured or
unsecured, are treated equally under bankruptcy law.
[[Page H530]]
Mr. Chairman, I am very pleased that H.R. 333's $100,000 federal
homestead cap (indexed for inflation) would only preempt state law if
the homeowner file for bankruptcy protection within two years of
establishing their initial homestead in the state, unless the value in
excess of that amount occurs from a transfer of residences within the
same state. Thus, any individual who has an existing homestead in Texas
for two or more years would not be subject to the cap nor would they,
anytime they moved within the state.
The Texas Homestead Law is a critical part of the Texas Constitution
and is part of the history of Texas. The Texas Homestead Law was
designed to protect settlers in Texas and to prevent the sale of their
home for payment of debts. Sam Houston, one of the original founders of
the Republic of Texas, was a strong proponent of including the Texas
Homestead Act in the Texas Constitution because he had personal
experience with declaring bankruptcy. In his former residence of
Tennessee, he and his family lost everything. Sam Houston wanted to
make sure that future Texans would not suffer the same humiliation.
H.R. 333 respects the Texas Homestead Act. I would not support any
measure that would not do so. I have worked with others who represent
Texas, including Senator Kay Bailey Hutchison, to ensure that Texans
retain their homestead exemption. In 1999, during consideration of an
earlier version of this bill by the House, Representative Bentsen
successfully authored an amendment allowing states to opt out of the
federal law placing a cap on the amount of equity protected by state
homestead laws. The Bentsen amendment allows states to opt out of any
federal cap. This language was amended in the Senate to create a two-
year residency requirement before one's homestead is exempt from the
cap. H.R. 333 maintains the Senate language, protecting the vast
majority of Texas homeowners.
Mr. Chairman, while this legislation is not perfect, I believe it has
some important provisions, including expanding the disclosure
requirements under the Truth and Lending Act with respect to several
types of credit plans and prohibiting retroactive finance charges with
respect to open-ended credit card accounts. Therefore, Mr. Chairman, I
urge passage of H.R. 333.
Mr. KINGSTON. Mr. Chairman, I have been a strong supporter of this
bill throughout its formulation. Despite the healthy economy these past
few years, people are still going bankrupt in record numbers. This
legislation included some much needed reforms in the area of
bankruptcies, especially in terms of personal credit.
I have also been very actively engaged in a section of this bill
which deals with bankruptcy judges. In 1998, there were over 26,000
bankruptcy cases filed in the Southern and Middle Judicial Districts of
Georgia alone, with only one shared judge to manage this tremendous
volume. I fought hard to ensure that this bill would establish a new
judgeship in the Southern Judicial District, which is the 7th busiest
in the United States. The new judgeship would benefit most of the
state, spanning five congressional districts, covering 3 million
people.
Finally, I would like to thank Chairman Gekas for his hard work in
this area, and for the work of Alan on his personal staff, and Susan on
the committee staff. Without everyone's team effort in dealing with
this legislation, we would not have been successful.
Mr. COSTELLO. Mr. Chairman, I rise today in support of H.R. 333.
Consumer bankruptcy filings have increased over the past two decades,
peaking at 1.44 million in 1998. Flaws in the bankruptcy law allow
individuals to walk away from their debts, regardless of whether they
are able to pay a portion of them. H.R. 333 offers a fresh start to
those overwhelmed by debt and financial obligations, while also
ensuring that debtors with financial means to pay a portion of their
debt will have to do so.
I believe this legislation is a good start at consumer protection
from predatory credit card companies. Credit card companies need to be
held responsible for continued aggressive credit card marketing. The
bill includes new safeguards against abusive reaffirmation agreements,
new credit card disclosure specifications, and requirements that credit
card companies provide explanatory statements on introductory interest
rates and minimum payments.
In addition, I support this bill because it considers domestic
support obligations, such as alimony and child support, as priority
debts. These debts are nondischargeable, meaning they must be paid,
regardless of whether an individual files under Chapter 7 or Chapter
13. This legislation raised the priority of domestic support
obligations from seventh to first, thereby granting greater protection
to child and domestic support.
Mr. Chairman, it is important to ensure bankruptcy protection is
available to those who truly need it. This legislation provides such
protections, places a higher priority on domestic support obligations,
and offers some consumer protection from credit card companies. For
these reasons, I support this legislation.
Mr. SENSENBRENNER. Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN pro tempore. All time for general debate has expired.
Pursuant to the rule, the amendments printed in the bill are adopted
and the bill, as amended, is considered read for amendment under the 5-
minute rule.
The text of H.R. 333, as amended, is as follows:
H.R. 333
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Bankruptcy
Abuse Prevention and Consumer Protection Act of 2001''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I--NEEDS-BASED BANKRUPTCY
Sec. 101. Conversion.
Sec. 102. Dismissal or conversion.
Sec. 103. Sense of Congress and study.
Sec. 104. Notice of alternatives.
Sec. 105. Debtor financial management training test program.
Sec. 106. Credit counseling.
Sec. 107. Schedules of reasonable and necessary expenses.
TITLE II--ENHANCED CONSUMER PROTECTION
Subtitle A--Penalties for Abusive Creditor Practices
Sec. 201. Promotion of alternative dispute resolution.
Sec. 202. Effect of discharge.
Sec. 203. Discouraging abuse of reaffirmation practices.
Subtitle B--Priority Child Support
Sec. 211. Definition of domestic support obligation.
Sec. 212. Priorities for claims for domestic support obligations.
Sec. 213. Requirements to obtain confirmation and discharge in cases
involving domestic support obligations.
Sec. 214. Exceptions to automatic stay in domestic support obligation
proceedings.
Sec. 215. Nondischargeability of certain debts for alimony,
maintenance, and support.
Sec. 216. Continued liability of property.
Sec. 217. Protection of domestic support claims against preferential
transfer motions.
Sec. 218. Disposable income defined.
Sec. 219. Collection of child support.
Sec. 220. Nondischargeability of certain educational benefits and
loans.
Subtitle C--Other Consumer Protections
Sec. 221. Amendments to discourage abusive bankruptcy filings.
Sec. 222. Sense of Congress.
Sec. 223. Additional amendments to title 11, United States Code.
Sec. 224. Protection of retirement savings in bankruptcy.
Sec. 225. Protection of education savings in bankruptcy.
Sec. 226. Definitions.
Sec. 227. Restrictions on debt relief agencies.
Sec. 228. Disclosures.
Sec. 229. Requirements for debt relief agencies.
Sec. 230. GAO study.
TITLE III--DISCOURAGING BANKRUPTCY ABUSE
Sec. 301. Reinforcement of the fresh start.
Sec. 302. Discouraging bad faith repeat filings.
Sec. 303. Curbing abusive filings.
Sec. 304. Debtor retention of personal property security.
Sec. 305. Relief from the automatic stay when the debtor does not
complete intended surrender of consumer debt collateral.
Sec. 306. Giving secured creditors fair treatment in chapter 13.
Sec. 307. Domiciliary requirements for exemptions.
Sec. 308. Residency requirement for homestead exemption.
Sec. 309. Protecting secured creditors in chapter 13 cases.
Sec. 310. Limitation on luxury goods.
Sec. 311. Automatic stay.
Sec. 312. Extension of period between bankruptcy discharges.
Sec. 313. Definition of household goods and antiques.
Sec. 314. Debt incurred to pay nondischargeable debts.
Sec. 315. Giving creditors fair notice in chapters 7 and 13 cases.
Sec. 316. Dismissal for failure to timely file schedules or provide
required information.
Sec. 317. Adequate time to prepare for hearing on confirmation of the
plan.
Sec. 318. Chapter 13 plans to have a 5-year duration in certain cases.
Sec. 319. Sense of Congress regarding expansion of rule 9011 of the
Federal Rules of Bankruptcy Procedure.
Sec. 320. Prompt relief from stay in individual cases.
Sec. 321. Chapter 11 cases filed by individuals.
[[Page H531]]
Sec. 322. Limitation.
Sec. 323. Excluding employee benefit plan participant contributions and
other property from the estate.
Sec. 324. Exclusive jurisdiction in matters involving bankruptcy
professionals.
Sec. 325. United States trustee program filing fee increase.
Sec. 326. Sharing of compensation.
Sec. 327. Fair valuation of collateral.
Sec. 328. Defaults based on nonmonetary obligations.
TITLE IV--GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS
Subtitle A--General Business Bankruptcy Provisions
Sec. 401. Adequate protection for investors.
Sec. 402. Meetings of creditors and equity security holders.
Sec. 403. Protection of refinance of security interest.
Sec. 404. Executory contracts and unexpired leases.
Sec. 405. Creditors and equity security holders committees.
Sec. 406. Amendment to section 546 of title 11, United States Code.
Sec. 407. Amendments to section 330(a) of title 11, United States Code.
Sec. 408. Postpetition disclosure and solicitation.
Sec. 409. Preferences.
Sec. 410. Venue of certain proceedings.
Sec. 411. Period for filing plan under chapter 11.
Sec. 412. Fees arising from certain ownership interests.
Sec. 413. Creditor representation at first meeting of creditors.
Sec. 414. Definition of disinterested person.
Sec. 415. Factors for compensation of professional persons.
Sec. 416. Appointment of elected trustee.
Sec. 417. Utility service.
Sec. 418. Bankruptcy fees.
Sec. 419. More complete information regarding assets of the estate.
Subtitle B--Small Business Bankruptcy Provisions
Sec. 431. Flexible rules for disclosure statement and plan.
Sec. 432. Definitions.
Sec. 433. Standard form disclosure statement and plan.
Sec. 434. Uniform national reporting requirements.
Sec. 435. Uniform reporting rules and forms for small business cases.
Sec. 436. Duties in small business cases.
Sec. 437. Plan filing and confirmation deadlines.
Sec. 438. Plan confirmation deadline.
Sec. 439. Duties of the United States trustee.
Sec. 440. Scheduling conferences.
Sec. 441. Serial filer provisions.
Sec. 442. Expanded grounds for dismissal or conversion and appointment
of trustee.
Sec. 443. Study of operation of title 11, United States Code, with
respect to small businesses.
Sec. 444. Payment of interest.
Sec. 445. Priority for administrative expenses.
TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS
Sec. 501. Petition and proceedings related to petition.
Sec. 502. Applicability of other sections to chapter 9.
TITLE VI--BANKRUPTCY DATA
Sec. 601. Improved bankruptcy statistics.
Sec. 602. Uniform rules for the collection of bankruptcy data.
Sec. 603. Audit procedures.
Sec. 604. Sense of Congress regarding availability of bankruptcy data.
TITLE VII--BANKRUPTCY TAX PROVISIONS
Sec. 701. Treatment of certain liens.
Sec. 702. Treatment of fuel tax claims.
Sec. 703. Notice of request for a determination of taxes.
Sec. 704. Rate of interest on tax claims.
Sec. 705. Priority of tax claims.
Sec. 706. Priority property taxes incurred.
Sec. 707. No discharge of fraudulent taxes in chapter 13.
Sec. 708. No discharge of fraudulent taxes in chapter 11.
Sec. 709. Stay of tax proceedings limited to prepetition taxes.
Sec. 710. Periodic payment of taxes in chapter 11 cases.
Sec. 711. Avoidance of statutory tax liens prohibited.
Sec. 712. Payment of taxes in the conduct of business.
Sec. 713. Tardily filed priority tax claims.
Sec. 714. Income tax returns prepared by tax authorities.
Sec. 715. Discharge of the estate's liability for unpaid taxes.
Sec. 716. Requirement to file tax returns to confirm chapter 13 plans.
Sec. 717. Standards for tax disclosure.
Sec. 718. Setoff of tax refunds.
Sec. 719. Special provisions related to the treatment of State and
local taxes.
Sec. 720. Dismissal for failure to timely file tax returns.
TITLE VIII--ANCILLARY AND OTHER CROSS-BORDER CASES
Sec. 801. Amendment to add chapter 15 to title 11, United States Code.
Sec. 802. Other amendments to titles 11 and 28, United States Code.
TITLE IX--FINANCIAL CONTRACT PROVISIONS
Sec. 901. Treatment of certain agreements by conservators or receivers
of insured depository institutions.
Sec. 902. Authority of the corporation with respect to failed and
failing institutions.
Sec. 903. Amendments relating to transfers of qualified financial
contracts.
Sec. 904. Amendments relating to disaffirmance or repudiation of
qualified financial contracts.
Sec. 905. Clarifying amendment relating to master agreements.
Sec. 906. Federal Deposit Insurance Corporation Improvement Act of
1991.
Sec. 907. Bankruptcy Code amendments.
Sec. 908. Recordkeeping requirements.
Sec. 909. Exemptions from contemporaneous execution requirement.
Sec. 910. Damage measure.
Sec. 911. SIPC stay.
Sec. 912. Asset-backed securitizations.
Sec. 913. Effective date; application of amendments.
TITLE X--PROTECTION OF FAMILY FARMERS
Sec. 1001. Permanent reenactment of chapter 12.
Sec. 1002. Debt limit increase.
Sec. 1003. Certain claims owed to governmental units.
TITLE XI--HEALTH CARE AND EMPLOYEE BENEFITS
Sec. 1101. Definitions.
Sec. 1102. Disposal of patient records.
Sec. 1103. Administrative expense claim for costs of closing a health
care business and other administrative expenses.
Sec. 1104. Appointment of ombudsman to act as patient advocate.
Sec. 1105. Debtor in possession; duty of trustee to transfer patients.
Sec. 1106. Exclusion from program participation not subject to
automatic stay.
TITLE XII--TECHNICAL AMENDMENTS
Sec. 1201. Definitions.
Sec. 1202. Adjustment of dollar amounts.
Sec. 1203. Extension of time.
Sec. 1204. Technical amendments.
Sec. 1205. Penalty for persons who negligently or fraudulently prepare
bankruptcy petitions.
Sec. 1206. Limitation on compensation of professional persons.
Sec. 1207. Effect of conversion.
Sec. 1208. Allowance of administrative expenses.
Sec. 1209. Exceptions to discharge.
Sec. 1210. Effect of discharge.
Sec. 1211. Protection against discriminatory treatment.
Sec. 1212. Property of the estate.
Sec. 1213. Preferences.
Sec. 1214. Postpetition transactions.
Sec. 1215. Disposition of property of the estate.
Sec. 1216. General provisions.
Sec. 1217. Abandonment of railroad line.
Sec. 1218. Contents of plan.
Sec. 1219. Discharge under chapter 12.
Sec. 1220. Bankruptcy cases and proceedings.
Sec. 1221. Knowing disregard of bankruptcy law or rule.
Sec. 1222. Transfers made by nonprofit charitable corporations.
Sec. 1223. Protection of valid purchase money security interests.
Sec. 1224. Bankruptcy judgeships.
Sec. 1225. Compensating trustees.
Sec. 1226. Amendment to section 362 of title 11, United States Code.
Sec. 1227. Judicial education.
Sec. 1228. Reclamation.
Sec. 1229. Providing requested tax documents to the court.
Sec. 1230. Encouraging creditworthiness.
Sec. 1231. Property no longer subject to redemption.
Sec. 1232. Trustees.
Sec. 1233. Bankruptcy forms.
Sec. 1234. Expedited appeals of bankruptcy cases to courts of appeals.
Sec. 1235. Exemptions.
TITLE XIII--CONSUMER CREDIT DISCLOSURE
Sec. 1301. Enhanced disclosures under an open end credit plan.
Sec. 1302. Enhanced disclosure for credit extensions secured by a
dwelling.
Sec. 1303. Disclosures related to ``introductory rates''.
Sec. 1304. Internet-based credit card solicitations.
Sec. 1305. Disclosures related to late payment deadlines and penalties.
Sec. 1306. Prohibition on certain actions for failure to incur finance
charges.
Sec. 1307. Dual use debit card.
Sec. 1308. Study of bankruptcy impact of credit extended to dependent
students.
Sec. 1309. Clarification of clear and conspicuous.
Sec. 1310. Enforcement of certain foreign judgments barred.
TITLE XIV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
TITLE I--NEEDS-BASED BANKRUPTCY
SEC. 101. CONVERSION.
Section 706(c) of title 11, United States Code, is amended
by inserting ``or consents to'' after ``requests''.
[[Page H532]]
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 11 or 13'';
and
(2) in subsection (b)--
(A) by inserting ``(1)'' after ``(b)'';
(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''
and inserting ``trustee, bankruptcy administrator, or'';
(II) by inserting ``, or, with the debtor's consent,
convert such a case to a case under chapter 11 or 13 of this
title,'' after ``consumer debts''; and
(III) by striking ``a substantial abuse'' and inserting
``an abuse''; and
(ii) by striking the next to last sentence; and
(C) by adding at the end the following:
``(2)(A)(i) In considering under paragraph (1) whether the
granting of relief would be an abuse of the provisions of
this chapter, the court shall presume abuse exists if the
debtor's current monthly income reduced by the amounts
determined under clauses (ii), (iii), and (iv), and
multiplied by 60 is not less than the lesser of--
``(I) 25 percent of the debtor's nonpriority unsecured
claims in the case, or $6,000, whichever is greater; or
``(II) $10,000.
``(ii)(I) The debtor's monthly expenses shall be the
debtor's applicable monthly expense amounts specified under
the National Standards and Local Standards, and the debtor's
actual monthly expenses for the categories specified as Other
Necessary Expenses issued by the Internal Revenue Service for
the area in which the debtor resides, as in effect on the
date of the entry of the order for relief, for the debtor,
the dependents of the debtor, and the spouse of the debtor in
a joint case, if the spouse is not otherwise a dependent.
Notwithstanding any other provision of this clause, the
monthly expenses of the debtor shall not include any
payments for debts. In addition, the debtor's monthly
expenses shall include the debtor's reasonably necessary
expenses incurred to maintain the safety of the debtor and
the family of the debtor from family violence as
identified under section 309 of the Family Violence
Prevention and Services Act (42 U.S.C. 10408), or other
applicable Federal law. The expenses included in the
debtor's monthly expenses described in the preceding
sentence shall be kept confidential by the court. In
addition, if it is demonstrated that it is reasonable and
necessary, the debtor's monthly expenses may also include
an additional allowance for food and clothing of up to 5
percent of the food and clothing categories as specified
by the National Standards issued by the Internal Revenue
Service.
``(II) In addition, the debtor's monthly expenses may
include, if applicable, the continuation of actual expenses
paid by the debtor that are reasonable and necessary for care
and support of an elderly, chronically ill, or disabled
household member or member of the debtor's immediate family
(including parents, grandparents, and siblings of the debtor,
the dependents of the debtor, and the spouse of the debtor in
a joint case) who is not a dependent and who is unable to pay
for such reasonable and necessary expenses.
``(III) In addition, for a debtor eligible for chapter 13,
the debtor's monthly expenses may include the actual
administrative expenses of administering a chapter 13 plan
for the district in which the debtor resides, up to an amount
of 10 percent of the projected plan payments, as
determined under schedules issued by the Executive Office
for United States Trustees.
``(IV) In addition, the debtor's monthly expenses may
include the actual expenses for each dependent child under
the age of 18 years up to $1,500 per year per child to attend
a private elementary or secondary school, if the debtor
provides documentation of such expenses and a detailed
explanation of why such expenses are reasonable and
necessary.
``(iii) The debtor's average monthly payments on account of
secured debts shall be calculated as--
``(I) the sum of--
``(aa) the total of all amounts scheduled as contractually
due to secured creditors in each month of the 60 months
following the date of the petition; and
``(bb) any additional payments to secured creditors
necessary for the debtor, in filing a plan under chapter 13
of this title, to maintain possession of the debtor's primary
residence, motor vehicle, or other property necessary for the
support of the debtor and the debtor's dependents, that
serves as collateral for secured debts; divided by
``(II) 60.
``(iv) The debtor's expenses for payment of all priority
claims (including priority child support and alimony claims)
shall be calculated as--
``(I) the total amount of debts entitled to priority;
divided by
``(II) 60.
``(B)(i) In any proceeding brought under this subsection,
the presumption of abuse may only be rebutted by
demonstrating special circumstances that justify additional
expenses or adjustments of current monthly income for which
there is no reasonable alternative.
``(ii) In order to establish special circumstances, the
debtor shall be required to--
``(I) itemize each additional expense or adjustment of
income; and
``(II) provide--
``(aa) documentation for such expense or adjustment to
income; and
``(bb) a detailed explanation of the special circumstances
that make such expenses or adjustment to income necessary and
reasonable.
``(iii) The debtor shall attest under oath to the accuracy
of any information provided to demonstrate that additional
expenses or adjustments to income are required.
``(iv) The presumption of abuse may only be rebutted if the
additional expenses or adjustments to income referred to in
clause (i) cause the product of the debtor's current monthly
income reduced by the amounts determined under clauses (ii),
(iii), and (iv) of subparagraph (A) when multiplied by 60 to
be less than the lesser of--
``(I) 25 percent of the debtor's nonpriority unsecured
claims, or $6,000, whichever is greater; or
``(II) $10,000.
``(C) As part of the schedule of current income and
expenditures required under section 521, the debtor shall
include a statement of the debtor's current monthly income,
and the calculations that determine whether a presumption
arises under subparagraph (A)(i), that shows how each such
amount is calculated.
``(3) In considering under paragraph (1) whether the
granting of relief would be an abuse of the provisions of
this chapter in a case in which the presumption in
subparagraph (A)(i) of such paragraph does not apply or has
been rebutted, the court shall consider--
``(A) whether the debtor filed the petition in bad faith;
or
``(B) the totality of the circumstances (including whether
the debtor seeks to reject a personal services contract and
the financial need for such rejection as sought by the
debtor) of the debtor's financial situation demonstrates
abuse.
``(4)(A) The court shall order the counsel for the debtor
to reimburse the trustee for all reasonable costs in
prosecuting a motion brought under section 707(b), including
reasonable attorneys' fees, if--
``(i) a trustee appointed under section 586(a)(1) of title
28 or from a panel of private trustees maintained by the
bankruptcy administrator brings a motion for dismissal or
conversion under this subsection; and
``(ii) the court--
``(I) grants that motion; and
``(II) finds that the action of the counsel for the debtor
in filing under this chapter violated rule 9011 of the
Federal Rules of Bankruptcy Procedure.
``(B) If the court finds that the attorney for the debtor
violated rule 9011 of the Federal Rules of Bankruptcy
Procedure, 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 trustee, the
United States trustee, or the bankruptcy administrator.
``(C) In the case of a petition, pleading, or written
motion, the signature of an attorney shall constitute a
certification that the attorney has--
``(i) performed a reasonable investigation into the
circumstances that gave rise to the petition, pleading, or
written motion; and
``(ii) determined that the petition, pleading, or written
motion--
``(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).
``(D) The signature of an attorney on the petition shall
constitute a certification that the attorney has no knowledge
after an inquiry that the information in the schedules filed
with such petition is incorrect.
``(5)(A) Except as provided in subparagraph (B) and subject
to paragraph (6), the court may award a debtor all reasonable
costs (including reasonable attorneys' fees) in contesting a
motion brought by a party in interest (other than a trustee,
United States trustee, or bankruptcy administrator) under
this subsection if--
``(i) the court does not grant the motion; and
``(ii) the court finds that--
``(I) the position of the party that brought the motion
violated rule 9011 of the Federal Rules of Bankruptcy
Procedure; 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) A small business that has a claim of an aggregate
amount less than $1,000 shall not be subject to subparagraph
(A)(ii)(I).
``(C) For purposes of this paragraph--
``(i) the term `small business' means an unincorporated
business, partnership, corporation, association, or
organization that--
``(I) has less than 25 full-time employees as determined on
the date the motion is filed; and
``(II) is engaged in commercial or business activity; and
``(ii) the number of employees of a wholly owned subsidiary
of a corporation includes the employees of--
``(I) a parent corporation; and
``(II) any other subsidiary corporation of the parent
corporation.
``(6) Only the judge, United States trustee, or bankruptcy
administrator may bring a motion under section 707(b), if the
current
[[Page H533]]
monthly income of the debtor, or in a joint case, the debtor
and the debtor's spouse, as of the date of the order for
relief, when multiplied by 12, is equal to or less than--
``(A) in the case of a debtor in a household of 1 person,
the median family income of the applicable State for 1 earner
last reported by the Bureau of the Census;
``(B) in the case of a debtor in a household of 2, 3, or 4
individuals, the highest median family income of the
applicable State for a family of the same number or fewer
individuals last reported by the Bureau of the Census; or
``(C) in the case of a debtor in a household exceeding 4
individuals, the highest median family income of the
applicable State for a family of 4 or fewer individuals last
reported by the Bureau of the Census, plus $525 per month for
each individual in excess of 4.
``(7) No judge, United States trustee, panel trustee,
bankruptcy administrator or other party in interest may bring
a motion under paragraph (2), if the current monthly income
of the debtor and the debtor's spouse combined, as of the
date of the order for relief when multiplied by 12, is equal
to or less than--
``(A) in the case of a debtor in a household of 1 person,
the median family income of the applicable State for 1 earner
last reported by the Bureau of the Census;
``(B) in the case of a debtor in a household of 2, 3, or 4
individuals, the highest median family income of the
applicable State for a family of the same number or fewer
individuals last reported by the Bureau of the Census; or
``(C) in the case of a debtor in a household exceeding 4
individuals, the highest median family income of the
applicable State for a family of 4 or fewer individuals last
reported by the Bureau of the Census, plus $525 per month for
each individual in excess of 4.''.
(b) Definition.--Section 101 of title 11, United States
Code, is amended by inserting after paragraph (10) the
following:
``(10A) `current monthly income'--
``(A) means the average monthly income from all sources
which the debtor, or in a joint case, the debtor and the
debtor's spouse, receive without regard to whether the income
is taxable income, derived during the 6-month period
preceding the date of determination; and
``(B) includes any amount paid by any entity other than the
debtor (or, in a joint case, the debtor and the debtor's
spouse), on a regular basis to the household expenses of the
debtor or the debtor's dependents (and, in a joint case, the
debtor's spouse if not otherwise a dependent), but excludes
benefits received under the Social Security Act and payments
to victims of war crimes or crimes against humanity on
account of their status as victims of such crimes;''.
(c) United States Trustee and Bankruptcy Administrator
Duties.--Section 704 of title 11, United States Code, is
amended--
(1) by inserting ``(a)'' before ``The trustee shall--'';
and
(2) by adding at the end the following:
``(b)(1) With respect to an individual debtor under this
chapter--
``(A) the United States trustee or bankruptcy administrator
shall review all materials filed by the debtor and, not later
than 10 days after the date of the first meeting of
creditors, file with the court a statement as to whether the
debtor's case would be presumed to be an abuse under section
707(b); and
``(B) not later than 5 days after receiving a statement
under subparagraph (A), the court shall provide a copy of the
statement to all creditors.
``(2) The United States trustee or bankruptcy administrator
shall, not later than 30 days after the date of filing a
statement under paragraph (1), either file a motion to
dismiss or convert under section 707(b) or file a statement
setting forth the reasons the United States trustee or
bankruptcy administrator does not believe that such a motion
would be appropriate, if the United States trustee or
bankruptcy administrator determines that the debtor's case
should be presumed to be an abuse under section 707(b) and
the product of the debtor's current monthly income,
multiplied by 12 is not less than--
``(A) in the case of a debtor in a household of 1 person,
the median family income of the applicable State for 1 earner
last reported by the Bureau of the Census; or
``(B) in the case of a debtor in a household of 2 or more
individuals, the highest median family income of the
applicable State for a family of the same number or fewer
individuals last reported by the Bureau of the Census.
``(3) In any case in which a motion to dismiss or convert,
or a statement is required to be filed by this subsection,
the United States trustee or bankruptcy administrator may
decline to file a motion to dismiss or convert pursuant to
section 704(b)(2) if the product of the debtor's current
monthly income multiplied by 12 exceeds 100 percent, but does
not exceed 150 percent of--
``(A)(i) in the case of a debtor in a household of 1
person, the median family income of the applicable State for
1 earner last reported by the Bureau of the Census; or
``(ii) in the case of a debtor in a household of 2 or more
individuals, the highest median family income of the
applicable State for a family of the same number or fewer
individuals last reported by the Bureau of the Census; and
``(B) the product of the debtor's current monthly income,
reduced by the amounts determined under section
707(b)(2)(A)(ii) (except for the amount calculated under the
other necessary expenses standard issued by the Internal
Revenue Service) and clauses (iii) and (iv) of section
707(b)(2)(A), multiplied by 60 is less than the lesser of--
``(i) 25 percent of the debtor's nonpriority unsecured
claims in the case or $6,000, whichever is greater; or
``(ii) $10,000.''.
(d) Notice.--Section 342 of title 11, United States Code,
is amended by adding at the end the following:
``(d) In an individual case under chapter 7 in which the
presumption of abuse is triggered under section 707(b), the
clerk shall give written notice to all creditors not later
than 10 days after the date of the filing of the petition
that the presumption of abuse has been triggered.''.
(e) Nonlimitation of Information.--Nothing in this title
shall limit the ability of a creditor to provide information
to a judge (except for information communicated ex parte,
unless otherwise permitted by applicable law), United States
trustee, bankruptcy administrator or trustee.
(f) Dismissal for Certain Crimes.--Section 707 of title 11,
United States Code, as amended by this section, is amended by
adding at the end the following:
``(c)(1) In this subsection--
``(A) the term `crime of violence' has the meaning given
that term in section 16 of title 18; and
``(B) the term `drug trafficking crime' has the meaning
given that term in section 924(c)(2) of title 18.
``(2) Except as provided in paragraph (3), after notice and
a hearing, the court, on a motion by the victim of a crime of
violence or a drug trafficking crime, may when it is in the
best interest of the victims dismiss a voluntary case filed
by an individual debtor under this chapter if that individual
was convicted of that crime.
``(3) The court may not dismiss a case under paragraph (2)
if the debtor establishes by a preponderance of the evidence
that the filing of a case under this chapter is necessary to
satisfy a claim for a domestic support obligation.''.
(g) Confirmation of Plan.--Section 1325(a) of title 11,
United States Code, is amended--
(1) in paragraph (5), by striking ``and'' at the end;
(2) in paragraph (6), by striking the period and inserting
a semicolon; and
(3) by adding at the end the following:
``(7) the action of the debtor in filing the petition was
in good faith;''.
(h) Applicability of Means Test to Chapter 13.--Section
1325(b) of title 11, United States Code, is amended--
(1) in paragraph (1)(B), by inserting ``to unsecured
creditors'' after ``to make payments''; and
(2) by striking paragraph (2) and inserting the following:
``(2) For purposes of this subsection, the term `disposable
income' means current monthly income received by the debtor
(other than child support payments, foster care payments, or
disability payments for a dependent child made in accordance
with applicable nonbankruptcy law to the extent reasonably
necessary to be expended for such child) less amounts
reasonably necessary to be expended--
``(A) for the maintenance or support of the debtor or a
dependent of the debtor or for a domestic support obligation
that first becomes payable after the date the petition is
filed and for charitable contributions (that meet the
definition of `charitable contribution' under section
548(d)(3) to a qualified religious or charitable entity or
organization (as that term is defined in section 548(d)(4))
in an amount not to exceed 15 percent of gross income of the
debtor for the year in which the contributions are made; and
``(B) if the debtor is engaged in business, for the payment
of expenditures necessary for the continuation, preservation,
and operation of such business.
``(3) Amounts reasonably necessary to be expended under
paragraph (2) shall be determined in accordance with
subparagraphs (A) and (B) of section 707(b)(2), if the debtor
has current monthly income, when multiplied by 12, greater
than--
``(A) in the case of a debtor in a household of 1 person,
the median family income of the applicable State for 1 earner
last reported by the Bureau of the Census;
``(B) in the case of a debtor in a household of 2, 3, or 4
individuals, the highest median family income of the
applicable State for a family of the same number or fewer
individuals last reported by the Bureau of the Census; or
``(C) in the case of a debtor in a household exceeding 4
individuals, the highest median family income of the
applicable State for a family of 4 or fewer individuals last
reported by the Bureau of the Census, plus $525 per month for
each individual in excess of 4.''.
(i) Clerical Amendment.--The table of sections for chapter
7 of title 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 11 or
13.''.
SEC. 103. SENSE OF CONGRESS AND STUDY.
(a) Sense of Congress.--It is the sense of Congress that
the Secretary of the Treasury has the authority to alter the
Internal Revenue Service standards established to set
guidelines for repayment plans as needed to accommodate their
use under section 707(b) of title 11, United States Code.
[[Page H534]]
(b) Study.--
(1) In general.--Not later than 2 years after the date of
enactment of this Act, the Director of the Executive Office
for United States Trustees shall submit a report to the
Committee on the Judiciary of the Senate and the Committee on
the Judiciary of the House of Representatives containing the
findings of the Director regarding the utilization of
Internal Revenue Service standards for determining--
(A) the current monthly expenses of a debtor under section
707(b) of title 11, United States Code; and
(B) the impact that the application of such standards has
had on debtors and on the bankruptcy courts.
(2) Recommendation.--The report under paragraph (1) may
include recommendations for amendments to title 11, United
States Code, that are consistent with the findings of the
Director under paragraph (1).
SEC. 104. NOTICE OF ALTERNATIVES.
Section 342(b) of title 11, United States Code, is amended
to read as follows:
``(b) Before the commencement of a case under this title by
an individual whose debts are primarily consumer debts, the
clerk shall give to such individual written notice
containing--
``(1) a brief description of--
``(A) chapters 7, 11, 12, and 13 and the general purpose,
benefits, and costs of proceeding under each of those
chapters; and
``(B) the types of services available from credit
counseling agencies; and
``(2) statements specifying that--
``(A) a person who knowingly and fraudulently conceals
assets or makes a false oath or statement under penalty of
perjury in connection with a bankruptcy case shall be subject
to fine, imprisonment, or both; and
``(B) all information supplied by a debtor in connection
with a bankruptcy case is subject to examination by the
Attorney General.''.
SEC. 105. DEBTOR FINANCIAL MANAGEMENT TRAINING TEST PROGRAM.
(a) Development of Financial Management and Training
Curriculum and Materials.--The Director of the Executive
Office for United States Trustees (in this section referred
to as the ``Director'') shall consult with a wide range of
individuals who are experts in the field of debtor education,
including trustees who are appointed under chapter 13 of
title 11, United States Code, and who operate financial
management education programs for debtors, and shall develop
a financial management training curriculum and materials that
can be used to educate individual debtors on how to better
manage their finances.
(b) Test.--
(1) Selection of districts.--The Director shall select 6
judicial districts of the United States in which to test the
effectiveness of the financial management training curriculum
and materials developed under subsection (a).
(2) Use.--For an 18-month period beginning not later than
270 days after the date of enactment of this Act, such
curriculum and materials shall be, for the 6 judicial
districts selected under paragraph (1), used as the
instructional course concerning personal financial management
for purposes of section 111 of title 11, United States Code.
(c) Evaluation.--
(1) In general.--During the 18-month period referred to in
subsection (b), the Director shall evaluate the effectiveness
of--
(A) the financial management training curriculum and
materials developed under subsection (a); and
(B) a sample of existing consumer education programs such
as those described in the Report of the National Bankruptcy
Review Commission (October 20, 1997) that are representative
of consumer education programs carried out by the credit
industry, by trustees serving under chapter 13 of title 11,
United States Code, and by consumer counseling groups.
(2) Report.--Not later than 3 months after concluding such
evaluation, the Director shall submit a report to the Speaker
of the House of Representatives and the President pro tempore
of the Senate, for referral to the appropriate committees of
the Congress, containing the findings of the Director
regarding the effectiveness of such curriculum, such
materials, and such programs and their costs.
SEC. 106. CREDIT COUNSELING.
(a) Who May Be a Debtor.--Section 109 of title 11, United
States Code, is amended by adding at the end the following:
``(h)(1) Subject to paragraphs (2) and (3), and
notwithstanding any other provision of this section, an
individual may not be a debtor under this title unless that
individual has, during the 180-day period preceding the date
of filing of the petition of that individual, received from
an approved nonprofit budget and credit counseling agency
described in section 111(a) an individual or group briefing
(including a briefing conducted by telephone or on the
Internet) that outlined the opportunities for available
credit counseling and assisted that individual in performing
a related budget analysis.
``(2)(A) Paragraph (1) shall not apply with respect to a
debtor who resides in a district for which the United States
trustee or bankruptcy administrator of the bankruptcy court
of that district determines that the approved nonprofit
budget and credit counseling agencies for that district
are not reasonably able to provide adequate services to
the additional individuals who would otherwise seek credit
counseling from that agency by reason of the requirements
of paragraph (1).
``(B) Each United States trustee or bankruptcy
administrator that makes a determination described in
subparagraph (A) shall review that determination not later
than 1 year after the date of that determination, and not
less frequently than every year thereafter. Notwithstanding
the preceding sentence, a nonprofit budget and credit
counseling service may be disapproved by the United States
trustee or bankruptcy administrator at any time.
``(3)(A) Subject to subparagraph (B), the requirements of
paragraph (1) shall not apply with respect to a debtor who
submits to the court a certification that--
``(i) describes exigent circumstances that merit a waiver
of the requirements of paragraph (1);
``(ii) states that the debtor requested credit counseling
services from an approved nonprofit budget and credit
counseling agency, but was unable to obtain the services
referred to in paragraph (1) during the 5-day period
beginning on the date on which the debtor made that request;
and
``(iii) is satisfactory to the court.
``(B) With respect to a debtor, an exemption under
subparagraph (A) shall cease to apply to that debtor on the
date on which the debtor meets the requirements of paragraph
(1), but in no case may the exemption apply to that debtor
after the date that is 30 days after the debtor files a
petition, except that the court, for cause, may order an
additional 15 days.''.
(b) Chapter 7 Discharge.--Section 727(a) of title 11,
United States Code, is amended--
(1) in paragraph (9), by striking ``or'' at the end;
(2) in paragraph (10), by striking the period and inserting
``; or''; and
(3) by adding at the end the following:
``(11) after the filing of the petition, the debtor failed
to complete an instructional course concerning personal
financial management described in section 111.
``(12)(A) Paragraph (11) shall not apply with respect to a
debtor who resides in a district for which the United States
trustee or bankruptcy administrator of that district
determines that the approved instructional courses are not
adequate to service the additional individuals required to
complete such instructional courses under this section.
``(B) Each United States trustee or bankruptcy
administrator that makes a determination described in
subparagraph (A) shall review that determination not later
than 1 year after the date of that determination, and not
less frequently than every year thereafter.''.
(c) Chapter 13 Discharge.--Section 1328 of title 11, United
States Code, is amended by adding at the end the following:
``(g) The court shall not grant a discharge under this
section to a debtor, unless after filing a petition the
debtor has completed an instructional course concerning
personal financial management described in section 111.
``(h) Subsection (g) shall not apply with respect to a
debtor who resides in a district for which the United States
trustee or bankruptcy administrator of the bankruptcy court
of that district determines that the approved instructional
courses are not adequate to service the additional
individuals who would be required to complete the
instructional course by reason of the requirements of this
section.
``(i) Each United States trustee or bankruptcy
administrator that makes a determination described in
subsection (h) shall review that determination not later than
1 year after the date of that determination, and not less
frequently than every year thereafter.''.
(d) Debtor's Duties.--Section 521 of title 11, United
States Code, is amended--
(1) by inserting ``(a)'' before ``The debtor shall--''; and
(2) by adding at the end the following:
``(b) In addition to the requirements under subsection (a),
an individual debtor shall file with the court--
``(1) a certificate from the approved nonprofit budget and
credit counseling agency that provided the debtor services
under section 109(h) describing the services provided to the
debtor; and
``(2) a copy of the debt repayment plan, if any, developed
under section 109(h) through the approved nonprofit budget
and credit counseling agency referred to in paragraph (1).''.
(e) General Provisions.--
(1) In general.--Chapter 1 of title 11, United States Code,
is amended by adding at the end the following:
``Sec. 111. Credit counseling services; financial management
instructional courses
``(a) The clerk of each district shall maintain a publicly
available list of--
``(1) credit counseling agencies that provide 1 or more
programs described in section 109(h) currently approved by
the United States trustee or the bankruptcy administrator for
the district, as applicable; and
``(2) instructional courses concerning personal financial
management currently approved by the United States trustee or
the bankruptcy administrator for the district, as applicable.
``(b) The United States trustee or bankruptcy administrator
shall only approve a credit counseling agency or
instructional course concerning personal financial management
as follows:
[[Page H535]]
``(1) The United States trustee or bankruptcy administrator
shall have thoroughly reviewed the qualifications of the
credit counseling agency or of the provider of the
instructional course under the standards set forth in this
section, and the programs or instructional courses which will
be offered by such agency or provider, and may require an
agency or provider of an instructional course which has
sought approval to provide information with respect to such
review.
``(2) The United States trustee or bankruptcy administrator
shall have determined that the credit counseling agency or
course of instruction fully satisfies the applicable
standards set forth in this section.
``(3) When an agency or course of instruction is initially
approved, such approval shall be for a probationary period
not to exceed 6 months. An agency or course of instruction is
initially approved if it did not appear on the approved list
for the district under subsection (a) immediately prior to
approval.
``(4) At the conclusion of the probationary period under
paragraph (3), the United States trustee or bankruptcy
administrator may only approve for an additional 1-year
period, and for successive 1-year periods thereafter, any
agency or course of instruction which has demonstrated during
the probationary or subsequent period that such agency or
course of instruction--
``(A) has met the standards set forth under this section
during such period; and
``(B) can satisfy such standards in the future.
``(5) Not later than 30 days after any final decision under
paragraph (4), that occurs either after the expiration of the
initial probationary period, or after any 2-year period
thereafter, an interested person may seek judicial review of
such decision in the appropriate United States District
Court.
``(c)(1) The United States trustee or bankruptcy
administrator shall only approve a credit counseling agency
that demonstrates that it will provide qualified counselors,
maintain adequate provision for safekeeping and payment of
client funds, provide adequate counseling with respect to
client credit problems, and deal responsibly and effectively
with other matters as relate to the quality, effectiveness,
and financial security of such programs.
``(2) To be approved by the United States trustee or
bankruptcy administrator, a credit counseling agency shall,
at a minimum--
``(A) be a nonprofit budget and credit counseling agency,
the majority of the board of directors of which--
``(i) are not employed by the agency; and
``(ii) will not directly or indirectly benefit financially
from the outcome of a credit counseling session;
``(B) if a fee is charged for counseling services, charge a
reasonable fee, and provide services without regard to
ability to pay the fee;
``(C) provide for safekeeping and payment of client funds,
including an annual audit of the trust accounts and
appropriate employee bonding;
``(D) provide full disclosures to clients, including
funding sources, counselor qualifications, possible impact on
credit reports, and any costs of such program that will be
paid by the debtor and how such costs will be paid;
``(E) provide adequate counseling with respect to client
credit problems that includes an analysis of their current
situation, what brought them to that financial status, and
how they can develop a plan to handle the problem without
incurring negative amortization of their debts;
``(F) provide trained counselors who receive no commissions
or bonuses based on the counseling session outcome, and who
have adequate experience, and have been adequately trained to
provide counseling services to individuals in financial
difficulty, including the matters described in subparagraph
(E);
``(G) demonstrate adequate experience and background in
providing credit counseling; and
``(H) have adequate financial resources to provide
continuing support services for budgeting plans over the life
of any repayment plan.
``(d) The United States trustee or bankruptcy administrator
shall only approve an instructional course concerning
personal financial management--
``(1) for an initial probationary period under subsection
(b)(3) if the course will provide at a minimum--
``(A) trained personnel with adequate experience and
training in providing effective instruction and services;
``(B) learning materials and teaching methodologies
designed to assist debtors in understanding personal
financial management and that are consistent with stated
objectives directly related to the goals of such course of
instruction;
``(C) adequate facilities situated in reasonably convenient
locations at which such course of instruction is offered,
except that such facilities may include the provision of such
course of instruction or program by telephone or through the
Internet, if the course of instruction or program is
effective; and
``(D) the preparation and retention of reasonable records
(which shall include the debtor's bankruptcy case number) to
permit evaluation of the effectiveness of such course of
instruction or program, including any evaluation of
satisfaction of course of instruction or program requirements
for each debtor attending such course of instruction or
program, which shall be available for inspection and
evaluation by the Executive Office for United States
Trustees, the United States trustee, bankruptcy
administrator, or chief bankruptcy judge for the district in
which such course of instruction or program is offered; and
``(2) for any 1-year period if the provider thereof has
demonstrated that the course meets the standards of paragraph
(1) and, in addition--
``(A) has been effective in assisting a substantial number
of debtors to understand personal financial management; and
``(B) is otherwise likely to increase substantially debtor
understanding of personal financial management.
``(e) The District Court may, at any time, investigate the
qualifications of a credit counseling agency referred to in
subsection (a), and request production of documents to ensure
the integrity and effectiveness of such credit counseling
agencies. The District Court may, at any time, remove from
the approved list under subsection (a) a credit counseling
agency upon finding such agency does not meet the
qualifications of subsection (b).
``(f) The United States trustee or bankruptcy administrator
shall notify the clerk that a credit counseling agency or an
instructional course is no longer approved, in which case the
clerk shall remove it from the list maintained under
subsection (a).
``(g)(1) No credit counseling service may provide to a
credit reporting agency information concerning whether an
individual debtor has received or sought instruction
concerning personal financial management from the credit
counseling service.
``(2) A credit counseling service that willfully or
negligently fails to comply with any requirement under this
title with respect to a debtor shall be liable for damages in
an amount equal to the sum of--
``(A) any actual damages sustained by the debtor as a
result of the violation; and
``(B) any court costs or reasonable attorneys' fees (as
determined by the court) incurred in an action to recover
those damages.''.
(2) Clerical amendment.--The table of sections for chapter
1 of title 11, United States Code, is amended by adding at
the end the following:
``111. Credit counseling services; financial management instructional
courses.''.
(f) Limitation.--Section 362 of title 11, United States
Code, is amended by adding at the end the following:
``(i) If a case commenced under chapter 7, 11, or 13 is
dismissed due to the creation of a debt repayment plan, for
purposes of subsection (c)(3), any subsequent case commenced
by the debtor under any such chapter shall not be presumed to
be filed not in good faith.
``(j) On request of a party in interest, the court shall
issue an order under subsection (c) confirming that the
automatic stay has been terminated.''.
SEC. 107. SCHEDULES OF REASONABLE AND NECESSARY EXPENSES.
For purposes of section 707(b) of title 11, United States
Code, as amended by this Act, the Director of the Executive
Office for United States Trustees shall, not later than 180
days after the date of enactment of this Act, issue schedules
of reasonable and necessary administrative expenses of
administering a chapter 13 plan for each judicial district
of the United States.
TITLE II--ENHANCED CONSUMER PROTECTION
Subtitle A--Penalties for Abusive Creditor Practices
SEC. 201. PROMOTION OF ALTERNATIVE DISPUTE RESOLUTION.
(a) Reduction of Claim.--Section 502 of title 11, United
States Code, is amended by adding at the end the following:
``(k)(1) The court, on the motion of the debtor and after a
hearing, may reduce a claim filed under this section based in
whole on unsecured consumer debts by not more than 20 percent
of the claim, if--
``(A) the claim was filed by a creditor who unreasonably
refused to negotiate a reasonable alternative repayment
schedule proposed by an approved credit counseling agency
described in section 111 acting on behalf of the debtor;
``(B) the offer of the debtor under subparagraph (A)--
``(i) was made at least 60 days before the filing of the
petition; and
``(ii) provided for payment of at least 60 percent of the
amount of the debt over a period not to exceed the repayment
period of the loan, or a reasonable extension thereof; and
``(C) no part of the debt under the alternative repayment
schedule is nondischargeable.
``(2) The debtor shall have the burden of proving, by clear
and convincing evidence, that--
``(A) the creditor unreasonably refused to consider the
debtor's proposal; and
``(B) the proposed alternative repayment schedule was made
prior to expiration of the 60-day period specified in
paragraph (1)(B)(i).''.
(b) Limitation on Avoidability.--Section 547 of title 11,
United States Code, is amended by adding at the end the
following:
``(h) The trustee may not avoid a transfer if such transfer
was made as a part of an alternative repayment plan between
the debtor
[[Page H536]]
and any creditor of the debtor created by an approved credit
counseling agency.''.
SEC. 202. EFFECT OF DISCHARGE.
Section 524 of title 11, United States Code, is amended by
adding at the end the following:
``(i) The willful 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), unless the plan is dismissed, in default, or the
creditor has not received payments required to be made under
the plan 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) if the act of the creditor to collect and failure to
credit payments in the manner required by the plan caused
material injury to the debtor.
``(j) Subsection (a)(2) does not operate as an injunction
against an act by a creditor that is the holder of a secured
claim, if--
``(1) such creditor retains a security interest in real
property that is the principal residence of the debtor;
``(2) such act is in the ordinary course of business
between the creditor and the debtor; and
``(3) such act is limited to seeking or obtaining periodic
payments associated with a valid security interest in lieu of
pursuit of in rem relief to enforce the lien.''.
SEC. 203. DISCOURAGING ABUSE OF REAFFIRMATION PRACTICES.
(a) In General.--Section 524 of title 11, United States
Code, as amended by this Act, is amended--
(1) in subsection (c), by striking paragraph (2) and
inserting the following:
``(2) the debtor received the disclosures described in
subsection (k) at or before the time at which the debtor
signed the agreement;'';
(2) by adding at the end the following:
``(k)(1) The disclosures required under subsection (c)(2)
shall consist of the disclosure statement described in
paragraph (3), completed as required in that paragraph,
together with the agreement, statement, declaration, motion
and order described, respectively, in paragraphs (4) through
(8), and shall be the only disclosures required in connection
with the reaffirmation.
``(2) Disclosures made under paragraph (1) shall be made
clearly and conspicuously and in writing. The terms `Amount
Reaffirmed' and `Annual Percentage Rate' shall be disclosed
more conspicuously than other terms, data or information
provided in connection with this disclosure, except that the
phrases `Before agreeing to reaffirm a debt, review these
important disclosures' and `Summary of Reaffirmation
Agreement' may be equally conspicuous. Disclosures may be
made in a different order and may use terminology different
from that set forth in paragraphs (2) through (8), except
that the terms `Amount Reaffirmed' and `Annual Percentage
Rate' must be used where indicated.
``(3) The disclosure statement required under this
paragraph shall consist of the following:
``(A) The statement: `Part A: Before agreeing to reaffirm a
debt, review these important disclosures:';
``(B) Under the heading `Summary of Reaffirmation
Agreement', the statement: `This Summary is made pursuant to
the requirements of the Bankruptcy Code';
``(C) The `Amount Reaffirmed', using that term, which shall
be--
``(i) the total amount which the debtor agrees to reaffirm,
and
``(ii) the total of any other fees or cost accrued as of
the date of the disclosure statement.
``(D) In conjunction with the disclosure of the `Amount
Reaffirmed', the statements--
``(i) `The amount of debt you have agreed to reaffirm'; and
``(ii) `Your credit agreement may obligate you to pay
additional amounts which may come due after the date of this
disclosure. Consult your credit agreement.'.
``(E) The `Annual Percentage Rate', using that term, which
shall be disclosed as--
``(i) if, at the time the petition is filed, the debt is
open end credit as defined under the Truth in Lending Act (15
U.S.C. 1601 et seq.), then--
``(I) the annual percentage rate determined under
paragraphs (5) and (6) of section 127(b) of the Truth in
Lending Act (15 U.S.C. 1637(b)(5) and (6)), as applicable, as
disclosed to the debtor in the most recent periodic statement
prior to the agreement or, if no such periodic statement has
been provided the debtor during the prior 6 months, the
annual percentage rate as it would have been so disclosed at
the time the disclosure statement is given the debtor, or to
the extent this annual percentage rate is not readily
available or not applicable, then
``(II) the simple interest rate applicable to the amount
reaffirmed as of the date the disclosure statement is given
to the debtor, or if different simple interest rates apply to
different balances, the simple interest rate applicable to
each such balance, identifying the amount of each such
balance included in the amount reaffirmed, or
``(III) if the entity making the disclosure elects, to
disclose the annual percentage rate under subclause (I) and
the simple interest rate under subclause (II);
``(ii) if, at the time the petition is filed, the debt is
closed end credit as defined under the Truth in Lending Act
(15 U.S.C. 1601 et seq.), then--
``(I) the annual percentage rate under section 128(a)(4) of
the Truth in Lending Act (15 U.S.C. 1638(a)(4)), as disclosed
to the debtor in the most recent disclosure statement given
the debtor prior to the reaffirmation agreement with respect
to the debt, or, if no such disclosure statement was provided
the debtor, the annual percentage rate as it would have been
so disclosed at the time the disclosure statement is given
the debtor, or to the extent this annual percentage rate is
not readily available or not applicable, then
``(II) the simple interest rate applicable to the amount
reaffirmed as of the date the disclosure statement is given
the debtor, or if different simple interest rates apply to
different balances, the simple interest rate applicable to
each such balance, identifying the amount of such balance
included in the amount reaffirmed, or
``(III) if the entity making the disclosure elects, to
disclose the annual percentage rate under (I) and the simple
interest rate under (II).
``(F) If the underlying debt transaction was disclosed as a
variable rate transaction on the most recent disclosure given
under the Truth in Lending Act (15 U.S.C. 1601 et seq.), by
stating `The interest rate on your loan may be a variable
interest rate which changes from time to time, so that the
annual percentage rate disclosed here may be higher or
lower.'.
``(G) If the debt is secured by a security interest which
has not been waived in whole or in part or determined to be
void by a final order of the court at the time of the
disclosure, by disclosing that a security interest or lien in
goods or property is asserted over some or all of the
obligations you are reaffirming and listing the items and
their original purchase price that are subject to the
asserted security interest, or if not a purchase-money
security interest then listing by items or types and the
original amount of the loan.
``(H) At the election of the creditor, a statement of the
repayment schedule using 1 or a combination of the
following--
``(i) by making the statement: `Your first payment in the
amount of $______ is due on ______ but the future payment
amount may be different. Consult your reaffirmation or credit
agreement, as applicable.', and stating the amount of the
first payment and the due date of that payment in the places
provided;
``(ii) by making the statement: `Your payment schedule will
be:', and describing the repayment schedule with the number,
amount and due dates or period of payments scheduled to repay
the obligations reaffirmed to the extent then known by the
disclosing party; or
``(iii) by describing the debtor's repayment obligations
with reasonable specificity to the extent then known by the
disclosing party.
``(I) The following statement: `Note: When this disclosure
refers to what a creditor `may' do, it does not use the word
`may' to give the creditor specific permission. The word
`may' is used to tell you what might occur if the law permits
the creditor to take the action. If you have questions about
your reaffirmation or what the law requires, talk to the
attorney who helped you negotiate this agreement. If you
don't have an attorney helping you, the judge will explain
the effect of your reaffirmation when the reaffirmation
hearing is held.'.
``(J)(i) The following additional statements:
`` `Reaffirming a debt is a serious financial decision. The
law requires you to take certain steps to make sure the
decision is in your best interest. If these steps are not
completed, the reaffirmation agreement is not effective, even
though you have signed it.
`` `1. Read the disclosures in this Part A carefully.
Consider the decision to reaffirm carefully. Then, if you
want to reaffirm, sign the reaffirmation agreement in Part B
(or you may use a separate agreement you and your creditor
agree on).
`` `2. Complete and sign Part D and be sure you can afford
to make the payments you are agreeing to make and have
received a copy of the disclosure statement and a completed
and signed reaffirmation agreement.
`` `3. If you were represented by an attorney during the
negotiation of the reaffirmation agreement, the attorney must
have signed the certification in Part C.
`` `4. If you were not represented by an attorney during
the negotiation of the reaffirmation agreement, you must have
completed and signed Part E.
`` `5. The original of this disclosure must be filed with
the court by you or your creditor. If a separate
reaffirmation agreement (other than the one in Part B) has
been signed, it must be attached.
`` `6. If you were represented by an attorney during the
negotiation of the reaffirmation agreement, your
reaffirmation agreement becomes effective upon filing with
the court unless the reaffirmation is presumed to be an undue
hardship as explained in Part D.
`` `7. If you were not represented by an attorney during
the negotiation of the reaffirmation agreement, it will not
be effective unless the court approves it. The court will
notify you of the hearing on your reaffirmation agreement.
You must attend this hearing in bankruptcy court where the
judge will review your agreement. The bankruptcy court must
approve the agreement as consistent with your best interests,
except that no court approval is required if the agreement is
for a consumer debt secured by a mortgage, deed of trust,
security deed or
[[Page H537]]
other lien on your real property, like your home.
`` `Your right to rescind a reaffirmation. You may rescind
(cancel) your reaffirmation at any time before the bankruptcy
court enters a discharge order or within 60 days after the
agreement is filed with the court, whichever is longer. To
rescind or cancel, you must notify the creditor that the
agreement is canceled.
`` `What are your obligations if you reaffirm the debt? A
reaffirmed debt remains your personal legal obligation. It is
not discharged in your bankruptcy. That means that if you
default on your reaffirmed debt after your bankruptcy is
over, your creditor may be able to take your property or your
wages. Otherwise, your obligations will be determined by the
reaffirmation agreement which may have changed the terms of
the original agreement. For example, if you are reaffirming
an open end credit agreement, the creditor may be permitted
by that agreement or applicable law to change the terms of
the agreement in the future under certain conditions.
`` `Are you required to enter into a reaffirmation
agreement by any law? No, you are not required to reaffirm a
debt by any law. Only agree to reaffirm a debt if it is in
your best interest. Be sure you can afford the payments you
agree to make.
`` `What if your creditor has a security interest or lien?
Your bankruptcy discharge does not eliminate any lien on your
property. A ``lien'' is often referred to as a security
interest, deed of trust, mortgage or security deed. Even if
you do not reaffirm and your personal liability on the debt
is discharged, because of the lien your creditor may still
have the right to take the security property if you do not
pay the debt or default on it. If the lien is on an item of
personal property that is exempt under your State's law or
that the trustee has abandoned, you may be able to redeem the
item rather than reaffirm the debt. To redeem, you make a
single payment to the creditor equal to the current value of
the security property, as agreed by the parties or determined
by the court.'.
``(ii) In the case of a reaffirmation under subsection
(m)(2), numbered paragraph 6 in the disclosures required by
clause (i) of this subparagraph shall read as follows:
`` `6. If you were represented by an attorney during the
negotiation of the reaffirmation agreement, your
reaffirmation agreement becomes effective upon filing with
the court.'.
``(4) The form of reaffirmation agreement required under
this paragraph shall consist of the following:
`` `Part B: Reaffirmation Agreement. I/we agree to reaffirm
the obligations arising under the credit agreement described
below.
`` `Brief description of credit agreement:
`` `Description of any changes to the credit agreement made
as part of this reaffirmation agreement:
`` `Signature: Date:
`` `Borrower:
`` `Co-borrower, if also reaffirming:
`` `Accepted by creditor:
`` `Date of creditor acceptance:'.
``(5)(A) The declaration shall consist of the following:
`` `Part C: Certification by Debtor's Attorney (If Any).
`` `I hereby certify that (1) this agreement represents a
fully informed and voluntary agreement by the debtor(s); (2)
this agreement does not impose an undue hardship on the
debtor or any dependent of the debtor; and (3) I have fully
advised the debtor of the legal effect and consequences of
this agreement and any default under this agreement.
`` `Signature of Debtor's Attorney: Date:'.
``(B) In the case of reaffirmations in which a presumption
of undue hardship has been established, the certification
shall state that in the opinion of the attorney, the debtor
is able to make the payment.
``(C) In the case of a reaffirmation agreement under
subsection (m)(2), subparagraph (B) is not applicable.
``(6)(A) The statement in support of reaffirmation
agreement, which the debtor shall sign and date prior to
filing with the court, shall consist of the following:
`` `Part D: Debtor's Statement in Support of Reaffirmation
Agreement.
`` `1. I believe this agreement will not impose an undue
hardship on my dependents or me. I can afford to make the
payments on the reaffirmed debt because my monthly income
(take home pay plus any other income received) is $______,
and my actual current monthly expenses including monthly
payments on post-bankruptcy debt and other reaffirmation
agreements total $______, leaving $______ to make the
required payments on this reaffirmed debt. I understand that
if my income less my monthly expenses does not leave enough
to make the payments, this reaffirmation agreement is
presumed to be an undue hardship on me and must be reviewed
by the court. However, this presumption may be overcome if I
explain to the satisfaction of the court how I can afford to
make the payments here: ______.
`` `2. I received a copy of the Reaffirmation Disclosure
Statement in Part A and a completed and signed reaffirmation
agreement.'.
``(B) Where the debtor is represented by counsel and is
reaffirming a debt owed to a creditor defined in section
19(b)(1)(A)(iv) of the Federal Reserve Act (12 U.S.C.
461(b)(1)(A)(iv)), the statement of support of the
reaffirmation agreement, which the debtor shall sign and date
prior to filing with the court, shall consist of the
following:
`` `I believe this agreement is in my financial interest. I
can afford to make the payments on the reaffirmed debt. I
received a copy of the Reaffirmation Disclosure Statement in
Part A and a completed and signed reaffirmation agreement.'
``(7) The motion, which may be used if approval of the
agreement by the court is required in order for it to be
effective and shall be signed and dated by the moving party,
shall consist of the following:
`` `Part E: Motion for Court Approval (To be completed only
where debtor is not represented by an attorney.). I (we), the
debtor, affirm the following to be true and correct:
`` `I am not represented by an attorney in connection with
this reaffirmation agreement.
`` `I believe this agreement is in my best interest based
on the income and expenses I have disclosed in my Statement
in Support of this reaffirmation agreement above, and because
(provide any additional relevant reasons the court should
consider):
`` `Therefore, I ask the court for an order approving this
reaffirmation agreement.'.
``(8) The court order, which may be used to approve a
reaffirmation, shall consist of the following:
`` `Court Order: The court grants the debtor's motion and
approves the reaffirmation agreement described above.'.
``(9) Subsection (a)(2) does not operate as an injunction
against an act by a creditor that is the holder of a secured
claim, if--
``(A) such creditor retains a security interest in real
property that is the debtor's principal residence;
``(B) such act is in the ordinary course of business
between the creditor and the debtor; and
``(C) such act is limited to seeking or obtaining periodic
payments associated with a valid security interest in lieu of
pursuit of in rem relief to enforce the lien.
``(l) Notwithstanding any other provision of this title:
``(1) A creditor may accept payments from a debtor before
and after the filing of a reaffirmation agreement with the
court.
``(2) A creditor may accept payments from a debtor under a
reaffirmation agreement which the creditor believes in good
faith to be effective.
``(3) The requirements of subsections (c)(2) and (k) shall
be satisfied if disclosures required under those subsections
are given in good faith.
``(m)(1) Until 60 days after a reaffirmation agreement is
filed with the court (or such additional period as the court,
after notice and hearing and for cause, orders before the
expiration of such period), it shall be presumed that the
reaffirmation agreement is an undue hardship on the debtor if
the debtor's monthly income less the debtor's monthly
expenses as shown on the debtor's completed and signed
statement in support of the reaffirmation agreement required
under subsection (k)(6)(A) is less than the scheduled
payments on the reaffirmed debt. This presumption shall be
reviewed by the court. The presumption may be rebutted in
writing by the debtor if the statement includes an
explanation which identifies additional sources of funds to
make the payments as agreed upon under the terms of the
reaffirmation agreement. If the presumption is not rebutted
to the satisfaction of the court, the court may disapprove
the agreement. No agreement shall be disapproved without
notice and hearing to the debtor and creditor and such
hearing shall be concluded before the entry of the debtor's
discharge.
``(2) This subsection does not apply to reaffirmation
agreements where the creditor is a credit union, as defined
in section 19(b)(1)(A)(iv) of the Federal Reserve Act (12
U.S.C. 461(b)(1)(A)(iv)).''.
(b) Law Enforcement.--
(1) In general.--Chapter 9 of title 18, United States Code,
is amended by adding at the end the following:
``Sec. 158. Designation of United States attorneys and agents
of the Federal Bureau of Investigation to address abusive
reaffirmations of debt and materially fraudulent statements
in bankruptcy schedules
``(a) In General.--The Attorney General of the United
States shall designate the individuals described in
subsection (b) to have primary responsibility in carrying out
enforcement activities in addressing violations of section
152 or 157 relating to abusive reaffirmations of debt. In
addition to addressing the violations referred to in the
preceding sentence, the individuals described under
subsection (b) shall address violations of section 152 or 157
relating to materially fraudulent statements in bankruptcy
schedules that are intentionally false or intentionally
misleading.
``(b) United States District Attorneys and Agents of the
Federal Bureau of Investigation--The individuals referred to
in subsection (a) are--
``(1) a United States attorney for each judicial district
of the United States; and
``(2) an agent of the Federal Bureau of Investigation
(within the meaning of section 3107) for each field office of
the Federal Bureau of Investigation.
``(c) Bankruptcy Investigations.--Each United States
attorney designated under this section shall, in addition to
any other responsibilities, have primary responsibility for
carrying out the duties of a United States attorney under
section 3057.
``(d) Bankruptcy Procedures.--The bankruptcy courts shall
establish procedures for referring any case which may contain
a materially fraudulent statement in a bankruptcy schedule to
the individuals designated under this section.''.
[[Page H538]]
(2) Clerical amendment.--The analysis for chapter 9 of
title 18, United States Code, is amended by adding at the end
the following:
``158. Designation of United States attorneys and agents of the Federal
Bureau of Investigation to address abusive reaffirmations
of debt and materially fraudulent statements in
bankruptcy schedules.''.
Subtitle B--Priority Child Support
SEC. 211. DEFINITION OF DOMESTIC SUPPORT OBLIGATION.
Section 101 of title 11, United States Code, is amended--
(1) by striking paragraph (12A); and
(2) by inserting after paragraph (14) the following:
``(14A) `domestic support obligation' means a debt that
accrues before or after the entry of an order for relief
under this title, including interest that accrues on that
debt as provided under applicable nonbankruptcy law
notwithstanding any other provision of this title, that is--
``(A) owed to or recoverable by--
``(i) a spouse, former spouse, or child of the debtor or
such child's parent, legal guardian, or responsible relative;
or
``(ii) a governmental unit;
``(B) in the nature of alimony, maintenance, or support
(including assistance provided by a governmental unit) of
such spouse, former spouse, or child of the debtor or such
child's parent, without regard to whether such debt is
expressly so designated;
``(C) established or subject to establishment before or
after entry of an order for relief under this title, by
reason of applicable provisions of--
``(i) a separation agreement, divorce decree, or property
settlement agreement;
``(ii) an order of a court of record; or
``(iii) a determination made in accordance with applicable
nonbankruptcy law by a governmental unit; and
``(D) not assigned to a nongovernmental entity, unless that
obligation is assigned voluntarily by the spouse, former
spouse, child, or parent, legal guardian, or responsible
relative of the child for the purpose of collecting the
debt;''.
SEC. 212. PRIORITIES FOR CLAIMS FOR DOMESTIC SUPPORT
OBLIGATIONS.
Section 507(a) of title 11, United States Code, is
amended--
(1) by striking paragraph (7);
(2) by redesignating paragraphs (1) through (6) as
paragraphs (2) through (7), respectively;
(3) in paragraph (2), as redesignated, by striking
``First'' and inserting ``Second'';
(4) in paragraph (3), as redesignated, by striking
``Second'' and inserting ``Third'';
(5) in paragraph (4), as redesignated--
(A) by striking ``Third'' and inserting ``Fourth''; and
(B) by striking the semicolon at the end and inserting a
period;
(6) in paragraph (5), as redesignated, by striking
``Fourth'' and inserting ``Fifth'';
(7) in paragraph (6), as redesignated, by striking
``Fifth'' and inserting ``Sixth'';
(8) in paragraph (7), as redesignated, by striking
``Sixth'' and inserting ``Seventh''; and
(9) by inserting before paragraph (2), as redesignated, the
following:
``(1) First:
``(A) Allowed unsecured claims for domestic support
obligations that, as of the date of the filing of the
petition, are owed to or recoverable by a spouse, former
spouse, or child of the debtor, or the parent, legal
guardian, or responsible relative of such child, without
regard to whether the claim is filed by such person or is
filed by a governmental unit on behalf of that person, on the
condition that funds received under this paragraph by a
governmental unit under this title after the date of filing
of the petition shall be applied and distributed in
accordance with applicable nonbankruptcy law.
``(B) Subject to claims under subparagraph (A), allowed
unsecured claims for domestic support obligations that, as of
the date the petition was filed are assigned by a spouse,
former spouse, child of the debtor, or such child's parent,
legal guardian, or responsible relative to a governmental
unit (unless such obligation is assigned voluntarily by the
spouse, former spouse, child, parent, legal guardian, or
responsible relative of the child for the purpose of
collecting the debt) or are owed directly to or recoverable
by a government unit under applicable nonbankruptcy law, on
the condition that funds received under this paragraph by a
governmental unit under this title after the date of filing
of the petition be applied and distributed in accordance with
applicable nonbankruptcy law.''.
SEC. 213. REQUIREMENTS TO OBTAIN CONFIRMATION AND DISCHARGE
IN CASES INVOLVING DOMESTIC SUPPORT
OBLIGATIONS.
Title 11, United States Code, is amended--
(1) in section 1129(a), by adding at the end the following:
``(14) If the debtor is required by a judicial or
administrative order or statute to pay a domestic support
obligation, the debtor has paid all amounts payable under
such order or statute for such obligation that first become
payable after the date on which the petition is filed.'';
(2) in section 1208(c)--
(A) in paragraph (8), by striking ``or'' at the end;
(B) in paragraph (9), by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(10) failure of the debtor to pay any domestic support
obligation that first becomes payable after the date on which
the petition is filed.'';
(3) in section 1222(a)--
(A) in paragraph (2), by striking ``and'' at the end;
(B) in paragraph (3), by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(4) notwithstanding any other provision of this section,
a plan may provide for less than full payment of all amounts
owed for a claim entitled to priority under section
507(a)(1)(B) only if the plan provides that all of the
debtor's projected disposable income for a 5-year period,
beginning on the date that the first payment is due under the
plan, will be applied to make payments under the plan.'';
(4) in section 1222(b)--
(A) by redesignating paragraph (11) as paragraph (12); and
(B) by inserting after paragraph (10) the following:
``(11) provide for the payment of interest accruing after
the date of the filing of the petition on unsecured claims
that are nondischargeable under section 1328(a), except that
such interest may be paid only to the extent that the debtor
has disposable income available to pay such interest after
making provision for full payment of all allowed claims;'';
(5) in section 1225(a)--
(A) in paragraph (5), by striking ``and'' at the end;
(B) in paragraph (6), by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(7) if the debtor is required by a judicial or
administrative order or statute to pay a domestic support
obligation, the debtor has paid all amounts payable under
such order for such obligation that first become payable
after the date on which the petition is filed.'';
(6) in section 1228(a), in the matter preceding paragraph
(1), by inserting ``, and in the case of a debtor who is
required by a judicial or administrative order to pay a
domestic support obligation, after such debtor certifies that
all amounts payable under such order or statute that are due
on or before the date of the certification (including amounts
due before the petition was filed, but only to the extent
provided for in the plan) have been paid'' after ``completion
by the debtor of all payments under the plan'';
(7) in section 1307(c)--
(A) in paragraph (9), by striking ``or'' at the end;
(B) in paragraph (10), by striking the period at the end
and inserting ``; or''; and
(C) by adding at the end the following:
``(11) failure of the debtor to pay any domestic support
obligation that first becomes payable after the date on which
the petition is filed.'';
(8) in section 1322(a)--
(A) in paragraph (2), by striking ``and'' at the end;
(B) in paragraph (3), by striking the period at the end and
inserting ``; and''; and
(C) by adding in the end the following:
``(4) notwithstanding any other provision of this section,
a plan may provide for less than full payment of all amounts
owed for a claim entitled to priority under section
507(a)(1)(B) only if the plan provides that all of the
debtor's projected disposable income for a 5-year period
beginning on the date that the first payment is due under the
plan will be applied to make payments under the plan.'';
(9) in section 1322(b)--
(A) in paragraph (9), by striking ``; and'' and inserting a
semicolon;
(B) by redesignating paragraph (10) as paragraph (11); and
(C) inserting after paragraph (9) the following:
``(10) provide for the payment of interest accruing after
the date of the filing of the petition on unsecured claims
that are nondischargeable under section 1328(a), except that
such interest may be paid only to the extent that the debtor
has disposable income available to pay such interest after
making provision for full payment of all allowed claims;
and'';
(10) in section 1325(a) (as amended by this Act), by adding
at the end the following:
``(8) the debtor is required by a judicial or
administrative order or statute to pay a domestic support
obligation, the debtor has paid all amounts payable under
such order or statute for such obligation that first becomes
payable after the date on which the petition is filed; and'';
(11) in section 1328(a), in the matter preceding paragraph
(1), by inserting ``, and in the case of a debtor who is
required by a judicial or administrative order to pay a
domestic support obligation, after such debtor certifies that
all amounts payable under such order or statute that are due
on or before the date of the certification (including amounts
due before the petition was filed, but only to the extent
provided for in the plan) have been paid'' after ``completion
by the debtor of all payments under the plan''.
SEC. 214. EXCEPTIONS TO AUTOMATIC STAY IN DOMESTIC SUPPORT
OBLIGATION PROCEEDINGS.
Section 362(b) of title 11, United States Code, is amended
by striking paragraph (2) and inserting the following:
``(2) under subsection (a)--
``(A) of the commencement or continuation of a civil action
or proceeding--
``(i) for the establishment of paternity;
[[Page H539]]
``(ii) for the establishment or modification of an order
for domestic support obligations;
``(iii) concerning child custody or visitation;
``(iv) for the dissolution of a marriage, except to the
extent that such proceeding seeks to determine the division
of property that is property of the estate; or
``(v) regarding domestic violence;
``(B) the collection of a domestic support obligation from
property that is not property of the estate;
``(C) with respect to the withholding of income that is
property of the estate or property of the debtor for payment
of a domestic support obligation under a judicial or
administrative order;
``(D) the withholding, suspension, or restriction of
drivers' licenses, professional and occupational licenses,
and recreational licenses under State law, as specified in
section 466(a)(16) of the Social Security Act (42 U.S.C.
666(a)(16));
``(E) the reporting of overdue support owed by a parent to
any consumer reporting agency as specified in section
466(a)(7) of the Social Security Act (42 U.S.C. 666(a)(7));
``(F) the interception of tax refunds, as specified in
sections 464 and 466(a)(3) of the Social Security Act (42
U.S.C. 664 and 666(a)(3)) or under an analogous State law; or
``(G) the enforcement of medical obligations as specified
under title IV of the Social Security Act (42 U.S.C. 601 et
seq.);''.
SEC. 215. NONDISCHARGEABILITY OF CERTAIN DEBTS FOR ALIMONY,
MAINTENANCE, AND SUPPORT.
Section 523 of title 11, United States Code, is amended--
(1) in subsection (a)--
(A) by striking paragraph (5) and inserting the following:
``(5) for a domestic support obligation;'';
(B) in paragraph (15)--
(i) by inserting ``to a spouse, former spouse, or child of
the debtor and'' before ``not of the kind'';
(ii) by inserting ``or'' after ``court of record,''; and
(iii) by striking ``unless--'' and all that follows through
the end of the paragraph and inserting a semicolon; and
(C) by striking paragraph (18); and
(2) in subsection (c), by striking ``(6), or (15)'' each
place it appears and inserting ``or (6)''.
SEC. 216. CONTINUED LIABILITY OF PROPERTY.
Section 522 of title 11, United States Code, is amended--
(1) in subsection (c), by striking paragraph (1) and
inserting the following:
``(1) a debt of a kind specified in paragraph (1) or (5) of
section 523(a) (in which case, notwithstanding any provision
of applicable nonbankruptcy law to the contrary, such
property shall be liable for a debt of a kind specified in
section 523(a)(5));'';
(2) in subsection (f)(1)(A), by striking the dash and all
that follows through the end of the subparagraph and
inserting ``of a kind that is specified in section 523(a)(5);
or''; and
(3) in subsection (g)(2), by striking ``subsection (f)(2)''
and inserting ``subsection (f)(1)(B)''.
SEC. 217. PROTECTION OF DOMESTIC SUPPORT CLAIMS AGAINST
PREFERENTIAL TRANSFER MOTIONS.
Section 547(c)(7) of title 11, United States Code, is
amended to read as follows:
``(7) to the extent such transfer was a bona fide payment
of a debt for a domestic support obligation;''.
SEC. 218. DISPOSABLE INCOME DEFINED.
(a) Confirmation of Plan Under Chapter 12.--Section
1225(b)(2)(A) of title 11, United States Code, is amended by
inserting ``or for a domestic support obligation that first
becomes payable after the date on which the petition is
filed'' after ``dependent of the debtor''.
(b) Confirmation of Plan Under Chapter 13.--Section
1325(b)(2)(A) of title 11, United States Code, is amended by
inserting ``or for a domestic support obligation that first
becomes payable after the date on which the petition is
filed'' after ``dependent of the debtor''.
SEC. 219. COLLECTION OF CHILD SUPPORT.
(a) Duties of Trustee Under Chapter 7.--Section 704 of
title 11, United States Code, as amended by this Act, is
amended--
(1) in subsection (a)--
(A) in paragraph (8), by striking ``and'' at the end;
(B) in paragraph (9), by striking the period and inserting
a semicolon; and
(C) by adding at the end the following:
``(10) if, with respect to an individual debtor, there is a
claim for a domestic support obligation, provide the
applicable notification specified in subsection (c); and'';
and
(2) by adding at the end the following:
``(c)(1) In any case described in subsection (a)(10), the
trustee shall--
``(A)(i) notify in writing the holder of the claim of the
right of that holder to use the services of a State child
support enforcement agency established under sections 464 and
466 of the Social Security Act (42 U.S.C. 664, 666) for the
State in which the holder resides for assistance in
collecting child support during and after the bankruptcy
procedures;
``(ii) include in the notice under this paragraph the
address and telephone number of the child support enforcement
agency; and
``(iii) include in the notice an explanation of the rights
of the holder of the claim to payment of the claim under this
chapter; and
``(B)(i) notify in writing the State child support agency
of the State in which the holder of the claim resides of the
claim;
``(ii) include in the notice under this paragraph the name,
address, and telephone number of the holder of the claim; and
``(iii) at such time as the debtor is granted a discharge
under section 727, notify the holder of that claim and the
State child support agency of the State in which that holder
resides of--
``(I) the granting of the discharge;
``(II) the last recent known address of the debtor;
``(III) the last recent known name and address of the
debtor's employer; and
``(IV) with respect to the debtor's case, the name of each
creditor that holds a claim that--
``(aa) is not discharged under paragraph (2), (4), or (14A)
of section 523(a); or
``(bb) was reaffirmed by the debtor under section 524(c).
``(2)(A) A holder of a claim or a State child support
agency may request from a creditor described in paragraph
(1)(B)(iii)(IV) the last known address of the debtor.
``(B) Notwithstanding any other provision of law, a
creditor that makes a disclosure of a last known address of a
debtor in connection with a request made under subparagraph
(A) shall not be liable to the debtor or any other person by
reason of making that disclosure.''.
(b) Duties of Trustee Under Chapter 11.--Section 1106 of
title 11, United States Code, is amended--
(1) in subsection (a)--
(A) in paragraph (6), by striking ``and'' at the end;
(B) in paragraph (7), by striking the period and inserting
``; and''; and
(C) by adding at the end the following:
``(8) if, with respect to an individual debtor, there is a
claim for a domestic support obligation, provide the
applicable notification specified in subsection (c).''; and
(2) by adding at the end the following:
``(c)(1) In any case described in subsection (a)(7), the
trustee shall--
``(A)(i) notify in writing the holder of the claim of the
right of that holder to use the services of a State child
support enforcement agency established under sections 464 and
466 of the Social Security Act (42 U.S.C. 664, 666) for the
State in which the holder resides; and
``(ii) include in the notice under this paragraph the
address and telephone number of the child support enforcement
agency; and
``(B)(i) notify, in writing, the State child support agency
(of the State in which the holder of the claim resides) of
the claim;
``(ii) include in the notice under this paragraph the name,
address, and telephone number of the holder of the claim; and
``(iii) at such time as the debtor is granted a discharge
under section 1141, notify the holder of the claim and the
State child support agency of the State in which that holder
resides of--
``(I) the granting of the discharge;
``(II) the last recent known address of the debtor;
``(III) the last recent known name and address of the
debtor's employer; and
``(IV) with respect to the debtor's case, the name of each
creditor that holds a claim that--
``(aa) is not discharged under paragraph (2), (3), or (14)
of section 523(a); or
``(bb) was reaffirmed by the debtor under section 524(c).
``(2)(A) A holder of a claim or a State child support
agency may request from a creditor described in paragraph
(1)(B)(iii)(IV) the last known address of the debtor.
``(B) Notwithstanding any other provision of law, a
creditor that makes a disclosure of a last known address of a
debtor in connection with a request made under subparagraph
(A) shall not be liable to the debtor or any other person by
reason of making that disclosure.''.
(c) Duties of Trustee Under Chapter 12.--Section 1202 of
title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4), by striking ``and'' at the end;
(B) in paragraph (5), by striking the period and inserting
``; and''; and
(C) by adding at the end the following:
``(6) if, with respect to an individual debtor, there is a
claim for a domestic support obligation, provide the
applicable notification specified in subsection (c).''; and
(2) by adding at the end the following:
``(c)(1) In any case described in subsection (b)(6), the
trustee shall--
``(A)(i) notify in writing the holder of the claim of the
right of that holder to use the services of a State child
support enforcement agency established under sections 464 and
466 of the Social Security Act (42 U.S.C. 664, 666) for the
State in which the holder resides; and
``(ii) include in the notice under this paragraph the
address and telephone number of the child support enforcement
agency; and
``(B)(i) notify, in writing, the State child support agency
(of the State in which the holder of the claim resides) of
the claim;
``(ii) include in the notice under this paragraph the name,
address, and telephone number of the holder of the claim; and
``(iii) at such time as the debtor is granted a discharge
under section 1228, notify the holder of the claim and the
State child support agency of the State in which that holder
resides of--
``(I) the granting of the discharge;
``(II) the last recent known address of the debtor;
``(III) the last recent known name and address of the
debtor's employer; and
[[Page H540]]
``(IV) with respect to the debtor's case, the name of each
creditor that holds a claim that--
``(aa) is not discharged under paragraph (2), (4), or (14)
of section 523(a); or
``(bb) was reaffirmed by the debtor under section 524(c).
``(2)(A) A holder of a claim or a State child support
agency may request from a creditor described in paragraph
(1)(B)(iii)(IV) the last known address of the debtor.
``(B) Notwithstanding any other provision of law, a
creditor that makes a disclosure of a last known address of a
debtor in connection with a request made under subparagraph
(A) shall not be liable to the debtor or any other person by
reason of making that disclosure.''.
(d) Duties of Trustee Under Chapter 13.--Section 1302 of
title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4), by striking ``and'' at the end;
(B) in paragraph (5), by striking the period and inserting
``; and''; and
(C) by adding at the end the following:
``(6) if, with respect to an individual debtor, there is a
claim for a domestic support obligation, provide the
applicable notification specified in subsection (d).''; and
(2) by adding at the end the following:
``(d)(1) In any case described in subsection (b)(6), the
trustee shall--
``(A)(i) notify in writing the holder of the claim of the
right of that holder to use the services of a State child
support enforcement agency established under sections 464 and
466 of the Social Security Act (42 U.S.C. 664, 666) for the
State in which the holder resides; and
``(ii) include in the notice under this paragraph the
address and telephone number of the child support enforcement
agency; and
``(B)(i) notify in writing the State child support agency
of the State in which the holder of the claim resides of the
claim;
``(ii) include in the notice under this paragraph the name,
address, and telephone number of the holder of the claim; and
``(iii) at such time as the debtor is granted a discharge
under section 1328, notify the holder of the claim and the
State child support agency of the State in which that holder
resides of--
``(I) the granting of the discharge;
``(II) the last recent known address of the debtor;
``(III) the last recent known name and address of the
debtor's employer; and
``(IV) with respect to the debtor's case, the name of each
creditor that holds a claim that--
``(aa) is not discharged under paragraph (2), (4), or (14)
of section 523(a); or
``(bb) was reaffirmed by the debtor under section 524(c).
``(2)(A) A holder of a claim or a State child support
agency may request from a creditor described in paragraph
(1)(B)(iii)(IV) the last known address of the debtor.
``(B) Notwithstanding any other provision of law, a
creditor that makes a disclosure of a last known address of a
debtor in connection with a request made under subparagraph
(A) shall not be liable to the debtor or any other person by
reason of making that disclosure.''.
SEC. 220. NONDISCHARGEABILITY OF CERTAIN EDUCATIONAL BENEFITS
AND LOANS.
Section 523(a) of title 11, United States Code, is amended
by striking paragraph (8) and inserting the following:
``(8) unless excepting such debt from discharge under this
paragraph would impose an undue hardship on the debtor and
the debtor's dependents, for--
``(A)(i) an educational benefit overpayment or loan made,
insured, or guaranteed by a governmental unit, or made under
any program funded in whole or in part by a governmental unit
or nonprofit institution; or
``(ii) an obligation to repay funds received as an
educational benefit, scholarship, or stipend; or
``(B) any other educational loan that is a qualified
education loan, as that term is defined in section 221(e)(1)
of the Internal Revenue Code of 1986, incurred by an
individual debtor;''.
Subtitle C--Other Consumer Protections
SEC. 221. AMENDMENTS TO DISCOURAGE ABUSIVE BANKRUPTCY
FILINGS.
Section 110 of title 11, United States Code, is amended--
(1) in subsection (a)(1), by striking ``a person, other
than an attorney or an employee of an attorney'' and
inserting ``the attorney for the debtor or an employee of
such attorney under the direct supervision of such
attorney'';
(2) in subsection (b)--
(A) in paragraph (1), by adding at the end the following:
``If a bankruptcy petition preparer is not an individual,
then an officer, principal, responsible person, or partner of
the preparer shall be required to--
``(A) sign the document for filing; and
``(B) print on the document the name and address of that
officer, principal, responsible person or partner.''; and
(B) by striking paragraph (2) and inserting the following:
``(2)(A) Before preparing any document for filing or
accepting any fees from a debtor, the bankruptcy petition
preparer shall provide to the debtor a written notice to
debtors concerning bankruptcy petition preparers, which shall
be on an official form issued by the Judicial Conference of
the United States.
``(B) The notice under subparagraph (A)--
``(i) shall inform the debtor in simple language that a
bankruptcy petition preparer is not an attorney and may not
practice law or give legal advice;
``(ii) may contain a description of examples of legal
advice that a bankruptcy petition preparer is not authorized
to give, in addition to any advice that the preparer may not
give by reason of subsection (e)(2); and
``(iii) shall--
``(I) be signed by--
``(aa) the debtor; and
``(bb) the bankruptcy petition preparer, under penalty of
perjury; and
``(II) be filed with any document for filing.'';
(3) in subsection (c)--
(A) in paragraph (2)--
(i) by striking ``(2) For purposes'' and inserting ``(2)(A)
Subject to subparagraph (B), for purposes''; and
(ii) by adding at the end the following:
``(B) If a bankruptcy petition preparer is not an
individual, the identifying number of the bankruptcy petition
preparer shall be the Social Security account number of the
officer, principal, responsible person, or partner of the
preparer.''; and
(B) by striking paragraph (3);
(4) in subsection (d)--
(A) by striking ``(d)(1)'' and inserting ``(d)''; and
(B) by striking paragraph (2);
(5) in subsection (e)--
(A) by striking paragraph (2); and
(B) by adding at the end the following:
``(2)(A) A bankruptcy petition preparer may not offer a
potential bankruptcy debtor any legal advice, including any
legal advice described in subparagraph (B).
``(B) The legal advice referred to in subparagraph (A)
includes advising the debtor--
``(i) whether--
``(I) to file a petition under this title; or
``(II) commencing a case under chapter 7, 11, 12, or 13 is
appropriate;
``(ii) whether the debtor's debts will be eliminated or
discharged in a case under this title;
``(iii) whether the debtor will be able to retain the
debtor's home, car, or other property after commencing a case
under this title;
``(iv) concerning--
``(I) the tax consequences of a case brought under this
title; or
``(II) the dischargeability of tax claims;
``(v) whether the debtor may or should promise to repay
debts to a creditor or enter into a reaffirmation agreement
with a creditor to reaffirm a debt;
``(vi) concerning how to characterize the nature of the
debtor's interests in property or the debtor's debts; or
``(vii) concerning bankruptcy procedures and rights.'';
(6) in subsection (f)--
(A) by striking ``(f)(1)'' and inserting ``(f)''; and
(B) by striking paragraph (2);
(7) in subsection (g)--
(A) by striking ``(g)(1)'' and inserting ``(g)''; and
(B) by striking paragraph (2);
(8) in subsection (h)--
(A) by redesignating paragraphs (1) through (4) as
paragraphs (2) through (5), respectively;
(B) by inserting before paragraph (2), as redesignated, the
following:
``(1) The Supreme Court may promulgate rules under section
2075 of title 28, or the Judicial Conference of the United
States may prescribe guidelines, for setting a maximum
allowable fee chargeable by a bankruptcy petition preparer. A
bankruptcy petition preparer shall notify the debtor of any
such maximum amount before preparing any document for filing
for a debtor or accepting any fee from the debtor.'';
(C) in paragraph (2), as redesignated--
(i) by striking ``Within 10 days after the date of filing a
petition, a bankruptcy petition preparer shall file a'' and
inserting ``A'';
(ii) by inserting ``by the bankruptcy petition preparer
shall be filed together with the petition,'' after
``perjury''; and
(iii) by adding at the end the following: ``If rules or
guidelines setting a maximum fee for services have been
promulgated or prescribed under paragraph (1), the
declaration under this paragraph shall include a
certification that the bankruptcy petition preparer complied
with the notification requirement under paragraph (1).'';
(D) by striking paragraph (3), as redesignated, and
inserting the following:
``(3)(A) The court shall disallow and order the immediate
turnover to the bankruptcy trustee any fee referred to in
paragraph (2) found to be in excess of the value of any
services--
``(i) rendered by the preparer during the 12-month period
immediately preceding the date of filing of the petition; or
``(ii) found to be in violation of any rule or guideline
promulgated or prescribed under paragraph (1).
``(B) All fees charged by a bankruptcy petition preparer
may be forfeited in any case in which the bankruptcy petition
preparer fails to comply with this subsection or subsection
(b), (c), (d), (e), (f), or (g).
``(C) An individual may exempt any funds recovered under
this paragraph under section 522(b).''; and
(E) in paragraph (4), as redesignated, by striking ``or the
United States trustee'' and inserting ``the United States
trustee, the bankruptcy administrator, or the court, on the
initiative of the court,'';
(9) in subsection (i)(1), by striking the matter preceding
subparagraph (A) and inserting the following:
[[Page H541]]
``(i)(1) If a bankruptcy petition preparer violates this
section or commits any act that the court finds to be
fraudulent, unfair, or deceptive, on motion of the debtor,
trustee, United States trustee, or bankruptcy administrator,
and after the court holds a hearing with respect to that
violation or act, the court shall order the bankruptcy
petition preparer to pay to the debtor--'';
(10) in subsection (j)--
(A) in paragraph (2)--
(i) in subparagraph (A)(i)(I), by striking ``a violation of
which subjects a person to criminal penalty'';
(ii) in subparagraph (B)--
(I) by striking ``or has not paid a penalty'' and inserting
``has not paid a penalty''; and
(II) by inserting ``or failed to disgorge all fees ordered
by the court'' after ``a penalty imposed under this
section,'';
(B) by redesignating paragraph (3) as paragraph (4); and
(C) by inserting after paragraph (2) the following:
``(3) The court, as part of its contempt power, may enjoin
a bankruptcy petition preparer that has failed to comply with
a previous order issued under this section. The injunction
under this paragraph may be issued upon motion of the court,
the trustee, the United States trustee, or the bankruptcy
administrator.''; and
(11) by adding at the end the following:
``(l)(1) A bankruptcy petition preparer who fails to comply
with any provision of subsection (b), (c), (d), (e), (f),
(g), or (h) may be fined not more than $500 for each such
failure.
``(2) The court shall triple the amount of a fine assessed
under paragraph (1) in any case in which the court finds that
a bankruptcy petition preparer--
``(A) advised the debtor to exclude assets or income that
should have been included on applicable schedules;
``(B) advised the debtor to use a false Social Security
account number;
``(C) failed to inform the debtor that the debtor was
filing for relief under this title; or
``(D) prepared a document for filing in a manner that
failed to disclose the identity of the preparer.
``(3) The debtor, the trustee, a creditor, the United
States trustee, or the bankruptcy administrator may file a
motion for an order imposing a fine on the bankruptcy
petition preparer for each violation of this section.
``(4)(A) Fines imposed under this subsection in judicial
districts served by United States trustees shall be paid to
the United States trustee, who shall deposit an amount equal
to such fines in a special account of the United States
Trustee System Fund referred to in section 586(e)(2) of title
28. Amounts deposited under this subparagraph shall be
available to fund the enforcement of this section on a
national basis.
``(B) Fines imposed under this subsection in judicial
districts served by bankruptcy administrators shall be
deposited as offsetting receipts to the fund established
under section 1931 of title 28, and shall remain available
until expended to reimburse any appropriation for the amount
paid out of such appropriation for expenses of the operation
and maintenance of the courts of the United States.''.
SEC. 222. SENSE OF CONGRESS.
It is the sense of Congress that States should develop
curricula relating to the subject of personal finance,
designed for use in elementary and secondary schools.
SEC. 223. ADDITIONAL AMENDMENTS TO TITLE 11, UNITED STATES
CODE.
Section 507(a) of title 11, United States Code, is amended
by inserting after paragraph (9) the following:
``(10) Tenth, allowed claims for death or personal injuries
resulting from the operation of a motor vehicle or vessel if
such operation was unlawful because the debtor was
intoxicated from using alcohol, a drug, or another
substance.''.
SEC. 224. PROTECTION OF RETIREMENT SAVINGS IN BANKRUPTCY.
(a) In General.--Section 522 of title 11, United States
Code, is amended--
(1) in subsection (b)--
(A) in paragraph (2)--
(i) in subparagraph (A), by striking ``and'' at the end;
(ii) in subparagraph (B), by striking the period at the end
and inserting ``; and'';
(iii) by adding at the end the following:
``(C) retirement funds to the extent that those funds are
in a fund or account that is exempt from taxation under
section 401, 403, 408, 408A, 414, 457, or 501(a) of the
Internal Revenue Code of 1986.''; and
(iv) by striking ``(2)(A) any property'' and inserting:
``(3) Property listed in this paragraph is--
``(A) any property'';
(B) by striking paragraph (1) and inserting:
``(2) Property listed in this paragraph is property that is
specified under subsection (d), unless the State law that is
applicable to the debtor under paragraph (3)(A) specifically
does not so authorize.'';
(C) by striking ``(b) Notwithstanding'' and inserting
``(b)(1) Notwithstanding'';
(D) by striking ``paragraph (2)'' each place it appears and
inserting ``paragraph (3)'';
(E) by striking ``paragraph (1)'' each place it appears and
inserting ``paragraph (2)'';
(F) by striking ``Such property is--''; and
(G) by adding at the end the following:
``(4) For purposes of paragraph (3)(C) and subsection
(d)(12), the following shall apply:
``(A) If the retirement funds are in a retirement fund that
has received a favorable determination under section 7805 of
the Internal Revenue Code of 1986, and that determination is
in effect as of the date of the commencement of the case
under section 301, 302, or 303 of this title, those funds
shall be presumed to be exempt from the estate.
``(B) If the retirement funds are in a retirement fund that
has not received a favorable determination under such section
7805, those funds are exempt from the estate if the debtor
demonstrates that--
``(i) no prior determination to the contrary has been made
by a court or the Internal Revenue Service; and
``(ii)(I) the retirement fund is in substantial compliance
with the applicable requirements of the Internal Revenue Code
of 1986; or
``(II) the retirement fund fails to be in substantial
compliance with the applicable requirements of the Internal
Revenue Code of 1986 and the debtor is not materially
responsible for that failure.
``(C) A direct transfer of retirement funds from 1 fund or
account that is exempt from taxation under section 401, 403,
408, 408A, 414, 457, or 501(a) of the Internal Revenue Code
of 1986, under section 401(a)(31) of the Internal Revenue
Code of 1986, or otherwise, shall not cease to qualify for
exemption under paragraph (3)(C) or subsection (d)(12) by
reason of that direct transfer.
``(D)(i) Any distribution that qualifies as an eligible
rollover distribution within the meaning of section 402(c) of
the Internal Revenue Code of 1986 or that is described in
clause (ii) shall not cease to qualify for exemption under
paragraph (3)(C) or subsection (d)(12) by reason of that
distribution.
``(ii) A distribution described in this clause is an amount
that--
``(I) has been distributed from a fund or account that is
exempt from taxation under section 401, 403, 408, 408A, 414,
457, or 501(a) of the Internal Revenue Code of 1986; and
``(II) to the extent allowed by law, is deposited in such a
fund or account not later than 60 days after the distribution
of that amount.''; and
(2) in subsection (d)--
(A) in the matter preceding paragraph (1), by striking
``subsection (b)(1)'' and inserting ``subsection (b)(2)'';
and
(B) by adding at the end the following:
``(12) Retirement funds to the extent that those funds are
in a fund or account that is exempt from taxation under
section 401, 403, 408, 408A, 414, 457, or 501(a) of the
Internal Revenue Code of 1986.''.
(b) 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 and inserting
a semicolon;
(3) by inserting after paragraph (18) the following:
``(19) under subsection (a), of withholding of income from
a debtor's wages and collection of amounts withheld, under
the debtor's agreement authorizing that withholding and
collection for the benefit of a pension, profit-sharing,
stock bonus, or other plan established under section 401,
403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue
Code of 1986, that is sponsored by the employer of the
debtor, or an affiliate, successor, or predecessor of such
employer--
``(A) to the extent that the amounts withheld and collected
are used solely for payments relating to a loan from a plan
that satisfies the requirements of section 408(b)(1) of the
Employee Retirement Income Security Act of 1974 or is subject
to section 72(p) of the Internal Revenue Code of 1986; or
``(B) in the case of a loan from a thrift savings plan
described in subchapter III of chapter 84 of title 5, that
satisfies the requirements of section 8433(g) of such
title;''; and
(4) by adding at the end of the flush material at the end
of the subsection, the following: ``Nothing in paragraph (19)
may be construed to provide that any loan made under a
governmental plan under section 414(d), or a contract or
account under section 403(b) of the Internal Revenue Code of
1986 constitutes a claim or a debt under this title.''.
(c) Exceptions To Discharge.--Section 523(a) of title 11,
United States Code, as amended by this Act, is amended by
adding at the end the following:
``(18) owed to a pension, profit-sharing, stock bonus, or
other plan established under section 401, 403, 408, 408A,
414, 457, or 501(c) of the Internal Revenue Code of 1986,
under--
``(A) a loan permitted under section 408(b)(1) of the
Employee Retirement Income Security Act of 1974, or subject
to section 72(p) of the Internal Revenue Code of 1986; or
``(B) a loan from the thrift savings plan described in
subchapter III of chapter 84 of title 5, that satisfies the
requirements of section 8433(g) of such title.
Nothing in paragraph (18) may be construed to provide that
any loan made under a governmental plan under section 414(d),
or a contract or account under section 403(b), of the
Internal Revenue Code of 1986 constitutes a claim or a debt
under this title.''.
(d) Plan Contents.--Section 1322 of title 11, United States
Code, is amended by adding at the end the following:
``(f) A plan may not materially alter the terms of a loan
described in section 362(b)(19) and any amounts required to
repay such loan shall not constitute `disposable income'
under section 1325.''.
(e) Asset Limitation.--Section 522 of title 11, United
States Code, is amended by adding at the end the following:
[[Page H542]]
``(n) For assets in individual retirement accounts
described in section 408 or 408A of the Internal Revenue Code
of 1986, other than a simplified employee pension under
section 408(k) of that Code or a simple retirement account
under section 408(p) of that Code, the aggregate value of
such assets exempted under this section, without regard to
amounts attributable to rollover contributions under section
402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8) of the
Internal Revenue Code of 1986, and earnings thereon, shall
not exceed $1,000,000 (which amount shall be adjusted as
provided in section 104 of this title) in a case filed by an
individual debtor, except that such amount may be increased
if the interests of justice so require.''.
SEC. 225. PROTECTION OF EDUCATION SAVINGS IN BANKRUPTCY.
(a) Exclusions.--Section 541 of title 11, United States
Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4), by striking ``or'' at the end;
(B) by redesignating paragraph (5) as paragraph (10); and
(C) by inserting after paragraph (4) the following:
``(5) funds placed in an education individual retirement
account (as defined in section 530(b)(1) of the Internal
Revenue Code of 1986) not later than 365 days before the date
of filing of the petition, but--
``(A) only if the designated beneficiary of such account
was a son, daughter, stepson, stepdaughter, grandchild, or
step-grandchild of the debtor for the taxable year for which
funds were placed in such account;
``(B) only to the extent that such funds--
``(i) are not pledged or promised to any entity in
connection with any extension of credit; and
``(ii) are not excess contributions (as described in
section 4973(e) of the Internal Revenue Code of 1986); and
``(C) in the case of funds placed in all such accounts
having the same designated beneficiary not earlier than 720
days nor later than 365 days before such date, only so much
of such funds as does not exceed $5,000;
``(6) funds used to purchase a tuition credit or
certificate or contributed to an account in accordance with
section 529(b)(1)(A) of the Internal Revenue Code of 1986
under a qualified State tuition program (as defined in
section 529(b)(1) of such Code) not later than 365 days
before the date of filing of the petition, but--
``(A) only if the designated beneficiary of the amounts
paid or contributed to such tuition program was a son,
daughter, stepson, stepdaughter, grandchild, or step-
grandchild of the debtor for the taxable year for which funds
were paid or contributed;
``(B) with respect to the aggregate amount paid or
contributed to such program having the same designated
beneficiary, only so much of such amount as does not exceed
the total contributions permitted under section 529(b)(7) of
such Code with respect to such beneficiary, as adjusted
beginning on the date of the filing of the petition by the
annual increase or decrease (rounded to the nearest tenth of
1 percent) in the education expenditure category of the
Consumer Price Index prepared by the Department of Labor; and
``(C) in the case of funds paid or contributed to such
program having the same designated beneficiary not earlier
than 720 days nor later than 365 days before such date, only
so much of such funds as does not exceed $5,000;''; and
(2) by adding at the end the following:
``(e) In determining whether any of the relationships
specified in paragraph (5)(A) or (6)(A) of subsection (b)
exists, a legally adopted child of an individual (and a child
who is a member of an individual's household, if placed with
such individual by an authorized placement agency for legal
adoption by such individual), or a foster child of an
individual (if such child has as the child's principal place
of abode the home of the debtor and is a member of the
debtor's household) shall be treated as a child of such
individual by blood.''.
(b) Debtor's Duties.--Section 521 of title 11, United
States Code, as amended by this Act, is amended by adding at
the end the following:
``(c) In addition to meeting the requirements under
subsection (a), a debtor shall file with the court a record
of any interest that a debtor has in an education individual
retirement account (as defined in section 530(b)(1) of the
Internal Revenue Code of 1986) or under a qualified State
tuition program (as defined in section 529(b)(1) of such
Code).''.
SEC. 226. DEFINITIONS.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended--
(1) by inserting after paragraph (2) the following:
``(3) `assisted person' means any person whose debts
consist primarily of consumer debts and whose non-exempt
assets are less than $150,000;'';
(2) by inserting after paragraph (4) the following:
``(4A) `bankruptcy assistance' means any goods or services
sold or otherwise provided to an assisted person with the
express or implied purpose of providing information, advice,
counsel, document preparation, or filing, or attendance at a
creditors' meeting or appearing in a proceeding on behalf of
another or providing legal representation with respect to a
case or proceeding under this title;''; and
(3) by inserting after paragraph (12) the following:
``(12A) `debt relief agency' means any person who provides
any bankruptcy assistance to an assisted person in return for
the payment of money or other valuable consideration, or who
is a bankruptcy petition preparer under section 110, but does
not include--
``(A) any person that is an officer, director, employee or
agent of that person;
``(B) a nonprofit organization which is exempt from
taxation under section 501(c)(3) of the Internal Revenue Code
of 1986;
``(C) a creditor of the person, to the extent that the
creditor is assisting the person to restructure any debt owed
by the person to the creditor;
``(D) a depository institution (as defined in section 3 of
the Federal Deposit Insurance Act) or any Federal credit
union or State credit union (as those terms are defined in
section 101 of the Federal Credit Union Act), or any
affiliate or subsidiary of such a depository institution or
credit union; or
``(E) an author, publisher, distributor, or seller of works
subject to copyright protection under title 17, when acting
in such capacity.''.
(b) Conforming Amendment.--Section 104(b)(1) of title 11,
United States Code, is amended by inserting ``101(3),'' after
``sections''.
SEC. 227. RESTRICTIONS ON DEBT RELIEF AGENCIES.
(a) Enforcement.--Subchapter II of chapter 5 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 526. Restrictions on debt relief agencies
``(a) A debt relief agency shall not--
``(1) fail to perform any service that such agency informed
an assisted person or prospective assisted person it would
provide in connection with a case or proceeding under this
title;
``(2) make any statement, or counsel or advise any assisted
person or prospective assisted person to make a statement in
a document filed in a case or proceeding under this title,
that is untrue and misleading, or that upon the exercise
of reasonable care, should have been known by such agency
to be untrue or misleading;
``(3) misrepresent to any assisted person or prospective
assisted person, directly or indirectly, affirmatively or by
material omission, with respect to--
``(i) the services that such agency will provide to such
person; or
``(ii) the benefits and risks that may result if such
person becomes a debtor in a case under this title; or
``(4) advise an assisted person or prospective assisted
person to incur more debt in contemplation of such person
filing a case under this title or to pay an attorney or
bankruptcy petition preparer fee or charge for services
performed as part of preparing for or representing a debtor
in a case under this title.
``(b) Any waiver by any assisted person of any protection
or right provided under this section shall not be enforceable
against the debtor by any Federal or State court or any other
person, but may be enforced against a debt relief agency.
``(c)(1) Any contract for bankruptcy assistance between a
debt relief agency and an assisted person that does not
comply with the material requirements of this section,
section 527, or section 528 shall be void and may not be
enforced by any Federal or State court or by any other
person, other than such assisted person.
``(2) Any debt relief agency shall be liable to an assisted
person in the amount of any fees or charges in connection
with providing bankruptcy assistance to such person that such
debt relief agency has received, for actual damages, and for
reasonable attorneys' fees and costs if such agency is found,
after notice and hearing, to have--
``(A) intentionally or negligently failed to comply with
any provision of this section, section 527, or section 528
with respect to a case or proceeding under this title for
such assisted person;
``(B) provided bankruptcy assistance to an assisted person
in a case or proceeding under this title that is dismissed or
converted to a case under another chapter of this title
because of such agency's intentional or negligent failure to
file any required document including those specified in
section 521; or
``(C) intentionally or negligently disregarded the material
requirements of this title or the Federal Rules of Bankruptcy
Procedure applicable to such agency.
``(3) In addition to such other remedies as are provided
under State law, whenever the chief law enforcement officer
of a State, or an official or agency designated by a State,
has reason to believe that any person has violated or is
violating this section, the State--
``(A) may bring an action to enjoin such violation;
``(B) may bring an action on behalf of its residents to
recover the actual damages of assisted persons arising from
such violation, including any liability under paragraph (2);
and
``(C) in the case of any successful action under
subparagraph (A) or (B), shall be awarded the costs of the
action and reasonable attorney fees as determined by the
court.
``(4) The United States District Court for any district
located in the State shall have concurrent jurisdiction of
any action under subparagraph (A) or (B) of paragraph (3).
[[Page H543]]
``(5) Notwithstanding any other provision of Federal law
and in addition to any other remedy provided under Federal or
State law, if the court, on its own motion or on motion of
the United States trustee or the debtor, finds that a person
intentionally violated this section, or engaged in a clear
and consistent pattern or practice of violating this section,
the court may--
``(A) enjoin the violation of such section; or
``(B) impose an appropriate civil penalty against such
person.''.
``(d) No provision of this section, section 527, or section
528 shall--
``(1) annul, alter, affect, or exempt any person subject to
such sections from complying with any law of any State except
to the extent that such law is inconsistent with those
sections, and then only to the extent of the inconsistency;
or
``(2) be deemed to limit or curtail the authority or
ability--
``(A) of a State or subdivision or instrumentality thereof,
to determine and enforce qualifications for the practice of
law under the laws of that State; or
``(B) of a Federal court to determine and enforce the
qualifications for the practice of law before that court.''.
(b) Conforming Amendment.--The table of sections for
chapter 5 of title 11, United States Code, is amended by
inserting before the item relating to section 527, the
following:
``526. Debt relief enforcement.''.
SEC. 228. DISCLOSURES.
(a) Disclosures.--Subchapter II of chapter 5 of title 11,
United States Code, as amended by this Act, is amended by
adding at the end the following:
``Sec. 527. Disclosures
``(a) A debt relief agency providing bankruptcy assistance
to an assisted person shall provide--
``(1) the written notice required under section 342(b)(1)
of this title; and
``(2) to the extent not covered in the written notice
described in paragraph (1), and not later than 3 business
days after the first date on which a debt relief agency first
offers to provide any bankruptcy assistance services to an
assisted person, a clear and conspicuous written notice
advising assisted persons that--
``(A) all information that the assisted person is required
to provide with a petition and thereafter during a case under
this title is required to be complete, accurate, and
truthful;
``(B) all assets and all liabilities are required to be
completely and accurately disclosed in the documents filed to
commence the case, and the replacement value of each asset as
defined in section 506 of this title must be stated in those
documents where requested after reasonable inquiry to
establish such value;
``(C) current monthly income, the amounts specified in
section 707(b)(2), and, in a case under chapter 13,
disposable income (determined in accordance with section
707(b)(2)), are required to be stated after reasonable
inquiry; and
``(D) information that an assisted person provides during
their case may be audited pursuant to this title, and that
failure to provide such information may result in dismissal
of the proceeding under this title or other sanction
including, in some instances, criminal sanctions.
``(b) A debt relief agency providing bankruptcy assistance
to an assisted person shall provide each assisted person at
the same time as the notices required under subsection (a)(1)
with the following statement, to the extent applicable, or
one substantially similar. The statement shall be clear and
conspicuous and shall be in a single document separate from
other documents or notices provided to the assisted person:
`` `IMPORTANT INFORMATION ABOUT BANKRUPTCY ASSISTANCE
SERVICES FROM AN ATTORNEY OR BANKRUPTCY PETITION PREPARER.
`` `If you decide to seek bankruptcy relief, you can
represent yourself, you can hire an attorney to represent
you, or you can get help in some localities from a bankruptcy
petition preparer who is not an attorney. THE LAW REQUIRES AN
ATTORNEY OR BANKRUPTCY PETITION PREPARER TO GIVE YOU A
WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY OR BANKRUPTCY
PETITION PREPARER WILL DO FOR YOU AND HOW MUCH IT WILL COST.
Ask to see the contract before you hire anyone.
`` `The following information helps you understand what
must be done in a routine bankruptcy case to help you
evaluate how much service you need. Although bankruptcy can
be complex, many cases are routine.
`` `Before filing a bankruptcy case, either you or your
attorney should analyze your eligibility for different forms
of debt relief made available by the Bankruptcy Code and
which form of relief is most likely to be beneficial for you.
Be sure you understand the relief you can obtain and its
limitations. To file a bankruptcy case, documents called a
Petition, Schedules and Statement of Financial Affairs, as
well as in some cases a Statement of Intention need to be
prepared correctly and filed with the bankruptcy court. You
will have to pay a filing fee to the bankruptcy court. Once
your case starts, you will have to attend the required first
meeting of creditors where you may be questioned by a court
official called a `trustee' and by creditors.
`` `If you choose to file a chapter 7 case, you may be
asked by a creditor to reaffirm a debt. You may want help
deciding whether to do so and a creditor is not permitted to
coerce you into reaffirming your debts.
`` `If you choose to file a chapter 13 case in which you
repay your creditors what you can afford over 3 to 5 years,
you may also want help with preparing your chapter 13 plan
and with the confirmation hearing on your plan which will be
before a bankruptcy judge.
`` `If you select another type of relief under the
Bankruptcy Code other than chapter 7 or chapter 13, you will
want to find out what needs to be done from someone familiar
with that type of relief.
`` `Your bankruptcy case may also involve litigation. You
are generally permitted to represent yourself in litigation
in bankruptcy court, but only attorneys, not bankruptcy
petition preparers, can give you legal advice.'.
``(c) Except to the extent the debt relief agency provides
the required information itself after reasonably diligent
inquiry of the assisted person or others so as to obtain such
information reasonably accurately for inclusion on the
petition, schedules or statement of financial affairs, a debt
relief agency providing bankruptcy assistance to an assisted
person, to the extent permitted by nonbankruptcy law, shall
provide each assisted person at the time required for the
notice required under subsection (a)(1) reasonably sufficient
information (which shall be provided in a clear and
conspicuous writing) to the assisted person on how to provide
all the information the assisted person is required to
provide under this title pursuant to section 521, including--
``(1) how to value assets at replacement value, determine
current monthly income, the amounts specified in section
707(b)(2)) and, in a chapter 13 case, how to determine
disposable income in accordance with section 707(b)(2) and
related calculations;
``(2) how to complete the list of creditors, including how
to determine what amount is owed and what address for the
creditor should be shown; and
``(3) how to determine what property is exempt and how to
value exempt property at replacement value as defined in
section 506 of this title.
``(d) A debt relief agency shall maintain a copy of the
notices required under subsection (a) of this section for 2
years after the date on which the notice is given the
assisted person.''.
(b) Conforming Amendment.--The table of sections for
chapter 5 of title 11, United States Code, as amended by this
Act, is amended by inserting after the item relating to
section 526 the following:
``527. Disclosures.''.
SEC. 229. REQUIREMENTS FOR DEBT RELIEF AGENCIES.
(a) Enforcement.--Subchapter II of chapter 5 of title 11,
United States Code, as amended by this Act, is amended by
adding at the end the following:
``Sec. 528. Requirements for debt relief agencies
``(a) A debt relief agency shall--
``(1) not later than 5 business days after the first date
such agency provides any bankruptcy assistance services to an
assisted person, but prior to such assisted person's petition
under this title being filed, execute a written contract with
such assisted person that explains clearly and
conspicuously--
``(A) the services such agency will provide to such
assisted person; and
``(B) the fees or charges for such services, and the terms
of payment;
``(2) provide the assisted person with a copy of the fully
executed and completed contract;
``(3) clearly and conspicuously disclose in any
advertisement of bankruptcy assistance services or of the
benefits of bankruptcy directed to the general public
(whether in general media, seminars or specific mailings,
telephonic or electronic messages, or otherwise) that the
services or benefits are with respect to bankruptcy relief
under this title; and
``(4) clearly and conspicuously using the following
statement: `We are a debt relief agency. We help people file
for bankruptcy relief under the Bankruptcy Code.' or a
substantially similar statement.
``(b)(1) An advertisement of bankruptcy assistance services
or of the benefits of bankruptcy directed to the general
public includes--
``(A) descriptions of bankruptcy assistance in connection
with a chapter 13 plan whether or not chapter 13 is
specifically mentioned in such advertisement; and
``(B) statements such as `federally supervised repayment
plan' or `Federal debt restructuring help' or other similar
statements that could lead a reasonable consumer to believe
that debt counseling was being offered when in fact the
services were directed to providing bankruptcy assistance
with a chapter 13 plan or other form of bankruptcy relief
under this title.
``(2) An advertisement, directed to the general public,
indicating that the debt relief agency provides assistance
with respect to credit defaults, mortgage foreclosures,
eviction proceedings, excessive debt, debt collection
pressure, or inability to pay any consumer debt shall--
``(A) disclose clearly and conspicuously in such
advertisement that the assistance may involve bankruptcy
relief under this title; and
``(B) include the following statement: `We are a debt
relief agency. We help people file
[[Page H544]]
for bankruptcy relief under the Bankruptcy Code,' or a
substantially similar statement.''.
(b) Conforming Amendment.--The table of sections for
chapter 5 of title 11, United States Code, as amended by this
Act, is amended by inserting after the item relating to
section 527, the following:
``528. Debtor's bill of rights.''.
SEC. 230. GAO STUDY.
(a) Study.--Not later than 270 days after the date of
enactment of this Act, the Comptroller General of the United
States shall conduct a study of the feasibility,
effectiveness, and cost of requiring trustees appointed under
title 11, United States Code, or the bankruptcy courts, to
provide to the Office of Child Support Enforcement promptly
after the commencement of cases by individual debtors under
such title, the names and social security numbers of such
debtors for the purposes of allowing such Office to determine
whether such debtors have outstanding obligations for child
support (as determined on the basis of information in the
Federal Case Registry or other national database).
(b) Report.--Not later than 300 days after the date of
enactment of this Act, the Comptroller General shall submit
to the President pro tempore of the Senate and the Speaker of
the House of Representatives a report containing the results
of the study required by subsection (a).
TITLE III--DISCOURAGING BANKRUPTCY ABUSE
SEC. 301. REINFORCEMENT OF THE FRESH START.
Section 523(a)(17) of title 11, United States Code, is
amended--
(1) by striking ``by a court'' and inserting ``on a
prisoner by any court'',
(2) by striking ``section 1915(b) or (f)'' and inserting
``subsection (b) or (f)(2) of section 1915'', and
(3) by inserting ``(or a similar non-Federal law)'' after
``title 28'' each place it appears.
SEC. 302. DISCOURAGING BAD FAITH REPEAT FILINGS.
Section 362(c) of title 11, United States Code, is
amended--
(1) in paragraph (1), by striking ``and'' at the end;
(2) in paragraph (2), by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following:
``(3) if a single or joint case is filed by or against an
individual debtor under chapter 7, 11, or 13, and if a single
or joint case of the debtor was pending within the preceding
1-year period but was dismissed, other than a case refiled
under a chapter other than chapter 7 after dismissal under
section 707(b)--
``(A) 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;
``(B) upon motion by a party in interest for continuation
of the automatic stay and upon notice and a hearing, the
court may extend the stay in particular cases as to any or
all creditors (subject to such conditions or limitations as
the court may then impose) after notice and a hearing
completed before the expiration of the 30-day period only if
the party in interest demonstrates that the filing of the
later case is in good faith as to the creditors to be stayed;
and
``(C) for purposes of subparagraph (B), a case is
presumptively filed not in good faith (but such presumption
may be rebutted by clear and convincing evidence to the
contrary)--
``(i) as to all creditors, if--
``(I) more than 1 previous case under any of chapter 7, 11,
or 13 in which the individual was a debtor was pending within
the preceding 1-year period;
``(II) a previous case under any of chapter 7, 11, or 13 in
which the individual was a debtor was dismissed within such
1-year period, after the debtor failed to--
``(aa) file or amend the petition or other documents as
required by this title or the court without substantial
excuse (but mere inadvertence or negligence shall not be a
substantial excuse unless the dismissal was caused by the
negligence of the debtor's attorney);
``(bb) provide adequate protection as ordered by the court;
or
``(cc) perform the terms of a plan confirmed by the court;
or
``(III) there has not been a substantial change in the
financial or personal affairs of the debtor since the
dismissal of the next most previous case under chapter 7, 11,
or 13 or any other reason to conclude that the later case
will be concluded--
``(aa) if a case under chapter 7, with a discharge; or
``(bb) if a case under chapter 11 or 13, with a confirmed
plan which will be fully performed; and
``(ii) as 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 such case, that
action was still pending or had been resolved by terminating,
conditioning, or limiting the stay as to actions of such
creditor; and
``(4)(A)(i) if a single or joint case is filed by or
against an individual debtor under this title, and if 2 or
more single or joint cases of the debtor were pending within
the previous year but were dismissed, other than a case
refiled under section 707(b), the stay under subsection (a)
shall not go into effect upon the filing of the later case;
and
``(ii) on request of a party in interest, the court shall
promptly enter an order confirming that no stay is in effect;
``(B) if, within 30 days after the filing of the later
case, a party in interest requests the court may order the
stay to take effect in the case as to any or all creditors
(subject to such conditions or limitations as the court may
impose), after notice and hearing, only if the party in
interest demonstrates that the filing of the later case is in
good faith as to the creditors to be stayed;
``(C) a stay imposed under subparagraph (B) shall be
effective on the date of entry of the order allowing the stay
to go into effect; and
``(D) for purposes of subparagraph (B), a case is
presumptively not filed in good faith (but such presumption
may be rebutted by clear and convincing evidence to the
contrary)--
``(i) as to all creditors if--
``(I) 2 or more previous cases under this title in which
the individual was a debtor were pending within the 1-year
period;
``(II) a previous case under this title in which the
individual was a debtor was dismissed within the time period
stated in this paragraph after the debtor failed to file or
amend the petition or other documents as required by this
title or the court without substantial excuse (but mere
inadvertence or negligence shall not be substantial excuse
unless the dismissal was caused by the negligence of the
debtor's attorney), failed to pay adequate protection as
ordered by the court, or failed to perform the terms of a
plan confirmed by the court; or
``(III) there has not been a substantial change in the
financial or personal affairs of the debtor since the
dismissal of the next most previous case under this title, or
any other reason to conclude that the later case will not be
concluded, if a case under chapter 7, with a discharge, and
if a case under chapter 11 or 13, with a confirmed plan that
will be fully performed; or
``(ii) as 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 such case, such
action was still pending or had been resolved by terminating,
conditioning, or limiting the stay as to action of such
creditor.''.
SEC. 303. CURBING ABUSIVE FILINGS.
(a) In General.--Section 362(d) of title 11, United States
Code, is amended--
(1) in paragraph (2), by striking ``or'' at the end;
(2) in paragraph (3), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(4) with respect to a stay of an act against real
property under subsection (a), by a creditor whose claim is
secured by an interest in such real estate, if the court
finds that the filing of the bankruptcy petition was part of
a scheme to delay, hinder, and defraud creditors that
involved either--
``(A) transfer of all or part ownership of, or other
interest in, the real property without the consent of the
secured creditor or court approval; or
``(B) multiple bankruptcy filings affecting the real
property.
If recorded in compliance with applicable State laws
governing notices of interests or liens in real property, an
order entered under this subsection shall be binding in any
other case under this title purporting to affect the real
property filed not later than 2 years after the date of entry
of such order by the court, except that a debtor in a
subsequent case may move for relief from such order based
upon changed circumstances or for good cause shown, after
notice and a hearing. Any Federal, State, or local
governmental unit that accepts notices of interests or liens
in real property shall accept any certified copy of an order
described in this subsection for indexing and recording.''.
(b) Automatic Stay.--Section 362(b) of title 11, United
States Code, is amended by inserting after paragraph (19), as
added by this Act, the following:
``(20) under subsection (a), of any act to enforce any lien
against or security interest in real property following the
entry of an order under section 362(d)(4) as to that property
in any prior bankruptcy case for a period of 2 years after
entry of such an order, except that the debtor, in a
subsequent case, may move the court for relief from such
order based upon changed circumstances or for other good
cause shown, after notice and a hearing;
``(21) under subsection (a), of any act to enforce any lien
against or security interest in real property--
``(A) if the debtor is ineligible under section 109(g) to
be a debtor in a bankruptcy case; or
``(B) if the bankruptcy case was filed in violation of a
bankruptcy court order in a prior bankruptcy case prohibiting
the debtor from being a debtor in another bankruptcy case;''.
SEC. 304. DEBTOR RETENTION OF PERSONAL PROPERTY SECURITY.
Title 11, United States Code, is amended--
(1) in section 521(a) (as so designated by this Act)--
(A) in paragraph (4), by striking ``, and'' at the end and
inserting a semicolon;
(B) in paragraph (5), by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(6) in an individual case under chapter 7 of this title,
not retain possession of personal property as to which a
creditor has an allowed claim for the purchase price secured
[[Page H545]]
in whole or in part by an interest in that personal property
unless, in the case of an individual debtor, the debtor, not
later than 45 days after the first meeting of creditors under
section 341(a), either--
``(A) enters into an agreement with the creditor pursuant
to section 524(c) of this title with respect to the claim
secured by such property; or
``(B) redeems such property from the security interest
pursuant to section 722 of this title.
If the debtor fails to so act within the 45-day period
referred to in paragraph (6), the stay under section 362(a)
of this title is terminated with respect to the personal
property of the estate or of the debtor which is affected,
such property shall no longer be property of the estate, and
the creditor may take whatever action as to such property as
is permitted by applicable nonbankruptcy law, unless the
court determines on the motion of the trustee brought before
the expiration of such 45-day period, and after notice and a
hearing, that such property is of consequential value or
benefit to the estate, orders appropriate adequate protection
of the creditor's interest, and orders the debtor to deliver
any collateral in the debtor's possession to the trustee.'';
and
(2) in section 722, by inserting ``in full at the time of
redemption'' before the period at the end.
SEC. 305. RELIEF FROM THE AUTOMATIC STAY WHEN THE DEBTOR DOES
NOT COMPLETE INTENDED SURRENDER OF CONSUMER
DEBT COLLATERAL.
Title 11, United States Code, is amended--
(1) in section 362--
(A) in subsection (c), by striking ``(e), and (f)''
inserting ``(e), (f), and (h)'';
(B) by redesignating subsection (h) as subsection (k); and
(C) by inserting after subsection (g) the following:
``(h)(1) In an individual case under chapter 7, 11, or 13,
the stay provided by subsection (a) is terminated with
respect to personal property of the estate or of the debtor
securing in whole or in part a claim, or subject to an
unexpired lease, and such personal property shall no longer
be property of the estate if the debtor fails within the
applicable time set by section 521(a)(2) of this title--
``(A) to file timely any statement of intention required
under section 521(a)(2) of this title with respect to that
property or to indicate in that statement that the debtor
will either surrender the property or retain it and, if
retaining it, either redeem the property pursuant to section
722 of this title, reaffirm the debt it secures pursuant to
section 524(c) of this title, or assume the unexpired lease
pursuant to section 365(p) of this title if the trustee does
not do so, as applicable; and
``(B) to take timely the action specified in that statement
of intention, as it may be amended before expiration of the
period for taking action, unless the statement of intention
specifies reaffirmation and the creditor refuses to reaffirm
on the original contract terms.
``(2) Paragraph (1) does not apply if the court determines,
on the motion of the trustee filed before the expiration of
the applicable time set by section 521(a)(2), after notice
and a hearing, that such property is of consequential value
or benefit to the estate, and orders appropriate adequate
protection of the creditor's interest, and orders the debtor
to deliver any collateral in the debtor's possession to the
trustee. If the court does not so determine, the stay
provided by subsection (a) shall terminate upon the
conclusion of the proceeding on the motion.''; and
(2) in section 521--
(A) in subsection (a)(2), as so designated by this Act, by
striking ``consumer'';
(B) in subsection (a)(2)(B), as so designated by this Act--
(i) by striking ``forty-five days after the filing of a
notice of intent under this section'' and inserting ``30 days
after the first date set for the meeting of creditors under
section 341(a) of this title''; and
(ii) by striking ``forty-five day'' and inserting ``30-
day'';
(C) in subsection (a)(2)(C), as so designated by this Act,
by inserting ``, except as provided in section 362(h) of this
title'' before the semicolon; and
(D) by adding at the end the following:
``(d) If the debtor fails timely to take the action
specified in subsection (a)(6) of this section, or in
paragraphs (1) and (2) of section 362(h) of this title, with
respect to property which a lessor or bailor owns and has
leased, rented, or bailed to the debtor or as to which a
creditor holds a security interest not otherwise voidable
under section 522(f), 544, 545, 547, 548, or 549 of this
title, nothing in this title shall prevent or limit the
operation of a provision in the underlying lease or agreement
which has the effect of placing the debtor in default under
such lease or agreement by reason of the occurrence,
pendency, or existence of a proceeding under this title or
the insolvency of the debtor. Nothing in this subsection
shall be deemed to justify limiting such a provision in any
other circumstance.''.
SEC. 306. GIVING SECURED CREDITORS FAIR TREATMENT IN CHAPTER
13.
(a) In General.--Section 1325(a)(5)(B)(i) of title 11,
United States Code, is amended to read as follows:
``(i) the plan provides that--
``(I) the holder of such claim retain the lien securing
such claim until the earlier of--
``(aa) the payment of the underlying debt determined under
nonbankruptcy law; or
``(bb) discharge under section 1328; and
``(II) if the case under this chapter is dismissed or
converted without completion of the plan, such lien shall
also be retained by such holder to the extent recognized by
applicable nonbankruptcy law; and''.
(b) Restoring the Foundation for Secured Credit.--Section
1325(a) of title 11, United States Code, is amended by adding
at the end the following flush sentence:
``For purposes of paragraph (5), section 506 shall not apply
to a claim described in that paragraph if the creditor has a
purchase money security interest securing the debt that is
the subject of the claim, the debt was incurred within the 5-
year period preceding the filing of the petition, and the
collateral for that debt consists of a motor vehicle (as
defined in section 30102 of title 49) acquired for the
personal use of the debtor, or if collateral for that debt
consists of any other thing of value, if the debt was
incurred during the 1-year period preceding that filing.''.
(c) Definitions.--Section 101 of title 11, United States
Code, as amended by this Act, is amended--
(1) by inserting after paragraph (13) the following:
``(13A) `debtor's principal residence'--
``(A) means a residential structure, including incidental
property, without regard to whether that structure is
attached to real property; and
``(B) includes an individual condominium or cooperative
unit, a mobile or manufactured home, or trailer;''; and
(2) by inserting after paragraph (27), the following:
``(27A) `incidental property' means, with respect to a
debtor's principal residence--
``(A) property commonly conveyed with a principal residence
in the area where the real estate is located;
``(B) all easements, rights, appurtenances, fixtures,
rents, royalties, mineral rights, oil or gas rights or
profits, water rights, escrow funds, or insurance proceeds;
and
``(C) all replacements or additions;''.
SEC. 307. DOMICILIARY REQUIREMENTS FOR EXEMPTIONS.
Section 522(b)(3)(A) of title 11, United States Code, as so
designated by this Act, is amended--
(1) by striking ``180 days'' and inserting ``730 days'';
and
(2) by striking ``, or for a longer portion of such 180-day
period than in any other place'' and inserting ``or if the
debtor's domicile has not been located at a single State for
such 730-day period, the place in which the debtor's domicile
was located for 180 days immediately preceding the 730-day
period or for a longer portion of such 180-day period than in
any other place''.
SEC. 308. RESIDENCY REQUIREMENT FOR HOMESTEAD EXEMPTION.
Section 522 of title 11, United States Code, is amended--
(1) in subsection (b)(3)(A), as so designated by this Act,
by inserting ``subject to subsections (o) and (p),'' before
``any property''; and
(2) by adding at the end the following:
``(o) For purposes of subsection (b)(3)(A), and
notwithstanding subsection (a), the value of an interest in--
``(1) real or personal property that the debtor or a
dependent of the debtor uses as a residence;
``(2) a cooperative that owns property that the debtor or a
dependent of the debtor uses as a residence; or
``(3) a burial plot for the debtor or a dependent of the
debtor;
shall be reduced to the extent that such value is
attributable to any portion of any property that the debtor
disposed of in the 7-year period ending on the date of the
filing of the petition with the intent to hinder, delay, or
defraud a creditor and that the debtor could not exempt, or
that portion that the debtor could not exempt, under
subsection (b), if on such date the debtor had held the
property so disposed of.''.
SEC. 309. PROTECTING SECURED CREDITORS IN CHAPTER 13 CASES.
(a) 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
a case under chapter 11 or 12, but not in a case converted to
a case under 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--
``(i) 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 such 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; and
``(ii) unless a prebankruptcy default has been fully cured
under the plan at the time of conversion, in any proceeding
under this title or otherwise, the default shall have the
effect given under applicable nonbankruptcy law.''.
(b) Giving Debtors the Ability To Keep Leased Personal
Property by Assumption.--Section 365 of title 11, United
States
[[Page H546]]
Code, is amended by adding at the end the following:
``(p)(1) If a lease of personal property is rejected or not
timely assumed by the trustee under subsection (d), the
leased property is no longer property of the estate and the
stay under section 362(a) is automatically terminated.
``(2)(A) In the case of an individual under chapter 7, the
debtor may notify the creditor in writing that the debtor
desires to assume the lease. Upon being so notified, the
creditor may, at its option, notify the debtor that it is
willing to have the lease assumed by the debtor and may
condition such assumption on cure of any outstanding default
on terms set by the contract.
``(B) If, not later than 30 days after notice is provided
under subparagraph (A), the debtor notifies the lessor in
writing that the lease is assumed, the liability under the
lease will be assumed by the debtor and not by the estate.
``(C) The stay under section 362 and the injunction under
section 524(a)(2) shall not be violated by notification of
the debtor and negotiation of cure under this subsection.
``(3) In a case under chapter 11 in which the debtor is an
individual and in a case under chapter 13, if the debtor is
the lessee with respect to personal property and the lease is
not assumed in the plan confirmed by the court, the lease is
deemed rejected as of the conclusion of the hearing on
confirmation. If the lease is rejected, the stay under
section 362 and any stay under section 1301 is automatically
terminated with respect to the property subject to the
lease.''.
(c) Adequate Protection of Lessors and Purchase Money
Secured Creditors.--
(1) Confirmation of plan.--Section 1325(a)(5)(B) of title
11, United States Code, is amended--
(A) in clause (i), by striking ``and'' at the end;
(B) in clause (ii), by striking ``or'' at the end and
inserting ``and''; and
(C) by adding at the end the following:
``(iii) if--
``(I) property to be distributed pursuant to this
subsection is in the form of periodic payments, such payments
shall be in equal monthly amounts; and
``(II) the holder of the claim is secured by personal
property, the amount of such payments shall not be less than
an amount sufficient to provide to the holder of such claim
adequate protection during the period of the plan; or''.
(2) Payments.--Section 1326(a) of title 11, United States
Code, is amended to read as follows:
``(a)(1) Unless the court orders otherwise, the debtor
shall commence making payments not later than 30 days after
the date of the filing of the plan or the order for relief,
whichever is earlier, in the amount--
``(A) proposed by the plan to the trustee;
``(B) scheduled in a lease of personal property directly to
the lessor for that portion of the obligation that becomes
due after the order for relief, reducing the payments under
subparagraph (A) by the amount so paid and providing the
trustee with evidence of such payment, including the amount
and date of payment; and
``(C) that provides adequate protection directly to a
creditor holding an allowed claim secured by personal
property to the extent the claim is attributable to the
purchase of such property by the debtor for that portion of
the obligation that becomes due after the order for relief,
reducing the payments under subparagraph (A) by the amount so
paid and providing the trustee with evidence of such payment,
including the amount and date of payment.
``(2) A payment made under paragraph (1)(A) shall be
retained by the trustee until confirmation or denial of
confirmation. If a plan is confirmed, the trustee shall
distribute any such payment in accordance with the plan as
soon as is practicable. If a plan is not confirmed, the
trustee shall return any such payments not previously paid
and not yet due and owing to creditors pursuant to paragraph
(3) to the debtor, after deducting any unpaid claim allowed
under section 503(b).
``(3) Subject to section 363, the court may, upon notice
and a hearing, modify, increase, or reduce the payments
required under this subsection pending confirmation of a
plan.
``(4) Not later than 60 days after the date of filing of a
case under this chapter, a debtor retaining possession of
personal property subject to a lease or securing a claim
attributable in whole or in part to the purchase price of
such property shall provide the lessor or secured creditor
reasonable evidence of the maintenance of any required
insurance coverage with respect to the use or ownership of
such property and continue to do so for so long as the debtor
retains possession of such property.''.
SEC. 310. LIMITATION ON LUXURY GOODS.
Section 523(a)(2)(C) of title 11, United States Code, is
amended to read as follows:
``(C)(i) for purposes of subparagraph (A)--
``(I) consumer debts owed to a single creditor and
aggregating more than $250 for luxury goods or services
incurred by an individual debtor on or within 90 days before
the order for relief under this title are presumed to be
nondischargeable; and
``(II) cash advances aggregating more than $750 that are
extensions of consumer credit under an open end credit plan
obtained by an individual debtor on or within 70 days before
the order for relief under this title, are presumed to be
nondischargeable; and
``(ii) for purposes of this subparagraph--
``(I) the term `extension of credit under an open end
credit plan' means an extension of credit under an open end
credit plan, within the meaning of the Consumer Credit
Protection Act (15 U.S.C. 1601 et seq.);
``(II) the term `open end credit plan' has the meaning
given that term under section 103 of Consumer Credit
Protection Act (15 U.S.C. 1602); and
``(III) the term `luxury goods or services' does not
include goods or services reasonably necessary for the
support or maintenance of the debtor or a dependent of the
debtor.''.
SEC. 311. AUTOMATIC STAY.
Section 362(b) of title 11, United States Code, is amended
by inserting after paragraph (21), as added by this Act, the
following:
``(22) under subsection (a)(3), of the continuation of any
eviction, unlawful detainer action, or similar proceeding by
a lessor against a debtor involving residential real property
in which the debtor resides as a tenant under a rental
agreement;
``(23) under subsection (a)(3), of the commencement of any
eviction, unlawful detainer action, or similar proceeding by
a lessor against a debtor involving residential real property
in which the debtor resides as a tenant under a rental
agreement that has terminated under the lease agreement or
applicable State law;
``(24) under subsection (a)(3), of eviction actions based
on endangerment to property or person or the use of illegal
drugs;
``(25) under subsection (a) of any transfer that is not
avoidable under section 544 and that is not avoidable under
section 549;''.
SEC. 312. EXTENSION OF PERIOD BETWEEN BANKRUPTCY DISCHARGES.
Title 11, United States Code, is amended--
(1) in section 727(a)(8), by striking ``six'' and inserting
``8''; and
(2) in section 1328, by inserting after subsection (e) the
following:
``(f) Notwithstanding subsections (a) and (b), the court
shall not grant a discharge of all debts provided for by the
plan or disallowed under section 502 if the debtor has
received a discharge in any case filed under this title
within 5 years before the order for relief under this
chapter.''.
SEC. 313. DEFINITION OF HOUSEHOLD GOODS AND ANTIQUES.
(a) Definition.--Section 522(f) of title 11, United States
Code, is amended by adding at the end the following:
``(4)(A) Subject to subparagraph (B), for purposes of
paragraph (1)(B), the term `household goods' means--
``(i) clothing;
``(ii) furniture;
``(iii) appliances;
``(iv) 1 radio;
``(v) 1 television;
``(vi) 1 VCR;
``(vii) linens;
``(viii) china;
``(ix) crockery;
``(x) kitchenware;
``(xi) educational materials and educational equipment
primarily for the use of minor dependent children of the
debtor, but only 1 personal computer only if used primarily
for the education or entertainment of such minor children;
``(xii) medical equipment and supplies;
``(xiii) furniture exclusively for the use of minor
children, or elderly or disabled dependents of the debtor;
and
``(xiv) personal effects (including the toys and hobby
equipment of minor dependent children and wedding rings) of
the debtor and the dependents of the debtor.
``(B) The term `household goods' does not include--
``(i) works of art (unless by or of the debtor or the
dependents of the debtor);
``(ii) electronic entertainment equipment (except 1
television, 1 radio, and 1 VCR);
``(iii) items acquired as antiques;
``(iv) jewelry (except wedding rings); and
``(v) a computer (except as otherwise provided for in this
section), motor vehicle (including a tractor or lawn
tractor), boat, or a motorized recreational device,
conveyance, vehicle, watercraft, or aircraft.''.
(b) Study.--Not later than 2 years after the date of
enactment of this Act, the Director of the Executive Office
for United States Trustees shall submit a report to the
Committee on the Judiciary of the Senate and the Committee on
the Judiciary of the House of Representatives containing its
findings regarding utilization of the definition of household
goods, as defined in section 522(f)(4) of title 11, United
States Code, as added by this section, with respect to the
avoidance of nonpossessory, nonpurchase money security
interests in household goods under section 522(f)(1)(B) of
title 11, United States Code, and the impact that section
522(f)(4) of that title, as added by this section, has had on
debtors and on the bankruptcy courts. Such report may include
recommendations for amendments to section 522(f)(4) of title
11, United States Code, consistent with the Director's
findings.
SEC. 314. DEBT INCURRED TO PAY NONDISCHARGEABLE DEBTS.
(a) In General.--Section 523(a) of title 11, United States
Code, is amended by inserting after paragraph (14) the
following:
``(14A) incurred to pay a tax to a governmental unit, other
than the United States, that would be nondischargeable under
paragraph (1);''.
(b) Discharge Under Chapter 13.--Section 1328(a) of title
11, United States Code, is amended by striking paragraphs (1)
through (3) and inserting the following:
``(1) provided for under section 1322(b)(5);
[[Page H547]]
``(2) of the kind specified in paragraph (2), (3), (4),
(5), (8), or (9) of section 523(a);
``(3) for restitution, or a criminal fine, included in a
sentence on the debtor's conviction of a crime; or
``(4) for restitution, or damages, awarded in a civil
action against the debtor as a result of willful or malicious
injury by the debtor that caused personal injury to an
individual or the death of an individual.''.
SEC. 315. GIVING CREDITORS FAIR NOTICE IN CHAPTERS 7 AND 13
CASES.
(a) Notice.--Section 342 of title 11, United States Code,
as amended by this Act, is amended--
(1) in subsection (c)--
(A) by inserting ``(1)'' after ``(c)'';
(B) by striking ``, but the failure of such notice to
contain such information shall not invalidate the legal
effect of such notice''; and
(C) by adding at the end the following:
``(2) If, within the 90 days prior to the date of the
filing of a petition in a voluntary case, the creditor
supplied the debtor in at least 2 communications sent to the
debtor with the current account number of the debtor and the
address at which the creditor wishes to receive
correspondence, then the debtor shall send any notice
required under this title to the address provided by the
creditor and such notice shall include the account number. In
the event the creditor would be in violation of applicable
nonbankruptcy law by sending any such communication within
such 90-day period and if the creditor supplied the debtor in
the last 2 communications with the current account number of
the debtor and the address at which the creditor wishes to
receive correspondence, then the debtor shall send any notice
required under this title to the address provided by the
creditor and such notice shall include the account number.'';
and
(2) by adding at the end the following:
``(e) At any time, a creditor, in a case of an individual
debtor 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. Five days after receipt of
such notice, if the court or the debtor is required to give
the creditor notice, such 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 chapters 7 and 13.
After 30 days following the filing of such 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. If
the creditor designates a person or department to be
responsible for receiving notices concerning bankruptcy cases
and establishes reasonable procedures so that bankruptcy
notices received by the creditor are to be delivered to such
department or person, notice shall not be considered to have
been brought to the attention of the creditor until received
by such person or department.
``(2) No sanction under section 362(k) or any other
sanction that a court may impose on account of violations of
the stay under section 362(a) or failure to comply with
section 542 or 543 may be imposed on any action of the
creditor unless the action takes place after the creditor has
received notice of the commencement of the case effective
under this section.''.
(b) Debtor's Duties.--Section 521 of title 11, United
States Code, as amended by this Act, is amended--
(1) in subsection (a), as so designated by this Act, 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 under section 110(b)(1) indicating that
such attorney or bankruptcy petition preparer delivered to
the debtor any notice required by section 342(b); 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 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 before the filing of the
petition;
``(v) a statement of the amount of monthly net income,
itemized to show how the amount is calculated; and
``(vi) a statement disclosing any reasonably anticipated
increase in income or expenditures over the 12-month period
following the date of filing;''; and
(2) by adding at the end the following:
``(e)(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)(A) The debtor shall provide either a tax return or
transcript at the election of the debtor, for the latest
taxable period prior to filing for which a tax return has
been or should have been filed, to the trustee, not later
than 7 days before the date first set for the first meeting
of creditors, or the case shall be dismissed, unless the
debtor demonstrates that the failure to file a return as
required is due to circumstances beyond the control of the
debtor.
``(B) If a creditor has requested a tax return or
transcript referred to in subparagraph (A), the debtor
shall provide such tax return or transcript to the
requesting creditor at the time the debtor provides the
tax return or transcript to the trustee, or the case shall
be dismissed, unless the debtor demonstrates that the
debtor is unable to provide such information due to
circumstances beyond the control of the debtor.
``(3)(A) 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.
``(B) The court shall make such plan available to the
creditor who request such plan--
``(i) at a reasonable cost; and
``(ii) not later than 5 days after such request.
``(f) An individual debtor in a case under chapter 7, 11,
or 13 shall file with the court at the request of any party
in interest--
``(1) at the time filed with the taxing authority, all tax
returns required under applicable law, 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 required under applicable law, 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 of 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.
``(g)(1) A statement referred to in subsection (f)(4) shall
disclose--
``(A) the amount and sources of income of the debtor;
``(B) the identity of any person responsible with the
debtor for the support of any dependent of the debtor; and
``(C) the identity of any person 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 subsection (e)(2)(A) and
subsection (f) shall be available to the United States
trustee, any bankruptcy administrator, any trustee, and any
party in interest for inspection and copying, subject to the
requirements of subsection (h).
``(h)(1) Not later than 180 days after the date of
enactment of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2001, the Director of the Administrative
Office of the United States Courts shall establish procedures
for safeguarding the confidentiality of any tax information
required to be provided under this section.
``(2) The procedures under paragraph (1) shall include
restrictions on creditor access to tax information that is
required to be provided under this section.
``(3) Not later than 1 year and 180 days after the date of
enactment of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2001, the Director of the Administrative
Office of the United States Courts shall prepare and submit
to Congress a report that--
``(A) assesses the effectiveness of the procedures under
paragraph (1); and
``(B) if appropriate, includes proposed legislation to--
``(i) further protect the confidentiality of tax
information; and
``(ii) provide penalties for the improper use by any person
of the tax information required to be provided under this
section.
``(i) If requested by the United States trustee or a
trustee serving in the case, the debtor shall provide--
``(1) a document that establishes the identity of the
debtor, including a driver's license, passport, or other
document that contains a photograph of the debtor; and
``(2) such other personal identifying information relating
to the debtor that establishes the identity of the debtor.''.
SEC. 316. DISMISSAL FOR FAILURE TO TIMELY FILE SCHEDULES OR
PROVIDE REQUIRED INFORMATION.
Section 521 of title 11, United States Code, as amended by
this Act, is amended by adding at the end the following:
``(j)(1) Notwithstanding section 707(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 subsection (a)(1) 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.
[[Page H548]]
``(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. If requested, the court shall enter an
order of dismissal not later than 5 days after such 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 45 days to file the information
required under subsection (a)(1) if the court finds
justification for extending the period for the filing.''.
SEC. 317. ADEQUATE TIME TO PREPARE FOR 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) The hearing on confirmation of the plan may be held
not earlier than 20 days and not later than 45 days after the
date of the meeting of creditors under section 341(a).''.
SEC. 318. CHAPTER 13 PLANS TO HAVE A 5-YEAR DURATION IN
CERTAIN CASES.
Title 11, United States Code, is amended--
(1) by amending section 1322(d) to read as follows:
``(d)(1) If the current monthly income of the debtor and
the debtor's spouse combined, when multiplied by 12, is not
less than--
``(A) in the case of a debtor in a household of 1 person,
the median family income of the applicable State for 1 earner
last reported by the Bureau of the Census;
``(B) in the case of a debtor in a household of 2, 3, or 4
individuals, the highest median family income of the
applicable State for a family of the same number or fewer
individuals last reported by the Bureau of the Census; or
``(C) in the case of a debtor in a household exceeding 4
individuals, the highest median family income of the
applicable State for a family of 4 or fewer individuals last
reported by the Bureau of the Census, plus $525 per month for
each individual in excess of 4,
the plan may not provide for payments over a period that is
longer than 5 years.
``(2) If the current monthly income of the debtor and the
debtor's spouse combined, when multiplied by 12, is less
than--
``(A) in the case of a debtor in a household of 1 person,
the median family income of the applicable State for 1 earner
last reported by the Bureau of the Census;
``(B) in the case of a debtor in a household of 2, 3, or 4
individuals, the highest median family income of the
applicable State for a family of the same number or fewer
individuals last reported by the Bureau of the Census; or
``(C) in the case of a debtor in a household exceeding 4
individuals, the highest median family income of the
applicable State for a family of 4 or fewer individuals last
reported by the Bureau of the Census, plus $525 per month for
each individual in excess of 4,
the plan may not provide for payments over a period that is
longer than 3 years, unless the court, for cause, approves a
longer period, but the court may not approve a period that is
longer than 5 years.'';
(2) in section 1325(b)(1)(B), by striking ``three-year
period'' and inserting ``applicable commitment period''; and
(3) in section 1325(b), as amended by this Act, by adding
at the end the following:
``(4) For purposes of this subsection, the `applicable
commitment period'--
``(A) subject to subparagraph (B), shall be--
``(i) 3 years; or
``(ii) not less than 5 years, if the current monthly income
of the debtor and the debtor's spouse combined, when
multiplied by 12, is not less than--
``(I) in the case of a debtor in a household of 1 person,
the median family income of the applicable State for 1 earner
last reported by the Bureau of the Census;
``(II) in the case of a debtor in a household of 2, 3, or 4
individuals, the highest median family income of the
applicable State for a family of the same number or fewer
individuals last reported by the Bureau of the Census; or
``(III) in the case of a debtor in a household exceeding 4
individuals, the highest median family income of the
applicable State for a family of 4 or fewer individuals last
reported by the Bureau of the Census, plus $525 per month for
each individual in excess of 4; and
``(B) may be less than 3 or 5 years, whichever is
applicable under subparagraph (A), but only if the plan
provides for payment in full of all allowed unsecured claims
over a shorter period.''; and
(4) in section 1329(c), by striking ``three years'' and
inserting ``the applicable commitment period under section
1325(b)(1)(B)''.
SEC. 319. SENSE OF CONGRESS REGARDING EXPANSION OF RULE 9011
OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE.
It is the sense of Congress that rule 9011 of the Federal
Rules of Bankruptcy Procedure (11 U.S.C. App.) should be
modified to include a requirement that all documents
(including schedules), signed and unsigned, submitted to the
court or to a trustee by debtors who represent themselves and
debtors who are represented by an attorney be submitted only
after the debtor or the debtor's attorney has made reasonable
inquiry to verify that the information contained in such
documents is--
(1) well grounded in fact; and
(2) warranted by existing law or a good-faith argument for
the extension, modification, or reversal of existing law.
SEC. 320. 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, as described in
findings made by the court.''.
SEC. 321. CHAPTER 11 CASES FILED BY INDIVIDUALS.
(a) Property of the Estate.--
(1) In general.--Subchapter I of chapter 11 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 1115. Property of the estate
``(a) In a case concerning an individual debtor, property
of the estate includes, in addition to the property specified
in section 541--
``(1) all property of the kind specified in section 541
that the debtor acquires after the commencement of the case
but before the case is closed, dismissed, or converted to a
case under chapter 7, 12, or 13, whichever occurs first; and
``(2) earnings from services performed by the debtor after
the commencement of the case but before the case is closed,
dismissed, or converted to a case under chapter 7, 12, or 13,
whichever occurs first.''.
``(b) Except as provided in section 1104 or a confirmed
plan or order confirming a plan, the debtor shall remain in
possession of all property of the estate.''.
(2) Clerical amendment.--The table of sections for chapter
11 of title 11, United States Code, is amended by adding at
the end of the matter relating to subchapter I the following:
``1115. Property of the estate.''.
(b) Contents of Plan.--Section 1123(a) of title 11, United
States Code, is amended--
(1) in paragraph (6), by striking ``and'' at the end;
(2) in paragraph (7), by striking the period and inserting
``; and''; and
(3) by adding at the end the following:
``(8) in a case concerning an individual, provide for the
payment to creditors through the plan of all or such portion
of earnings from personal services performed by the debtor
after the commencement of the case or other future income of
the debtor as is necessary for the execution of the plan.''.
(c) Confirmation of Plan.--
(1) Requirements relating to value of property.--Section
1129(a) of title 11, United States Code, is amended by adding
at the end the following:
``(15) In a case concerning an individual in which the
holder of an allowed unsecured claim objects to the
confirmation of the plan--
``(A) the value of the property to be distributed under the
plan on account of such claim is, as of the effective date of
the plan, not less than the amount of such claim; or
``(B) the value of the property to be distributed under the
plan is not less than the debtor's projected disposable
income (as that term is defined in section 1325(b)(2)) to be
received during the 5-year period beginning on the date that
the first payment is due under the plan, or during the term
of the plan, whichever is longer.''.
(2) Requirement relating to interests in property.--Section
1129(b)(2)(B)(ii) of title 11, United States Code, is amended
by inserting before the period at the end the following: ``,
except that in a case concerning an individual, the debtor
may retain property included in the estate under section
1115, subject to the requirements of subsection (a)(14)''.
(d) Effect of Confirmation--Section 1141(d) of title 11,
United States Code, is amended--
(1) in paragraph (2), by striking ``The confirmation of a
plan does not discharge an individual debtor'' and inserting
``A discharge under this chapter does not discharge a
debtor''; and
(2) by adding at the end the following:
``(5) In a case concerning an individual--
``(A) except as otherwise ordered for cause shown, the
discharge is not effective until completion of all payments
under the plan; and
``(B) at any time after the confirmation of the plan and
after notice and a hearing, the court may grant a discharge
to a debtor that has not completed payments under the plan
only if--
``(i) for each allowed unsecured claim, the value, as of
the effective date of the plan, of property actually
distributed under the plan on account of that claim is not
less than the amount that would have been paid on such claim
if the estate of the debtor had been liquidated under chapter
7 of this title on such date; and
``(ii) modification of the plan under 1127 of this title is
not practicable.''.
[[Page H549]]
(e) Modification of Plan.--Section 1127 of title 11, United
States Code, is amended by adding at the end the following:
``(e) In a case concerning an individual, the plan may be
modified at any time after confirmation of the plan but
before the completion of payments under the plan, whether or
not the plan has been substantially consummated, upon request
of the debtor, the trustee, the United States trustee, or the
holder of an allowed unsecured claim, to--
``(1) increase or reduce the amount of payments on claims
of a particular class provided for by the plan;
``(2) extend or reduce the time period for such payments;
or
``(3) alter the amount of the distribution to a creditor
whose claim is provided for by the plan to the extent
necessary to take account of any payment of such claim made
other than under the plan.
``(f)(1) Sections 1121 through 1128 of this title and the
requirements of section 1129 of this title apply to any
modification under subsection (a).
``(2) The plan, as modified, shall become the plan only
after there has been disclosure under section 1125, as the
court may direct, notice and a hearing, and such modification
is approved.''.
SEC. 322. LIMITATION.
(a) Exemptions.--Section 522 of title 11, United States
Code, as amended by this Act, is amended by adding at the end
the following:
``(p)(1) Except as provided in paragraph (2) of this
subsection and sections 544 and 548 of this title, as a
result of electing under subsection (b)(3)(A) to
exempt property under State or local law, a debtor may not
exempt any amount of interest that was acquired by the
debtor during the 2-year period preceding the filing of
the petition which exceeds in the aggregate $100,000 in
value in--
``(A) real or personal property that the debtor or a
dependent of the debtor uses as a residence;
``(B) a cooperative that owns property that the debtor or a
dependent of the debtor uses as a residence; or
``(C) a burial plot for the debtor or a dependent of the
debtor.
``(2)(A) The limitation under paragraph (1) shall not apply
to an exemption claimed under subsection (b)(3)(A) by a
family farmer for the principal residence of that farmer.
``(B) For purposes of paragraph (1), any amount of such
interest does not include any interest transferred from a
debtor's previous principal residence (which was acquired
prior to the beginning of the 2-year period) into the
debtor's current principal residence, where the debtor's
previous and current residences are located in the same
State.''.
(b) Adjustment of Dollar Amounts.--Section 104(b) of title
11, United States Code, is amended--
(1) in paragraph (1), by striking ``522(d),'' and inserting
``522(d), 522(n), 522(p),''; and
(2) in paragraph (3), by striking ``522(d),'' and inserting
``522(d), 522(n), 522(p),''.
SEC. 323. EXCLUDING EMPLOYEE BENEFIT PLAN PARTICIPANT
CONTRIBUTIONS AND OTHER PROPERTY FROM THE
ESTATE.
(a) In General.--Section 541(b) of title 11, United States
Code, is amended by inserting after paragraph (6), as added
by this Act, the following:
``(7) any amount--
``(A) withheld by an employer from the wages of employees
for payment as contributions to--
``(i) an employee benefit plan subject to title I of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1001 et seq.) or under an employee benefit plan which is a
governmental plan under section 414(d) of the Internal
Revenue Code of 1986, a deferred compensation plan under
section 457 of the Internal Revenue Code of 1986, or a tax-
deferred annuity under section 403(b) of the Internal Revenue
Code of 1986, except that amount shall not constitute
disposable income, as defined in section 1325(b)(2) of this
title; or
``(ii) a health insurance plan regulated by State law
whether or not subject to such title; or
``(B) received by the employer from employees for payment
as contributions to--
``(i) an employee benefit plan subject to title I of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1001 et seq.) or under an employee benefit plan which is a
governmental plan under section 414(d) of the Internal
Revenue Code of 1986, a deferred compensation plan under
section 457 of the Internal Revenue Code of 1986, or a tax-
deferred annuity under section 403(b) of the Internal Revenue
Code of 1986, except that amount shall not constitute
disposable income, as defined in section 1325(b)(2) of this
title; or
``(ii) a health insurance plan regulated by State law
whether or not subject to such title;''.
(b) Application of Amendment.--The amendments made by this
section shall not apply to cases commenced under title 11,
United States Code, before the expiration of the 180-day
period beginning on the date of enactment of this Act.
SEC. 324. EXCLUSIVE JURISDICTION IN MATTERS INVOLVING
BANKRUPTCY PROFESSIONALS.
(a) In General.--Section 1334 of title 28, United States
Code, is amended--
(1) in subsection (b), by striking ``Notwithstanding'' and
inserting ``Except as provided in subsection (e)(2), and
notwithstanding''; and
(2) by striking subsection (e) and inserting the following:
``(e) The district court in which a case under title 11 is
commenced or is pending shall have exclusive jurisdiction--
``(1) of all the property, wherever located, of the debtor
as of the date of commencement of such case, and of property
of the estate; and
``(2) over all claims or causes of action that involve
construction of section 327 of title 11, United States Code,
or rules relating to disclosure requirements under section
327.''.
(b) Applicability.--This section shall only apply to cases
filed after the date of enactment of this Act.
SEC. 325. UNITED STATES TRUSTEE PROGRAM FILING FEE INCREASE.
(a) Actions Under Chapter 7 or 13 of Title 11, United
States Code.--Section 1930(a) of title 28, United States
Code, is amended by striking paragraph (1) and inserting the
following:
``(1) For a case commenced--
``(A) under chapter 7 of title 11, $160; or
``(B) under chapter 13 of title 11, $150.''.
(b) United States Trustee System Fund.--Section 589a(b) of
title 28, United States Code, is amended--
(1) by striking paragraph (1) and inserting the following:
``(1)(A) 40.63 percent of the fees collected under section
1930(a)(1)(A) of this title in cases commenced under chapter
7 of title 11; and
``(B) 70.00 percent of the fees collected under section
1930(a)(1)(B) of this title in cases commenced under chapter
13 of title 11;'';
(2) in paragraph (2), by striking ``one-half'' and
inserting ``three-fourths''; and
(3) in paragraph (4), by striking ``one-half'' and
inserting ``100 percent''.
(c) Collection and Deposit of Miscellaneous Bankruptcy
Fees.--Section 406(b) of the Judiciary Appropriations Act,
1990 (28 U.S.C. 1931 note) is amended by striking ``pursuant
to 28 U.S.C. section 1930(b) and 33.87 per centum of the fees
hereafter collected under 28 U.S.C. section 1930(a)(1) and 25
percent of the fees hereafter collected under 28 U.S.C.
section 1930(a)(3) shall be deposited as offsetting receipts
to the fund established under 28 U.S.C. section 1931'' and
inserting ``under section 1930(b) of title 28, United States
Code, and 31.25 percent of the fees collected under section
1930(a)(1)(A) of that title, 30.00 percent of the fees
collected under section 1930(a)(1)(B) of that title, and 25
percent of the fees collected under section 1930(a)(3) of
that title shall be deposited as offsetting receipts to the
fund established under section 1931 of that title''.
SEC. 326. SHARING OF COMPENSATION.
Section 504 of title 11, United States Code, is amended by
adding at the end the following:
``(c) This section shall not apply with respect to sharing,
or agreeing to share, compensation with a bona fide public
service attorney referral program that operates in accordance
with non-Federal law regulating attorney referral services
and with rules of professional responsibility applicable to
attorney acceptance of referrals.''.
SEC. 327. FAIR VALUATION OF COLLATERAL.
Section 506(a) of title 11, United States Code, is amended
by--
(1) inserting ``(1)'' after ``(a)''; and
(2) by adding at the end the following:
``(2) In the case of an individual debtor under chapters 7
and 13, such value with respect to personal property securing
an allowed claim shall be determined based on the replacement
value of such property as of the date of filing the petition
without deduction for costs of sale or marketing. With
respect to property acquired for personal, family, or
household purpose, replacement value shall mean the price a
retail merchant would charge for property of that kind
considering the age and condition of the property at the time
value is determined.''.
SEC. 328. 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 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, except that if such default arises from a
failure to operate in accordance with a nonresidential real
property lease, then such default shall be cured by
performance at and after the time of assumption in accordance
with such lease, and pecuniary losses resulting from such
default shall be compensated in accordance with the
provisions of paragraph (b)(l);''; and
(B) in paragraph (2)(D), by striking ``penalty rate or
provision'' and inserting ``penalty rate or penalty
provision'';
(2) in subsection (c)--
(A) in paragraph (2), by inserting ``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
[[Page H550]]
(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)(2) 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, other than a
default arising from failure to operate a non-residential
real property lease subject to section 365(b)(1)(A),
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''.
TITLE IV--GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS
Subtitle A--General Business Bankruptcy Provisions
SEC. 401. ADEQUATE PROTECTION FOR INVESTORS.
(a) Definition.--Section 101 of title 11, United States
Code, as amended by this Act, is amended by inserting after
paragraph (48) the following:
``(48A) `securities self regulatory organization' means
either a securities association registered with the
Securities and Exchange Commission under section 15A of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-3) or a
national securities exchange registered with the Securities
and Exchange Commission under section 6 of the Securities
Exchange Act of 1934 (15 U.S.C. 78f);''.
(b) Automatic Stay.--Section 362(b) of title 11, United
States Code, is amended by inserting after paragraph (25), as
added by this Act, the following:
``(26) under subsection (a), of--
``(A) the commencement or continuation of an investigation
or action by a securities self regulatory organization to
enforce such organization's regulatory power;
``(B) the enforcement of an order or decision, other than
for monetary sanctions, obtained in an action by the
securities self regulatory organization to enforce such
organization's regulatory power; or
``(C) any act taken by the securities self regulatory
organization to delist, delete, or refuse to permit quotation
of any stock that does not meet applicable regulatory
requirements;''.
SEC. 402. MEETINGS OF CREDITORS AND EQUITY SECURITY HOLDERS.
Section 341 of title 11, United States Code, is amended by
adding at the end the following:
``(e) Notwithstanding subsections (a) and (b), the court,
on the request of a party in interest and after notice and a
hearing, for cause may order that the United States trustee
not convene a meeting of creditors or equity security holders
if the debtor has filed a plan as to which the debtor
solicited acceptances prior to the commencement of the
case.''.
SEC. 403. PROTECTION OF REFINANCE OF SECURITY INTEREST.
Subparagraphs (A), (B), and (C) of section 547(e)(2) of
title 11, United States Code, are each amended by striking
``10'' each place it appears and inserting ``30''.
SEC. 404. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
(a) In General.--Section 365(d)(4) of title 11, United
States Code, is amended to read as follows:
``(4)(A) Subject to subparagraph (B), in any case under any
chapter of this title, an unexpired lease of nonresidential
real property under which the debtor is the lessee shall be
deemed rejected, and the trustee shall immediately surrender
that nonresidential real property to the lessor, if the
trustee does not assume or reject the unexpired lease by the
earlier of--
``(i) the date that is 120 days after the date of the order
for relief; or
``(ii) the date of the entry of an order confirming a plan.
``(B)(i) The court may extend the period determined under
subparagraph (A), prior to the expiration of the 120-day
period, for 90 days upon motion of the trustee or lessor for
cause.
``(ii) If the court grants an extension under clause (i),
the court may grant a subsequent extension only upon prior
written consent of the lessor in each instance.''.
(b) Exception.--Section 365(f)(1) of title 11, United
States Code, is amended by striking ``subsection'' the first
place it appears and inserting ``subsections (b) and''.
SEC. 405. CREDITORS AND EQUITY SECURITY HOLDERS COMMITTEES.
(a) Appointment.--Section 1102(a) of title 11, United
States Code, is amended by adding at the end the following:
``(4) On request of a party in interest and after notice
and a hearing, the court may order the United States trustee
to change the membership of a committee appointed under this
subsection, if the court determines that the change is
necessary to ensure adequate representation of creditors or
equity security holders. The court may order the United
States trustee to increase the number of members of a
committee to include a creditor that is a small business
concern (as described in section 3(a)(1) of the Small
Business Act (15 U.S.C. 632(a)(1))), if the court determines
that the creditor holds claims (of the kind represented by
the committee) the aggregate amount of which, in comparison
to the annual gross revenue of that creditor, is
disproportionately large.''.
(b) Information.--Section 1102(b) of title 11, United
States Code, is amended by adding at the end the following:
``(3) A committee appointed under subsection (a) shall--
``(A) provide access to information for creditors who--
``(i) hold claims of the kind represented by that
committee; and
``(ii) are not appointed to the committee;
``(B) solicit and receive comments from the creditors
described in subparagraph (A); and
``(C) be subject to a court order that compels any
additional report or disclosure to be made to the creditors
described in subparagraph (A).''.
SEC. 406. AMENDMENT TO SECTION 546 OF TITLE 11, UNITED STATES
CODE.
Section 546 of title 11, United States Code, is amended--
(1) by redesignating the second subsection designated as
subsection (g) (as added by section 222(a) of Public Law 103-
394) as subsection (i); and
(2) by adding at the end the following:
``(j)(1) Notwithstanding paragraphs (2) and (3) of section
545, the trustee may not avoid a warehouseman's lien for
storage, transportation, or other costs incidental to the
storage and handling of goods.
``(2) The prohibition under paragraph (1) shall be applied
in a manner consistent with any applicable State statute that
is similar to section 7-209 of the Uniform Commercial Code,
as in effect on the date of enactment of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2001, or any
successor thereto.''.
SEC. 407. AMENDMENTS TO SECTION 330(A) OF TITLE 11, UNITED
STATES CODE.
Section 330(a) of title 11, United States Code, is
amended--
(1) in paragraph (3)--
(A) by striking ``(A) In'' and inserting ``In''; and
(B) by inserting ``to an examiner, trustee under chapter
11, or professional person'' after ``awarded''; and
(2) by adding at the end the following:
``(7) In determining the amount of reasonable compensation
to be awarded to a trustee, the court shall treat such
compensation as a commission, based on section 326 of this
title.''.
SEC. 408. POSTPETITION DISCLOSURE AND SOLICITATION.
Section 1125 of title 11, United States Code, is amended by
adding at the end the following:
``(g) Notwithstanding subsection (b), an acceptance or
rejection of the plan may be solicited from a holder of a
claim or interest if such solicitation complies with
applicable nonbankruptcy law and if such holder was solicited
before the commencement of the case in a manner complying
with applicable nonbankruptcy law.''.
SEC. 409. PREFERENCES.
Section 547(c) of title 11, United States Code, is
amended--
(1) by striking paragraph (2) and inserting the following:
``(2) to the extent that such transfer was in payment of a
debt incurred by the debtor in the ordinary course of
business or financial affairs of the debtor and the
transferee, and such transfer was--
``(A) made in the ordinary course of business or financial
affairs of the debtor and the transferee; or
``(B) made according to ordinary business terms;'';
(2) in paragraph (8), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(9) if, in a case filed by a debtor whose debts are not
primarily consumer debts, the aggregate value of all property
that constitutes or is affected by such transfer is less than
$5,000.''.
SEC. 410. VENUE OF CERTAIN PROCEEDINGS.
Section 1409(b) of title 28, United States Code, is amended
by inserting ``, or a nonconsumer debt against a noninsider
of less than $10,000,'' after ``$5,000''.
SEC. 411. PERIOD FOR FILING PLAN UNDER CHAPTER 11.
Section 1121(d) of title 11, United States Code, is
amended--
(1) by striking ``On'' and inserting ``(1) Subject to
paragraph (2), on''; and
(2) by adding at the end the following:
``(2)(A) The 120-day period specified in paragraph (1) may
not be extended beyond a date that is 18 months after the
date of the order for relief under this chapter.
``(B) The 180-day period specified in paragraph (1) may not
be extended beyond a date that is 20 months after the date of
the order for relief under this chapter.''.
SEC. 412. FEES ARISING FROM CERTAIN OWNERSHIP INTERESTS.
Section 523(a)(16) of title 11, United States Code, is
amended--
(1) by striking ``dwelling'' the first place it appears;
(2) by striking ``ownership or'' and inserting
``ownership,'';
(3) by striking ``housing'' the first place it appears; and
(4) by striking ``but only'' and all that follows through
``such period'' and inserting ``or a lot in a homeowners
association, for as long as the debtor or the trustee has a
legal, equitable, or possessory ownership interest in such
unit, such corporation, or such lot,''.
[[Page H551]]
SEC. 413. CREDITOR REPRESENTATION AT FIRST MEETING OF
CREDITORS.
Section 341(c) of title 11, United States Code, is amended
by inserting at the end 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 1 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. 414. DEFINITION OF DISINTERESTED PERSON.
Section 101(14) of title 11, United States Code, is amended
to read as follows:
``(14) `disinterested person' means a person that--
``(A) is not a creditor, an equity security holder, or an
insider;
``(B) is not and was not, within 2 years before the date of
the filing of the petition, a director, officer, or employee
of the debtor; and
``(C) does not have an interest materially adverse to the
interest of the estate or of any class of creditors or equity
security holders, by reason of any direct or indirect
relationship to, connection with, or interest in, the debtor,
or for any other reason;''.
SEC. 415. FACTORS FOR COMPENSATION OF PROFESSIONAL PERSONS.
Section 330(a)(3) of title 11, United States Code, as
amended by this Act, is amended--
(1) in subparagraph (D), by striking ``and'' at the end;
(2) by redesignating subparagraph (E) as subparagraph (F);
and
(3) by inserting after subparagraph (D) the following:
``(E) with respect to a professional person, whether the
person is board certified or otherwise has demonstrated skill
and experience in the bankruptcy field; and''.
SEC. 416. 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:
``(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.
``(B) Upon the filing of a report under subparagraph (A)--
``(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.
``(C) In the case of any dispute arising out of an election
described in subparagraph (A), the court shall resolve the
dispute.''.
SEC. 417. UTILITY SERVICE.
Section 366 of title 11, United States Code, is amended--
(1) in subsection (a), by striking ``subsection (b)'' and
inserting ``subsections (b) and (c)''; and
(2) by adding at the end the following:
``(c)(1)(A) For purposes of this subsection, the term
`assurance of payment' means--
``(i) a cash deposit;
``(ii) a letter of credit;
``(iii) a certificate of deposit;
``(iv) a surety bond;
``(v) a prepayment of utility consumption; or
``(vi) another form of security that is mutually agreed on
between the utility and the debtor or the trustee.
``(B) For purposes of this subsection an administrative
expense priority shall not constitute an assurance of
payment.
``(2) Subject to paragraphs (3) through (5), with respect
to a case filed under chapter 11, a utility referred to in
subsection (a) may alter, refuse, or discontinue utility
service, if during the 30-day period beginning on the date of
filing of the petition, the utility does not receive from the
debtor or the trustee adequate assurance of payment for
utility service that is satisfactory to the utility.
``(3)(A) On request of a party in interest and after notice
and a hearing, the court may order modification of the amount
of an assurance of payment under paragraph (2).
``(B) In making a determination under this paragraph
whether an assurance of payment is adequate, the court may
not consider--
``(i) the absence of security before the date of filing of
the petition;
``(ii) the payment by the debtor of charges for utility
service in a timely manner before the date of filing of the
petition; or
``(iii) the availability of an administrative expense
priority.
``(4) Notwithstanding any other provision of law, with
respect to a case subject to this subsection, a utility may
recover or set off against a security deposit provided to the
utility by the debtor before the date of filing of the
petition without notice or order of the court.''.
SEC. 418. BANKRUPTCY FEES.
Section 1930 of title 28, United States Code, is amended--
(1) in subsection (a), by striking ``Notwithstanding
section 1915 of this title, the'' and inserting ``The''; and
(2) by adding at the end the following:
``(f)(1) Under the procedures prescribed by the Judicial
Conference of the United States, the district court or the
bankruptcy court may waive the filing fee in a case under
chapter 7 of title 11 for an individual if the court
determines that such debtor has income less than 150 percent
of the income official poverty line (as defined by the Office
of Management and Budget, and revised annually in accordance
with section 673(2) of the Omnibus Budget Reconciliation Act
of 1981) applicable to a family of the size involved and is
unable to pay that fee in installments. For purposes of this
paragraph, the term ``filing fee'' means the filing required
by subsection (a), or any other fee prescribed by the
Judicial Conference under subsections (b) and (c) that is
payable to the clerk upon the commencement of a case under
chapter 7.
``(2) The district court or the bankruptcy court may waive
for such debtors other fees prescribed under subsections (b)
and (c).
``(3) This subsection does not restrict the district court
or the bankruptcy court from waiving, in accordance with
Judicial Conference policy, fees prescribed under this
section for other debtors and creditors.''.
SEC. 419. MORE COMPLETE INFORMATION REGARDING ASSETS OF THE
ESTATE.
(a) In General.--
(1) Disclosure.--The Advisory Committee on Bankruptcy Rules
of the Judicial Conference of the United States, after
consideration of the views of the Director of the Executive
Office for United States Trustees, shall propose for adoption
amended Federal Rules of Bankruptcy Procedure and Official
Bankruptcy Forms directing debtors under chapter 11 of title
11, United States Code, to disclose the information described
in paragraph (2) by filing and serving periodic financial and
other reports designed to provide such information.
(2) Information.--The information referred to in paragraph
(1) is the value, operations, and profitability of any
closely held corporation, partnership, or of any other entity
in which the debtor holds a substantial or controlling
interest.
(b) Purpose.--The purpose of the rules and reports under
subsection (a) shall be to assist parties in interest taking
steps to ensure that the debtor's interest in any entity
referred to in subsection (a)(2) is used for the payment of
allowed claims against debtor.
Subtitle B--Small Business Bankruptcy Provisions
SEC. 431. FLEXIBLE RULES FOR DISCLOSURE STATEMENT AND PLAN.
Section 1125 of title 11, United States Code, is amended--
(1) in subsection (a)(1), by inserting before the semicolon
``and in determining whether a disclosure statement provides
adequate information, the court shall consider the complexity
of the case, the benefit of additional information to
creditors and other parties in interest, and the cost of
providing additional information''; and
(2) by striking subsection (f), and inserting the
following:
``(f) Notwithstanding subsection (b), in a small business
case--
``(1) the court may determine that the plan itself provides
adequate information and that a separate disclosure statement
is not necessary;
``(2) the court may approve a disclosure statement
submitted on standard forms approved by the court or adopted
under section 2075 of title 28; and
``(3)(A) the court may conditionally approve a disclosure
statement subject to final approval after notice and a
hearing;
``(B) acceptances and rejections of a plan may be solicited
based on a conditionally approved disclosure statement if the
debtor provides adequate information to each holder of a
claim or interest that is solicited, but a conditionally
approved disclosure statement shall be mailed not later than
20 days before the date of the hearing on confirmation of the
plan; and
``(C) the hearing on the disclosure statement may be
combined with the hearing on confirmation of a plan.''.
SEC. 432. DEFINITIONS.
(a) Definitions.--Section 101 of title 11, United States
Code, as amended by this Act, is amended by striking
paragraph (51C) and inserting the following:
``(51C) `small business case' means a case filed under
chapter 11 of this title in which the debtor is a small
business debtor;
``(51D) `small business debtor'--
``(A) subject to subparagraph (B), means a person engaged
in commercial or business activities (including any affiliate
of such person that is also a debtor under this title and
excluding a person whose primary activity is the business of
owning or operating real property or activities incidental
thereto) that has aggregate noncontingent, liquidated secured
and unsecured debts as of the date of the petition or the
order for relief in an amount not more than $3,000,000
(excluding debts owed to 1 or more affiliates or insiders)
for a case in which the United States trustee has not
appointed under section 1102(a)(1) a committee of unsecured
creditors or where the court has determined that the
committee of unsecured creditors is not sufficiently active
and representative to provide effective oversight of the
debtor; and
``(B) does not include any member of a group of affiliated
debtors that has aggregate noncontingent liquidated secured
and unsecured debts in an amount greater than $3,000,000
(excluding debt owed to 1 or more affiliates or insiders);''.
[[Page H552]]
(b) Conforming Amendment.--Section 1102(a)(3) of title 11,
United States Code, is amended by inserting ``debtor'' after
``small business''.
SEC. 433. STANDARD FORM DISCLOSURE STATEMENT AND PLAN.
Within a reasonable period of time after the date of
enactment of this Act, the Advisory Committee on Bankruptcy
Rules of the Judicial Conference of the United States shall
propose for adoption standard form disclosure statements and
plans of reorganization for small business debtors (as
defined in section 101 of title 11, United States Code, as
amended by this Act), designed to achieve a practical balance
between--
(1) the reasonable needs of the courts, the United States
trustee, creditors, and other parties in interest for
reasonably complete information; and
(2) economy and simplicity for debtors.
SEC. 434. UNIFORM NATIONAL REPORTING REQUIREMENTS.
(a) Reporting Required.--
(1) In general.--Chapter 3 of title 11, United States Code,
is amended by inserting after section 307 the following:
``Sec. 308. Debtor reporting requirements
``(a) For purposes of this section, the term
`profitability' means, with respect to a debtor, the amount
of money that the debtor has earned or lost during current
and recent fiscal periods.
``(b) A small business debtor shall file periodic financial
and other reports containing information including--
``(1) the debtor's profitability;
``(2) reasonable approximations of the debtor's projected
cash receipts and cash disbursements over a reasonable
period;
``(3) comparisons of actual cash receipts and disbursements
with projections in prior reports;
``(4)(A) whether the debtor is--
``(i) in compliance in all material respects with
postpetition requirements imposed by this title and the
Federal Rules of Bankruptcy Procedure; and
``(ii) timely filing tax returns and other required
government filings and paying taxes and other administrative
claims when due;
``(B) if the debtor is not in compliance with the
requirements referred to in subparagraph (A)(i) or filing tax
returns and other required government filings and making the
payments referred to in subparagraph (A)(ii), what the
failures are and how, at what cost, and when the debtor
intends to remedy such failures; and
``(C) such other matters as are in the best interests of
the debtor and creditors, and in the public interest in fair
and efficient procedures under chapter 11 of this title.''.
(2) Clerical amendment.--The table of sections for chapter
3 of title 11, United States Code, is amended by inserting
after the item relating to section 307 the following:
``308. Debtor reporting requirements.''.
(b) Effective Date.--The amendments made by subsection (a)
shall take effect 60 days after the date on which rules are
prescribed under section 2075 of title 28, United States
Code, to establish forms to be used to comply with section
308 of title 11, United States Code, as added by subsection
(a).
SEC. 435. UNIFORM REPORTING RULES AND FORMS FOR SMALL
BUSINESS CASES.
(a) Proposal of Rules and Forms.--The Advisory Committee on
Bankruptcy Rules of the Judicial Conference of the United
States shall propose for adoption amended Federal Rules of
Bankruptcy Procedure and Official Bankruptcy Forms to be used
by small business debtors to file periodic financial and
other reports containing information, including information
relating to--
(1) the debtor's profitability;
(2) the debtor's cash receipts and disbursements; and
(3) whether the debtor is timely filing tax returns and
paying taxes and other administrative claims when due.
(b) Purpose.--The rules and forms proposed under subsection
(a) shall be designed to achieve a practical balance among--
(1) the reasonable needs of the bankruptcy court, the
United States trustee, creditors, and other parties in
interest for reasonably complete information;
(2) the small business debtor's interest that required
reports be easy and inexpensive to complete; and
(3) the interest of all parties that the required reports
help the small business debtor to understand the small
business debtor's financial condition and plan the small
business debtor's future.
SEC. 436. DUTIES IN SMALL BUSINESS CASES.
(a) Duties in Chapter 11 Cases.--Subchapter I of title 11,
United States Code, as amended by this Act, is amended by
adding at the end the following:
``Sec. 1116. Duties of trustee or debtor in possession in
small business cases
``In a small business case, a trustee or the debtor in
possession, in addition to the duties provided in this title
and as otherwise required by law, shall--
``(1) append to the voluntary petition or, in an
involuntary case, file not later than 7 days after the date
of the order for relief--
``(A) its most recent balance sheet, statement of
operations, cash-flow statement, Federal income tax return;
or
``(B) a statement made under penalty of perjury that no
balance sheet, statement of operations, or cash-flow
statement has been prepared and no Federal tax return has
been filed;
``(2) attend, through its senior management personnel and
counsel, meetings scheduled by the court or the United States
trustee, including initial debtor interviews, scheduling
conferences, and meetings of creditors convened under section
341 unless the court waives that requirement after notice and
hearing, upon a finding of extraordinary and compelling
circumstances;
``(3) timely file all schedules and statements of financial
affairs, unless the court, after notice and a hearing, grants
an extension, which shall not extend such time period to a
date later than 30 days after the date of the order for
relief, absent extraordinary and compelling circumstances;
``(4) file all postpetition financial and other reports
required by the Federal Rules of Bankruptcy Procedure or by
local rule of the district court;
``(5) subject to section 363(c)(2), maintain insurance
customary and appropriate to the industry;
``(6)(A) timely file tax returns and other required
government filings; and
``(B) subject to section 363(c)(2), timely pay all
administrative expense tax claims, except those being
contested by appropriate proceedings being diligently
prosecuted; and
``(7) allow the United States trustee, or a designated
representative of the United States trustee, to inspect the
debtor's business premises, books, and records at reasonable
times, after reasonable prior written notice, unless notice
is waived by the debtor.''.
(b) Clerical Amendment.--The table of sections for chapter
11 of title 11, United States Code, is amended by adding at
the end of the matter relating to subchapter I the following:
``1116. Duties of trustee or debtor in possession in small business
cases.''.
SEC. 437. PLAN FILING AND CONFIRMATION DEADLINES.
Section 1121 of title 11, United States Code, is amended by
striking subsection (e) and inserting the following:
``(e) In a small business case--
``(1) only the debtor may file a plan until after 180 days
after the date of the order for relief, unless that period
is--
``(A) extended as provided by this subsection, after notice
and hearing; or
``(B) the court, for cause, orders otherwise;
``(2) the plan, and any necessary disclosure statement,
shall be filed not later than 300 days after the date of the
order for relief; and
``(3) the time periods specified in paragraphs (1) and (2),
and the time fixed in section 1129(e), within which the plan
shall be confirmed, may be extended only if--
``(A) the debtor, after providing notice to parties in
interest (including the United States trustee), demonstrates
by a preponderance of the evidence that it is more likely
than not that the court will confirm a plan within a
reasonable period of time;
``(B) a new deadline is imposed at the time the extension
is granted; and
``(C) the order extending time is signed before the
existing deadline has expired.''.
SEC. 438. PLAN CONFIRMATION DEADLINE.
Section 1129 of title 11, United States Code, is amended by
adding at the end the following:
``(e) In a small business case, the plan shall be confirmed
not later than 175 days after the date of the order for
relief, unless such 175-day period is extended as provided in
section 1121(e)(3).''.
SEC. 439. DUTIES OF THE UNITED STATES TRUSTEE.
Section 586(a) of title 28, United States Code, is
amended--
(1) in paragraph (3)--
(A) in subparagraph (G), by striking ``and'' at the end;
(B) by redesignating subparagraph (H) as subparagraph (I);
and
(C) by inserting after subparagraph (G) the following:
``(H) in small business cases (as defined in section 101 of
title 11), performing the additional duties specified in
title 11 pertaining to such cases; and'';
(2) in paragraph (5), by striking ``and'' at the end;
(3) in paragraph (6), by striking the period at the end and
inserting a semicolon; and
(4) by adding at the end the following:
``(7) in each of such small business cases--
``(A) conduct an initial debtor interview as soon as
practicable after the entry of order for relief but before
the first meeting scheduled under section 341(a) of title 11,
at which time the United States trustee shall--
``(i) begin to investigate the debtor's viability;
``(ii) inquire about the debtor's business plan;
``(iii) explain the debtor's obligations to file monthly
operating reports and other required reports;
``(iv) attempt to develop an agreed scheduling order; and
``(v) inform the debtor of other obligations;
``(B) if determined to be appropriate and advisable, visit
the appropriate business premises of the debtor and ascertain
the state of the debtor's books and records and verify that
the debtor has filed its tax returns; and
``(C) review and monitor diligently the debtor's
activities, to identify as promptly as possible whether the
debtor will be unable to confirm a plan; and
``(8) in any case in which the United States trustee finds
material grounds for any relief
[[Page H553]]
under section 1112 of title 11, the United States trustee
shall apply promptly after making that finding to the court
for relief.''.
SEC. 440. SCHEDULING CONFERENCES.
Section 105(d) of title 11, United States Code, is
amended--
(1) in the matter preceding paragraph (1), by striking ``,
may''; and
(2) by striking paragraph (1) and inserting the following:
``(1) shall hold such status conferences as are necessary
to further the expeditious and economical resolution of the
case; and''.
SEC. 441. SERIAL FILER PROVISIONS.
Section 362 of title 11, United States Code, as amended by
this Act is amended--
(1) in subsection (k), as redesignated by this Act--
(A) by striking ``An'' and inserting ``(1) Except as
provided in paragraph (2), an''; and
(B) by adding at the end the following:
``(2) If such violation is based on an action taken by an
entity in the good faith belief that subsection (h) applies
to the debtor, the recovery under paragraph (1) of this
subsection against such entity shall be limited to actual
damages.''; and
(2) by adding at the end the following:
``(l)(1) Except as provided in paragraph (2) of this
subsection, the provisions of subsection (a) do not apply in
a case in which the debtor--
``(A) is a debtor in a small business case pending at the
time the petition is filed;
``(B) was a debtor in a small business case that was
dismissed for any reason by an order that became final in the
2-year period ending on the date of the order for relief
entered with respect to the petition;
``(C) was a debtor in a small business case in which a plan
was confirmed in the 2-year period ending on the date of the
order for relief entered with respect to the petition; or
``(D) is an entity that has succeeded to substantially all
of the assets or business of a small business debtor
described in subparagraph (A), (B), or (C).
``(2) This subsection does not apply--
``(A) to an involuntary case involving no collusion by the
debtor with creditors; or
``(B) to the filing of a petition if--
``(i) the debtor proves by a preponderance of the evidence
that the filing of that petition resulted from circumstances
beyond the control of the debtor not foreseeable at the time
the case then pending was filed; and
``(ii) it is more likely than not that the court will
confirm a feasible plan, but not a liquidating plan, within a
reasonable period of time.''.
SEC. 442. EXPANDED GROUNDS FOR DISMISSAL OR CONVERSION AND
APPOINTMENT OF TRUSTEE.
(a) Expanded Grounds for Dismissal or Conversion.--Section
1112 of title 11, United States Code, is amended by striking
subsection (b) and inserting the following:
``(b)(1) Except as provided in paragraph (2) of this
subsection, subsection (c) of this section, and section
1104(a)(3), on request of a party in interest, and after
notice and a hearing, the court shall convert a case under
this chapter to a case under chapter 7 or dismiss a case
under this chapter, whichever is in the best interest of
creditors and the estate, if the movant establishes cause.
``(2) The relief provided in paragraph (1) shall not be
granted if the debtor or another party in interest objects
and establishes by a preponderance of the evidence that--
``(A) a plan with a reasonable possibility of being
confirmed will be filed within a reasonable period of time;
and
``(B) the grounds include an act or omission of the
debtor--
``(i) for which there exists a reasonable justification for
the act or omission; and
``(ii) that will be cured within a reasonable period of
time fixed by the court.
``(3) The court shall commence the hearing on any motion
under this subsection not later than 30 days after filing of
the motion, and shall decide the motion not later than 15
days after commencement of the hearing, unless the movant
expressly consents to a continuance for a specific period of
time or compelling circumstances prevent the court from
meeting the time limits established by this paragraph.
``(4) For purposes of this subsection, the term `cause'
includes--
``(A) substantial or continuing loss to or diminution of
the estate;
``(B) gross mismanagement of the estate;
``(C) failure to maintain appropriate insurance that poses
a risk to the estate or to the public;
``(D) unauthorized use of cash collateral harmful to 1 or
more creditors;
``(E) failure to comply with an order of the court;
``(F) repeated failure timely to satisfy any filing or
reporting requirement established by this title or by any
rule applicable to a case under this chapter;
``(G) failure to attend the meeting of creditors convened
under section 341(a) or an examination ordered under rule
2004 of the Federal Rules of Bankruptcy Procedure;
``(H) failure timely to provide information or attend
meetings reasonably requested by the United States trustee or
the bankruptcy administrator;
``(I) failure timely to pay taxes due after the date of the
order for relief or to file tax returns due after the order
for relief;
``(J) failure to file a disclosure statement, or to file or
confirm a plan, within the time fixed by this title or by
order of the court;
``(K) failure to pay any fees or charges required under
chapter 123 of title 28;
``(L) revocation of an order of confirmation under section
1144;
``(M) inability to effectuate substantial consummation of a
confirmed plan;
``(N) material default by the debtor with respect to a
confirmed plan;
``(O) termination of a confirmed plan by reason of the
occurrence of a condition specified in the plan; and
``(P) failure of the debtor to pay any domestic support
obligation that first becomes payable after the date on which
the petition is filed.
``(5) The court shall commence the hearing on any motion
under this subsection not later than 30 days after filing of
the motion, and shall decide the motion not later than 15
days after commencement of the hearing, unless the movant
expressly consents to a continuance for a specific period of
time or compelling circumstances prevent the court from
meeting the time limits established by this paragraph.''.
(b) Additional Grounds for Appointment of Trustee.--Section
1104(a) of title 11, United States Code, is amended--
(1) in paragraph (1), by striking ``or'' at the end;
(2) in paragraph (2), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(3) if grounds exist to convert or dismiss the case under
section 1112, but the court determines that the appointment
of a trustee or an examiner is in the best interests of
creditors and the estate.''.
SEC. 443. STUDY OF OPERATION OF TITLE 11, UNITED STATES CODE,
WITH RESPECT TO SMALL BUSINESSES.
Not later than 2 years after the date of enactment of this
Act, the Administrator of the Small Business Administration,
in consultation with the Attorney General, the Director of
the Administrative Office of United States Trustees, and the
Director of the Administrative Office of the United States
Courts, shall--
(1) conduct a study to determine--
(A) the internal and external factors that cause small
businesses, especially sole proprietorships, to become
debtors in cases under title 11, United States Code, and that
cause certain small businesses to successfully complete cases
under chapter 11 of such title; and
(B) how Federal laws relating to bankruptcy may be made
more effective and efficient in assisting small businesses to
remain viable; and
(2) submit to the President pro tempore of the Senate and
the Speaker of the House of Representatives a report
summarizing that study.
SEC. 444. PAYMENT OF INTEREST.
Section 362(d)(3) of title 11, United States Code, is
amended--
(1) by inserting ``or 30 days after the court determines
that the debtor is subject to this paragraph, whichever is
later'' after ``90-day period)''; and
(2) by striking subparagraph (B) and inserting the
following:
``(B) the debtor has commenced monthly payments that--
``(i) may, in the debtor's sole discretion, notwithstanding
section 363(c)(2), be made from rents or other income
generated before or after the commencement of the case by or
from the property to each creditor whose claim is secured by
such real estate (other than a claim secured by a judgment
lien or by an unmatured statutory lien); and
``(ii) are in an amount equal to interest at the then
applicable nondefault contract rate of interest on the value
of the creditor's interest in the real estate; or''.
SEC. 445. PRIORITY FOR ADMINISTRATIVE EXPENSES.
Section 503(b) of title 11, United States Code, is
amended--
(1) in paragraph (5), by striking ``and'' at the end;
(2) in paragraph (6), by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following:
``(7) with respect to a nonresidential real property lease
previously assumed under section 365, and subsequently
rejected, a sum equal to all monetary obligations due,
excluding those arising from or relating to a failure to
operate or penalty provisions, for the period of 2 years
following the later of the rejection date or the date of
actual turnover of the premises, without reduction or setoff
for any reason whatsoever except for sums actually received
or to be received from a nondebtor, and the claim for
remaining sums due for the balance of the term of the lease
shall be a claim under section 502(b)(6);''.
TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS
SEC. 501. PETITION AND PROCEEDINGS RELATED TO PETITION.
(a) Technical Amendment Relating to Municipalities.--
Section 921(d) of title 11, United States Code, is amended by
inserting ``notwithstanding section 301(b)'' before the
period at the end.
(b) Conforming Amendment.--Section 301 of title 11, United
States Code, is amended--
(1) by inserting ``(a)'' before ``A voluntary''; and
(2) by striking the last sentence and inserting the
following:
``(b) The commencement of a voluntary case under a chapter
of this title constitutes an order for relief under such
chapter.''.
SEC. 502. APPLICABILITY OF OTHER SECTIONS TO CHAPTER 9.
Section 901(a) of title 11, United States Code, is
amended--
[[Page H554]]
(1) by inserting ``555, 556,'' after ``553,''; and
(2) by inserting ``559, 560, 561, 562'' after ``557,''.
TITLE VI--BANKRUPTCY DATA
SEC. 601. IMPROVED BANKRUPTCY STATISTICS.
(a) In General.--Chapter 6 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 collect statistics
regarding individual debtors with primarily consumer debts
seeking relief under chapters 7, 11, and 13 of title 11.
Those statistics shall be on a standardized form prescribed
by the Director of the Administrative Office of the United
States Courts (referred to in this section as the
`Director').
``(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, 2002, 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 monthly income, average income, and
average expenses of those debtors as reported on the
schedules and statements that each such debtor files under
sections 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 of cases in which the debtor was not represented
by an attorney; and
``(III) of those cases in which a reaffirmation was filed,
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
``(II) the number of final orders determining the value of
property securing a claim issued;
``(ii) the number of cases dismissed, the number of cases
dismissed for failure to make payments under the plan, the
number of cases refiled after dismissal, and the number of
cases in which the plan was completed, separately itemized
with respect to the number of modifications made before
completion of the plan, if any; and
``(iii) the number of cases in which the debtor filed
another case during the 6-year period preceding the filing;
``(G) the number of cases in which creditors were fined for
misconduct and any amount of punitive damages awarded by the
court for creditor misconduct; and
``(H) the number of cases in which sanctions under rule
9011 of the Federal Rules of Bankruptcy Procedure were
imposed against debtor's counsel or damages awarded under
such Rule.''.
(b) Clerical Amendment.--The table of sections for 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. 602. UNIFORM RULES FOR THE COLLECTION OF BANKRUPTCY
DATA.
(a) Amendment.--Chapter 39 of title 28, United States Code,
is amended by adding at the end the following:
``Sec. 589b. Bankruptcy data
``(a) Rules.--The Attorney General shall, within a
reasonable time after the effective date of this section,
issue rules requiring uniform forms for (and from time to
time thereafter to appropriately modify and approve)--
``(1) final reports by trustees in cases under chapters 7,
12, and 13 of title 11; and
``(2) periodic reports by debtors in possession or
trustees, as the case may be, in cases under chapter 11 of
title 11.
``(b) Reports.--Each report referred to in subsection (a)
shall be designed (and the requirements as to place and
manner of filing shall be established) so as to facilitate
compilation of data and maximum possible access of the
public, both by physical inspection at one or more central
filing locations, and by electronic access through the
Internet or other appropriate media.
``(c) Required Information.--The information required to be
filed in the reports referred to in subsection (b) shall be
that which is in the best interests of debtors and creditors,
and in the public interest in reasonable and adequate
information to evaluate the efficiency and practicality of
the Federal bankruptcy system. In issuing rules proposing the
forms referred to in subsection (a), the Attorney General
shall strike the best achievable practical balance between--
``(1) the reasonable needs of the public for information
about the operational results of the Federal bankruptcy
system;
``(2) economy, simplicity, and lack of undue burden on
persons with a duty to file reports; and
``(3) appropriate privacy concerns and safeguards.
``(d) Final Reports.--Final reports proposed for adoption
by trustees under chapters 7, 12, and 13 of title 11 shall,
in addition to such other matters as are required by law or
as the Attorney General in the discretion of the Attorney
General, shall propose, include with respect to a case under
such title--
``(1) information about the length of time the case was
pending;
``(2) assets abandoned;
``(3) assets exempted;
``(4) receipts and disbursements of the estate;
``(5) expenses of administration, including for use under
section 707(b), actual costs of administering cases under
chapter 13 of title 11;
``(6) claims asserted;
``(7) claims allowed; and
``(8) distributions to claimants and claims discharged
without payment,
in each case by appropriate category and, in cases under
chapters 12 and 13 of title 11, date of confirmation of the
plan, each modification thereto, and defaults by the debtor
in performance under the plan.
``(e) Periodic Reports.--Periodic reports proposed for
adoption by trustees or debtors in possession under chapter
11 of title 11 shall, in addition to such other matters as
are required by law or as the Attorney General, in the
discretion of the Attorney General, shall propose, include--
``(1) information about the standard industry
classification, published by the Department of Commerce, for
the businesses conducted by the debtor;
``(2) length of time the case has been pending;
``(3) number of full-time employees as of the date of the
order for relief and at the end of each reporting period
since the case was filed;
``(4) cash receipts, cash disbursements and profitability
of the debtor for the most recent period and cumulatively
since the date of the order for relief;
``(5) compliance with title 11, whether or not tax returns
and tax payments since the date of the order for relief have
been timely filed and made;
``(6) all professional fees approved by the court in the
case for the most recent period and cumulatively since the
date of the order for relief (separately reported, for the
professional fees incurred by or on behalf of the debtor,
between those that would have been incurred absent a
bankruptcy case and those not); and
``(7) plans of reorganization filed and confirmed and, with
respect thereto, by class, the recoveries of the holders,
expressed in aggregate dollar values and, in the case of
claims, as a percentage of total claims of the class
allowed.''.
(b) Clerical Amendment.--The table of sections at the
beginning of chapter 39 of title 28, United States Code, is
amended by adding at the end the following:
``589b. Bankruptcy data.''.
SEC. 603. AUDIT PROCEDURES.
(a) In General.--
(1) Establishment of procedures.--The Attorney General (in
judicial districts served by United States trustees) and the
Judicial Conference of the United States (in judicial
districts served by bankruptcy administrators) shall
establish procedures to determine the accuracy, veracity, 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. Such audits shall be in accordance with generally
accepted auditing standards and performed by independent
certified public accountants or independent licensed public
accountants, provided that the Attorney General and the
Judicial Conference, as appropriate, may develop alternative
auditing standards not later than 2 years after the date of
enactment of this Act.
(2) Procedures.--Those procedures required by paragraph (1)
shall--
(A) establish a method of selecting appropriate qualified
persons to contract to perform those audits;
(B) establish a method of randomly selecting cases to be
audited, except that not less than 1 out of every 250 cases
in each Federal judicial district shall be selected for
audit;
(C) 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 if those variances occur by reason of higher income or
higher expenses than the statistical norm of the district in
which the schedules were filed; and
[[Page H555]]
(D) establish procedures for 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.
(b) Amendments.--Section 586 of title 28, United States
Code, is amended--
(1) in subsection (a), by striking paragraph (6) and
inserting the following:
``(6) make such reports as the Attorney General directs,
including the results of audits performed under section
603(a) of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2001; and''; and
(2) by adding at the end the following:
``(f)(1) The United States trustee for each district is
authorized to contract with auditors to perform audits in
cases designated by the United States trustee, in accordance
with the procedures established under section 603(a) of the
Bankruptcy Abuse Prevention and Consumer Protection Act of
2001.
``(2)(A) The report of each audit referred to in paragraph
(1) shall be filed with the court and transmitted to the
United States trustee. Each report shall clearly and
conspicuously specify any material misstatement of income or
expenditures or of assets identified by the person performing
the audit. In any case in which a material misstatement of
income or expenditures or of assets has been reported, the
clerk of the bankruptcy court shall give notice of the
misstatement to the creditors in the case.
``(B) If a material misstatement of income or expenditures
or of assets is reported, the United States trustee shall--
``(i) report the material misstatement, if appropriate, to
the United States Attorney pursuant to section 3057 of title
18; and
``(ii) if advisable, take appropriate action, including but
not limited to commencing an adversary proceeding to revoke
the debtor's discharge pursuant to section 727(d) of title
11.''.
(c) Amendments to Section 521 of Title 11, U.S.C.--Section
521(a) of title 11, United States Code, as so designated by
this Act, is amended in each of paragraphs (3) and (4) by
inserting ``or an auditor appointed under section 586(f) of
title 28'' after ``serving in the case''.
(d) Amendments to Section 727 of Title 11, U.S.C.--Section
727(d) of title 11, United States Code, is amended--
(1) in paragraph (2), by striking ``or'' at the end;
(2) in paragraph (3), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(4) the debtor has failed to explain satisfactorily--
``(A) a material misstatement in an audit referred to in
section 586(f) of title 28; or
``(B) a failure to make available for inspection all
necessary accounts, papers, documents, financial records,
files, and all other papers, things, or property belonging to
the debtor that are requested for an audit referred to in
section 586(f) of title 28.''.
(e) Effective Date.--The amendments made by this section
shall take effect 18 months after the date of enactment of
this Act.
SEC. 604. SENSE OF CONGRESS REGARDING AVAILABILITY OF
BANKRUPTCY DATA.
It is the sense of Congress that--
(1) the national policy of the United States should be that
all data held by bankruptcy clerks in electronic form, to the
extent such data reflects only public records (as defined in
section 107 of title 11, United States Code), should be
released in a usable electronic form in bulk to the public,
subject to such appropriate privacy concerns and safeguards
as Congress and the Judicial Conference of the United States
may determine; and
(2) there should be established a bankruptcy data system in
which--
(A) a single set of data definitions and forms are used to
collect data nationwide; and
(B) data for any particular bankruptcy case are aggregated
in the same electronic record.
TITLE VII--BANKRUPTCY TAX PROVISIONS
SEC. 701. TREATMENT OF CERTAIN LIENS.
(a) Treatment of Certain Liens.--Section 724 of title 11,
United States Code, is amended--
(1) in subsection (b), in the matter preceding paragraph
(1), by inserting ``(other than to the extent that there is a
properly perfected unavoidable tax lien arising in connection
with an ad valorem tax on real or personal property of the
estate)'' after ``under this title'';
(2) in subsection (b)(2), by inserting ``(except that such
expenses, other than claims for wages, salaries, or
commissions which arise after the filing of a petition, shall
be limited to expenses incurred under chapter 7 of this title
and shall not include expenses incurred under chapter 11 of
this title)'' after ``507(a)(1)''; and
(3) by adding at the end the following:
``(e) Before subordinating a tax lien on real or personal
property of the estate, the trustee shall--
``(1) exhaust the unencumbered assets of the estate; and
``(2) in a manner consistent with section 506(c), recover
from property securing an allowed secured claim the
reasonable, necessary costs and expenses of preserving or
disposing of that property.
``(f) Notwithstanding the exclusion of ad valorem tax liens
under this section and subject to the requirements of
subsection (e), the following may be paid from property of
the estate which secures a tax lien, or the proceeds of such
property:
``(1) Claims for wages, salaries, and commissions that are
entitled to priority under section 507(a)(4).
``(2) Claims for contributions to an employee benefit plan
entitled to priority under section 507(a)(5).''.
(b) Determination of Tax Liability.--Section 505(a)(2) of
title 11, United States Code, is amended--
(1) in subparagraph (A), by striking ``or'' at the end;
(2) in subparagraph (B), by striking the period at the end
and inserting ``; or''; and
(3) by adding at the end the following:
``(C) the amount or legality of any amount arising in
connection with an ad valorem tax on real or personal
property of the estate, if the applicable period for
contesting or redetermining that amount under any law (other
than a bankruptcy law) has expired.''.
SEC. 702. TREATMENT OF FUEL TAX CLAIMS.
Section 501 of title 11, United States Code, is amended by
adding at the end the following:
``(e) A claim arising from the liability of a debtor for
fuel use tax assessed consistent with the requirements of
section 31705 of title 49 may be filed by the base
jurisdiction designated pursuant to the International Fuel
Tax Agreement and, if so filed, shall be allowed as a single
claim.''.
SEC. 703. NOTICE OF REQUEST FOR A DETERMINATION OF TAXES.
Section 505(b) of title 11, United States Code, is
amended--
(1) in the first sentence, by inserting ``at the address
and in the manner designated in paragraph (1)'' after
``determination of such tax'';
(2) by striking ``(1) upon payment'' and inserting ``(A)
upon payment'';
(3) by striking ``(A) such governmental unit'' and
inserting ``(i) such governmental unit'';
(4) by striking ``(B) such governmental unit'' and
inserting ``(ii) such governmental unit'';
(5) by striking ``(2) upon payment'' and inserting ``(B)
upon payment'';
(6) by striking ``(3) upon payment'' and inserting ``(C)
upon payment'';
(7) by striking ``(b)'' and inserting ``(2)''; and
(8) by inserting before paragraph (2), as so designated,
the following:
``(b)(1)(A) The clerk of each district shall maintain a
listing under which a Federal, State, or local governmental
unit responsible for the collection of taxes within the
district may--
``(i) designate an address for service of requests under
this subsection; and
``(ii) describe where further information concerning
additional requirements for filing such requests may be
found.
``(B) If a governmental unit referred to in subparagraph
(A) does not designate an address and provide that address to
the clerk under that subparagraph, any request made under
this subsection may be served at the address for the filing
of a tax return or protest with the appropriate taxing
authority of that governmental unit.''.
SEC. 704. RATE OF INTEREST ON TAX CLAIMS.
(a) In General.--Subchapter I of chapter 5 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 511. Rate of interest on tax claims
``(a) If any provision of this title requires the payment
of interest on a tax claim or on an administrative expense
tax, or the payment of interest to enable a creditor to
receive the present value of the allowed amount of a tax
claim, the rate of interest shall be the rate determined
under applicable nonbankruptcy law.
``(b) In the case of taxes paid under a confirmed plan
under this title, the rate of interest shall be determined as
of the calendar month in which the plan is confirmed.''.
(b) Clerical Amendment.--The table of sections for chapter
5 of title 11, United States Code, is amended by inserting
after the item relating to section 510 the following:
``511. Rate of interest on tax claims.''.
SEC. 705. PRIORITY OF TAX CLAIMS.
Section 507(a)(8) of title 11, United States Code, is
amended--
(1) in subparagraph (A)--
(A) in the matter preceding clause (i), by inserting ``for
a taxable year ending on or before the date of filing of the
petition'' after ``gross receipts'';
(B) in clause (i), by striking ``for a taxable year ending
on or before the date of filing of the petition''; and
(C) by striking clause (ii) and inserting the following:
``(ii) assessed within 240 days before the date of the
filing of the petition, exclusive of--
``(I) any time during which an offer in compromise with
respect to that tax was pending or in effect during that 240-
day period, plus 30 days; and
``(II) any time during which a stay of proceedings against
collections was in effect in a prior case under this title
during that 240-day period; plus 90 days.''; and
(2) by adding at the end the following:
``An otherwise applicable time period specified in this
paragraph shall be suspended for (i) any period during which
a governmental unit is prohibited under applicable
nonbankruptcy law from collecting a tax as a result
[[Page H556]]
of a request by the debtor for a hearing and an appeal of any
collection action taken or proposed against the debtor, plus
90 days; plus (ii) any time during which the stay of
proceedings was in effect in a prior case under this title or
during which collection was precluded by the existence of 1
or more confirmed plans under this title, plus 90 days.''.
SEC. 706. PRIORITY PROPERTY TAXES INCURRED.
Section 507(a)(8)(B) of title 11, United States Code, is
amended by striking ``assessed'' and inserting ``incurred''.
SEC. 707. NO DISCHARGE OF FRAUDULENT TAXES IN CHAPTER 13.
Section 1328(a)(2) of title 11, United States Code, as
amended by section 314 of this Act, is amended by striking
``paragraph'' and inserting ``section 507(a)(8)(C) or in
paragraph (1)(B), (1)(C),''.
SEC. 708. NO DISCHARGE OF FRAUDULENT TAXES IN CHAPTER 11.
Section 1141(d) of title 11, United States Code, as amended
by this Act, is amended by adding at the end the following:
``(6) Notwithstanding paragraph (1), the confirmation of a
plan does not discharge a debtor that is a corporation from
any debt described in section 523(a)(2) or for a tax or
customs duty with respect to which the debtor--
``(A) made a fraudulent return; or
``(B) willfully attempted in any manner to evade or defeat
that tax or duty.''.
SEC. 709. STAY OF TAX PROCEEDINGS LIMITED TO PREPETITION
TAXES.
Section 362(a)(8) of title 11, United States Code, is
amended by striking ``the debtor'' and inserting ``a
corporate debtor's tax liability for a taxable period the
bankruptcy court may determine or concerning an individual
debtor's tax liability for a taxable period ending before the
order for relief under this title''.
SEC. 710. PERIODIC PAYMENT OF TAXES IN CHAPTER 11 CASES.
Section 1129(a)(9) of title 11, United States Code, is
amended--
(1) in subparagraph (B), by striking ``and'' at the end;
(2) in subparagraph (C), by striking ``deferred cash
payments,'' and all that follows through the end of the
subparagraph, and inserting ``regular installment payments in
cash--
``(i) of a total value, as of the effective date of the
plan, equal to the allowed amount of such claim;
``(ii) over a period ending not later than 5 years after
the date of the entry of the order for relief under section
301, 302, or 303; and
``(iii) in a manner not less favorable than the most
favored nonpriority unsecured claim provided for in the plan
(other than cash payments made to a class of creditors under
section 1122(b)); and''; and
(3) by adding at the end the following:
``(D) with respect to a secured claim which would otherwise
meet the description of an unsecured claim of a governmental
unit under section 507(a)(8), but for the secured status of
that claim, the holder of that claim will receive on account
of that claim, cash payments, in the same manner and over
the same period, as prescribed in subparagraph (C).''.
SEC. 711. AVOIDANCE OF STATUTORY TAX LIENS PROHIBITED.
Section 545(2) of title 11, United States Code, is amended
by inserting before the semicolon at the end the following:
``, except in any case in which a purchaser is a purchaser
described in section 6323 of the Internal Revenue Code of
1986, or in any other similar provision of State or local
law''.
SEC. 712. PAYMENT OF TAXES IN THE CONDUCT OF BUSINESS.
(a) Payment of Taxes Required.--Section 960 of title 28,
United States Code, is amended--
(1) by inserting ``(a)'' before ``Any''; and
(2) by adding at the end the following:
``(b) A tax under subsection (a) shall be paid on or before
the due date of the tax under applicable nonbankruptcy law,
unless--
``(1) the tax is a property tax secured by a lien against
property that is abandoned within a reasonable period of time
after the lien attaches by the trustee of a bankruptcy estate
under section 554 of title 11; or
``(2) payment of the tax is excused under a specific
provision of title 11.
``(c) In a case pending under chapter 7 of title 11,
payment of a tax may be deferred until final distribution is
made under section 726 of title 11, if--
``(1) the tax was not incurred by a trustee duly appointed
under chapter 7 of title 11; or
``(2) before the due date of the tax, an order of the court
makes a finding of probable insufficiency of funds of the
estate to pay in full the administrative expenses allowed
under section 503(b) of title 11 that have the same priority
in distribution under section 726(b) of title 11 as the
priority of that tax.''.
(b) Payment of Ad Valorem Taxes Required.--Section
503(b)(1)(B)(i) of title 11, United States Code, is amended
by inserting ``whether secured or unsecured, including
property taxes for which liability is in rem, in personam, or
both,'' before ``except''.
(c) Request for Payment of Administrative Expense Taxes
Eliminated.--Section 503(b)(1) of title 11, United States
Code, is amended--
(1) in subparagraph (B), by striking ``and'' at the end;
(2) in subparagraph (C), by adding ``and'' at the end; and
(3) by adding at the end the following:
``(D) notwithstanding the requirements of subsection (a), a
governmental unit shall not be required to file a request for
the payment of an expense described in subparagraph (B) or
(C), as a condition of its being an allowed administrative
expense;''.
(d) Payment of Taxes and Fees as Secured Claims.--Section
506 of title 11, United States Code, is amended--
(1) in subsection (b), by inserting ``or State statute''
after ``agreement''; and
(2) in subsection (c), by inserting ``, including the
payment of all ad valorem property taxes with respect to the
property'' before the period at the end.
SEC. 713. TARDILY FILED PRIORITY TAX CLAIMS.
Section 726(a)(1) of title 11, United States Code, is
amended by striking ``before the date on which the trustee
commences distribution under this section;'' and inserting
the following: ``on or before the earlier of--
``(A) the date that is 10 days after the mailing to
creditors of the summary of the trustee's final report; or
``(B) the date on which the trustee commences final
distribution under this section;''.
SEC. 714. INCOME TAX RETURNS PREPARED BY TAX AUTHORITIES.
Section 523(a) of title 11, United States Code, as amended
by this Act, is amended--
(1) in paragraph (1)(B)--
(A) in the matter preceding clause (i), by inserting ``or
equivalent report or notice,'' after ``a return,'';
(B) in clause (i), by inserting ``or given'' after
``filed''; and
(C) in clause (ii)--
(i) by inserting ``or given'' after ``filed''; and
(ii) by inserting ``, report, or notice'' after ``return'';
and
(2) by adding at the end the following:
``For purposes of this subsection, the term `return' means a
return that satisfies the requirements of applicable
nonbankruptcy law (including applicable filing requirements).
Such term includes a return prepared pursuant to section
6020(a) of the Internal Revenue Code of 1986, or similar
State or local law, or a written stipulation to a judgment or
a final order entered by a nonbankruptcy tribunal, but does
not include a return made pursuant to section 6020(b) of the
Internal Revenue Code of 1986, or a similar State or local
law.''.
SEC. 715. DISCHARGE OF THE ESTATE'S LIABILITY FOR UNPAID
TAXES.
Section 505(b)(2) of title 11, United States Code, as
amended by this Act, is amended by inserting ``the estate,''
after ``misrepresentation,''.
SEC. 716. REQUIREMENT TO FILE TAX RETURNS TO CONFIRM CHAPTER
13 PLANS.
(a) Filing of Prepetition Tax Returns Required for Plan
Confirmation.--Section 1325(a) of title 11, United States
Code, as amended by this Act, is amended by adding at the end
the following:
``(9) the debtor has filed all applicable Federal, State,
and local tax returns as required by section 1308.''.
(b) Additional Time Permitted for Filing Tax Returns.--
(1) In general.--Subchapter I of chapter 13 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 1308. Filing of prepetition tax returns
``(a) Not later than the day before the date on which the
meeting of the creditors is first scheduled to be held under
section 341(a), if the debtor was required to file a tax
return under applicable nonbankruptcy law, the debtor shall
file with appropriate tax authorities all tax returns for all
taxable periods ending during the 4-year period ending on the
date of the filing of the petition.
``(b)(1) Subject to paragraph (2), if the tax returns
required by subsection (a) have not been filed by the date on
which the meeting of creditors is first scheduled to be held
under section 341(a), the trustee may hold open that meeting
for a reasonable period of time to allow the debtor an
additional period of time to file any unfiled returns, but
such additional period of time shall not extend beyond--
``(A) for any return that is past due as of the date of the
filing of the petition, the date that is 120 days after the
date of that meeting; or
``(B) for any return that is not past due as of the date of
the filing of the petition, the later of--
``(i) the date that is 120 days after the date of that
meeting; or
``(ii) the date on which the return is due under the last
automatic extension of time for filing that return to which
the debtor is entitled, and for which request is timely made,
in accordance with applicable nonbankruptcy law.
``(2) Upon notice and hearing, and order entered before the
tolling of any applicable filing period determined under this
subsection, if the debtor demonstrates by a preponderance of
the evidence that the failure to file a return as required
under this subsection is attributable to circumstances beyond
the control of the debtor, the court may extend the filing
period established by the trustee under this subsection for--
``(A) a period of not more than 30 days for returns
described in paragraph (1); and
``(B) a period not to extend after the applicable extended
due date for a return described in paragraph (2).
``(c) For purposes of this section, the term `return'
includes a return prepared pursuant
[[Page H557]]
to subsection (a) or (b) of section 6020 of the Internal
Revenue Code of 1986, or a similar State or local law, or a
written stipulation to a judgment or a final order entered by
a nonbankruptcy tribunal.''.
(2) Conforming amendment.--The table of sections at the
beginning of chapter 13 of title 11, United States Code, is
amended by inserting after the item relating to section 1307
the following:
``1308. Filing of prepetition tax returns.''.
(c) Dismissal or Conversion on Failure To Comply.--Section
1307 of title 11, United States Code, is amended--
(1) by redesignating subsections (e) and (f) as subsections
(f) and (g), respectively; and
(2) by inserting after subsection (d) the following:
``(e) Upon the failure of the debtor to file a tax return
under section 1308, on request of a party in interest or the
United States trustee and after notice and a hearing, the
court shall dismiss a case or convert a case under this
chapter to a case under chapter 7 of this title, whichever is
in the best interest of the creditors and the estate.''.
(d) Timely Filed Claims.--Section 502(b)(9) of title 11,
United States Code, is amended by inserting before the period
at the end the following ``, and except that in a case under
chapter 13, a claim of a governmental unit for a tax with
respect to a return filed under section 1308 shall be timely
if the claim is filed on or before the date that is 60 days
after the date on which such return was filed as required''.
(e) Rules for Objections to Claims and to Confirmation.--It
is the sense of Congress that the Advisory Committee on
Bankruptcy Rules of the Judicial Conference of the United
States should, as soon as practicable after the date of
enactment of this Act, propose for adoption amended Federal
Rules of Bankruptcy Procedure which provide that--
(1) notwithstanding the provisions of Rule 3015(f), in
cases under chapter 13 of title 11, United States Code, an
objection to the confirmation of a plan filed by a
governmental unit on or before the date that is 60 days after
the date on which the debtor files all tax returns required
under sections 1308 and 1325(a)(7) of title 11, United States
Code, shall be treated for all purposes as if such objection
had been timely filed before such confirmation; and
(2) in addition to the provisions of Rule 3007, in a case
under chapter 13 of title 11, United States Code, no
objection to a tax with respect to which a return is required
to be filed under section 1308 of title 11, United States
Code, shall be filed until such return has been filed as
required.
SEC. 717. STANDARDS FOR TAX DISCLOSURE.
Section 1125(a)(1) of title 11, United States Code, is
amended--
(1) by inserting ``including a discussion of the potential
material Federal tax consequences of the plan to the debtor,
any successor to the debtor, and a hypothetical investor
typical of the holders of claims or interests in the case,''
after ``records''; and
(2) by striking ``a hypothetical reasonable investor
typical of holders of claims or interests'' and inserting
``such a hypothetical investor''.
SEC. 718. SETOFF OF TAX REFUNDS.
Section 362(b) of title 11, United States Code, is amended
by inserting after paragraph (26), as added by this Act, the
following:
``(27) under subsection (a), of the setoff under applicable
nonbankruptcy law of an income tax refund, by a governmental
unit, with respect to a taxable period that ended before the
order for relief against an income tax liability for a
taxable period that also ended before the order for relief,
except that in any case in which the setoff of an income tax
refund is not permitted under applicable nonbankruptcy law
because of a pending action to determine the amount or
legality of a tax liability, the governmental unit may hold
the refund pending the resolution of the action, unless the
court, upon motion of the trustee and after notice and
hearing, grants the taxing authority adequate protection
(within the meaning of section 361) for the secured claim of
that authority in the setoff under section 506(a);''.
SEC. 719. SPECIAL PROVISIONS RELATED TO THE TREATMENT OF
STATE AND LOCAL TAXES.
(a) In General.--Section 346 of title 11, United States
Code, is amended to read as follows:
``Sec. 346. Special provisions related to the treatment of
state and local taxes
``(a) Whenever the Internal Revenue Code of 1986 provides
that a separate taxable estate or entity is created in a case
concerning a debtor under this title, and the income, gain,
loss, deductions, and credits of such estate shall be taxed
to or claimed by the estate, a separate taxable estate is
also created for purposes of any State and local law imposing
a tax on or measured by income and such income, gain, loss,
deductions, and credits shall be taxed to or claimed by the
estate and may not be taxed to or claimed by the debtor. The
preceding sentence shall not apply if the case is dismissed.
The trustee shall make tax returns of income required under
any such State or local law.
``(b) Whenever the Internal Revenue Code of 1986 provides
that no separate taxable estate shall be created in a case
concerning a debtor under this title, and the income, gain,
loss, deductions, and credits of an estate shall be taxed to
or claimed by the debtor, such income, gain, loss,
deductions, and credits shall be taxed to or claimed by the
debtor under a State or local law imposing a tax on or
measured by income and may not be taxed to or claimed by the
estate. The trustee shall make such tax returns of income of
corporations and of partnerships as are required under any
State or local law, but with respect to partnerships, shall
make said returns only to the extent such returns are also
required to be made under such Code. The estate shall be
liable for any tax imposed on such corporation or
partnership, but not for any tax imposed on partners or
members.
``(c) With respect to a partnership or any entity treated
as a partnership under a State or local law imposing a tax on
or measured by income that is a debtor in a case under this
title, any gain or loss resulting from a distribution of
property from such partnership, or any distributive share of
any income, gain, loss, deduction, or credit of a partner or
member that is distributed, or considered distributed, from
such partnership, after the commencement of the case, is
gain, loss, income, deduction, or credit, as the case may be,
of the partner or member, and if such partner or member is a
debtor in a case under this title, shall be subject to tax in
accordance with subsection (a) or (b).
``(d) For purposes of any State or local law imposing a tax
on or measured by income, the taxable period of a debtor in a
case under this title shall terminate only if and to the
extent that the taxable period of such debtor terminates
under the Internal Revenue Code of 1986.
``(e) The estate in any case described in subsection (a)
shall use the same accounting method as the debtor used
immediately before the commencement of the case, if such
method of accounting complies with applicable nonbankruptcy
tax law.
``(f) For purposes of any State or local law imposing a tax
on or measured by income, a transfer of property from the
debtor to the estate or from the estate to the debtor shall
not be treated as a disposition for purposes of any provision
assigning tax consequences to a disposition, except to the
extent that such transfer is treated as a disposition under
the Internal Revenue Code of 1986.
``(g) Whenever a tax is imposed pursuant to a State or
local law imposing a tax on or measured by income pursuant to
subsection (a) or (b), such tax shall be imposed at rates
generally applicable to the same types of entities under such
State or local law.
``(h) The trustee shall withhold from any payment of claims
for wages, salaries, commissions, dividends, interest, or
other payments, or collect, any amount required to be
withheld or collected under applicable State or local tax
law, and shall pay such withheld or collected amount to the
appropriate governmental unit at the time and in the manner
required by such tax law, and with the same priority as the
claim from which such amount was withheld or collected was
paid.
``(i)(1) To the extent that any State or local law imposing
a tax on or measured by income provides for the carryover of
any tax attribute from one taxable period to a subsequent
taxable period, the estate shall succeed to such tax
attribute in any case in which such estate is subject to tax
under subsection (a).
``(2) After such a case is closed or dismissed, the debtor
shall succeed to any tax attribute to which the estate
succeeded under paragraph (1) to the extent consistent with
the Internal Revenue Code of 1986.
``(3) The estate may carry back any loss or tax attribute
to a taxable period of the debtor that ended before the order
for relief under this title to the extent that--
``(A) applicable State or local tax law provides for a
carryback in the case of the debtor; and
``(B) the same or a similar tax attribute may be carried
back by the estate to such a taxable period of the debtor
under the Internal Revenue Code of 1986.
``(j)(1) For purposes of any State or local law imposing a
tax on or measured by income, income is not realized by the
estate, the debtor, or a successor to the debtor by reason of
discharge of indebtedness in a case under this title, except
to the extent, if any, that such income is subject to tax
under the Internal Revenue Code of 1986.
``(2) Whenever the Internal Revenue Code of 1986 provides
that the amount excluded from gross income in respect of the
discharge of indebtedness in a case under this title shall be
applied to reduce the tax attributes of the debtor or the
estate, a similar reduction shall be made under any State or
local law imposing a tax on or measured by income to the
extent such State or local law recognizes such attributes.
Such State or local law may also provide for the reduction of
other attributes to the extent that the full amount of income
from the discharge of indebtedness has not been applied.
``(k)(1) Except as provided in this section and section
505, the time and manner of filing tax returns and the items
of income, gain, loss, deduction, and credit of any taxpayer
shall be determined under applicable nonbankruptcy law.
``(2) For Federal tax purposes, the provisions of this
section are subject to the Internal Revenue Code of 1986 and
other applicable Federal nonbankruptcy law.''.
(b) Conforming Amendments.--
(1) Section 728 of title 11, United States Code, is
repealed.
(2) Section 1146 of title 11, United States Code, is
amended--
(A) by striking subsections (a) and (b); and
[[Page H558]]
(B) by redesignating subsections (c) and (d) as subsections
(a) and (b), respectively.
(3) Section 1231 of title 11, United States Code, is
amended--
(A) by striking subsections (a) and (b); and
(B) by redesignating subsections (c) and (d) as subsections
(a) and (b), respectively.
SEC. 720. DISMISSAL FOR FAILURE TO TIMELY FILE TAX RETURNS.
Section 521 of title 11, United States Code, as amended by
this Act, is amended by adding at the end the following:
``(k)(1) Notwithstanding any other provision of this title,
if the debtor fails to file a tax return that becomes due
after the commencement of the case or to properly obtain an
extension of the due date for filing such return, the taxing
authority may request that the court enter an order
converting or dismissing the case.
``(2) If the debtor does not file the required return or
obtain the extension referred to in paragraph (1) within 90
days after a request is filed by the taxing authority under
that paragraph, the court shall convert or dismiss the case,
whichever is in the best interests of creditors and the
estate.''.
TITLE VIII--ANCILLARY AND OTHER CROSS-BORDER CASES
SEC. 801. AMENDMENT TO ADD CHAPTER 15 TO TITLE 11, UNITED
STATES CODE.
(a) In General.--Title 11, United States Code, is amended
by inserting after chapter 13 the following:
``CHAPTER 15--ANCILLARY AND OTHER CROSS-BORDER CASES
``Sec.
``1501. Purpose and scope of application.
``SUBCHAPTER I--GENERAL PROVISIONS
``1502. Definitions.
``1503. International obligations of the United States.
``1504. Commencement of ancillary case.
``1505. Authorization to act in a foreign country.
``1506. Public policy exception.
``1507. Additional assistance.
``1508. Interpretation.
``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT
``1509. Right of direct access.
``1510. Limited jurisdiction.
``1511. Commencement of case under section 301 or 303.
``1512. Participation of a foreign representative in a case under this
title.
``1513. Access of foreign creditors to a case under this title.
``1514. Notification to foreign creditors concerning a case under this
title.
``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF
``1515. Application for recognition.
``1516. Presumptions concerning recognition.
``1517. Order granting recognition.
``1518. Subsequent information.
``1519. Relief that may be granted upon filing petition for
recognition.
``1520. Effects of recognition of a foreign main proceeding.
``1521. Relief that may be granted upon recognition.
``1522. Protection of creditors and other interested persons.
``1523. Actions to avoid acts detrimental to creditors.
``1524. Intervention by a foreign representative.
``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES
``1525. Cooperation and direct communication between the court and
foreign courts or foreign representatives.
``1526. Cooperation and direct communication between the trustee and
foreign courts or foreign representatives.
``1527. Forms of cooperation.
``SUBCHAPTER V--CONCURRENT PROCEEDINGS
``1528. Commencement of a case under this title after recognition of a
foreign main proceeding.
``1529. Coordination of a case under this title and a foreign
proceeding.
``1530. Coordination of more than 1 foreign proceeding.
``1531. Presumption of insolvency based on recognition of a foreign
main proceeding.
``1532. Rule of payment in concurrent proceedings.
``Sec. 1501. Purpose and scope of application
``(a) The purpose of this chapter is to incorporate the
Model Law on Cross-Border Insolvency so as to provide
effective mechanisms for dealing with cases of cross-border
insolvency with the objectives of--
``(1) cooperation between--
``(A) United States courts, United States trustees,
trustees, examiners, debtors, and debtors in possession; and
``(B) the courts and other competent authorities of foreign
countries involved in cross-border insolvency cases;
``(2) greater legal certainty for trade and investment;
``(3) fair and efficient administration of cross-border
insolvencies that protects the interests of all creditors,
and other interested entities, including the debtor;
``(4) protection and maximization of the value of the
debtor's assets; and
``(5) facilitation of the rescue of financially troubled
businesses, thereby protecting investment and preserving
employment.
``(b) This chapter applies where--
``(1) assistance is sought in the United States by a
foreign court or a foreign representative in connection with
a foreign proceeding;
``(2) assistance is sought in a foreign country in
connection with a case under this title;
``(3) a foreign proceeding and a case under this title with
respect to the same debtor are taking place concurrently; or
``(4) creditors or other interested persons in a foreign
country have an interest in requesting the commencement of,
or participating in, a case or proceeding under this title.
``(c) This chapter does not apply to--
``(1) a proceeding concerning an entity, other than a
foreign insurance company, identified by exclusion in section
109(b);
``(2) an individual, or to an individual and such
individual's spouse, who have debts within the limits
specified in section 109(e) and who are citizens of the
United States or aliens lawfully admitted for permanent
residence in the United States; or
``(3) an entity subject to a proceeding under the
Securities Investor Protection Act of 1970, a stockbroker
subject to subchapter III of chapter 7 of this title, or a
commodity broker subject to subchapter IV of chapter 7 of
this title.
``(d) The court may not grant relief under this chapter
with respect to any deposit, escrow, trust fund, or other
security required or permitted under any applicable State
insurance law or regulation for the benefit of claim holders
in the United States.
``SUBCHAPTER I--GENERAL PROVISIONS
``Sec. 1502. Definitions
``For the purposes of this chapter, the term--
``(1) `debtor' means an entity that is the subject of a
foreign proceeding;
``(2) `establishment' means any place of operations where
the debtor carries out a nontransitory economic activity;
``(3) `foreign court' means a judicial or other authority
competent to control or supervise a foreign proceeding;
``(4) `foreign main proceeding' means a foreign proceeding
taking place in the country where the debtor has the center
of its main interests;
``(5) `foreign nonmain proceeding' means a foreign
proceeding, other than a foreign main proceeding, taking
place in a country where the debtor has an establishment;
``(6) `trustee' includes a trustee, a debtor in possession
in a case under any chapter of this title, or a debtor under
chapter 9 of this title;
``(7) `recognition' means the entry of an order granting
recognition of a foreign main proceeding or foreign nonmain
proceeding under this chapter; and
``(8) `within the territorial jurisdiction of the United
States', when used with reference to property of a debtor,
refers to tangible property located within the territory of
the United States and intangible property deemed under
applicable nonbankruptcy law to be located within that
territory, including any property subject to attachment or
garnishment that may properly be seized or garnished by an
action in a Federal or State court in the United States.
``Sec. 1503. International obligations of the United States
``To the extent that this chapter conflicts with an
obligation of the United States arising out of any treaty or
other form of agreement to which it is a party with one or
more other countries, the requirements of the treaty or
agreement prevail.
``Sec. 1504. Commencement of ancillary case
``A case under this chapter is commenced by the filing of a
petition for recognition of a foreign proceeding under
section 1515.
``Sec. 1505. Authorization to act in a foreign country
``A trustee or another entity (including an examiner) may
be authorized by the court to act in a foreign country on
behalf of an estate created under section 541. An entity
authorized to act under this section may act in any way
permitted by the applicable foreign law.
``Sec. 1506. Public policy exception
``Nothing in this chapter prevents the court from refusing
to take an action governed by this chapter if the action
would be manifestly contrary to the public policy of the
United States.
``Sec. 1507. Additional assistance
``(a) Subject to the specific limitations stated elsewhere
in this chapter the court, if recognition is granted, may
provide additional assistance to a foreign representative
under this title or under other laws of the United States.
``(b) In determining whether to provide additional
assistance under this title or under other laws of the United
States, the court shall consider whether such additional
assistance, consistent with the principles of comity, will
reasonably assure--
``(1) just treatment of all holders of claims against or
interests in the debtor's property;
``(2) protection of claim holders in the United States
against prejudice and inconvenience in the processing of
claims in such foreign proceeding;
``(3) prevention of preferential or fraudulent dispositions
of property of the debtor;
``(4) distribution of proceeds of the debtor's property
substantially in accordance with the order prescribed by this
title; and
``(5) if appropriate, the provision of an opportunity for a
fresh start for the individual that such foreign proceeding
concerns.
[[Page H559]]
``Sec. 1508. Interpretation
``In interpreting this chapter, the court shall consider
its international origin, and the need to promote an
application of this chapter that is consistent with the
application of similar statutes adopted by foreign
jurisdictions.
``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT
``Sec. 1509. Right of direct access
``(a) A foreign representative may commence a case under
section 1504 by filing directly with the court a petition for
recognition of a foreign proceeding under section 1515.
``(b) If the court grants recognition under section 1515,
and subject to any limitations that the court may impose
consistent with the policy of this chapter--
``(1) the foreign representative has the capacity to sue
and be sued in a court in the United States;
``(2) the foreign representative may apply directly to a
court in the United States for appropriate relief in that
court; and
``(3) a court in the United States shall grant comity or
cooperation to the foreign representative.
``(c) A request for comity or cooperation by a foreign
representative in a court in the United States other than the
court which granted recognition shall be accompanied by a
certified copy of an order granting recognition under section
1517.
``(d) If the court denies recognition under this chapter,
the court may issue any appropriate order necessary to
prevent the foreign representative from obtaining comity or
cooperation from courts in the United States.
``(e) Whether or not the court grants recognition, and
subject to sections 306 and 1510, a foreign representative is
subject to applicable nonbankruptcy law.
``(f) Notwithstanding any other provision of this section,
the failure of a foreign representative to commence a case or
to obtain recognition under this chapter does not affect any
right the foreign representative may have to sue in a court
in the United States to collect or recover a claim which is
the property of the debtor.
``Sec. 1510. Limited jurisdiction
``The sole fact that a foreign representative files a
petition under section 1515 does not subject the foreign
representative to the jurisdiction of any court in the United
States for any other purpose.
``Sec. 1511. Commencement of case under section 301 or 303
``(a) Upon recognition, a foreign representative may
commence--
``(1) an involuntary case under section 303; or
``(2) a voluntary case under section 301 or 302, if the
foreign proceeding is a foreign main proceeding.
``(b) The petition commencing a case under subsection (a)
must be accompanied by a certified copy of an order granting
recognition. The court where the petition for recognition has
been filed must be advised of the foreign representative's
intent to commence a case under subsection (a) prior to such
commencement.
``Sec. 1512. Participation of a foreign representative in a
case under this title
``Upon recognition of a foreign proceeding, the foreign
representative in the recognized proceeding is entitled to
participate as a party in interest in a case regarding the
debtor under this title.
``Sec. 1513. Access of foreign creditors to a case under this
title
``(a) Foreign creditors have the same rights regarding the
commencement of, and participation in, a case under this
title as domestic creditors.
``(b)(1) Subsection (a) does not change or codify present
law as to the priority of claims under section 507 or 726 of
this title, except that the claim of a foreign creditor under
those sections shall not be given a lower priority than that
of general unsecured claims without priority solely because
the holder of such claim is a foreign creditor.
``(2)(A) Subsection (a) and paragraph (1) do not change or
codify present law as to the allowability of foreign revenue
claims or other foreign public law claims in a proceeding
under this title.
``(B) Allowance and priority as to a foreign tax claim or
other foreign public law claim shall be governed by any
applicable tax treaty of the United States, under the
conditions and circumstances specified therein.
``Sec. 1514. Notification to foreign creditors concerning a
case under this title
``(a) Whenever in a case under this title notice is to be
given to creditors generally or to any class or category of
creditors, such notice shall also be given to the known
creditors generally, or to creditors in the notified class or
category, that do not have addresses in the United States.
The court may order that appropriate steps be taken with a
view to notifying any creditor whose address is not yet
known.
``(b) Such notification to creditors with foreign addresses
described in subsection (a) shall be given individually,
unless the court considers that, under the circumstances,
some other form of notification would be more appropriate. No
letter or other formality is required.
``(c) When a notification of commencement of a case is to
be given to foreign creditors, the notification shall--
``(1) indicate the time period for filing proofs of claim
and specify the place for their filing;
``(2) indicate whether secured creditors need to file their
proofs of claim; and
``(3) contain any other information required to be included
in such a notification to creditors under this title and the
orders of the court.
``(d) Any rule of procedure or order of the court as to
notice or the filing of a claim shall provide such additional
time to creditors with foreign addresses as is reasonable
under the circumstances.
``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF
``Sec. 1515. Application for recognition
``(a) A foreign representative applies to the court for
recognition of the foreign proceeding in which the foreign
representative has been appointed by filing a petition for
recognition.
``(b) A petition for recognition shall be accompanied by--
``(1) a certified copy of the decision commencing the
foreign proceeding and appointing the foreign representative;
``(2) a certificate from the foreign court affirming the
existence of the foreign proceeding and of the appointment of
the foreign representative; or
``(3) in the absence of evidence referred to in paragraphs
(1) and (2), any other evidence acceptable to the court of
the existence of the foreign proceeding and of the
appointment of the foreign representative.
``(c) A petition for recognition shall also be accompanied
by a statement identifying all foreign proceedings with
respect to the debtor that are known to the foreign
representative.
``(d) The documents referred to in paragraphs (1) and (2)
of subsection (b) shall be translated into English. The court
may require a translation into English of additional
documents.
``Sec. 1516. Presumptions concerning recognition
``(a) If the decision or certificate referred to in section
1515(b) indicates that the foreign proceeding is a foreign
proceeding (as defined in section 101) and that the person or
body is a foreign representative (as defined in section 101),
the court is entitled to so presume.
``(b) The court is entitled to presume that documents
submitted in support of the petition for recognition are
authentic, whether or not they have been legalized.
``(c) In the absence of evidence to the contrary, the
debtor's registered office, or habitual residence in the case
of an individual, is presumed to be the center of the
debtor's main interests.
``Sec. 1517. Order granting recognition
``(a) Subject to section 1506, after notice and a hearing,
an order recognizing a foreign proceeding shall be entered
if--
``(1) the foreign proceeding for which recognition is
sought is a foreign main proceeding or foreign nonmain
proceeding within the meaning of section 1502;
``(2) the foreign representative applying for recognition
is a person or body as defined in section 101; and
``(3) the petition meets the requirements of section 1515.
``(b) The foreign proceeding shall be recognized--
``(1) as a foreign main proceeding if it is taking place in
the country where the debtor has the center of its main
interests; or
``(2) as a foreign nonmain proceeding if the debtor has an
establishment within the meaning of section 1502 in the
foreign country where the proceeding is pending.
``(c) A petition for recognition of a foreign proceeding
shall be decided upon at the earliest possible time. Entry of
an order recognizing a foreign proceeding constitutes
recognition under this chapter.
``(d) The provisions of this subchapter do not prevent
modification or termination of recognition if it is shown
that the grounds for granting it were fully or partially
lacking or have ceased to exist, but in considering such
action the court shall give due weight to possible prejudice
to parties that have relied upon the order granting
recognition. The case under this chapter may be closed in the
manner prescribed under section 350.
``Sec. 1518. Subsequent information
``From the time of filing the petition for recognition of
the foreign proceeding, the foreign representative shall file
with the court promptly a notice of change of status
concerning--
``(1) any substantial change in the status of the foreign
proceeding or the status of the foreign representative's
appointment; and
``(2) any other foreign proceeding regarding the debtor
that becomes known to the foreign representative.
``Sec. 1519. Relief that may be granted upon filing petition
for recognition
``(a) From the time of filing a petition for recognition
until the court rules on the petition, the court may, at the
request of the foreign representative, where relief is
urgently needed to protect the assets of the debtor or the
interests of the creditors, grant relief of a provisional
nature, including--
``(1) staying execution against the debtor's assets;
``(2) entrusting the administration or realization of all
or part of the debtor's assets located in the United States
to the foreign representative or another person authorized by
the court, including an examiner, in order to protect and
preserve the value of assets that,
[[Page H560]]
by their nature or because of other circumstances, are
perishable, susceptible to devaluation or otherwise in
jeopardy; and
``(3) any relief referred to in paragraph (3), (4), or (7)
of section 1521(a).
``(b) Unless extended under section 1521(a)(6), the relief
granted under this section terminates when the petition for
recognition is granted.
``(c) It is a ground for denial of relief under this
section that such relief would interfere with the
administration of a foreign main proceeding.
``(d) The court may not enjoin a police or regulatory act
of a governmental unit, including a criminal action or
proceeding, under this section.
``(e) The standards, procedures, and limitations applicable
to an injunction shall apply to relief under this section.
``(f) The exercise of rights not subject to the stay
arising under section 362(a) pursuant to paragraph (6), (7),
(17), or (28) of section 362(b) or pursuant to section 362(l)
shall not be stayed by any order of a court or administrative
agency in any proceeding under this chapter.
``Sec. 1520. Effects of recognition of a foreign main
proceeding
``(a) Upon recognition of a foreign proceeding that is a
foreign main proceeding--
``(1) sections 361 and 362 apply with respect to the debtor
and that property of the debtor that is within the
territorial jurisdiction of the United States;
``(2) sections 363, 549, and 552 of this title apply to a
transfer of an interest of the debtor in property that is
within the territorial jurisdiction of the United States to
the same extent that the sections would apply to property of
an estate;
``(3) unless the court orders otherwise, the foreign
representative may operate the debtor's business and may
exercise the rights and powers of a trustee under and to the
extent provided by sections 363 and 552; and
``(4) section 552 applies to property of the debtor that is
within the territorial jurisdiction of the United States.
``(b) Subsection (a) does not affect the right to commence
an individual action or proceeding in a foreign country to
the extent necessary to preserve a claim against the debtor.
``(c) Subsection (a) does not affect the right of a foreign
representative or an entity to file a petition commencing a
case under this title or the right of any party to file
claims or take other proper actions in such a case.
``Sec. 1521. Relief that may be granted upon recognition
``(a) Upon recognition of a foreign proceeding, whether
main or nonmain, where necessary to effectuate the purpose of
this chapter and to protect the assets of the debtor or the
interests of the creditors, the court may, at the request
of the foreign representative, grant any appropriate
relief, including--
``(1) staying the commencement or continuation of an
individual action or proceeding concerning the debtor's
assets, rights, obligations or liabilities to the extent they
have not been stayed under section 1520(a);
``(2) staying execution against the debtor's assets to the
extent it has not been stayed under section 1520(a);
``(3) suspending the right to transfer, encumber or
otherwise dispose of any assets of the debtor to the extent
this right has not been suspended under section 1520(a);
``(4) providing for the examination of witnesses, the
taking of evidence or the delivery of information concerning
the debtor's assets, affairs, rights, obligations or
liabilities;
``(5) entrusting the administration or realization of all
or part of the debtor's assets within the territorial
jurisdiction of the United States to the foreign
representative or another person, including an examiner,
authorized by the court;
``(6) extending relief granted under section 1519(a); and
``(7) granting any additional relief that may be available
to a trustee, except for relief available under sections 522,
544, 545, 547, 548, 550, and 724(a).
``(b) Upon recognition of a foreign proceeding, whether
main or nonmain, the court may, at the request of the foreign
representative, entrust the distribution of all or part of
the debtor's assets located in the United States to the
foreign representative or another person, including an
examiner, authorized by the court, provided that the court is
satisfied that the interests of creditors in the United
States are sufficiently protected.
``(c) In granting relief under this section to a
representative of a foreign nonmain proceeding, the court
must be satisfied that the relief relates to assets that,
under the law of the United States, should be administered in
the foreign nonmain proceeding or concerns information
required in that proceeding.
``(d) The court may not enjoin a police or regulatory act
of a governmental unit, including a criminal action or
proceeding, under this section.
``(e) The standards, procedures, and limitations applicable
to an injunction shall apply to relief under paragraphs (1),
(2), (3), and (6) of subsection (a).
``(f) The exercise of rights not subject to the stay
arising under section 362(a) pursuant to paragraph (6), (7),
(17), or (28) of section 362(b) or pursuant to section 362(l)
shall not be stayed by any order of a court or administrative
agency in any proceeding under this chapter.
``Sec. 1522. Protection of creditors and other interested
persons
``(a) The court may grant relief under section 1519 or
1521, or may modify or terminate relief under subsection (c),
only if the interests of the creditors and other interested
entities, including the debtor, are sufficiently protected.
``(b) The court may subject relief granted under section
1519 or 1521, or the operation of the debtor's business under
section 1520(a)(3) of this title, to conditions it considers
appropriate, including the giving of security or the filing
of a bond.
``(c) The court may, at the request of the foreign
representative or an entity affected by relief granted under
section 1519 or 1521, or at its own motion, modify or
terminate such relief.
``(d) Section 1104(d) shall apply to the appointment of an
examiner under this chapter. Any examiner shall comply with
the qualification requirements imposed on a trustee by
section 322.
``Sec. 1523. Actions to avoid acts detrimental to creditors
``(a) Upon recognition of a foreign proceeding, the foreign
representative has standing in a case concerning the debtor
pending under another chapter of this title to initiate
actions under sections 522, 544, 545, 547, 548, 550, 553, and
724(a).
``(b) When the foreign proceeding is a foreign nonmain
proceeding, the court must be satisfied that an action under
subsection (a) relates to assets that, under United States
law, should be administered in the foreign nonmain
proceeding.
``Sec. 1524. Intervention by a foreign representative
``Upon recognition of a foreign proceeding, the foreign
representative may intervene in any proceedings in a State or
Federal court in the United States in which the debtor is a
party.
``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES
``Sec. 1525. Cooperation and direct communication between the
court and foreign courts or foreign representatives
``(a) Consistent with section 1501, the court shall
cooperate to the maximum extent possible with foreign courts
or foreign representatives, either directly or through the
trustee.
``(b) The court is entitled to communicate directly with,
or to request information or assistance directly from,
foreign courts or foreign representatives, subject to the
rights of parties in interest to notice and participation.
``Sec. 1526. Cooperation and direct communication between the
trustee and foreign courts or foreign representatives
``(a) Consistent with section 1501, the trustee or other
person, including an examiner, authorized by the court,
shall, subject to the supervision of the court, cooperate to
the maximum extent possible with foreign courts or foreign
representatives.
``(b) The trustee or other person, including an examiner,
authorized by the court is entitled, subject to the
supervision of the court, to communicate directly with
foreign courts or foreign representatives.
``Sec. 1527. Forms of cooperation
``Cooperation referred to in sections 1525 and 1526 may be
implemented by any appropriate means, including--
``(1) appointment of a person or body, including an
examiner, to act at the direction of the court;
``(2) communication of information by any means considered
appropriate by the court;
``(3) coordination of the administration and supervision of
the debtor's assets and affairs;
``(4) approval or implementation of agreements concerning
the coordination of proceedings; and
``(5) coordination of concurrent proceedings regarding the
same debtor.
``SUBCHAPTER V--CONCURRENT PROCEEDINGS
``Sec. 1528. Commencement of a case under this title after
recognition of a foreign main proceeding
``After recognition of a foreign main proceeding, a case
under another chapter of this title may be commenced only if
the debtor has assets in the United States. The effects of
such case shall be restricted to the assets of the debtor
that are within the territorial jurisdiction of the United
States and, to the extent necessary to implement cooperation
and coordination under sections 1525, 1526, and 1527, to
other assets of the debtor that are within the jurisdiction
of the court under sections 541(a) of this title, and 1334(e)
of title 28, to the extent that such other assets are not
subject to the jurisdiction and control of a foreign
proceeding that has been recognized under this chapter.
``Sec. 1529. Coordination of a case under this title and a
foreign proceeding
``If a foreign proceeding and a case under another chapter
of this title are taking place concurrently regarding the
same debtor, the court shall seek cooperation and
coordination under sections 1525, 1526, and 1527, and the
following shall apply:
``(1) If the case in the United States is taking place at
the time the petition for recognition of the foreign
proceeding is filed--
``(A) any relief granted under sections 1519 or 1521 must
be consistent with the relief granted in the case in the
United States; and
[[Page H561]]
``(B) even if the foreign proceeding is recognized as a
foreign main proceeding, section 1520 does not apply.
``(2) If a case in the United States under this title
commences after recognition, or after the filing of the
petition for recognition, of the foreign proceeding--
``(A) any relief in effect under sections 1519 or 1521
shall be reviewed by the court and shall be modified or
terminated if inconsistent with the case in the United
States; and
``(B) if the foreign proceeding is a foreign main
proceeding, the stay and suspension referred to in section
1520(a) shall be modified or terminated if inconsistent with
the relief granted in the case in the United States.
``(3) In granting, extending, or modifying relief granted
to a representative of a foreign nonmain proceeding, the
court must be satisfied that the relief relates to assets
that, under the laws of the United States, should be
administered in the foreign nonmain proceeding or concerns
information required in that proceeding.
``(4) In achieving cooperation and coordination under
sections 1528 and 1529, the court may grant any of the relief
authorized under section 305.
``Sec. 1530. Coordination of more than 1 foreign proceeding
``In matters referred to in section 1501, with respect to
more than 1 foreign proceeding regarding the debtor, the
court shall seek cooperation and coordination under sections
1525, 1526, and 1527, and the following shall apply:
``(1) Any relief granted under section 1519 or 1521 to a
representative of a foreign nonmain proceeding after
recognition of a foreign main proceeding must be consistent
with the foreign main proceeding.
``(2) If a foreign main proceeding is recognized after
recognition, or after the filing of a petition for
recognition, of a foreign nonmain proceeding, any relief in
effect under section 1519 or 1521 shall be reviewed by the
court and shall be modified or terminated if inconsistent
with the foreign main proceeding.
``(3) If, after recognition of a foreign nonmain
proceeding, another foreign nonmain proceeding is recognized,
the court shall grant, modify, or terminate relief for the
purpose of facilitating coordination of the proceedings.
``Sec. 1531. Presumption of insolvency based on recognition
of a foreign main proceeding
``In the absence of evidence to the contrary, recognition
of a foreign main proceeding is, for the purpose of
commencing a proceeding under section 303, proof that the
debtor is generally not paying its debts as such debts become
due.
``Sec. 1532. Rule of payment in concurrent proceedings
``Without prejudice to secured claims or rights in rem, a
creditor who has received payment with respect to its claim
in a foreign proceeding pursuant to a law relating to
insolvency may not receive a payment for the same claim in a
case under any other chapter of this title regarding the
debtor, so long as the payment to other creditors of the same
class is proportionately less than the payment the creditor
has already received.''.
(b) Clerical Amendment.--The table of chapters for title
11, United States Code, is amended by inserting after the
item relating to chapter 13 the following:
``15. Ancillary and Other Cross-Border Cases................1501''.....
SEC. 802. OTHER AMENDMENTS TO TITLES 11 AND 28, UNITED STATES
CODE.
(a) Applicability of Chapters.--Section 103 of title 11,
United States Code, is amended--
(1) in subsection (a), by inserting before the period the
following: ``, and this chapter, sections 307, 362(l), 555
through 557, and 559 through 562 apply in a case under
chapter 15''; and
(2) by adding at the end the following:
``(j) Chapter 15 applies only in a case under such chapter,
except that--
``(1) sections 1505, 1513, and 1514 apply in all cases
under this title; and
``(2) section 1509 applies whether or not a case under this
title is pending.''.
(b) Definitions.--Section 101 of title 11, United States
Code, is amended by striking paragraphs (23) and (24) and
inserting the following:
``(23) `foreign proceeding' means a collective judicial or
administrative proceeding in a foreign country, including an
interim proceeding, under a law relating to insolvency or
adjustment of debt in which proceeding the assets and affairs
of the debtor are subject to control or supervision by a
foreign court, for the purpose of reorganization or
liquidation;
``(24) `foreign representative' means a person or body,
including a person or body appointed on an interim basis,
authorized in a foreign proceeding to administer the
reorganization or the liquidation of the debtor's assets or
affairs or to act as a representative of the foreign
proceeding;''.
(c) Amendments to Title 28, United States Code.--
(1) Procedures.--Section 157(b)(2) of title 28, United
States Code, is amended--
(A) in subparagraph (N), by striking ``and'' at the end;
(B) in subparagraph (O), by striking the period at the end
and inserting ``; and''; and
(C) by adding at the end the following:
``(P) recognition of foreign proceedings and other matters
under chapter 15 of title 11.''.
(2) Bankruptcy cases and proceedings.--Section 1334(c) of
title 28, United States Code, is amended by striking
``Nothing in'' and inserting ``Except with respect to a case
under chapter 15 of title 11, nothing in''.
(3) Duties of trustees.--Section 586(a)(3) of title 28,
United States Code, is amended by striking ``or 13'' and
inserting ``13, or 15,''.
(4) Venue of cases ancillary to foreign proceedings.--
Section 1410 of title 28, United States Code, is amended to
read as follows:
``Sec. 1410. Venue of cases ancillary to foreign proceedings
``A case under chapter 15 of title 11 may be commenced in
the district court for the district--
``(1) in which the debtor has its principal place of
business or principal assets in the United States;
``(2) if the debtor does not have a place of business or
assets in the United States, in which there is pending
against the debtor an action or proceeding in a Federal or
State court; or
``(3) in a case other than those specified in paragraph (1)
or (2), in which venue will be consistent with the interests
of justice and the convenience of the parties, having regard
to the relief sought by the foreign representative.''.
(d) Other Sections of Title 11.--
(1) Section 109(b)(3) of title 11, United States Code, is
amended to read as follows:
``(3)(A) a foreign insurance company, engaged in such
business in the United States; or
``(B) a foreign bank, savings bank, cooperative bank,
savings and loan association, building and loan association,
or credit union, that has a branch or agency (as defined in
section 1(b) of the International Banking Act of 1978 (12
U.S.C. 3101) in the United States.''.
(2) Section 303(k) of title 11, United States Code, is
repealed.
(3)(A) Section 304 of title 11, United States Code, is
repealed.
(B) The table of sections at the beginning of chapter 3 of
title 11, United States Code, is amended by striking the item
relating to section 304.
(C) Section 306 of title 11, United States Code, is amended
by striking ``, 304,'' each place it appears.
(4) Section 305(a)(2) of title 11, United States Code, is
amended to read as follows:
``(2)(A) a petition under section 1515 of this title for
recognition of a foreign proceeding has been granted; and
``(B) the purposes of chapter 15 of this title would be
best served by such dismissal or suspension.''.
(5) Section 508 of title 11, United States Code, is
amended--
(A) by striking subsection (a); and
(B) in subsection (b), by striking ``(b)''.
TITLE IX--FINANCIAL CONTRACT PROVISIONS
SEC. 901. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS OR
RECEIVERS OF INSURED DEPOSITORY INSTITUTIONS.
(a) Definition of Qualified Financial Contract.--Section
11(e)(8)(D)(i) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(i)) is amended by inserting ``,
resolution, or order'' after ``any similar agreement that the
Corporation determines by regulation''.
(b) Definition of Securities Contract.--Section
11(e)(8)(D)(ii) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(ii)) is amended to read as follows:
``(ii) Securities contract.--The term `securities
contract'--
``(I) means a contract for the purchase, sale, or loan of a
security, a certificate of deposit, a mortgage loan, or any
interest in a mortgage loan, a group or index of securities,
certificates of deposit, or mortgage loans or interests
therein (including any interest therein or based on the value
thereof) or any option on any of the foregoing, including any
option to purchase or sell any such security, certificate of
deposit, loan, interest, group or index, or option;
``(II) does not include any purchase, sale, or repurchase
obligation under a participation in a commercial mortgage
loan unless the Corporation determines by regulation,
resolution, or order to include any such agreement within the
meaning of such term;
``(III) means any option entered into on a national
securities exchange relating to foreign currencies;
``(IV) means the guarantee by or to any securities clearing
agency of any settlement of cash, securities, certificates of
deposit, mortgage loans or interests therein, group or index
of securities, certificates of deposit, or mortgage loans or
interests therein (including any interest therein or based on
the value thereof) or option on any of the foregoing,
including any option to purchase or sell any such security,
certificate of deposit, loan, interest, group or index or
option;
``(V) means any margin loan;
``(VI) means any other agreement or transaction that is
similar to any agreement or transaction referred to in this
clause;
``(VII) means any combination of the agreements or
transactions referred to in this clause;
``(VIII) means any option to enter into any agreement or
transaction referred to in this clause;
``(IX) means a master agreement that provides for an
agreement or transaction referred to in subclause (I), (III),
(IV), (V), (VI), (VII), or (VIII), together with all
supplements to any such master agreement, without regard
to whether the master agreement
[[Page H562]]
provides for an agreement or transaction that is not a
securities contract under this clause, except that the
master agreement shall be considered to be a securities
contract under this clause only with respect to each
agreement or transaction under the master agreement that
is referred to in subclause (I), (III), (IV), (V), (VI),
(VII), or (VIII); and
``(X) means any security agreement or arrangement or other
credit enhancement related to any agreement or transaction
referred to in this clause.''.
(c) Definition of Commodity Contract.--Section
11(e)(8)(D)(iii) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(iii)) is amended to read as follows:
``(iii) Commodity contract.--The term `commodity contract'
means--
``(I) with respect to a futures commission merchant, a
contract for the purchase or sale of a commodity for future
delivery on, or subject to the rules of, a contract market or
board of trade;
``(II) with respect to a foreign futures commission
merchant, a foreign future;
``(III) with respect to a leverage transaction merchant, a
leverage transaction;
``(IV) with respect to a clearing organization, a contract
for the purchase or sale of a commodity for future delivery
on, or subject to the rules of, a contract market or board of
trade that is cleared by such clearing organization, or
commodity option traded on, or subject to the rules of, a
contract market or board of trade that is cleared by such
clearing organization;
``(V) with respect to a commodity options dealer, a
commodity option;
``(VI) any other agreement or transaction that is similar
to any agreement or transaction referred to in this clause;
``(VII) any combination of the agreements or transactions
referred to in this clause;
``(VIII) any option to enter into any agreement or
transaction referred to in this clause;
``(IX) a master agreement that provides for an agreement or
transaction referred to in subclause (I), (II), (III), (IV),
(V), (VI), (VII), or (VIII), together with all supplements to
any such master agreement, without regard to whether the
master agreement provides for an agreement or transaction
that is not a commodity contract under this clause, except
that the master agreement shall be considered to be a
commodity contract under this clause only with respect to
each agreement or transaction under the master agreement that
is referred to in subclause (I), (II), (III), (IV), (V),
(VI), (VII), or (VIII); or
``(X) any security agreement or arrangement or other credit
enhancement related to any agreement or transaction referred
to in this clause.''.
(d) Definition of Forward Contract.--Section
11(e)(8)(D)(iv) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(iv)) is amended to read as follows:
``(iv) Forward contract.--The term `forward contract'
means--
``(I) a contract (other than a commodity contract) for the
purchase, sale, or transfer of a commodity or any similar
good, article, service, right, or interest which is presently
or in the future becomes the subject of dealing in the
forward contract trade, or product or byproduct thereof, with
a maturity date more than 2 days after the date the contract
is entered into, including, a repurchase transaction, reverse
repurchase transaction, consignment, lease, swap, hedge
transaction, deposit, loan, option, allocated transaction,
unallocated transaction, or any other similar agreement;
``(II) any combination of agreements or transactions
referred to in subclauses (I) and (III);
``(III) any option to enter into any agreement or
transaction referred to in subclause (I) or (II);
``(IV) a master agreement that provides for an agreement or
transaction referred to in subclauses (I), (II), or (III),
together with all supplements to any such master agreement,
without regard to whether the master agreement provides for
an agreement or transaction that is not a forward contract
under this clause, except that the master agreement shall be
considered to be a forward contract under this clause only
with respect to each agreement or transaction under
the master agreement that is referred to in subclause (I),
(II), or (III); or
``(V) any security agreement or arrangement or other credit
enhancement related to any agreement or transaction referred
to in subclause (I), (II), (III), or (IV).''.
(e) Definition of Repurchase Agreement.--Section
11(e)(8)(D)(v) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(v)) is amended to read as follows:
``(v) Repurchase agreement.--The term `repurchase
agreement' (which definition also applies to a reverse
repurchase agreement)--
``(I) means an agreement, including related terms, which
provides for the transfer of one or more certificates of
deposit, mortgage-related securities (as such term is defined
in the Securities Exchange Act of 1934), mortgage loans,
interests in mortgage-related securities or mortgage loans,
eligible bankers' acceptances, qualified foreign government
securities or securities that are direct obligations of, or
that are fully guaranteed by, the United States or any agency
of the United States against the transfer of funds by the
transferee of such certificates of deposit, eligible bankers'
acceptances, securities, loans, or interests with a
simultaneous agreement by such transferee to transfer to the
transferor thereof certificates of deposit, eligible bankers'
acceptances, securities, loans, or interests as described
above, at a date certain not later than 1 year after such
transfers or on demand, against the transfer of funds, or any
other similar agreement;
``(II) does not include any repurchase obligation under a
participation in a commercial mortgage loan unless the
Corporation determines by regulation, resolution, or order to
include any such participation within the meaning of such
term;
``(III) means any combination of agreements or transactions
referred to in subclauses (I) and (IV);
``(IV) means any option to enter into any agreement or
transaction referred to in subclause (I) or (III);
``(V) means a master agreement that provides for an
agreement or transaction referred to in subclause (I), (III),
or (IV), together with all supplements to any such master
agreement, without regard to whether the master agreement
provides for an agreement or transaction that is not a
repurchase agreement under this clause, except that the
master agreement shall be considered to be a repurchase
agreement under this subclause only with respect to each
agreement or transaction under the master agreement that is
referred to in subclause (I), (III), or (IV); and
``(VI) means any security agreement or arrangement or other
credit enhancement related to any agreement or transaction
referred to in subclause (I), (III), (IV), or (V).
For purposes of this clause, the term `qualified foreign
government security' means a security that is a direct
obligation of, or that is fully guaranteed by, the central
government of a member of the Organization for Economic
Cooperation and Development (as determined by regulation or
order adopted by the appropriate Federal banking
authority).''.
(f) Definition of Swap Agreement.--Section 11(e)(8)(D)(vi)
of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(vi)) is amended to read as follows:
``(vi) Swap agreement.--The term `swap agreement' means--
``(I) any agreement, including the terms and conditions
incorporated by reference in any such agreement, which is an
interest rate swap, option, future, or forward agreement,
including a rate floor, rate cap, rate collar, cross-currency
rate swap, and basis swap; a spot, same day-tomorrow,
tomorrow-next, forward, or other foreign exchange or precious
metals agreement; a currency swap, option, future, or forward
agreement; an equity index or equity swap, option, future, or
forward agreement; a debt index or debt swap, option, future,
or forward agreement; a credit spread or credit swap, option,
future, or forward agreement; a commodity index or commodity
swap, option, future, or forward agreement; or a weather
swap, weather derivative, or weather option;
``(II) any agreement or transaction similar to any other
agreement or transaction referred to in this clause that is
presently, or in the future becomes, regularly entered into
in the swap market (including terms and conditions
incorporated by reference in such agreement) and that is a
forward, swap, future, or option on one or more rates,
currencies, commodities, equity securities or other equity
instruments, debt securities or other debt instruments, or
economic indices or measures of economic risk or value;
``(III) any combination of agreements or transactions
referred to in this clause;
``(IV) any option to enter into any agreement or
transaction referred to in this clause;
``(V) a master agreement that provides for an agreement or
transaction referred to in subclause (I), (II), (III), or
(IV), together with all supplements to any such master
agreement, without regard to whether the master agreement
contains an agreement or transaction that is not a swap
agreement under this clause, except that the master agreement
shall be considered to be a swap agreement under this clause
only with respect to each agreement or transaction under the
master agreement that is referred to in subclause (I), (II),
(III), or (IV); and
``(VI) any security agreement or arrangement or other
credit enhancement related to any agreements or transactions
referred to in subparagraph (I), (II), (III), (IV), or (V).
Such term is applicable for purposes of this title only and
shall not be construed or applied so as to challenge or
affect the characterization, definition, or treatment of any
swap agreement under any other statute, regulation, or rule,
including the Securities Act of 1933, the Securities Exchange
Act of 1934, the Public Utility Holding Company Act of 1935,
the Trust Indenture Act of 1939, the Investment Company Act
of 1940, the Investment Advisers Act of 1940, the Securities
Investor Protection Act of 1970, the Commodity Exchange Act,
and the regulations promulgated by the Securities and
Exchange Commission or the Commodity Futures Trading
Commission.''.
(g) Definition of Transfer.--Section 11(e)(8)(D)(viii) of
the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(viii)) is amended to read as follows:
``(viii) Transfer.--The term `transfer' means every mode,
direct or indirect, absolute or conditional, voluntary or
involuntary, of disposing of or parting with property or with
an interest in property, including retention of title as a
security interest and
[[Page H563]]
foreclosure of the depository institutions's equity of
redemption.''.
(h) Treatment of Qualified Financial Contracts.--Section
11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)) is amended--
(1) in subparagraph (A)--
(A) by striking ``paragraph (10)'' and inserting
``paragraphs (9) and (10)'';
(B) in clause (i), by striking ``to cause the termination
or liquidation'' and inserting ``such person has to cause the
termination, liquidation, or acceleration''; and
(C) by striking clause (ii) and inserting the following:
``(ii) any right under any security agreement or
arrangement or other credit enhancement related to one or
more qualified financial contracts described in clause
(i);''; and
(2) in subparagraph (E), by striking clause (ii) and
inserting the following:
``(ii) any right under any security agreement or
arrangement or other credit enhancement related to one or
more qualified financial contracts described in clause
(i);''.
(i) Avoidance of Transfers.--Section 11(e)(8)(C)(i) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(C)(i)) is
amended by inserting ``section 5242 of the Revised Statutes
of the United States (12 U.S.C. 91) or any other Federal or
State law relating to the avoidance of preferential or
fraudulent transfers,'' before ``the Corporation''.
SEC. 902. AUTHORITY OF THE CORPORATION WITH RESPECT TO FAILED
AND FAILING INSTITUTIONS.
(a) In General.--Section 11(e)(8) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)(8)) is amended--
(1) in subparagraph (E), by striking ``other than paragraph
(12) of this subsection, subsection (d)(9)'' and inserting
``other than subsections (d)(9) and (e)(10)''; and
(2) by adding at the end the following new subparagraphs:
``(F) Clarification.--No provision of law shall be
construed as limiting the right or power of the Corporation,
or authorizing any court or agency to limit or delay, in any
manner, the right or power of the Corporation to transfer any
qualified financial contract in accordance with paragraphs
(9) and (10) of this subsection or to disaffirm or repudiate
any such contract in accordance with subsection (e)(1) of
this section.
``(G) Walkaway clauses not effective.--
``(i) In general.--Notwithstanding the provisions of
subparagraphs (A) and (E), and sections 403 and 404 of the
Federal Deposit Insurance Corporation Improvement Act of
1991, no walkaway clause shall be enforceable in a qualified
financial contract of an insured depository institution in
default.
``(ii) Walkaway clause defined.--For purposes of this
subparagraph, the term `walkaway clause' means a provision in
a qualified financial contract that, after calculation of a
value of a party's position or an amount due to or from 1 of
the parties in accordance with its terms upon termination,
liquidation, or acceleration of the qualified financial
contract, either does not create a payment obligation of a
party or extinguishes a payment obligation of a party in
whole or in part solely because of such party's status as a
nondefaulting party.''.
(b) Technical and Conforming Amendment.--Section
11(e)(12)(A) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(12)(A)) is amended by inserting ``or the exercise of
rights or powers by'' after ``the appointment of''.
SEC. 903. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED
FINANCIAL CONTRACTS.
(a) Transfers of Qualified Financial Contracts to Financial
Institutions.--Section 11(e)(9) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)(9)) is amended to read as
follows:
``(9) Transfer of qualified financial contracts.--
``(A) In general.--In making any transfer of assets or
liabilities of a depository institution in default which
includes any qualified financial contract, the conservator or
receiver for such depository institution shall either--
``(i) transfer to one financial institution, other than a
financial institution for which a conservator, receiver,
trustee in bankruptcy, or other legal custodian has been
appointed or which is otherwise the subject of a bankruptcy
or insolvency proceeding--
``(I) all qualified financial contracts between any person
or any affiliate of such person and the depository
institution in default;
``(II) all claims of such person or any affiliate of such
person against such depository institution under any such
contract (other than any claim which, under the terms of any
such contract, is subordinated to the claims of general
unsecured creditors of such institution);
``(III) all claims of such depository institution against
such person or any affiliate of such person under any such
contract; and
``(IV) all property securing or any other credit
enhancement for any contract described in subclause (I) or
any claim described in subclause (II) or (III) under any such
contract; or
``(ii) transfer none of the qualified financial contracts,
claims, property or other credit enhancement referred to in
clause (i) (with respect to such person and any affiliate of
such person).
``(B) Transfer to foreign bank, foreign financial
institution, or branch or agency of a foreign bank or
financial institution.--In transferring any qualified
financial contract and related claims and property under
subparagraph (A)(i), the conservator or receiver for the
depository institution shall not make such transfer to a
foreign bank, financial institution organized under the laws
of a foreign country, or a branch or agency of a foreign bank
or financial institution unless, under the law applicable to
such bank, financial institution, branch or agency, to the
qualified financial contracts, and to any netting
contract, any security agreement or arrangement or other
credit enhancement related to one or more qualified
financial contracts, the contractual rights of the parties
to such qualified financial contracts, netting contracts,
security agreements or arrangements, or other credit
enhancements are enforceable substantially to the same
extent as permitted under this section.
``(C) Transfer of contracts subject to the rules of a
clearing organization.--In the event that a conservator or
receiver transfers any qualified financial contract and
related claims, property, and credit enhancements pursuant to
subparagraph (A)(i) and such contract is subject to the rules
of a clearing organization, the clearing organization shall
not be required to accept the transferee as a member by
virtue of the transfer.
``(D) Definition.--For purposes of this paragraph, the term
`financial institution' means a broker or dealer, a
depository institution, a futures commission merchant, or any
other institution, as determined by the Corporation by
regulation to be a financial institution.''.
(b) Notice to Qualified Financial Contract
Counterparties.--Section 11(e)(10)(A) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)(10)(A)) is amended in the
material immediately following clause (ii) by striking ``the
conservator'' and all that follows through the period and
inserting the following: ``the conservator or receiver shall
notify any person who is a party to any such contract of such
transfer by 5:00 p.m. (eastern time) on the business day
following the date of the appointment of the receiver in the
case of a receivership, or the business day following such
transfer in the case of a conservatorship.''.
(c) Rights Against Receiver and Treatment of Bridge
Banks.--Section 11(e)(10) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(10)) is amended--
(1) by redesignating subparagraph (B) as subparagraph (D);
and
(2) by inserting after subparagraph (A) the following new
subparagraphs:
``(B) Certain rights not enforceable.--
``(i) Receivership.--A person who is a party to a qualified
financial contract with an insured depository institution may
not exercise any right that such person has to terminate,
liquidate, or net such contract under paragraph (8)(A) of
this subsection or section 403 or 404 of the Federal Deposit
Insurance Corporation Improvement Act of 1991, solely by
reason of or incidental to the appointment of a receiver for
the depository institution (or the insolvency or financial
condition of the depository institution for which the
receiver has been appointed)--
``(I) until 5:00 p.m. (eastern time) on the business day
following the date of the appointment of the receiver; or
``(II) after the person has received notice that the
contract has been transferred pursuant to paragraph (9)(A).
``(ii) Conservatorship.--A person who is a party to a
qualified financial contract with an insured depository
institution may not exercise any right that such person has
to terminate, liquidate, or net such contract under
paragraph (8)(E) of this subsection or sections 403 or 404
of the Federal Deposit Insurance Corporation Improvement
Act of 1991, solely by reason of or incidental to the
appointment of a conservator for the depository
institution (or the insolvency or financial condition of
the depository institution for which the conservator has
been appointed).
``(iii) Notice.--For purposes of this paragraph, the
Corporation as receiver or conservator of an insured
depository institution shall be deemed to have notified a
person who is a party to a qualified financial contract with
such depository institution if the Corporation has taken
steps reasonably calculated to provide notice to such person
by the time specified in subparagraph (A).
``(C) Treatment of bridge banks.--The following
institutions shall not be considered to be a financial
institution for which a conservator, receiver, trustee in
bankruptcy, or other legal custodian has been appointed or
which is otherwise the subject of a bankruptcy or insolvency
proceeding for purposes of paragraph (9):
``(i) A bridge bank.
``(ii) A depository institution organized by the
Corporation, for which a conservator is appointed either--
``(I) immediately upon the organization of the institution;
or
``(II) at the time of a purchase and assumption transaction
between the depository institution and the Corporation as
receiver for a depository institution in default.''.
SEC. 904. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION
OF QUALIFIED FINANCIAL CONTRACTS.
Section 11(e) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)) is amended--
(1) by redesignating paragraphs (11) through (15) as
paragraphs (12) through (16), respectively; and
[[Page H564]]
(2) by inserting after paragraph (10) the following new
paragraph:
``(11) Disaffirmance or repudiation of qualified financial
contracts.--In exercising the rights of disaffirmance or
repudiation of a conservator or receiver with respect to any
qualified financial contract to which an insured depository
institution is a party, the conservator or receiver for such
institution shall either--
``(A) disaffirm or repudiate all qualified financial
contracts between--
``(i) any person or any affiliate of such person; and
``(ii) the depository institution in default; or
``(B) disaffirm or repudiate none of the qualified
financial contracts referred to in subparagraph (A) (with
respect to such person or any affiliate of such person).''.
SEC. 905. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.
Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(8)(D)(vii)) is amended to read as
follows:
``(vii) Treatment of master agreement as one agreement.--
Any master agreement for any contract or agreement described
in any preceding clause of this subparagraph (or any master
agreement for such master agreement or agreements), together
with all supplements to such master agreement, shall be
treated as a single agreement and a single qualified
financial contract. If a master agreement contains provisions
relating to agreements or transactions that are not
themselves qualified financial contracts, the master
agreement shall be deemed to be a qualified financial
contract only with respect to those transactions that are
themselves qualified financial contracts.''.
SEC. 906. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT
ACT OF 1991.
(a) Definitions.--Section 402 of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (12 U.S.C.
4402) is amended--
(1) in paragraph (2)--
(A) in subparagraph (A)(ii), by inserting before the
semicolon ``, or is exempt from such registration by order of
the Securities and Exchange Commission''; and
(B) in subparagraph (B), by inserting before the period
``or that has been granted an exemption under section 4(c)(1)
of the Commodity Exchange Act'';
(2) in paragraph (6)--
(A) by redesignating subparagraphs (B) through (D) as
subparagraphs (C) through (E), respectively;
(B) by inserting after subparagraph (A) the following new
subparagraph:
``(B) an uninsured national bank or an uninsured State bank
that is a member of the Federal Reserve System, if the
national bank or State member bank is not eligible to make
application to become an insured bank under section 5 of the
Federal Deposit Insurance Act;''; and
(C) by amending subparagraph (C) (as redesignated) to read
as follows:
``(C) a branch or agency of a foreign bank, a foreign bank
and any branch or agency of the foreign bank, or the foreign
bank that established the branch or agency, as those terms
are defined in section 1(b) of the International Banking Act
of 1978;'';
(3) in paragraph (11), by inserting before the period ``and
any other clearing organization with which such clearing
organization has a netting contract'';
(4) by amending paragraph (14)(A)(i) to read as follows:
``(i) means a contract or agreement between 2 or more
financial institutions, clearing organizations, or members
that provides for netting present or future payment
obligations or payment entitlements (including liquidation or
closeout values relating to such obligations or entitlements)
among the parties to the agreement; and''; and
(5) by adding at the end the following new paragraph:
``(15) Payment.--The term `payment' means a payment of
United States dollars, another currency, or a composite
currency, and a noncash delivery, including a payment or
delivery to liquidate an unmatured obligation.''.
(b) Enforceability of Bilateral Netting Contracts.--Section
403 of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (12 U.S.C. 4403) is amended--
(1) by striking subsection (a) and inserting the following:
``(a) General Rule.--Notwithstanding any other provision of
State or Federal law (other than paragraphs (8)(E), (8)(F),
and (10)(B) of section 11(e) of the Federal Deposit Insurance
Act or any order authorized under section 5(b)(2) of the
Securities Investor Protection Act of 1970), the covered
contractual payment obligations and the covered contractual
payment entitlements between any 2 financial institutions
shall be netted in accordance with, and subject to the
conditions of, the terms of any applicable netting contract
(except as provided in section 561(b)(2) of title 11, United
States Code).''; and
(2) by adding at the end the following new subsection:
``(f) Enforceability of Security Agreements.--The
provisions of any security agreement or arrangement or other
credit enhancement related to one or more netting contracts
between any 2 financial institutions shall be enforceable in
accordance with their terms (except as provided in section
561(b)(2) of title 11, United States Code), and shall not be
stayed, avoided, or otherwise limited by any State or Federal
law (other than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance Act and
section 5(b)(2) of the Securities Investor Protection Act of
1970).''.
(c) Enforceability of Clearing Organization Netting
Contracts.--Section 404 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4404) is
amended--
(1) by striking subsection (a) and inserting the following:
``(a) General Rule.--Notwithstanding any other provision of
State or Federal law (other than paragraphs (8)(E), (8)(F),
and (10)(B) of section 11(e) of the Federal Deposit Insurance
Act and any order authorized under section 5(b)(2) of the
Securities Investor Protection Act of 1970), the covered
contractual payment obligations and the covered contractual
payment entitlements of a member of a clearing organization
to and from all other members of a clearing organization
shall be netted in accordance with and subject to the
conditions of any applicable netting contract (except as
provided in section 561(b)(2) of title 11, United States
Code).''; and
(2) by adding at the end the following new subsection:
``(h) Enforceability of Security Agreements.--The
provisions of any security agreement or arrangement or other
credit enhancement related to one or more netting contracts
between any 2 members of a clearing organization shall be
enforceable in accordance with their terms (except as
provided in section 561(b)(2) of title 11, United States
Code), and shall not be stayed, avoided, or otherwise limited
by any State or Federal law (other than paragraphs (8)(E),
(8)(F), and (10)(B) of section 11(e) of the Federal Deposit
Insurance Act and section 5(b)(2) of the Securities Investor
Protection Act of 1970).''.
(d) Enforceability of Contracts With Uninsured National
Banks and Uninsured Federal Branches and Agencies.--The
Federal Deposit Insurance Corporation Improvement Act of 1991
(12 U.S.C. 4401 et seq.) is amended--
(1) by redesignating section 407 as 407A; and
(2) by inserting after section 406 the following new
section:
``SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL
BANKS AND UNINSURED FEDERAL BRANCHES AND
AGENCIES.
``(a) In General.--Notwithstanding any other provision of
law, paragraphs (8), (9), (10), and (11) of section 11(e) of
the Federal Deposit Insurance Act shall apply to an uninsured
national bank or uninsured Federal branch or Federal agency,
except that for such purpose--
``(1) any reference to the `Corporation as receiver' or
`the receiver or the Corporation' shall refer to the receiver
of an uninsured national bank or uninsured Federal branch or
Federal agency appointed by the Comptroller of the Currency;
``(2) any reference to the `Corporation' (other than in
section 11(e)(8)(D) of such Act), the `Corporation, whether
acting as such or as conservator or receiver', a `receiver',
or a `conservator' shall refer to the receiver or conservator
of an uninsured national bank or uninsured Federal branch or
Federal agency appointed by the Comptroller of the Currency;
and
``(3) any reference to an `insured depository institution'
or `depository institution' shall refer to an uninsured
national bank or an uninsured Federal branch or Federal
agency.
``(b) Liability.--The liability of a receiver or
conservator of an uninsured national bank or uninsured
Federal branch or agency shall be determined in the same
manner and subject to the same limitations that apply to
receivers and conservators of insured depository institutions
under section 11(e) of the Federal Deposit Insurance Act.
``(c) Regulatory Authority.--
``(1) In general.--The Comptroller of the Currency, in
consultation with the Federal Deposit Insurance Corporation,
may promulgate regulations to implement this section.
``(2) Specific requirement.--In promulgating regulations to
implement this section, the Comptroller of the Currency shall
ensure that the regulations generally are consistent with the
regulations and policies of the Federal Deposit Insurance
Corporation adopted pursuant to the Federal Deposit Insurance
Act.
``(d) Definitions.--For purposes of this section, the terms
`Federal branch', `Federal agency', and `foreign bank' have
the same meanings as in section 1(b) of the International
Banking Act of 1978.''.
SEC. 907. BANKRUPTCY CODE AMENDMENTS.
(a) Definitions of Forward Contract, Repurchase Agreement,
Securities Clearing Agency, Swap Agreement, Commodity
Contract, and Securities Contract.--Title 11, United States
Code, is amended--
(1) in section 101--
(A) in paragraph (25)--
(i) by striking ``means a contract'' and inserting
``means--
``(A) a contract'';
(ii) by striking ``, or any combination thereof or option
thereon;'' and inserting ``, or any other similar
agreement;''; and
(iii) by adding at the end the following:
``(B) any combination of agreements or transactions
referred to in subparagraphs (A) and (C);
``(C) any option to enter into an agreement or transaction
referred to in subparagraph (A) or (B);
``(D) a master agreement that provides for an agreement or
transaction referred to in subparagraph (A), (B), or (C),
together with
[[Page H565]]
all supplements to any such master agreement, without regard
to whether such master agreement provides for an agreement or
transaction that is not a forward contract under this
paragraph, except that such master agreement shall be
considered to be a forward contract under this paragraph only
with respect to each agreement or transaction under such
master agreement that is referred to in subparagraph (A),
(B), or (C); or
``(E) any security agreement or arrangement, or other
credit enhancement related to any agreement or transaction
referred to in subparagraph (A), (B), (C), or (D), but not to
exceed the actual value of such contract on the date of the
filing of the petition;'';
(B) in paragraph (46), by striking ``on any day during the
period beginning 90 days before the date of'' and inserting
``at any time before'';
(C) by amending paragraph (47) to read as follows:
``(47) `repurchase agreement' (which definition also
applies to a reverse repurchase agreement)--
``(A) means--
``(i) an agreement, including related terms, which provides
for the transfer of one or more certificates of deposit,
mortgage related securities (as defined in section 3 of the
Securities Exchange Act of 1934), mortgage loans, interests
in mortgage related securities or mortgage loans, eligible
bankers' acceptances, qualified foreign government securities
(defined as a security that is a direct obligation of, or
that is fully guaranteed by, the central government of a
member of the Organization for Economic Cooperation and
Development), or securities that are direct obligations of,
or that are fully guaranteed by, the United States or any
agency of the United States against the transfer of funds by
the transferee of such certificates of deposit, eligible
bankers' acceptances, securities, loans, or interests, with a
simultaneous agreement by such transferee to transfer to the
transferor thereof certificates of deposit, eligible bankers'
acceptance, securities, loans, or interests of the kind
described in this clause, at a date certain not later than 1
year after such transfer or on demand, against the transfer
of funds;
``(ii) any combination of agreements or transactions
referred to in clauses (i) and (iii);
``(iii) an option to enter into an agreement or transaction
referred to in clause (i) or (ii);
``(iv) a master agreement that provides for an agreement or
transaction referred to in clause (i), (ii), or (iii),
together with all supplements to any such master agreement,
without regard to whether such master agreement provides for
an agreement or transaction that is not a repurchase
agreement under this paragraph, except that such master
agreement shall be considered to be a repurchase agreement
under this paragraph only with respect to each agreement or
transaction under the master agreement that is referred to in
clause (i), (ii), or (iii); or
``(v) any security agreement or arrangement or other credit
enhancement related to any agreement or transaction referred
to in clause (i), (ii), (iii), or (iv), but not to exceed the
actual value of such contract on the date of the filing of
the petition; and
``(B) does not include a repurchase obligation under a
participation in a commercial mortgage loan;'';
(D) in paragraph (48), by inserting ``, or exempt from such
registration under such section pursuant to an order of the
Securities and Exchange Commission,'' after ``1934''; and
(E) by amending paragraph (53B) to read as follows:
``(53B) `swap agreement'--
``(A) means--
``(i) any agreement, including the terms and conditions
incorporated by reference in such agreement, which is an
interest rate swap, option, future, or forward agreement,
including--
``(I) a rate floor, rate cap, rate collar, cross-currency
rate swap, and basis swap;
``(II) a spot, same day-tomorrow, tomorrow-next, forward,
or other foreign exchange or precious metals agreement;
``(III) a currency swap, option, future, or forward
agreement;
``(IV) an equity index or an equity swap, option, future,
or forward agreement;
``(V) a debt index or a debt swap, option, future, or
forward agreement;
``(VI) a credit spread or a credit swap, option, future, or
forward agreement;
``(VII) a commodity index or a commodity swap, option,
future, or forward agreement; or
``(VIII) a weather swap, weather derivative, or weather
option;
``(ii) any agreement or transaction similar to any other
agreement or transaction referred to in this paragraph that--
``(I) is presently, or in the future becomes, regularly
entered into in the swap market (including terms and
conditions incorporated by reference therein); and
``(II) is a forward, swap, future, or option on one or more
rates, currencies, commodities, equity securities, or other
equity instruments, debt securities or other debt
instruments, or economic indices or measures of economic risk
or value;
``(iii) any combination of agreements or transactions
referred to in this subparagraph;
``(iv) any option to enter into an agreement or transaction
referred to in this subparagraph;
``(v) a master agreement that provides for an agreement or
transaction referred to in clause (i), (ii), (iii), or (iv),
together with all supplements to any such master agreement,
and without regard to whether the master agreement contains
an agreement or transaction that is not a swap agreement
under this paragraph, except that the master agreement shall
be considered to be a swap agreement under this paragraph
only with respect to each agreement or transaction under the
master agreement that is referred to in clause (i), (ii),
(iii), or (iv); or
``(vi) any security agreement or arrangement or other
credit enhancement related to any agreements or transactions
referred to in clause (i) through (v), but not to exceed the
actual value of such contract on the date of the filing of
the petition; and
``(B) is applicable for purposes of this title only, and
shall not be construed or applied so as to challenge or
affect the characterization, definition, or treatment of any
swap agreement under any other statute, regulation, or rule,
including the Securities Act of 1933, the Securities Exchange
Act of 1934, the Public Utility Holding Company Act of 1935,
the Trust Indenture Act of 1939, the Investment Company Act
of 1940, the Investment Advisers Act of 1940, the Securities
Investor Protection Act of 1970, the Commodity Exchange Act,
and the regulations prescribed by the Securities and Exchange
Commission or the Commodity Futures Trading Commission.'';
(2) in section 741(7), by striking paragraph (7) and
inserting the following:
``(7) `securities contract'--
``(A) means--
``(i) a contract for the purchase, sale, or loan of a
security, a certificate of deposit, a mortgage loan or any
interest in a mortgage loan, a group or index of securities,
certificates of deposit, or mortgage loans or interests
therein (including an interest therein or based on the value
thereof), or option on any of the foregoing, including an
option to purchase or sell any such security, certificate of
deposit, loan, interest, group or index, or option;
``(ii) any option entered into on a national securities
exchange relating to foreign currencies;
``(iii) the guarantee by or to any securities clearing
agency of a settlement of cash, securities, certificates of
deposit, mortgage loans or interests therein, group or index
of securities, or mortgage loans or interests therein
(including any interest therein or based on the value
thereof), or option on any of the foregoing, including an
option to purchase or sell any such security, certificate of
deposit, loan, interest, group or index, or option;
``(iv) any margin loan;
``(v) any other agreement or transaction that is similar to
an agreement or transaction referred to in this subparagraph;
``(vi) any combination of the agreements or transactions
referred to in this subparagraph;
``(vii) any option to enter into any agreement or
transaction referred to in this subparagraph;
``(viii) a master agreement that provides for an agreement
or transaction referred to in clause (i), (ii), (iii), (iv),
(v), (vi), or (vii), together with all supplements to any
such master agreement, without regard to whether the master
agreement provides for an agreement or transaction that is
not a securities contract under this subparagraph, except
that such master agreement shall be considered to be a
securities contract under this subparagraph only with respect
to each agreement or transaction under such master agreement
that is referred to in clause (i), (ii), (iii), (iv), (v),
(vi), or (vii); or
``(ix) any security agreement or arrangement or other
credit enhancement, related to any agreement or transaction
referred to in this subparagraph, but not to exceed the
actual value of such contract on the date of the filing of
the petition; and
``(B) does not include any purchase, sale, or repurchase
obligation under a participation in a commercial mortgage
loan.''; and
(3) in section 761(4)--
(A) by striking ``or'' at the end of subparagraph (D); and
(B) by adding at the end the following:
``(F) any other agreement or transaction that is similar to
an agreement or transaction referred to in this paragraph;
``(G) any combination of the agreements or transactions
referred to in this paragraph;
``(H) any option to enter into an agreement or transaction
referred to in this paragraph;
``(I) a master agreement that provides for an agreement or
transaction referred to in subparagraph (A), (B), (C), (D),
(E), (F), (G), or (H), together with all supplements to such
master agreement, without regard to whether the master
agreement provides for an agreement or transaction that is
not a commodity contract under this paragraph, except that
the master agreement shall be considered to be a commodity
contract under this paragraph only with respect to each
agreement or transaction under the master agreement that
is referred to in subparagraph (A), (B), (C), (D), (E),
(F), (G), or (H); or
``(J) any security agreement or arrangement or other credit
enhancement related to any agreement or transaction referred
to in this paragraph, but not to exceed the actual value of
such contract on the date of the filing of the petition;''.
(b) Definitions of Financial Institution, Financial
Participant, and Forward Contract Merchant.--Section 101 of
title 11, United States Code, is amended--
[[Page H566]]
(1) by inserting after paragraph (22) the following:
``(22A) `financial participant' means an entity that, at
the time it enters into a securities contract, commodity
contract, or forward contract, or at the time of the filing
of the petition, has one or more agreements or transactions
described in paragraph (1), (2), (3), (4), (5), or (6) of
section 561(a) with the debtor or any other entity (other
than an affiliate) of a total gross dollar value of not less
than $1,000,000,000 in notional or actual principal amount
outstanding on any day during the previous 15-month period,
or has gross mark-to-market positions of not less than
$100,000,000 (aggregated across counterparties) in one or
more such agreements or transactions with the debtor or any
other entity (other than an affiliate) on any day during the
previous 15-month period;''; and
(2) by striking paragraph (26) and inserting the following:
``(26) `forward contract merchant' means a Federal reserve
bank, or an entity, the business of which consists in whole
or in part of entering into forward contracts as or with
merchants or in a commodity, as defined or in section 761 or
any similar good, article, service, right, or interest which
is presently or in the future becomes the subject of dealing
in the forward contract trade;''.
(c) Definition of Master Netting Agreement and Master
Netting Agreement Participant.--Section 101 of title 11,
United States Code, is amended by inserting after paragraph
(38) the following new paragraphs:
``(38A) `master netting agreement'--
``(A) means an agreement providing for the exercise of
rights, including rights of netting, setoff, liquidation,
termination, acceleration, or closeout, under or in
connection with one or more contracts that are described in
any one or more of paragraphs (1) through (5) of section
561(a), or any security agreement or arrangement or other
credit enhancement related to one or more of the foregoing;
and
``(B) if the agreement contains provisions relating to
agreements or transactions that are not contracts described
in paragraphs (1) through (5) of section 561(a), shall be
deemed to be a master netting agreement only with respect to
those agreements or transactions that are described in any
one or more of paragraphs (1) through (5) of section 561(a);
``(38B) `master netting agreement participant' means an
entity that, at any time before the filing of the petition,
is a party to an outstanding master netting agreement with
the debtor;''.
(d) Swap Agreements, Securities Contracts, Commodity
Contracts, Forward Contracts, Repurchase Agreements, and
Master Netting Agreements Under the Automatic-Stay.--
(1) In general.--Section 362(b) of title 11, United States
Code, as amended by this Act, is amended--
(A) in paragraph (6), by inserting ``, pledged to, and
under the control of,'' after ``held by'';
(B) in paragraph (7), by inserting ``, pledged to, and
under the control of,'' after ``held by'';
(C) by striking paragraph (17) and inserting the following:
``(17) under subsection (a), of the setoff by a swap
participant of a mutual debt and claim under or in connection
with one or more swap agreements that constitutes the setoff
of a claim against the debtor for any payment or other
transfer of property due from the debtor under or in
connection with any swap agreement against any payment due to
the debtor from the swap participant under or in connection
with any swap agreement or against cash, securities, or other
property held by, pledged to, and under the control of, or
due from such swap participant to margin, guarantee, secure,
or settle any swap agreement;''; and
(D) by inserting after paragraph (27), as added by this
Act, the following new paragraph:
``(28) under subsection (a), of the setoff by a master
netting agreement participant of a mutual debt and claim
under or in connection with one or more master netting
agreements or any contract or agreement subject to such
agreements that constitutes the setoff of a claim against the
debtor for any payment or other transfer of property due from
the debtor under or in connection with such agreements or any
contract or agreement subject to such agreements against any
payment due to the debtor from such master netting agreement
participant under or in connection with such agreements or
any contract or agreement subject to such agreements or
against cash, securities, or other property held by, pledged
to, and under the control of, or due from such master netting
agreement participant to margin, guarantee, secure, or settle
such agreements or any contract or agreement subject to such
agreements, to the extent that such participant is eligible
to exercise such offset rights under paragraph (6), (7), or
(17) for each individual contract covered by the master
netting agreement in issue; or''.
(2) Limitation.--Section 362 of title 11, United States
Code, as amended by this Act, is amended by adding at the end
the following:
``(l) Limitation.--The exercise of rights not subject to
the stay arising under subsection (a) pursuant to paragraph
(6), (7), (17), or (28) of subsection (b) shall not be stayed
by any order of a court or administrative agency in any
proceeding under this title.''.
(e) Limitation of Avoidance Powers Under Master Netting
Agreement.--Section 546 of title 11, United States Code, as
amended by this Act, is amended--
(1) in subsection (g) (as added by section 103 of Public
Law 101-311)--
(A) by striking ``under a swap agreement''; and
(B) by striking ``in connection with a swap agreement'' and
inserting ``under or in connection with any swap agreement'';
and
(2) by adding at the end the following:
``(k) Notwithstanding sections 544, 545, 547, 548(a)(1)(B),
and 548(b) the trustee may not avoid a transfer made by or to
a master netting agreement participant under or in connection
with any master netting agreement or any individual contract
covered thereby that is made before the commencement of the
case, except under section 548(a)(1)(A) and except to the
extent that the trustee could otherwise avoid such a transfer
made under an individual contract covered by such master
netting agreement.''.
(f) Fraudulent Transfers of Master Netting Agreements.--
Section 548(d)(2) of title 11, United States Code, is
amended--
(1) in subparagraph (C), by striking ``and'' at the end;
(2) in subparagraph (D), by striking the period and
inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(E) a master netting agreement participant that receives
a transfer in connection with a master netting agreement or
any individual contract covered thereby takes for value to
the extent of such transfer, except that, with respect to a
transfer under any individual contract covered thereby, to
the extent that such master netting agreement participant
otherwise did not take (or is otherwise not deemed to have
taken) such transfer for value.''.
(g) Termination or Acceleration of Securities Contracts.--
Section 555 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 555. Contractual right to liquidate, terminate, or
accelerate a securities contract'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(h) Termination or Acceleration of Commodities or Forward
Contracts.--Section 556 of title 11, United States Code, is
amended--
(1) by amending the section heading to read as follows:
``Sec. 556. Contractual right to liquidate, terminate, or
accelerate a commodities contract or forward contract'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(i) Termination or Acceleration of Repurchase Agreements.--
Section 559 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 559. Contractual right to liquidate, terminate, or
accelerate a repurchase agreement'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(j) Liquidation, Termination, or Acceleration of Swap
Agreements.--Section 560 of title 11, United States Code, is
amended--
(1) by amending the section heading to read as follows:
``Sec. 560. Contractual right to liquidate, terminate, or
accelerate a swap agreement'';
(2) in the first sentence, by striking ``termination of a
swap agreement'' and inserting ``liquidation, termination, or
acceleration of one or more swap agreements''; and
(3) by striking ``in connection with any swap agreement''
and inserting ``in connection with the termination,
liquidation, or acceleration of one or more swap
agreements''.
(k) Liquidation, Termination, Acceleration, or Offset Under
a Master Netting Agreement and Across Contracts.--
(1) In general.--Title 11, United States Code, is amended
by inserting after section 560 the following:
``Sec. 561. Contractual right to terminate, liquidate,
accelerate, or offset under a master netting agreement and
across contracts
``(a) In General.--Subject to subsection (b), the exercise
of any contractual right, because of a condition of the kind
specified in section 365(e)(1), to cause the termination,
liquidation, or acceleration of or to offset or net
termination values, payment amounts, or other transfer
obligations arising under or in connection with one or more
(or the termination, liquidation, or acceleration of one or
more)--
``(1) securities contracts, as defined in section 741(7);
``(2) commodity contracts, as defined in section 761(4);
``(3) forward contracts;
``(4) repurchase agreements;
``(5) swap agreements; or
``(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by
operation of any provision of this title or by any order of a
court or administrative agency in any proceeding under this
title.
``(b) Exception.--
``(1) In general.--A party may exercise a contractual right
described in subsection (a)
[[Page H567]]
to terminate, liquidate, or accelerate only to the extent
that such party could exercise such a right under section
555, 556, 559, or 560 for each individual contract covered by
the master netting agreement in issue.
``(2) Commodity brokers.--If a debtor is a commodity broker
subject to subchapter IV of chapter 7--
``(A) a party may not net or offset an obligation to the
debtor arising under, or in connection with, a commodity
contract against any claim arising under, or in connection
with, other instruments, contracts, or agreements listed in
subsection (a) except to the extent that the party has
positive net equity in the commodity accounts at the debtor,
as calculated under that subchapter IV; and
``(B) another commodity broker may not net or offset an
obligation to the debtor arising under, or in connection
with, a commodity contract entered into or held on behalf of
a customer of the debtor against any claim arising under, or
in connection with, other instruments, contracts, or
agreements listed in subsection (a).
``(3) Construction.--No provision of subparagraph (A) or
(B) of paragraph (2) shall prohibit the offset of claims and
obligations that arise under--
``(A) a cross-margining agreement that has been approved by
the Commodity Futures Trading Commission or submitted to the
Commodity Futures Trading Commission under section
5(a)(12)(A) of the Commodity Exchange Act and has been
approved; or
``(B) any other netting agreement between a clearing
organization, as defined in section 761, and another entity
that has been approved by the Commodity Futures Trading
Commission.
``(c) Definition.--As used in this section, the term
`contractual right' includes a right set forth in a rule or
bylaw of a national securities exchange, a national
securities association, or a securities clearing agency, a
right set forth in a bylaw of a clearing organization or
contract market or in a resolution of the governing board
thereof, and a right, whether or not evidenced in writing,
arising under common law, under law merchant, or by reason of
normal business practice.
``(d) Cases Ancillary to Foreign Proceedings.--Any
provisions of this title relating to securities contracts,
commodity contracts, forward contracts, repurchase
agreements, swap agreements, or master netting agreements
shall apply in a case under chapter 15 of this title, so that
enforcement of contractual provisions of such contracts and
agreements in accordance with their terms will not be stayed
or otherwise limited by operation of any provision of this
title or by order of a court in any case under this title,
and to limit avoidance powers to the same extent as in a
proceeding under chapter 7 or 11 of this title (such
enforcement not to be limited based on the presence or
absence of assets of the debtor in the United States).''.
(2) Conforming amendment.--The table of sections for
chapter 5 of title 11, United States Code, is amended by
inserting after the item relating to section 560 the
following:
``561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across contracts.''.
(l) Commodity Broker Liquidations.--Title 11, United States
Code, is amended by inserting after section 766 the
following:
``Sec. 767. Commodity broker liquidation and forward contract
merchants, commodity brokers, stockbrokers, financial
institutions, financial participants, securities clearing
agencies, swap participants, repo participants, and master
netting agreement participants
``Notwithstanding any other provision of this title, the
exercise of rights by a forward contract merchant, commodity
broker, stockbroker, financial institution, financial
participant, securities clearing agency, swap participant,
repo participant, or master netting agreement participant
under this title shall not affect the priority of any
unsecured claim it may have after the exercise of such
rights.''.
(m) Stockbroker Liquidations.--Title 11, United States
Code, is amended by inserting after section 752 the
following:
``Sec. 753. Stockbroker liquidation and forward contract
merchants, commodity brokers, stockbrokers, financial
institutions, securities clearing agencies, swap
participants, repo participants, and master netting
agreement participants
``Notwithstanding any other provision of this title, the
exercise of rights by a forward contract merchant, commodity
broker, stockbroker, financial institution, securities
clearing agency, swap participant, repo participant,
financial participant, or master netting agreement
participant under this title shall not affect the priority of
any unsecured claim it may have after the exercise of such
rights.''.
(n) Setoff.--Section 553 of title 11, United States Code,
is amended--
(1) in subsection (a)(3)(C), by inserting before the period
the following: ``(except for a setoff of a kind described in
section 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(28), 555,
556, 559, 560, or 561 of this title)''; and
(2) in subsection (b)(1), by striking ``362(b)(14),'' and
inserting ``362(b)(17), 362(b)(28), 555, 556, 559, 560,
561''.
(o) Securities Contracts, Commodity Contracts, and Forward
Contracts.--Title 11, United States Code, is amended--
(1) in section 362(b)(6), by striking ``financial
institutions,'' each place such term appears and inserting
``financial institution, financial participant,'';
(2) in section 546(e), by inserting ``financial
participant,'' after ``financial institution,'';
(3) in section 548(d)(2)(B), by inserting ``financial
participant,'' after ``financial institution,'';
(4) in section 555--
(A) by inserting ``financial participant,'' after
``financial institution,''; and
(B) by inserting before the period at the end ``, a right
set forth in a bylaw of a clearing organization or contract
market or in a resolution of the governing board thereof, and
a right, whether or not in writing, arising under common law,
under law merchant, or by reason of normal business
practice''; and
(5) in section 556, by inserting ``, financial
participant,'' after ``commodity broker''.
(p) Conforming Amendments.--Title 11, United States Code,
is amended--
(1) in the table of sections for chapter 5--
(A) by amending the items relating to sections 555 and 556
to read as follows:
``555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
``556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract.'';
and
(B) by amending the items relating to sections 559 and 560
to read as follows:
``559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
``560. Contractual right to liquidate, terminate, or accelerate a swap
agreement.'';
and
(2) in the table of sections for chapter 7--
(A) by inserting after the item relating to section 766 the
following:
``767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
securities clearing agencies, swap participants, repo
participants, and master netting agreement
participants.'';
and
(B) by inserting after the item relating to section 752 the
following:
``753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
securities clearing agencies, swap participants, repo
participants, and master netting agreement
participants.''.
SEC. 908. RECORDKEEPING REQUIREMENTS.
Section 11(e)(8) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)) is amended by adding at the end the
following new subparagraph:
``(H) Recordkeeping requirements.--The Corporation, in
consultation with the appropriate Federal banking agencies,
may prescribe regulations requiring more detailed
recordkeeping with respect to qualified financial contracts
(including market valuations) by insured depository
institutions.''.
SEC. 909. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION
REQUIREMENT.
Section 13(e)(2) of the Federal Deposit Insurance Act (12
U.S.C. 1823(e)(2)) is amended to read as follows:
``(2) Exemptions from contemporaneous execution
requirement.--An agreement to provide for the lawful
collateralization of--
``(A) deposits of, or other credit extension by, a Federal,
State, or local governmental entity, or of any depositor
referred to in section 11(a)(2), including an agreement to
provide collateral in lieu of a surety bond;
``(B) bankruptcy estate funds pursuant to section 345(b)(2)
of title 11, United States Code;
``(C) extensions of credit, including any overdraft, from a
Federal reserve bank or Federal home loan bank; or
``(D) one or more qualified financial contracts, as defined
in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph (1)(B)
solely because such agreement was not executed
contemporaneously with the acquisition of the collateral or
because of pledges, delivery, or substitution of the
collateral made in accordance with such agreement.''.
SEC. 910. DAMAGE MEASURE.
(a) In General.--Title 11, United States Code, is amended--
(1) by inserting after section 561, as added by this Act,
the following:
``Sec. 562. Damage measure in connection with swap
agreements, securities contracts, forward contracts,
commodity contracts, repurchase agreements, or master
netting agreements
``If the trustee rejects a swap agreement, securities
contract (as defined in section 741), forward contract,
commodity contract (as defined in section 761), repurchase
agreement, or master netting agreement pursuant to section
365(a), or if a forward contract
[[Page H568]]
merchant, stockbroker, financial institution, securities
clearing agency, repo participant, financial participant,
master netting agreement participant, or swap participant
liquidates, terminates, or accelerates such contract or
agreement, damages shall be measured as of the earlier of--
``(1) the date of such rejection; or
``(2) the date of such liquidation, termination, or
acceleration.''; and
(2) in the table of sections for chapter 5, by inserting
after the item relating to section 561 (as added by this Act)
the following:
``562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity contracts,
repurchase agreements, or master netting agreements.''.
(b) Claims Arising From Rejection.--Section 502(g) of title
11, United States Code, is amended--
(1) by inserting ``(1)'' after ``(g)''; and
(2) by adding at the end the following:
``(2) A claim for damages calculated in accordance with
section 562 of this title shall be allowed under subsection
(a), (b), or (c), or disallowed under subsection (d) or (e),
as if such claim had arisen before the date of the filing of
the petition.''.
SEC. 911. SIPC STAY.
Section 5(b)(2) of the Securities Investor Protection Act
of 1970 (15 U.S.C. 78eee(b)(2)) is amended by adding at the
end the following new subparagraph:
``(C) Exception from stay.--
``(i) Notwithstanding section 362 of title 11, United
States Code, neither the filing of an application under
subsection (a)(3) nor any order or decree obtained by SIPC
from the court shall operate as a stay of any contractual
rights of a creditor to liquidate, terminate, or accelerate a
securities contract, commodity contract, forward contract,
repurchase agreement, swap agreement, or master netting
agreement, as those terms are defined in sections 101 and 741
of title 11, United States Code, to offset or net termination
values, payment amounts, or other transfer obligations
arising under or in connection with one or more of such
contracts or agreements, or to foreclose on any cash
collateral pledged by the debtor, whether or not with respect
to one or more of such contracts or agreements.
``(ii) Notwithstanding clause (i), such application, order,
or decree may operate as a stay of the foreclosure on, or
disposition of, securities collateral pledged by the debtor,
whether or not with respect to one or more of such contracts
or agreements, securities sold by the debtor under a
repurchase agreement, or securities lent under a securities
lending agreement.
``(iii) As used in this subparagraph, the term `contractual
right' includes a right set forth in a rule or bylaw of a
national securities exchange, a national securities
association, or a securities clearing agency, a right set
forth in a bylaw of a clearing organization or contract
market or in a resolution of the governing board thereof,
and a right, whether or not in writing, arising under
common law, under law merchant, or by reason of normal
business practice.''.
SEC. 912. ASSET-BACKED SECURITIZATIONS.
Section 541 of title 11, United States Code, is amended--
(1) in subsection (b), by inserting after paragraph (7), as
added by this Act, the following:
``(8) any eligible asset (or proceeds thereof), to the
extent that such eligible asset was transferred by the
debtor, before the date of commencement of the case, to an
eligible entity in connection with an asset-backed
securitization, except to the extent such asset (or proceeds
or value thereof) may be recovered by the trustee under
section 550 by virtue of avoidance under section 548(a);'';
and
(2) by adding at the end the following new subsection:
``(f) For purposes of this section--
``(1) the term `asset-backed securitization' means a
transaction in which eligible assets transferred to an
eligible entity are used as the source of payment on
securities, including, without limitation, all securities
issued by governmental units, at least one class or tranche
of which was rated investment grade by one or more nationally
recognized securities rating organizations, when the
securities were initially issued by an issuer;
``(2) the term `eligible asset' means--
``(A) financial assets (including interests therein and
proceeds thereof), either fixed or revolving, whether or not
the same are in existence as of the date of the transfer,
including residential and commercial mortgage loans, consumer
receivables, trade receivables, assets of governmental units,
including payment obligations relating to taxes, receipts,
fines, tickets, and other sources of revenue, and lease
receivables, that, by their terms, convert into cash within a
finite time period, plus any residual interest in property
subject to receivables included in such financial assets plus
any rights or other assets designed to assure the servicing
or timely distribution of proceeds to security holders;
``(B) cash; and
``(C) securities, including without limitation, all
securities issued by governmental units;
``(3) the term `eligible entity' means--
``(A) an issuer; or
``(B) a trust, corporation, partnership, governmental unit,
limited liability company (including a single member limited
liability company), or other entity engaged exclusively in
the business of acquiring and transferring eligible assets
directly or indirectly to an issuer and taking actions
ancillary thereto;
``(4) the term `issuer' means a trust, corporation,
partnership, or other entity engaged exclusively in the
business of acquiring and holding eligible assets, issuing
securities backed by eligible assets, and taking actions
ancillary thereto; and
``(5) the term `transferred' means the debtor, under a
written agreement, represented and warranted that eligible
assets were sold, contributed, or otherwise conveyed with the
intention of removing them from the estate of the debtor
pursuant to subsection (b)(8) (whether or not reference is
made to this title or any section hereof), irrespective and
without limitation of--
``(A) whether the debtor directly or indirectly obtained or
held an interest in the issuer or in any securities issued by
the issuer;
``(B) whether the debtor had an obligation to repurchase or
to service or supervise the servicing of all or any portion
of such eligible assets; or
``(C) the characterization of such sale, contribution, or
other conveyance for tax, accounting, regulatory reporting,
or other purposes.''.
SEC. 913. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date.--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 with respect to cases commenced or
appointments made under any Federal or State law after the
date of enactment of this Act, but shall not apply with
respect to cases commenced or appointments made under any
Federal or State law before the date of enactment of this
Act.
TITLE X--PROTECTION OF FAMILY FARMERS
SEC. 1001. PERMANENT REENACTMENT OF CHAPTER 12.
(a) Reenactment.--
(1) In general.--Chapter 12 of title 11, United States
Code, as reenacted by section 149 of division C of the
Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (Public Law 105-277), is hereby
reenacted, and as here reenacted is amended by this Act.
(2) Effective date.--Subsection (a) shall take effect on
July 1, 2000.
(b) Conforming Amendment.--Section 302 of the Bankruptcy,
Judges, United States Trustees, and Family Farmer Bankruptcy
Act of 1986 (28 U.S.C. 581 note) is amended by striking
subsection (f).
SEC. 1002. DEBT LIMIT INCREASE.
Section 104(b) of title 11, United States Code, is amended
by adding at the end the following:
``(4) The dollar amount in section 101(18) shall be
adjusted at the same times and in the same manner as the
dollar amounts in paragraph (1) of this subsection, beginning
with the adjustment to be made on April 1, 2004.''.
SEC. 1003. CERTAIN CLAIMS OWED TO GOVERNMENTAL UNITS.
(a) Contents of Plan.--Section 1222(a)(2) of title 11,
United States Code, is amended to read as follows:
``(2) provide for the full payment, in deferred cash
payments, of all claims entitled to priority under section
507, unless--
``(A) the claim is a claim owed to a governmental unit that
arises as a result of the sale, transfer, exchange, or other
disposition of any farm asset used in the debtor's farming
operation, in which case the claim shall be treated as an
unsecured claim that is not entitled to priority under
section 507, but the debt shall be treated in such manner
only if the debtor receives a discharge; or
``(B) the holder of a particular claim agrees to a
different treatment of that claim;''.
(b) Special Notice Provisions.--Section 1231(b) of title
11, United States Code, as so designated by this Act, is
amended by striking ``a State or local governmental unit''
and inserting ``any governmental unit''.
TITLE XI--HEALTH CARE AND EMPLOYEE BENEFITS
SEC. 1101. DEFINITIONS.
(a) Health Care Business Defined.--Section 101 of title 11,
United States Code, is amended--
(1) by redesignating paragraph (27A), as added by this Act,
as paragraph (27B); and
(2) by inserting after paragraph (27) the following:
``(27A) `health care business'--
``(A) means any public or private entity (without regard to
whether that entity is organized for profit or not for
profit) that is primarily engaged in offering to the general
public facilities and services for--
``(i) the diagnosis or treatment of injury, deformity, or
disease; and
``(ii) surgical, drug treatment, psychiatric, or obstetric
care; and
``(B) includes--
``(i) any--
``(I) general or specialized hospital;
``(II) ancillary ambulatory, emergency, or surgical
treatment facility;
``(III) hospice;
``(IV) home health agency; and
``(V) other health care institution that is similar to an
entity referred to in subclause (I), (II), (III), or (IV);
and
``(ii) any long-term care facility, including any--
``(I) skilled nursing facility;
[[Page H569]]
``(II) intermediate care facility;
``(III) assisted living facility;
``(IV) home for the aged;
``(V) domiciliary care facility; and
``(VI) health care institution that is related to a
facility referred to in subclause (I), (II), (III), (IV), or
(V), if that institution is primarily engaged in offering
room, board, laundry, or personal assistance with activities
of daily living and incidentals to activities of daily
living;''.
(b) Patient and Patient Records Defined.--Section 101 of
title 11, United States Code, is amended by inserting after
paragraph (40) the following:
``(40A) `patient' means any person who obtains or receives
services from a health care business;
``(40B) `patient records' means any written document
relating to a patient or a record recorded in a magnetic,
optical, or other form of electronic medium;''.
(c) Rule of Construction.--The amendments made by
subsection (a) of this section shall not affect the
interpretation of section 109(b) of title 11, United States
Code.
SEC. 1102. DISPOSAL OF PATIENT RECORDS.
(a) In General.--Subchapter III of chapter 3 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 351. Disposal of patient records
``If a health care business commences a case under chapter
7, 9, or 11, and the trustee does not have a sufficient
amount of funds to pay for the storage of patient records in
the manner required under applicable Federal or State law,
the following requirements shall apply:
``(1) The trustee shall--
``(A) promptly publish notice, in 1 or more appropriate
newspapers, that if patient records are not claimed by the
patient or an insurance provider (if applicable law permits
the insurance provider to make that claim) by the date that
is 365 days after the date of that notification, the trustee
will destroy the patient records; and
``(B) during the first 180 days of the 365-day period
described in subparagraph (A), promptly attempt to notify
directly each patient that is the subject of the patient
records and appropriate insurance carrier concerning the
patient records by mailing to the last known address of that
patient, or a family member or contact person for that
patient, and to the appropriate insurance carrier an
appropriate notice regarding the claiming or disposing of
patient records.
``(2) If, after providing the notification under paragraph
(1), patient records are not claimed during the 365-day
period described under that paragraph, the trustee shall
mail, by certified mail, at the end of such 365-day period a
written request to each appropriate Federal agency to request
permission from that agency to deposit the patient records
with that agency, except that no Federal agency is required
to accept patient records under this paragraph.
``(3) If, following the 365-day period described in
paragraph (2) and after providing the notification under
paragraph (1), patient records are not claimed by a patient
or insurance provider, or request is not granted by a Federal
agency to deposit such records with that agency, the trustee
shall destroy those records by--
``(A) if the records are written, shredding or burning the
records; or
``(B) if the records are magnetic, optical, or other
electronic records, by otherwise destroying those records so
that those records cannot be retrieved.''.
(b) Clerical Amendment.--The table of sections for chapter
3 of title 11, United States Code, is amended by inserting
after the item relating to section 350 the following:
``351. Disposal of patient records.''.
SEC. 1103. ADMINISTRATIVE EXPENSE CLAIM FOR COSTS OF CLOSING
A HEALTH CARE BUSINESS AND OTHER ADMINISTRATIVE
EXPENSES.
Section 503(b) of title 11, United States Code, as amended
by this Act, is amended by adding at the end the following:
``(8) the actual, necessary costs and expenses of closing a
health care business incurred by a trustee or by a Federal
agency (as that term is defined in section 551(1) of title 5)
or a department or agency of a State or political subdivision
thereof, including any cost or expense incurred--
``(A) in disposing of patient records in accordance with
section 351; or
``(B) in connection with transferring patients from the
health care business that is in the process of being closed
to another health care business;
``(9) with respect to a nonresidential real property lease
previously assumed under section 365, and subsequently
rejected, a sum equal to all monetary obligations due,
excluding those arising from or related to a failure to
operate or penalty provisions, for the period of 2 years
following the later of the rejection date or date of actual
turnover of the premises, without reduction or setoff for any
reason whatsoever except for sums actually received or to be
received from a nondebtor, and the claim for remaining sums
due for the balance of the term of the lease shall be a claim
under section 502(b)(6); and''.
SEC. 1104. APPOINTMENT OF OMBUDSMAN TO ACT AS PATIENT
ADVOCATE.
(a) In General.--
(1) Appointment of ombudsman.--Subchapter II of chapter 3
of title 11, United States Code, is amended by inserting
after section 331 the following:
``Sec. 332. Appointment of ombudsman
``(a) In General.--
``(1) Authority to appoint.--Not later than 30 days after a
case is commenced by a health care business under chapter 7,
9, or 11, the court shall order the appointment of an
ombudsman to monitor the quality of patient care to represent
the interests of the patients of the health care business,
unless the court finds that the appointment of the ombudsman
is not necessary for the protection of patients under the
specific facts of the case.
``(2) Qualifications.--If the court orders the appointment
of an ombudsman, the United States trustee shall appoint 1
disinterested person, other than the United States trustee,
to serve as an ombudsman, including a person who is serving
as a State Long-Term Care Ombudsman appointed under title III
or VII of the Older Americans Act of 1965 (42 U.S.C. 3021 et
seq., 3058 et seq.).
``(b) Duties.--An ombudsman appointed under subsection (a)
shall--
``(1) monitor the quality of patient care, to the extent
necessary under the circumstances, including interviewing
patients and physicians;
``(2) not later than 60 days after the date of appointment,
and not less frequently than every 60 days thereafter, report
to the court, at a hearing or in writing, regarding the
quality of patient care at the health care business involved;
and
``(3) if the ombudsman determines that the quality of
patient care is declining significantly or is otherwise being
materially compromised, notify the court by motion or written
report, with notice to appropriate parties in interest,
immediately upon making that determination.
``(c) Confidentiality.--An ombudsman shall maintain any
information obtained by the ombudsman under this section that
relates to patients (including information relating to
patient records) as confidential information. The ombudsman
may not review confidential patient records, unless the court
provides prior approval, with restrictions on the ombudsman
to protect the confidentiality of patient records.''.
(2) Clerical amendment.--The table of sections for chapter
3 of title 11, United States Code, is amended by inserting
after the item relating to section 331 the following:
``332. Appointment of ombudsman.''.
(b) Compensation of Ombudsman.--Section 330(a)(1) of title
11, United States Code, is amended--
(1) in the matter proceeding subparagraph (A), by inserting
``an ombudsman appointed under section 331, or'' before ``a
professional person''; and
(2) in subparagraph (A), by inserting ``ombudsman,'' before
``professional person''.
SEC. 1105. DEBTOR IN POSSESSION; DUTY OF TRUSTEE TO TRANSFER
PATIENTS.
(a) In General.--Section 704(a) of title 11, United States
Code, as amended by this Act, is amended by adding at the end
the following:
``(11) use all reasonable and best efforts to transfer
patients from a health care business that is in the process
of being closed to an appropriate health care business that--
``(A) is in the vicinity of the health care business that
is closing;
``(B) provides the patient with services that are
substantially similar to those provided by the health care
business that is in the process of being closed; and
``(C) maintains a reasonable quality of care.''.
(b) Conforming Amendment.--Section 1106(a)(1) of title 11,
United States Code, is amended by striking ``sections 704(2),
704(5), 704(7), 704(8), and 704(9)'' and inserting
``paragraphs (2), (5), (7), (8), (9), and (11) of section
704(a)''.
SEC. 1106. EXCLUSION FROM PROGRAM PARTICIPATION NOT SUBJECT
TO AUTOMATIC STAY.
Section 362(b) of title 11, United States Code, is amended
by inserting after paragraph (28), as added by this Act, the
following:
``(29) under subsection (a), of the exclusion by the
Secretary of Health and Human Services of the debtor from
participation in the medicare program or any other Federal
health care program (as defined in section 1128B(f) of the
Social Security Act (42 U.S.C. 1320a-7b(f)) pursuant to title
XI of such Act (42 U.S.C. 1301 et seq.) or title XVIII of
such Act (42 U.S.C. 1395 et seq.).''.
TITLE XII--TECHNICAL AMENDMENTS
SEC. 1201. DEFINITIONS.
Section 101 of title 11, United States Code, as amended by
this Act, is amended--
(1) by striking ``In this title--'' and inserting ``In this
title the following definitions shall apply:'';
(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), (38), and (54A), 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 striking paragraph (54) and inserting the following:
[[Page H570]]
``(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--
``(i) property; or
``(ii) an interest in property.''; and
(7) in each of paragraphs (1) through (35), in each of
paragraphs (36) and (37), and in each of paragraphs (40)
through (55), by striking the semicolon at the end and
inserting a period.
SEC. 1202. ADJUSTMENT OF DOLLAR AMOUNTS.
Section 104 of title 11, United States Code, as amended by
section 322 of this Act, is amended by inserting
``522(f)(3),'' after ``522(d),'' each place it appears.
SEC. 1203. 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. 1204. TECHNICAL AMENDMENTS.
Title 11, United States Code, is amended--
(1) in section 109(b)(2), by striking ``subsection (c) or
(d) of''; and
(2) in section 552(b)(1), by striking ``product'' each
place it appears and inserting ``products''.
SEC. 1205. PENALTY FOR PERSONS WHO NEGLIGENTLY OR
FRAUDULENTLY PREPARE BANKRUPTCY PETITIONS.
Section 110(j)(4) of title 11, United States Code, as so
designated by this Act, is amended by striking ``attorney's''
and inserting ``attorneys' ''.
SEC. 1206. 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. 1207. 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. 1208. 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. 1209. EXCEPTIONS TO DISCHARGE.
Section 523 of title 11, United States Code, as amended by
this Act, is amended--
(1) by transferring paragraph (15), as added by section
304(e) of Public Law 103-394 (108 Stat. 4133), so as to
insert such paragraph after subsection (a)(14);
(2) in subsection (a)(9), by striking ``motor vehicle'' and
inserting ``motor vehicle, vessel, or aircraft''; and
(3) in subsection (e), by striking ``a insured'' and
inserting ``an insured''.
SEC. 1210. 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), or that''.
SEC. 1211. 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. 1212. 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. 1213. PREFERENCES.
(a) In General.--Section 547 of title 11, United States
Code, as amended by this Act, 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 transfer
made 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 transfer shall be considered to be avoided under this
section only with respect to the creditor that is an
insider.''.
(b) Applicability.--The amendments made by this section
shall apply to any case that is pending or commenced on or
after the date of enactment of this Act.
SEC. 1214. POSTPETITION TRANSACTIONS.
Section 549(c) of title 11, United States Code, is
amended--
(1) by inserting ``an interest in'' after ``transfer of''
each place it appears;
(2) by striking ``such property'' and inserting ``such real
property''; and
(3) by striking ``the interest'' and inserting ``such
interest''.
SEC. 1215. DISPOSITION OF PROPERTY OF THE ESTATE.
Section 726(b) of title 11, United States Code, is amended
by striking ``1009,''.
SEC. 1216. GENERAL PROVISIONS.
Section 901(a) of title 11, United States Code, as amended
by this Act, is amended by inserting ``1123(d),'' after
``1123(b),''.
SEC. 1217. 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. 1218. 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. 1219. 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. 1220. 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. 1221. 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. 1222. TRANSFERS MADE BY NONPROFIT CHARITABLE
CORPORATIONS.
(a) Sale of Property of Estate.--Section 363(d) of title
11, United States Code, is amended by striking ``only'' and
all that follows through the end of the subsection and
inserting ``only--
``(1) in accordance with applicable nonbankruptcy law that
governs the transfer of property by a corporation or trust
that is not a moneyed, business, or commercial corporation or
trust; and
``(2) to the extent not inconsistent with any relief
granted under subsection (c), (d), (e), or (f) of section
362.''.
(b) Confirmation of Plan for Reorganization.--Section
1129(a) of title 11, United States Code, as amended by this
Act, is amended by adding at the end the following:
``(16) All transfers of property of the plan shall be made
in accordance with any applicable provisions of nonbankruptcy
law that govern the transfer of property by a corporation or
trust that is not a moneyed, business, or commercial
corporation or trust.''.
(c) Transfer of Property.--Section 541 of title 11, United
States Code, as amended by this Act, is amended by adding at
the end the following:
``(g) Notwithstanding any other provision of this title,
property that is held by a debtor that is a corporation
described in section 501(c)(3) of the Internal Revenue Code
of 1986 and exempt from tax under section 501(a) of such Code
may be transferred to an entity that is not such a
corporation, but only under the same conditions as would
apply if the debtor had not filed a case under this title.''.
(d) Applicability.--The amendments made by this section
shall apply to a case pending under title 11, United States
Code, on the date of enactment of this Act, or filed under
that title on or after that date of enactment, except that
the court shall not confirm a plan under chapter 11 of title
11, United States Code, without considering whether this
section would substantially affect the rights of a party in
interest who first acquired rights with respect to the debtor
after the date of the petition. The parties who may appear
and be heard in a proceeding under this section include the
attorney general of the State in which the debtor is
incorporated, was formed, or does business.
(e) Rule of Construction.--Nothing in this section shall be
construed to require the court in which a case under chapter
11 of title 11, United States Code, is pending to remand or
refer any proceeding, issue, or controversy to any other
court or to require the approval of any other court for the
transfer of property.
SEC. 1223. PROTECTION OF VALID PURCHASE MONEY SECURITY
INTERESTS.
Section 547(c)(3)(B) of title 11, United States Code, is
amended by striking ``20'' and inserting ``30''.
SEC. 1224. BANKRUPTCY JUDGESHIPS.
(a) Short Title.--This section may be cited as the
``Bankruptcy Judgeship Act of 2001''.
(b) Temporary Judgeships.--
(1) Appointments.--The following judgeship positions shall
be filled in the manner prescribed in section 152(a)(1) of
title 28, United States Code, for the appointment of
bankruptcy judges provided for in section 152(a)(2) of such
title:
(A) One additional bankruptcy judgeship for the eastern
district of California.
(B) Four additional bankruptcy judgeships for the central
district of California.
(C) One additional bankruptcy judgeship for the district of
Delaware.
(D) Two additional bankruptcy judgeships for the southern
district of Florida.
(E) One additional bankruptcy judgeship for the southern
district of Georgia.
(F) Two additional bankruptcy judgeships for the district
of Maryland.
(G) One additional bankruptcy judgeship for the eastern
district of Michigan.
(H) One additional bankruptcy judgeship for the southern
district of Mississippi.
(I) One additional bankruptcy judgeship for the district of
New Jersey.
(J) One additional bankruptcy judgeship for the eastern
district of New York.
(K) One additional bankruptcy judgeship for the northern
district of New York.
(L) One additional bankruptcy judgeship for the southern
district of New York.
[[Page H571]]
(M) One additional bankruptcy judgeship for the eastern
district of North Carolina.
(N) One additional bankruptcy judgeship for the eastern
district of Pennsylvania.
(O) One additional bankruptcy judgeship for the middle
district of Pennsylvania.
(P) One additional bankruptcy judgeship for the district of
Puerto Rico.
(Q) One additional bankruptcy judgeship for the western
district of Tennessee.
(R) One additional bankruptcy judgeship for the eastern
district of Virginia.
(2) Vacancies.--The first vacancy occurring in the office
of a bankruptcy judge in each of the judicial districts set
forth in paragraph (1) shall not be filled if the vacancy--
(A) results from the death, retirement, resignation, or
removal of a bankruptcy judge; and
(B) occurs 5 years or more after the appointment date of a
bankruptcy judge appointed under paragraph (1).
(c) Extensions.--
(1) In general.--The temporary bankruptcy judgeship
positions authorized for the northern district of Alabama,
the district of Delaware, the district of Puerto Rico, the
district of South Carolina, and the eastern district of
Tennessee under paragraphs (1), (3), (7), (8), and (9) of
section 3(a) of the Bankruptcy Judgeship Act of 1992 (28
U.S.C. 152 note) are extended until the first vacancy
occurring in the office of a bankruptcy judge in the
applicable district resulting from the death, retirement,
resignation, or removal of a bankruptcy judge and occurring--
(A) 8 years or more after November 8, 1993, with respect to
the northern district of Alabama;
(B) 10 years or more after October 28, 1993, with respect
to the district of Delaware;
(C) 8 years or more after August 29, 1994, with respect to
the district of Puerto Rico;
(D) 8 years or more after June 27, 1994, with respect to
the district of South Carolina; and
(E) 8 years or more after November 23, 1993, with respect
to the eastern district of Tennessee.
(2) Applicability of other provisions.--All other
provisions of section 3 of the Bankruptcy Judgeship Act of
1992 (28 U.S.C. 152 note) remain applicable to temporary
judgeship positions referred to in this subsection.
(d) Technical Amendments.--Section 152(a) of title 28,
United States Code, is amended--
(1) in paragraph (1), by striking the first sentence and
inserting the following: ``Each bankruptcy judge to be
appointed for a judicial district, as provided in paragraph
(2), shall be appointed by the United States court of appeals
for the circuit in which such district is located.''; and
(2) in paragraph (2)--
(A) in the item relating to the middle district of Georgia,
by striking ``2'' and inserting ``3''; and
(B) in the collective item relating to the middle and
southern districts of Georgia, by striking ``Middle and
Southern . . . . . . 1''.
(e) Effective Dates.--(1) Except as provided in paragraph
(2), this section and the amendments made by this section
shall take effect on the date of the enactment of this Act.
(2) With respect to the temporary bankruptcy judgeship
authorized for the district of South Carolina under paragraph
(8) of the Bankruptcy Judgeship Act of 1992 (28 U.S.C. 152
note), subsection (c)(1) as it applies to the extension
specified in subparagraph (D) of such subsection shall take
effect immediately before December 31, 2000.
SEC. 1225. COMPENSATING TRUSTEES.
Section 1326 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (1), by striking ``and'';
(B) in paragraph (2), by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(3) if a chapter 7 trustee has been allowed compensation
due to the conversion or dismissal of the debtor's prior case
pursuant to section 707(b), and some portion of that
compensation remains unpaid in a case converted to this
chapter or in the case dismissed under section 707(b) and
refiled under this chapter, the amount of any such unpaid
compensation, which shall be paid monthly--
``(A) by prorating such amount over the remaining duration
of the plan; and
``(B) by monthly payments not to exceed the greater of--
``(i) $25; or
``(ii) the amount payable to unsecured nonpriority
creditors, as provided by the plan, multiplied by 5 percent,
and the result divided by the number of months in the
plan.''; and
(2) by adding at the end the following:
``(d) Notwithstanding any other provision of this title--
``(1) compensation referred to in subsection (b)(3) is
payable and may be collected by the trustee under that
paragraph, even if such amount has been discharged in a prior
proceeding under this title; and
``(2) such compensation is payable in a case under this
chapter only to the extent permitted by subsection (b)(3).''.
SEC. 1226. AMENDMENT TO SECTION 362 OF TITLE 11, UNITED
STATES CODE.
Section 362(b)(18) of title 11, United States Code, is
amended to read as follows:
``(18) under subsection (a) of the creation or perfection
of a statutory lien for an ad valorem property tax, or a
special tax or special assessment on real property whether or
not ad valorem, imposed by a governmental unit, if such tax
or assessment comes due after the filing of the petition;''.
SEC. 1227. JUDICIAL EDUCATION.
The Director of the Federal Judicial Center, in
consultation with the Director of the Executive Office for
United States Trustees, shall develop materials and conduct
such training as may be useful to courts in implementing this
Act and the amendments made by this Act, including the
requirements relating to the means test and reaffirmations
under section 707(b) of title 11, United States Code, as
amended by this Act.
SEC. 1228. RECLAMATION.
(a) Rights and Powers of the Trustee.--Section 546(c) of
title 11, United States Code, is amended to read as follows:
``(c)(1) Except as provided in subsection (d) of this
section and subsection (c) of section 507, and subject to the
prior rights of holders of security interests in such goods
or the proceeds thereof, the rights and powers of the trustee
under sections 544(a), 545, 547, and 549 are subject to the
right of a seller of goods that has sold goods to the debtor,
in the ordinary course of such seller's business, to reclaim
such goods if the debtor has received such goods while
insolvent, not later than 45 days after the date of the
commencement of a case under this title, but such seller may
not reclaim such goods unless such seller demands in writing
reclamation of such goods--
``(A) not later than 45 days after the date of receipt of
such goods by the debtor; or
``(B) not later than 20 days after the date of commencement
of the case, if the 45-day period expires after the
commencement of the case.
``(2) If a seller of goods fails to provide notice in the
manner described in paragraph (1), the seller still may
assert the rights contained in section 503(b)(7).''.
(b) Administrative Expenses.--Section 503(b) of title 11,
United States Code, as amended by this Act, is amended by
adding at the end the following:
``(10) the value of any goods received by the debtor not
later than 20 days after the date of commencement of a case
under this title in which the goods have been sold to the
debtor in the ordinary course of such debtor's business.''.
SEC. 1229. PROVIDING REQUESTED TAX DOCUMENTS TO THE COURT.
(a) Chapter 7 Cases.--The court shall not grant a discharge
in the case of an individual seeking bankruptcy under chapter
7 of title 11, United States Code, unless requested tax
documents have been provided to the court.
(b) Chapter 11 and Chapter 13 Cases.--The court shall not
confirm a plan of reorganization in the case of an individual
under chapter 11 or 13 of title 11, United States Code,
unless requested tax documents have been filed with the
court.
(c) Document Retention.--The court shall destroy documents
submitted in support of a bankruptcy claim not sooner than 3
years after the date of the conclusion of a bankruptcy case
filed by an individual under chapter 7, 11, or 13 of title
11, United States Code. In the event of a pending audit or
enforcement action, the court may extend the time for
destruction of such requested tax documents.
SEC. 1230. ENCOURAGING CREDITWORTHINESS.
(a) Sense of the Congress.--It is the sense of the Congress
that--
(1) certain lenders may sometimes offer credit to consumers
indiscriminately, without taking steps to ensure that
consumers are capable of repaying the resulting debt, and in
a manner which may encourage certain consumers to accumulate
additional debt; and
(2) resulting consumer debt may increasingly be a major
contributing factor to consumer insolvency.
(b) Study Required.--The Board of Governors of the Federal
Reserve System (hereafter in this section referred to as the
``Board'') shall conduct a study of--
(1) consumer credit industry practices of soliciting and
extending credit--
(A) indiscriminately;
(B) without taking steps to ensure that consumers are
capable of repaying the resulting debt; and
(C) in a manner that encourages consumers to accumulate
additional debt; and
(2) the effects of such practices on consumer debt and
insolvency.
(c) Report and Regulations.--Not later than 12 months after
the date of enactment of this Act, the Board--
(1) shall make public a report on its findings with respect
to the indiscriminate solicitation and extension of credit by
the credit industry;
(2) may issue regulations that would require additional
disclosures to consumers; and
(3) may take any other actions, consistent with its
existing statutory authority, that the Board finds necessary
to ensure responsible industrywide practices and to prevent
resulting consumer debt and insolvency.
SEC. 1231. PROPERTY NO LONGER SUBJECT TO REDEMPTION.
Section 541(b) of title 11, United States Code, is amended
by inserting after paragraph (8), as added by this Act, the
following:
``(9) subject to subchapter III of chapter 5, any interest
of the debtor in property where the debtor pledged or sold
tangible personal property (other than securities or written
or printed evidences of indebtedness or title) as collateral
for a loan or advance of money given by a person licensed
under law to make such loans or advances, where--
[[Page H572]]
``(A) the tangible personal property is in the possession
of the pledgee or transferee;
``(B) the debtor has no obligation to repay the money,
redeem the collateral, or buy back the property at a
stipulated price; and
``(C) neither the debtor nor the trustee have exercised any
right to redeem provided under the contract or State law, in
a timely manner as provided under State law and section
108(b) of this title; or''.
SEC. 1232. TRUSTEES.
(a) Suspension and Termination of Panel Trustees and
Standing Trustees.--Section 586(d) of title 28, United States
Code, is amended--
(1) by inserting ``(1)'' after ``(d)''; and
(2) by adding at the end the following:
``(2) A trustee whose appointment under subsection (a)(1)
or under subsection (b) is terminated or who ceases to be
assigned to cases filed under title 11, United States Code,
may obtain judicial review of the final agency decision by
commencing an action in the United States district court for
the district for which the panel to which the trustee is
appointed under subsection (a)(1), or in the United States
district court for the district in which the trustee is
appointed under subsection (b) resides, after first
exhausting all available administrative remedies, which if
the trustee so elects, shall also include an administrative
hearing on the record. Unless the trustee elects to have an
administrative hearing on the record, the trustee shall be
deemed to have exhausted all administrative remedies for
purposes of this paragraph if the agency fails to make a
final agency decision within 90 days after the trustee
requests administrative remedies. The Attorney General shall
prescribe procedures to implement this paragraph. The
decision of the agency shall be affirmed by the district
court unless it is unreasonable and without cause based on
the administrative record before the agency.''.
(b) Expenses of Standing Trustees.--Section 586(e) of title
28, United States Code, is amended by adding at the end the
following:
``(3) After first exhausting all available administrative
remedies, an individual appointed under subsection (b) may
obtain judicial review of final agency action to deny a claim
of actual, necessary expenses under this subsection by
commencing an action in the United States district court in
the district where the individual resides. The decision of
the agency shall be affirmed by the district court unless it
is unreasonable and without cause based upon the
administrative record before the agency.
``(4) The Attorney General shall prescribe procedures to
implement this subsection.''.
SEC. 1233. BANKRUPTCY FORMS.
Section 2075 of title 28, United States Code, is amended by
adding at the end the following:
``The bankruptcy rules promulgated under this section shall
prescribe a form for the statement required under section
707(b)(2)(C) of title 11 and may provide general rules on the
content of such statement.''.
SEC. 1234. EXPEDITED APPEALS OF BANKRUPTCY CASES TO COURTS OF
APPEALS.
(a) In General.--Section 158 of title 28, United States
Code, is amended--
(1) by striking subsection (d) and inserting the following:
``(d)(1) In a case in which the appeal is heard by the
district court, the judgment, decision, order, or decree of
the bankruptcy judge shall be deemed a judgment, decision,
order, or decree of the district court entered 31 days after
such appeal is filed with the district court, unless not
later than 30 days after such appeal is filed with the
district court--
``(A) the district court--
``(i) files a decision on the appeal from the judgment,
decision, order, or decree of the bankruptcy judge; or
``(ii) enters an order extending such 30-day period for
cause upon motion of a party or upon the court's own motion;
or
``(B) all parties to the appeal file written consent that
the district court may retain such appeal until it enters a
decision.
``(2) For the purpose of this subsection, an appeal shall
be considered filed with the district court on the date on
which the notice of appeal is filed, except that in a case in
which the appeal is heard by the district court because a
party has made an election under subsection (c)(1)(B), the
appeal shall be considered filed with the district court on
the date on which such election is made.
``(e) The courts of appeals shall have jurisdiction of
appeals from--
``(1) all final judgments, decisions, orders, and decrees
of district courts entered under subsection (a);
``(2) all final judgments, decisions, orders, and decrees
of bankruptcy appellate panels entered under subsection (b);
and
``(3) all judgments, decisions, orders, and decrees of
district courts entered under subsection (d) to the extent
that such judgments, decisions, orders, and decrees would be
reviewable by a district court under subsection (a).
``(f) In accordance with rules prescribed by the Supreme
Court of the United States under sections 2072 through 2077,
the court of appeals may, in its discretion, exercise
jurisdiction over an appeal from an interlocutory judgment,
decision, order, or decree under subsection (e)(3).''.
(b) Technical and Conforming Amendments.--
(1) Section 305(c) of title 11, United States Code, is
amended by striking ``section 158(d)'' and inserting
``subsection (e) or (f) of section 158''.
(2) Section 1334(d) of title 28, United States Code, is
amended by striking ``section 158(d)'' and inserting
``subsection (e) or (f) of section 158''.
(3) Section 1452(b) of title 28, United States Code, is
amended by striking ``section 158(d)'' and inserting
``subsection (e) or (f) of section 158''.
SEC. 1235. EXEMPTIONS.
Section 522(g)(2) of title 11, United States Code, is
amended by striking ``subsection (f)(2)'' and inserting
``subsection (f)(1)(B)''.
TITLE XIII--CONSUMER CREDIT DISCLOSURE
SEC. 1301. ENHANCED DISCLOSURES UNDER AN OPEN END CREDIT
PLAN.
(a) Minimum Payment Disclosures.--Section 127(b) of the
Truth in Lending Act (15 U.S.C. 1637(b)) is amended by adding
at the end the following:
``(11)(A) In the case of an open end credit plan that
requires a minimum monthly payment of not more than 4 percent
of the balance on which finance charges are accruing, the
following statement, located on the front of the billing
statement, disclosed clearly and conspicuously: `Minimum
Payment Warning: Making only the minimum payment will
increase the interest you pay and the time it takes to repay
your balance. For example, making only the typical 2% minimum
monthly payment on a balance of $1,000 at an interest rate of
17% would take 88 months to repay the balance in full. For an
estimate of the time it would take to repay your balance,
making only minimum payments, call this toll-free number:
____________.' (the blank space to be filled in by the
creditor).
``(B) In the case of an open end credit plan that requires
a minimum monthly payment of more than 4 percent of the
balance on which finance charges are accruing, the following
statement, in a prominent location on the front of the
billing statement, disclosed clearly and conspicuously:
`Minimum Payment Warning: Making only the required minimum
payment will increase the interest you pay and the time it
takes to repay your balance. Making a typical 5% minimum
monthly payment on a balance of $300 at an interest rate of
17% would take 24 months to repay the balance in full. For an
estimate of the time it would take to repay your balance,
making only minimum monthly payments, call this toll-free
number: ____________.' (the blank space to be filled in by
the creditor).
``(C) Notwithstanding subparagraphs (A) and (B), in the
case of a creditor with respect to which compliance with this
title is enforced by the Federal Trade Commission, the
following statement, in a prominent location on the front of
the billing statement, disclosed clearly and conspicuously:
`Minimum Payment Warning: Making only the required minimum
payment will increase the interest you pay and the time it
takes to repay your balance. For example, making only the
typical 5% minimum monthly payment on a balance of $300 at an
interest rate of 17% would take 24 months to repay the
balance in full. For an estimate of the time it would take to
repay your balance, making only minimum monthly payments,
call the Federal Trade Commission at this toll-free number:
____________.' (the blank space to be filled in by the
creditor). A creditor who is subject to this subparagraph
shall not be subject to subparagraph (A) or (B).
``(D) Notwithstanding subparagraph (A), (B), or (C), in
complying with any such subparagraph, a creditor may
substitute an example based on an interest rate that is
greater than 17 percent. Any creditor that is subject to
subparagraph (B) may elect to provide the disclosure required
under subparagraph (A) in lieu of the disclosure required
under subparagraph (B).
``(E) The Board shall, by rule, periodically recalculate,
as necessary, the interest rate and repayment period under
subparagraphs (A), (B), and (C).
``(F)(i) The toll-free telephone number disclosed by a
creditor or the Federal Trade Commission under subparagraph
(A), (B), or (G), as appropriate, may be a toll-free
telephone number established and maintained by the creditor
or the Federal Trade Commission, as appropriate, or may be a
toll-free telephone number established and maintained by a
third party for use by the creditor or multiple creditors or
the Federal Trade Commission, as appropriate. The toll-free
telephone number may connect consumers to an automated device
through which consumers may obtain information described in
subparagraph (A), (B), or (C), by inputting information using
a touch-tone telephone or similar device, if consumers whose
telephones are not equipped to use such automated device are
provided the opportunity to be connected to an individual
from whom the information described in subparagraph (A), (B),
or (C), as applicable, may be obtained. A person that
receives a request for information described in
subparagraph (A), (B), or (C) from an obligor through the
toll-free telephone number disclosed under subparagraph
(A), (B), or (C), as applicable, shall disclose in
response to such request only the information set forth in
the table promulgated by the Board under subparagraph
(H)(i).
``(ii)(I) The Board shall establish and maintain for a
period not to exceed 24 months following the effective date
of the Bankruptcy Abuse Prevention and Consumer Protection
Act of 2001, a toll-free telephone number, or
[[Page H573]]
provide a toll-free telephone number established and
maintained by a third party, for use by creditors that are
depository institutions (as defined in section 3 of the
Federal Deposit Insurance Act), including a Federal credit
union or State credit union (as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752)), with total assets
not exceeding $250,000,000. The toll-free telephone number
may connect consumers to an automated device through which
consumers may obtain information described in subparagraph
(A) or (B), as applicable, by inputting information using a
touch-tone telephone or similar device, if consumers whose
telephones are not equipped to use such automated device are
provided the opportunity to be connected to an individual
from whom the information described in subparagraph (A) or
(B), as applicable, may be obtained. A person that receives a
request for information described in subparagraph (A) or (B)
from an obligor through the toll-free telephone number
disclosed under subparagraph (A) or (B), as applicable, shall
disclose in response to such request only the information set
forth in the table promulgated by the Board under
subparagraph (H)(i). The dollar amount contained in this
subclause shall be adjusted according to an indexing
mechanism established by the Board.
``(II) Not later than 6 months prior to the expiration of
the 24-month period referenced in subclause (I), the Board
shall submit to the Committee on Banking, Housing, and Urban
Affairs of the Senate and the Committee on Banking and
Financial Services of the House of Representatives a report
on the program described in subclause (I).
``(G) The Federal Trade Commission shall establish and
maintain a toll-free number for the purpose of providing to
consumers the information required to be disclosed under
subparagraph (C).
``(H) The Board shall--
``(i) establish a detailed table illustrating the
approximate number of months that it would take to repay an
outstanding balance if a consumer pays only the required
minimum monthly payments and if no other advances are made,
which table shall clearly present standardized information to
be used to disclose the information required to be disclosed
under subparagraph (A), (B), or (C), as applicable;
``(ii) establish the table required under clause (i) by
assuming--
``(I) a significant number of different annual percentage
rates;
``(II) a significant number of different account balances;
``(III) a significant number of different minimum payment
amounts; and
``(IV) that only minimum monthly payments are made and no
additional extensions of credit are obtained; and
``(iii) promulgate regulations that provide instructional
guidance regarding the manner in which the information
contained in the table established under clause (i) should be
used in responding to the request of an obligor for any
information required to be disclosed under subparagraph (A),
(B), or (C).
``(I) The disclosure requirements of this paragraph do not
apply to any charge card account, the primary purpose of
which is to require payment of charges in full each month.
``(J) A creditor that maintains a toll-free telephone
number for the purpose of providing customers with the actual
number of months that it will take to repay the customer's
outstanding balance is not subject to the requirements of
subparagraph (A) or (B).
``(K) A creditor that maintains a toll-free telephone
number for the purpose of providing customers with the actual
number of months that it will take to repay an outstanding
balance shall include the following statement on each billing
statement: `Making only the minimum payment will increase the
interest you pay and the time it takes to repay your balance.
For more information, call this toll-free number: ________.'
(the blank space to be filled in by the creditor).''.
(b) Regulatory Implementation.--
(1) In general.--The Board of Governors of the Federal
Reserve System (hereafter in this title referred to as the
``Board'') shall promulgate regulations implementing the
requirements of section 127(b)(11) of the Truth in Lending
Act, as added by subsection (a) of this section.
(2) Effective date.--Section 127(b)(11) of the Truth in
Lending Act, as added by subsection (a) of this section, and
the regulations issued under paragraph (1) of this subsection
shall not take effect until the later of--
(A) 18 months after the date of enactment of this Act; or
(B) 12 months after the publication of such final
regulations by the Board.
(c) Study of Financial Disclosures.--
(1) In general.--The Board may conduct a study to determine
the types of information available to potential borrowers
from consumer credit lending institutions regarding factors
qualifying potential borrowers for credit, repayment
requirements, and the consequences of default.
(2) Factors for consideration.--In conducting a study under
paragraph (1), the Board should, in consultation with the
other Federal banking agencies (as defined in section 3 of
the Federal Deposit Insurance Act), the National Credit Union
Administration, and the Federal Trade Commission, consider
the extent to which--
(A) consumers, in establishing new credit arrangements, are
aware of their existing payment obligations, the need to
consider those obligations in deciding to take on new credit,
and how taking on excessive credit can result in financial
difficulty;
(B) minimum periodic payment features offered in connection
with open end credit plans impact consumer default rates;
(C) consumers make only the required minimum payment under
open end credit plans;
(D) consumers are aware that making only required minimum
payments will increase the cost and repayment period of an
open end credit obligation; and
(E) the availability of low minimum payment options is a
cause of consumers experiencing financial difficulty.
(3) Report to congress.--Findings of the Board in
connection with any study conducted under this subsection
shall be submitted to Congress. Such report shall also
include recommendations for legislative initiatives, if any,
of the Board, based on its findings.
SEC. 1302. ENHANCED DISCLOSURE FOR CREDIT EXTENSIONS SECURED
BY A DWELLING.
(a) Open End Credit Extensions.--
(1) Credit applications.--Section 127A(a)(13) of the Truth
in Lending Act (15 U.S.C. 1637a(a)(13)) is amended--
(A) by striking ``consultation of tax adviser.--A statement
that the'' and inserting the following: ``tax
deductibility.--A statement that--
``(A) the''; and
(B) by striking the period at the end and inserting the
following: ``; and
``(B) in any case in which the extension of credit exceeds
the fair market value (as defined under the Internal Revenue
Code of 1986) of the dwelling, the interest on the portion of
the credit extension that is greater than the fair market
value of the dwelling is not tax deductible for Federal
income tax purposes.''.
(2) Credit advertisements.--Section 147(b) of the Truth in
Lending Act (15 U.S.C. 1665b(b)) is amended--
(A) by striking ``If any'' and inserting the following:
``(1) In general.--If any''; and
(B) by adding at the end the following:
``(2) Credit in excess of fair market value.--Each
advertisement described in subsection (a) that relates to an
extension of credit that may exceed the fair market value of
the dwelling, and which advertisement is disseminated in
paper form to the public or through the Internet, as opposed
to by radio or television, shall include a clear and
conspicuous statement that--
``(A) the interest on the portion of the credit extension
that is greater than the fair market value of the dwelling is
not tax deductible for Federal income tax purposes; and
``(B) the consumer should consult a tax adviser for further
information regarding the deductibility of interest and
charges.''.
(b) Non-Open End Credit Extensions.--
(1) Credit applications.--Section 128 of the Truth in
Lending Act (15 U.S.C. 1638) is amended--
(A) in subsection (a), by adding at the end the following:
``(15) In the case of a consumer credit transaction that is
secured by the principal dwelling of the consumer, in which
the extension of credit may exceed the fair market value of
the dwelling, a clear and conspicuous statement that--
``(A) the interest on the portion of the credit extension
that is greater than the fair market value of the dwelling is
not tax deductible for Federal income tax purposes; and
``(B) the consumer should consult a tax adviser for further
information regarding the deductibility of interest and
charges.''; and
(B) in subsection (b), by adding at the end the following:
``(3) In the case of a credit transaction described in
paragraph (15) of subsection (a), disclosures required by
that paragraph shall be made to the consumer at the time of
application for such extension of credit.''.
(2) Credit advertisements.--Section 144 of the Truth in
Lending Act (15 U.S.C. 1664) is amended by adding at the end
the following:
``(e) Each advertisement to which this section applies that
relates to a consumer credit transaction that is secured by
the principal dwelling of a consumer in which the extension
of credit may exceed the fair market value of the dwelling,
and which advertisement is disseminated in paper form to the
public or through the Internet, as opposed to by radio or
television, shall clearly and conspicuously state that--
``(1) the interest on the portion of the credit extension
that is greater than the fair market value of the dwelling is
not tax deductible for Federal income tax purposes; and
``(2) the consumer should consult a tax adviser for further
information regarding the deductibility of interest and
charges.''.
(c) Regulatory Implementation.--
(1) In general.--The Board shall promulgate regulations
implementing the amendments made by this section.
(2) Effective date.--Regulations issued under paragraph (1)
shall not take effect until the later of--
(A) 12 months after the date of enactment of this Act; or
(B) 12 months after the date of publication of such final
regulations by the Board.
SEC. 1303. DISCLOSURES RELATED TO ``INTRODUCTORY RATES''.
(a) Introductory Rate Disclosures.--Section 127(c) of the
Truth in Lending Act (15
[[Page H574]]
U.S.C. 1637(c)) is amended by adding at the end the
following:
``(6) Additional notice concerning `introductory rates'.--
``(A) In general.--Except as provided in subparagraph (B),
an application or solicitation to open a credit card account
and all promotional materials accompanying such application
or solicitation for which a disclosure is required under
paragraph (1), and that offers a temporary annual percentage
rate of interest, shall--
``(i) use the term `introductory' in immediate proximity to
each listing of the temporary annual percentage rate
applicable to such account, which term shall appear clearly
and conspicuously;
``(ii) if the annual percentage rate of interest that will
apply after the end of the temporary rate period will be a
fixed rate, state in a clear and conspicuous manner in a
prominent location closely proximate to the first listing of
the temporary annual percentage rate (other than a listing of
the temporary annual percentage rate in the tabular format
described in section 122(c)), the time period in which the
introductory period will end and the annual percentage rate
that will apply after the end of the introductory period; and
``(iii) if the annual percentage rate that will apply after
the end of the temporary rate period will vary in accordance
with an index, state in a clear and conspicuous manner in a
prominent location closely proximate to the first listing of
the temporary annual percentage rate (other than a listing in
the tabular format prescribed by section 122(c)), the time
period in which the introductory period will end and the rate
that will apply after that, based on an annual percentage
rate that was in effect within 60 days before the date of
mailing the application or solicitation.
``(B) Exception.--Clauses (ii) and (iii) of subparagraph
(A) do not apply with respect to any listing of a temporary
annual percentage rate on an envelope or other enclosure in
which an application or solicitation to open a credit card
account is mailed.
``(C) Conditions for introductory rates.--An application or
solicitation to open a credit card account for which a
disclosure is required under paragraph (1), and that offers a
temporary annual percentage rate of interest shall, if that
rate of interest is revocable under any circumstance or upon
any event, clearly and conspicuously disclose, in a prominent
manner on or with such application or solicitation--
``(i) a general description of the circumstances that may
result in the revocation of the temporary annual percentage
rate; and
``(ii) if the annual percentage rate that will apply upon
the revocation of the temporary annual percentage rate--
``(I) will be a fixed rate, the annual percentage rate that
will apply upon the revocation of the temporary annual
percentage rate; or
``(II) will vary in accordance with an index, the rate that
will apply after the temporary rate, based on an annual
percentage rate that was in effect within 60 days before the
date of mailing the application or solicitation.
``(D) Definitions.--In this paragraph--
``(i) the terms `temporary annual percentage rate of
interest' and `temporary annual percentage rate' mean any
rate of interest applicable to a credit card account for an
introductory period of less than 1 year, if that rate is less
than an annual percentage rate that was in effect within 60
days before the date of mailing the application or
solicitation; and
``(ii) the term `introductory period' means the maximum
time period for which the temporary annual percentage rate
may be applicable.
``(E) Relation to other disclosure requirements.--Nothing
in this paragraph may be construed to supersede subsection
(a) of section 122, or any disclosure required by paragraph
(1) or any other provision of this subsection.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate regulations
implementing the requirements of section 127(c)(6) of the
Truth in Lending Act, as added by this section.
(2) Effective date.--Section 127(c)(6) of the Truth in
Lending Act, as added by this section, and regulations issued
under paragraph (1) of this subsection shall not take effect
until the later of--
(A) 12 months after the date of enactment of this Act; or
(B) 12 months after the date of publication of such final
regulations by the Board.
SEC. 1304. INTERNET-BASED CREDIT CARD SOLICITATIONS.
(a) Internet-Based Applications and Solicitations.--Section
127(c) of the Truth in Lending Act (15 U.S.C. 1637(c)) is
amended by adding at the end the following:
``(7) Internet-based applications and solicitations.--
``(A) In general.--In any solicitation to open a credit
card account for any person under an open end consumer credit
plan using the Internet or other interactive computer
service, the person making the solicitation shall clearly and
conspicuously disclose--
``(i) the information described in subparagraphs (A) and
(B) of paragraph (1); and
``(ii) the information described in paragraph (6).
``(B) Form of disclosure.--The disclosures required by
subparagraph (A) shall be--
``(i) readily accessible to consumers in close proximity to
the solicitation to open a credit card account; and
``(ii) updated regularly to reflect the current policies,
terms, and fee amounts applicable to the credit card account.
``(C) Definitions.--For purposes of this paragraph--
``(i) the term `Internet' means the international computer
network of both Federal and non-Federal interoperable packet
switched data networks; and
``(ii) the term `interactive computer service' means any
information service, system, or access software provider that
provides or enables computer access by multiple users to a
computer server, including specifically a service or system
that provides access to the Internet and such systems
operated or services offered by libraries or educational
institutions.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate regulations
implementing the requirements of section 127(c)(7) of the
Truth in Lending Act, as added by this section.
(2) Effective date.--The amendment made by subsection (a)
and the regulations issued under paragraph (1) of this
subsection shall not take effect until the later of--
(A) 12 months after the date of enactment of this Act; or
(B) 12 months after the date of publication of such final
regulations by the Board.
SEC. 1305. DISCLOSURES RELATED TO LATE PAYMENT DEADLINES AND
PENALTIES.
(a) Disclosures Related to Late Payment Deadlines and
Penalties.--Section 127(b) of the Truth in Lending Act (15
U.S.C. 1637(b)) is amended by adding at the end the
following:
``(12) If a late payment fee is to be imposed due to the
failure of the obligor to make payment on or before a
required payment due date, the following shall be stated
clearly and conspicuously on the billing statement:
``(A) The date on which that payment is due or, if
different, the earliest date on which a late payment fee may
be charged.
``(B) The amount of the late payment fee to be imposed if
payment is made after such date.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate regulations
implementing the requirements of section 127(b)(12) of the
Truth in Lending Act, as added by this section.
(2) Effective date.--The amendment made by subsection (a)
and regulations issued under paragraph (1) of this subsection
shall not take effect until the later of--
(A) 12 months after the date of enactment of this Act; or
(B) 12 months after the date of publication of such final
regulations by the Board.
SEC. 1306. PROHIBITION ON CERTAIN ACTIONS FOR FAILURE TO
INCUR FINANCE CHARGES.
(a) Prohibition on Certain Actions for Failure To Incur
Finance Charges.--Section 127 of the Truth in Lending Act (15
U.S.C. 1637) is amended by adding at the end the
following:
``(h) Prohibition on Certain Actions for Failure To Incur
Finance Charges.--A creditor of an account under an open end
consumer credit plan may not terminate an account prior to
its expiration date solely because the consumer has not
incurred finance charges on the account. Nothing in this
subsection shall prohibit a creditor from terminating an
account for inactivity in 3 or more consecutive months.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate regulations
implementing the requirements of section 127(h) of the Truth
in Lending Act, as added by this section.
(2) Effective date.--The amendment made by subsection (a)
and regulations issued under paragraph (1) of this subsection
shall not take effect until the later of--
(A) 12 months after the date of enactment of this Act; or
(B) 12 months after the date of publication of such final
regulations by the Board.
SEC. 1307. DUAL USE DEBIT CARD.
(a) Report.--The Board may conduct a study of, and present
to Congress a report containing its analysis of, consumer
protections under existing law to limit the liability of
consumers for unauthorized use of a debit card or similar
access device. Such report, if submitted, shall include
recommendations for legislative initiatives, if any, of the
Board, based on its findings.
(b) Considerations.--In preparing a report under subsection
(a), the Board may include--
(1) the extent to which section 909 of the Electronic Fund
Transfer Act (15 U.S.C. 1693g), as in effect at the time of
the report, and the implementing regulations promulgated by
the Board to carry out that section provide adequate
unauthorized use liability protection for consumers;
(2) the extent to which any voluntary industry rules have
enhanced or may enhance the level of protection afforded
consumers in connection with such unauthorized use liability;
and
(3) whether amendments to the Electronic Fund Transfer Act
(15 U.S.C. 1693 et seq.), or revisions to regulations
promulgated by the Board to carry out that Act, are necessary
to further address adequate protection for consumers
concerning unauthorized use liability.
SEC. 1308. STUDY OF BANKRUPTCY IMPACT OF CREDIT EXTENDED TO
DEPENDENT STUDENTS.
(a) Study.--
[[Page H575]]
(1) In general.--The Board shall conduct a study regarding
the impact that the extension of credit described in
paragraph (2) has on the rate of bankruptcy cases filed under
title 11, United States Code.
(2) Extension of credit.--The extension of credit described
in this paragraph is the extension of credit to individuals
who are--
(A) claimed as dependents for purposes of the Internal
Revenue Code of 1986; and
(B) enrolled within 1 year of successfully completing all
required secondary education requirements and on a full-time
basis, in postsecondary educational institutions.
(b) Report.--Not later than 1 year after the date of
enactment of this Act, the Board shall submit to the Senate
and the House of Representatives a report summarizing the
results of the study conducted under subsection (a).
SEC. 1309. CLARIFICATION OF CLEAR AND CONSPICUOUS.
(a) Regulations.--Not later than 6 months after the date of
enactment of this Act, the Board, in consultation with the
other Federal banking agencies (as defined in section 3 of
the Federal Deposit Insurance Act), the National Credit Union
Administration Board, and the Federal Trade Commission, shall
promulgate regulations to provide guidance regarding the
meaning of the term ``clear and conspicuous'', as used in
subparagraphs (A), (B), and (C) of section 127(b)(11) and
clauses (ii) and (iii) of section 127(c)(6)(A) of the Truth
in Lending Act.
(b) Examples.--Regulations promulgated under subsection (a)
shall include examples of clear and conspicuous model
disclosures for the purposes of disclosures required by the
provisions of the Truth in Lending Act referred to in
subsection (a).
(c) Standards.--In promulgating regulations under this
section, the Board shall ensure that the clear and
conspicuous standard required for disclosures made under the
provisions of the Truth in Lending Act referred to in
subsection (a) can be implemented in a manner which results
in disclosures which are reasonably understandable and
designed to call attention to the nature and significance of
the information in the notice.
SEC. 1310. ENFORCEMENT OF CERTAIN FOREIGN JUDGMENTS BARRED.
(a) In General.--Notwithstanding any other provision of law
or contract, a court within the United States shall not
recognize or enforce any judgment rendered in a foreign court
if, by clear and convincing evidence, the court in which
recognition or enforcement of the judgment is sought
determines that the judgment gives effect to any purported
right or interest derived, directly or indirectly, from any
fraudulent misrepresentation or fraudulent omission that
occurred in the United States during the period beginning on
January 1, 1975, and ending on December 31, 1993.
(b) Exception.--Subsection (a) shall not prevent
recognition or enforcement of a judgment rendered in a
foreign court if the foreign tribunal rendering judgment
giving effect to the right or interest concerned determines
that no fraudulent misrepresentation or fraudulent omission
described in subsection (a) occurred.
TITLE XIV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
SEC. 1401. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date.--Except as otherwise provided in this
Act, this Act and the amendments made by this Act shall take
effect 180 days after the date of enactment of this Act.
(b) Application of Amendments.--Except as otherwise
provided in this Act, the amendments made by this Act shall
not apply with respect to cases commenced under title 11,
United States Code, before the effective date of this Act.
The CHAIRMAN pro tempore. No further amendment is in order except
those printed in the House Report 107-4. Each amendment may be offered
only in the order printed, may be offered only by a Member designated
in the report, shall be considered read, debatable for the time
specified in the report, equally divided and controlled by the
proponent and an opponent, shall not be subject to amendment, and shall
not be subject to a demand for division of the question.
It is now in order to consider amendment No. 1 printed in House
Report 107-4.
Amendment No. 1 Offered by Mr. Sensenbrenner
Mr. SENSENBRENNER. Mr. Chairman, I offer an amendment made in order
by the rule.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 1 offered by Mr. Sensenbrenner:
Page 10, line 13, strike ``case) who is not a dependent''
and insert ``case who is not a dependent)''.
Page 22, line 3, strike ``an individual case under chapter
7'' and insert ``a case under chapter 7 of this title in
which the debtor is an individual and''.
Page 31, line 9, strike ``service'' and insert ``agency''.
Page 34, line 20, strike ``services'' and insert
``agencies''.
Page 41, lines 12 and 16, strike ``service'' and insert
``agency''.
Page 42, in the matter following line 3, strike
``services'' and insert ``agencies''.
page 74, strike lines 5 through 20, and insert the
following:
(1) in subsection (a)--
(A) by striking paragraph (5) and inserting the following:
``(5) for a domestic support obligation;''; and
(B) by striking paragraph (18);
(2) in subsection (c), by striking ``(6), or (15)'' each
place it appears and inserting ``or (6)''; and
(3) in paragraph (15), as added by Public Law 103-394 (108
Stat. 4133)--
(A) by inserting ``to a spouse, former spouse, or child of
the debtor and'' before ``not of the kind'';
(B) by inserting ``or'' after ``court of record,''; and
(C) by striking ``unless--'' and all that follows through
the end of the paragraph and inserting a semicolon.
Page 75, strike line 21.
Page 76, strike lines 1 through 5.
Page 86, line 14, insert ``a person other than'' before the
open quotation marks.
Page 99, lines 18 through 21, indent the left margin 2 ems
to the right.
Page 101, line 22, strike the period at the end and insert
a semicolon.
Page 101, line 23, strike ``Nothing in paragraph (18)'' and
insert ``but nothing in this paragraph''.
Page 107, line 18, strike ``that person'' and insert ``a
person who provides such assistance or of such preparer''.
Page 107, lines 22, 23, and 24, strike ``the person'' and
insert ``such assisted person''.
Page 113, strike the matter after line 4, and insert the
following:
``526. Restrictions on debt relief agencies.''.
Page 114, line 18, strike ``proceeding'' and insert
``case''.
Page 120, strike the matter after line 22, and insert the
following:
``528. Requirements for debt relief agencies.''.
Page 123, lines 19 and 24, strike ``chapter 7, 11, or 13''
and insert ``chapters 7, 11, and 13''.
Page 130, beginning line 15, strike ``an individual case
under chapter 7 of this title'' and insert ``a case under
chapter 7 of this title in which the debtor in an
individual''.
Page 132, beginning on line 13, strike ``an individual case
under chapter 7, 11, or 13'' and insert ``in which the debtor
is an individual''.
Page 140, line 2, strike ``chapter 13 proceeding'' and
insert ``case under chapter 13''.
Page 142, line 1, move the left margin 2 ems to the left.
Page 142, lines 2 through 13, move the left margin 2 ems to
the left.
Page 144, line 13, indent the left margin 2 additional ems
to the right.
Page 144, lines 14 through 25, indent the left margin 2
additional ems to the right.
Page 145, line 1, indent the left margin 2 additional ems
to the right.
Page 145, lines 2 through 14, indent the left margin 2
additional ems to the right.
Page 164, beginning on line 10, strike ``the case of an
individual filing under chapter 7, 11, or 13'' and insert ``a
case under chapter 7, 11, or 13 in which the debtor in an
individual''.
Page 165, line 7, strike ``concerning an individual
debtor'' and insert `` in which the debtor is an
individual''.
Page 171, line 3, strike ``(3)'' and insert ``(2)''.
Page 172, line 1, strike ``amount'' and insert ``such
amount under this clause''.
Page 172, line 20, strike ``amount'' and insert ``such
amount under this clause''.
Page 177, line 14, strike ``(b)(l)'' and insert ``(b)(1)''.
Page 183, line 24, strike ``(i)'' and insert ``(h)''.
Page 184, line 2, strike ``(j)'' and insert ``(i)''
Beginning on page 184, line 23 and all that follows through
line 2 on page 185, move the left margin 2 ems to the left.
Page 187, line 12, strike ``period'' and insert
``period,''.
Page 189, lines 11 through 14, move the left margin 2 ems
to the left.
Page 198, line 24, strike ``claims'' and insert
``expenses''.
Page 200, line 11, strike ``claims'' and insert
``expenses''.
Page 201, line 2, add ``of chapter 11'' after ``Subchapter
1''.
Page 216, line 19, strike ``each district'' and insert
``the district court, or the clerk of the bankruptcy court if
one has been certified pursuant to section 156(b) of this
title,''.
Page 216, line 22, strike ``on a standardized form'' and
insert ``in a standardized format''.
Page 218, line 5, insert ``cases filed during'' after
``in''.
Page 218, line 13, insert ``for cases closed during the
reporting period'' after ``case''.
Page 218, line 14, insert ``cases closed during'' after
``for''.
Page 219, line 11, insert ``entered'' after ``orders''.
Page 219, line 13, strike ``issued''.
Page 224, beginning on line 24, strike ``individual cases
filed under chapter 7 or 13 of such title'' and insert
``cases filed under chapter 7 or 13 in which the debtor is an
individual''.
Page 234, line 7, insert ``the'' after ``date of''.
Page 235, line 3, strike ``(i)''.
Page 235, line 9, strike ``(ii)''.
Page 246, line 16, insert ``claim for a'' after ``to a''.
[[Page H576]]
Page 248, line 3, insert ``(1)'' before ``Section''.
Page 252, after line 22, insert the following:
(2) Clerical Amendment.--The table of sections for chapter
3 of title 11, United States Code, is amended by striking the
item relating to section 346 and inserting the following:
``346. Special provisions related to the treatment of State and local
taxes.''.
Page 252, line 24, insert ``(A)'' after ``(1)''.
Page 252, after line 25, insert the following:
(B) The table of sections for chapter 7 of title 11, United
States Code, is amended by striking the item relating to
section 728.
Page 281, line 13, strike ``(j)'' and insert ``(k)''.
Page 283, line 3, strike ``15,'' and insert ``15''.
Page 327, line 17, strike the period and insert a
semicolon.
Page 331, line 15, strike ``Financial Institution''.
Page 336, line 21, strike ``(l)'' and insert ``(m)''.
Page 337, lne 13, strike ``(k)'' and insert ``(j)''.
Page 346, line 16, strike ``561'' and insert ``561,''.
Page 348, strike the matter following line 4, and insert
the following:
``767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
financial participants, securities clearing agencies,
swap participants, repo participants, and master netting
agreement participants.'';
Page 356, strike lines 11 through 21 (and make such
technical and conforming changes as may be appropriate).
Page 357, line 11, strike ``Bankruptcy,'' and insert
``Bankruptcy''.
Page 369, line 13, insert ``and inserting a semicolon''
after ``paragraph''.
Page 370, line 1, strike ``property.'' and insert
``property;''.
Page 370, line 3, strike ``and (37)'' and insert ``(37),
(38A), and (38B),''.
Page 377, beginning on line 20, strike ``judgeship
positions shall be filled'' and insert ``bankruptcy judges
shall be appointed''.
Page 378, lines 1, 5, 9, 13, 15, 17, 19, 21, and 23, strike
``judgeship'' and insert ``judge''.
Page 378, line 3, 7, and 11, strike ``judgeships'' and
insert ``judges''.
Page 379, lines 1, 3, 5, 7, 9, and 11, strike ``judgeship''
and insert ``judge''.
Page 379, beginning on line 23, strike ``bankruptcy
judgeship positions'' and insert ``office of bankruptcy
judges''.
Page 381, beginning on line 2, strike ``judgeship positions
referred to in this subsection'' and insert ``office of
bankruptcy judges referred to in paragraph (1)''.
Page 393, strike lines 10 through 13 (and conform the table
of contents of the bill accordingly).
Page 411, line 21, strike ``Applications and''.
Page 412, line 1, strike ``Applications and''.
The CHAIRMAN pro tempore. Pursuant to House Resolution 71, the
gentleman from Wisconsin (Mr. Sensenbrenner) and the gentleman from
Michigan (Mr. Conyers) each will control 5 minutes.
The Chair recognizes the gentleman from Wisconsin (Mr.
Sensenbrenner).
Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, this amendment is one that proposes to make technical
and conforming changes to the bill. The 420-page bill had a number of
technical problems, such as improper spacing, incorrect terminology,
drafting errors, incorrect headings, incorrect references to section
numbers and grammatical inconsistencies. This amendment will clean up
the bill which will make the provisions of the legislation easier to
execute and to understand.
I want to emphasize that this amendment does not substantively alter
the composition of the bill. Over the last several years, the Congress
has considered, amended, debated, negotiated and refined this measure,
and the product under consideration is the result of those labors.
During the last Congress, that delicate balance is preserved in this
legislation. This amendment improves the bill by making it as
technically accurate as possible, which is important because lawyers,
accountants, creditors and debtors will be relying on and scrutinizing
its provisions. Again, this is a technical amendment meant only to
clarify with precision the terms of this legislation. I urge its
adoption.
Mr. Chairman, I reserve the balance of my time.
Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
Could I ask my friend the chairman why the Schiff provision was struck
out after it had been put in, which led to the dilemma that we did not
put it in, and so, therefore, it was subsequently struck out, and now
we do not have it at all?
Mr. SENSENBRENNER. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Wisconsin.
Mr. SENSENBRENNER. Mr. Chairman, this provision was struck because it
was determined to be substantive in nature and potentially
controversial. It is the intention of me as the author of this
amendment to have the amendment to be completely technical and
nonsubstantive in nature and to clean up the inconsistencies in the
bill that was presented to the President last year and ended up being
pocket vetoed.
Mr. CONYERS. We are now in this situation that it was subsequently
struck after we went to the Committee on Rules. We are under the
limitation of the Committee on Rules' determination of what is allowed
to be brought to the floor. So what do we do now, assuming that you are
sympathetic to this, to what was in it?
By the way, it was also struck unilaterally. We never got any word
that it was going to be struck. In the midst of the great atmosphere of
bipartisanship which has been repeatedly urged upon us by the
administration, we have a problem brewing that, if possible, I would
like to try to extinguish. How do we do that?
{time} 1230
The gentleman could extend me some kind of a proposal that would lend
us to be able to get this measure back in.
By the way, I thought it was a technical amendment that the gentleman
from California had accepted.
Mr. SENSENBRENNER. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Wisconsin.
Mr. SENSENBRENNER. Mr. Chairman, I thank the gentleman from Michigan
(Mr. Conyers) for yielding again.
Mr. Chairman, the problem is that it ended up not being technical in
nature and it ended up changing substantive rights in the bill, which
is something that we had decided to keep out of the technical
amendment.
I would further point out to my friend, the gentleman from Michigan
(Mr. Conyers), that the change was made prior to the Committee on Rules
holding its hearing yesterday, and the amendment that was before the
Committee on Rules was the revised text.
Mr. CONYERS. Mr. Chairman, it was issued February 28, 2001, 3:29 p.m.
Does the gentleman know what time we went into Committee on Rules
yesterday? 2:00. So this came out afterward.
Beside that, we were not notified, contrary to the practice that I
understand that we operate under for technical amendments.
Mr. SENSENBRENNER. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Wisconsin.
Mr. SENSENBRENNER. Mr. Chairman, all of the amendments that were made
in order by the Committee on Rules were redrafted to reflect the Union
Calendar print that has been submitted to the House for its
consideration. So of the five amendments that were made in order by the
Committee on Rules, all of them had to be redrafted, recognizing the
fact that the text of the bill as reported from committee is not the
text of the Union Calendar printed as before the Committee of the Whole
today.
Mr. CONYERS. I beg to differ with my friend, the chairman, but the
only change was page numbers. There were no substantive changes
whatsoever; and if the gentleman knows of any, beside the one of which
I complain, which was dropping a technical amendment, there were no
other changes made outside of the pagination.
So February 28, 2001, 3:29 p.m. It came after the fact, no notice. I
think we are off to a not-good start here about how we are going to
operate.
We went before the committee, and I was asked before the Committee on
Rules what is my priority for these amendments? And I said in the order
in which they are numbered if there is some cutoff.
How much time does the gentleman need?
Well, as much as the generosity will extend.
The CHAIRMAN pro tempore (Mr. LaHood). The time of the gentleman from
Michigan (Mr. Conyers) has expired.
[[Page H577]]
Mr. SENSENBRENNER. Mr. Chairman, I yield 1 minute to the gentleman
from Michigan (Mr. Conyers).
Mr. CONYERS. Mr. Chairman, it was in the Committee on Rules that we
were asked how much time and how many amendments we would like; and as
I recall it, we got one amendment and certainly not in the priority
which was listed.
So this is a very unhappy situation. The version before the House is
not the version that was submitted to the Committee on Rules, and the
majority dropped the amendment after the Committee on Rules met or the
Committee on Rules did or the leadership did or somebody did to ensure
that an important provision was eliminated that would ensure that
children and single parents do not suffer unduly in bankruptcy.
Therefore, Mr. Chairman, I regretfully announce that I will not be
able to support the gentleman's amendment.
Mr. SENSENBRENNER. Mr. Chairman, I yield myself the balance of the
time.
Mr. Chairman, this is a technical amendment. The gentleman from
Michigan (Mr. Conyers) is complaining about the fact that there is an
omission in the technical amendment, and the fact that it is
substantive in nature means that the provisions that the gentleman from
Michigan (Mr. Conyers) is complaining about do not belong in a
technical amendment.
Now, the question before the committee, when we vote on this
amendment, is whether or not to pass a technical amendment that is
needed to clean up the bill and to make its provisions easier to
understand and easier to execute when the court has questions placed
before them.
A no vote means that people want to make it harder to understand and
harder to execute. I would urge the House to support this amendment so
that it can be made easier to understand by everybody.
Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN pro tempore. The question is on the amendment offered by
the gentleman from Wisconsin (Mr. Sensenbrenner).
The question was taken; and the Chairman pro tempore announced that
the ayes appeared to have it.
Mr. CONYERS. Mr. Chairman, I demand a recorded vote, and pending
that, I make the point of order that a quorum is not present.
The CHAIRMAN pro tempore. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Wisconsin
(Mr. Sensenbrenner) will be postponed.
The point of no quorum is considered withdrawn.
It is now in order to consider amendment No. 2 printed in House
Report 107-4.
Amendment No. 2 Offered by Ms. Jackson-Lee of Texas
Ms. JACKSON-LEE of Texas. Mr. Chairman, I offer amendment No. 2.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 2 offered by Ms. Jackson-Lee of Texas:
Page 11, line 1, insert ``or public'' after ``private''.
The CHAIRMAN pro tempore. Pursuant to House Resolution 71, the
gentlewoman from Texas (Ms. Jackson-Lee) and a Member opposed each will
control 10 minutes.
The Chair recognizes the gentlewoman from Texas (Ms. Jackson-Lee).
Ms. JACKSON-LEE of Texas. Mr. Chairman, I yield myself such time as I
may consume.
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Chairman, let me thank both the
chairman and the ranking member and the Committee on Rules for seeing
merit in this amendment. As I indicated, I have concerns about this
legislation. I have offered it to say that important elements of
protecting the consumer are not included, but I do believe that we have
an opportunity to add to the enhancement of the legislation. So I offer
an amendment that speaks to all Americans, Americans who are raising
children, from rural hamlets to urban centers, from large school
districts to small school districts.
Recognizing that the education of our children from K to 12 is an
expensive endeavor, H.R. 333 includes a provision that allows for
private school expenses to be deducted or to be utilized as relates to
bankruptcy so that those expenses could be paid, and therefore this
particular amendment adds a debtor's monthly public school expenses as
allowable expenses under the means test.
Mr. SENSENBRENNER. Mr. Chairman, will the gentlewoman yield?
Ms. JACKSON-LEE of Texas. I yield to the gentleman from Wisconsin.
Mr. SENSENBRENNER. Mr. Chairman, I thank the gentlewoman from Texas
(Ms. Jackson-Lee) for yielding.
Mr. Chairman, I believe that the gentlewoman has pointed out an
unequal treatment in this bill which needs correction. I am happy to
support the amendment of the gentlewoman from Texas (Ms. Jackson-Lee)
and hope that we can get it passed quickly.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I thank the gentleman from
Wisconsin (Mr. Sensenbrenner) very much for his comments, and I will
move to summarize my remarks. I ask the gentleman, if the gentleman
would stand, I would very much encourage the gentleman's support. I
believe that is what I heard. I am just trying to be clear.
Mr. SENSENBRENNER. Mr. Chairman, will the gentlewoman yield?
Ms. JACKSON-LEE of Texas. I yield to the gentleman from Wisconsin.
Mr. SENSENBRENNER. The gentleman from Wisconsin said he is pleased to
support the amendment of the gentlewoman from Texas (Ms. Jackson-Lee).
Ms. JACKSON-LEE of Texas. I thank the gentleman from Wisconsin very
much for his support.
Mr. Chairman, I am going to be very responsive in summarizing simply
to say that, as we well know, parents who have children who are in
debate clubs and cheerleaders, choir, athletic programs in public
schools have many of the enormous expenses that other parents have and
we believe that equalizing that provision is very important. It
certainly helps our low-income families, our middle-income families.
Mr. Chairman, I would like to ask my colleagues to support this
amendment.
Mr. CONYERS. Mr. Chairman, will the gentlewoman yield?
Ms. JACKSON-LEE of Texas. I yield to the gentleman from Michigan.
Mr. CONYERS. Mr. Chairman, I have a full page statement touting all
of the excellent parts of the amendment of the gentlewoman from Texas
(Ms. Jackson-Lee), but I think I will insert them in the Record instead
and congratulate the gentlewoman and thank the chairman of the
committee for joining in his support.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I thank the ranking member
for his leadership and his excellent statement.
Mr. Chairman, I ask support of my amendment.
Mr. Chairman, this amendment to page 11, line 1 of H.R. 333 merely
adds a debtor's monthly public school expenses as an allowable expense
under the means test. My amendment would put public school expenses at
an equal footing with that of private school expenses, which is already
included in the bill.
I am surprised that my colleagues in the majority do not know that
there are expenses associated with sending children to public schools.
Parents whose children participate in extra-curricular activities such
as, the debate club, bank, choir, athletic programs, cheerleaders, or
dozens of other courses that are offered in public schools. These
courses require that parents provide financial support from their own
resources in order to support their child's participation in these
programs. It is very unfair to assume that only parents whose children
attend private schools have expenses worth protecting under this new
bankruptcy reform legislation. What does not make sense is protecting
private education, for no other reason other than it is private
education, while ignoring the overwhelming majority of children who's
parents send their children to public schools.
The principal problem with the means test is that the rigid one-size-
fits-all in determining eligibility for chapter 7 and the operation of
chapter 13 will often operate in an arbitrary fashion.
Access to bankruptcy would be more difficult, especially for low-
income filers who are not able to meet the requirements because they
cannot list public school expenses as an allowable expense as would
their private school counterparts. The ``safe harbor'' provision that
is supposed to protect some low-income families from the application of
the IRS
[[Page H578]]
standards will not protect many single mothers, because it is based on
the combined income of the debtor and the debtor's spouse--even if they
are separated and the mother who is filing for bankruptcy is receiving
no support from the nondebtor spouse from whom she is separated. As the
committee knows, the majority of low-income families send their
children to public schools (as opposed to higher income people) because
they cannot afford the private school tuition. It would seem that if
the true intent of this bill were to assist all Americans, a provision
recognizing public school tuition would have accompanied the
recognition of private school tuition as an allowable expense under the
``means test,'' however, this is not the case.
Under my amendment, low-income people will have a more flexible
standard (that is consistent with that of high-income people) that
would allow the debtor to have a fair opportunity to financial
recourse, which is not possible under the legislation as written. I
think such a change in the standard would be warmly welcomed for
middle-income and low-income filers. We cannot in good conscience allow
such an unbalanced approach to prevail, Mr. Chairman.
The CHAIRMAN pro tempore. The question is on the amendment offered by
the gentlewoman from Texas (Ms. Jackson-Lee).
The amendment was agreed to.
The CHAIRMAN pro tempore. It is now in order to consider amendment
No. 3 printed in House Report 107-4.
Amendment No. 3 Offered By Mr. Green of Wisconsin
Mr. GREEN of Wisconsin. Mr. Chairman, I offer amendment No. 3.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 3 offered by Mr. Green of Wisconsin:
Page 121, after line 16, insert the following (and make
such technical and conforming changes as may be appropriate):
SEC. 231. PROHIBITION ON DISCLOSURE OF IDENTITY OF MINOR
CHILDREN.
(a) Prohibition.--Title 11 of the United States Code, as
amended by section 106, is amended by inserting after section
111 the following:
``Sec. 112. Prohibition on disclosure of identity of minor
child
``In a case under this title, the debtor may be required to
provide information regarding a minor child involved in
matters under this title, but may not be required to disclose
in the public records in the case the name of such minor
child.''.
(b) Clerical Amendment.--The table of sections for chapter
1 of title 11, United States Code, is amended by adding at
the end the following:
``112. Prohibition on disclosure of name of minor child.''.
The CHAIRMAN pro tempore. Pursuant to House Resolution 71, the
gentleman from Wisconsin (Mr. Green) and a Member opposed each will
control 10 minutes.
The Chair recognizes the gentleman from Wisconsin (Mr. Green).
Mr. GREEN of Wisconsin. Mr. Chairman, I yield myself such time as I
may consume.
Mr. Chairman, let me begin by congratulating not only the gentleman
from Pennsylvania (Mr. Gekas) but also the gentleman from Wisconsin
(Mr. Sensenbrenner) for their fine work in moving this forward. This
amendment that I rise to address is not so much an amendment about
bankruptcy as it is an effort of closing a small, unintended hole in
child safety. It in no way restricts the flow of necessary information
regarding debtor's financial records, and it does not attempt to deal
with larger issues of privacy or the Internet.
What it does try to do is take a small, modest step towards
protecting children from unnecessary exposure to harm. The problem is a
real simple one, Mr. Chairman.
When someone files for bankruptcy, they are naturally required to
disclose information regarding themselves and their dependents. This
information is vital to ensuring the integrity of the bankruptcy
process, but as we all recognize, it is also very detailed and
personal.
Schedule I, for example, a document entitled ``The Current Income of
Individual Debtors,'' requires the debtor to list his or her
dependents, their names, ages and their relationship to the debtor.
Now, much of this information is important to creditors. Unfortunately,
if it is left unchanged it is also all of the information that some
people might need to seek out and contact children. I think in this
dangerous world, that represents a problem.
My amendment makes a single, small, modest change that makes no
difference to the information that creditors need but perhaps a great
difference to debtors. It simply prevents the name of the child from
being disclosed in these forms that go into the public domain. That is
all that it attempts to do.
Mr. SENSENBRENNER. Mr. Chairman, will the gentleman yield?
Mr. GREEN of Wisconsin. I yield to the gentleman from Wisconsin.
Mr. SENSENBRENNER. Mr. Chairman, I am happy to support the amendment.
I think the points made by my colleague, the gentleman from Wisconsin
(Mr. Green) are absolutely correct, and I believe that this would be a
significant improvement to this bill and hope that the committee adopts
it.
Mr. GREEN of Wisconsin. Mr. Chairman, I thank the chairman for his
graciousness.
Ms. JACKSON-LEE of Texas. Mr. Chairman, will the gentleman yield?
Mr. GREEN of Wisconsin. I yield to the gentlewoman from Texas.
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Chairman, let me say that my preceding
amendment dealing with children being educated follows my concern as
chair of the Congressional Children's Caucus and welcomes this
amendment. I congratulate the gentleman for it.
The personal information about children certainly needs to be avoided
in this instance and the gentleman is right, it has no impact on this
legislation. We are happy to support his amendment, and
congratulations.
Mr. Chairman, I rise in support of the amendment offered by the
gentleman from Wisconsin and commend him for taking action on a problem
that was identified during our Committee hearing on the bill. While I
agree that we must protect our children by removing their names from
bankruptcy filings, which now can be accessed electronically over the
Internet, this amendment is only the tip of the iceberg.
We have a much bigger problem--namely the availability of all kinds
of personal information that is part of a bankruptcy proceeding. This
information is now available for the world to see over the Internet.
That is why our Democratic substitute limits electronic access to all
personal, financial, or medical data that is part of a bankruptcy
petition.
In addition to the names of children, there are all kinds of other
information that debtors have to disclose in bankruptcy. There is basic
personal information such as the debtor's social security number,
telephone number, credit card and bank account numbers, medical
history, mother's maiden name, and other highly sensitive data. I don't
think any one of us would want this information to be just a point-and-
click away from being available to persons who have no legitimate use
for the information.
In addition, there's even a risk that personal information about
third parties will be posted on the Internet. If the debtor is paying
the medical expenses for a child or an aging parent, that medical
information about someone other than the debtor will be just a point-
and-click away as well.
If we really want to protect our children whose parent or guardian
files for bankruptcy, then we've got to do more than just keep their
names out of the filings. A provision in our Democratic substitute
amendment that was originally drafted by Senator Leahy would protect
not only the names of children and all other sensitive information by
limiting electronic access to such information only to those parties
who certify that they are qualified to obtain it.
If we really want to protect the privacy of our children in
bankruptcy, then we've got to support the Green amendment and the
additional privacy protections in the Democratic substitute.
Mr. GREEN of Wisconsin. Mr. Chairman, I thank the gentlewoman from
Texas (Ms. Jackson-Lee) for her support.
Mr. LAMPSON. Mr. Chairman, today I rise in support of Congressman
Green's amendment would prevent the name of a child from being
disclosed during a bankruptcy proceeding. Although this is a small part
of the bigger picture of privacy, this amendment will have an immediate
effect in protecting innocent children.
Last Congress, our former colleague and my former co-chairman of the
Congressional Missing and Exploited Children's Caucus, Congressman Bob
Franks, introduced legislation that would have amended the Federal
criminal code to prohibit and set penalties for
[[Page H579]]
specified activities relating to personal information about a child
including knowingly selling such information (by a list broker) without
the written consent of a parent of that child, knowing that such
information pertains to a child; and distributing or soliciting any
such information, knowing or having reason to believe that the
information will be used to abuse or physically harm the child.
How easily could a pedophile construct a list of names, ages and
addresses of children simply by obtaining a list of bankruptcy filings
over the Internet? Very easily.
I contacted the National Center for Missing and Exploited Children
just to be certain that NCMEC doesn't use bankruptcy filings in aiding
their searches for missing children. Few, if any, of these filings are
used. While it may not be very common practice for a child predator to
use these filings to his or her advantage, I would rather not take that
chance.
I urge my colleagues to support Congressman Green's amendment to keep
our children safe.
Mr. GREEN of Wisconsin. Mr. Chairman, I yield back the balance of my
time.
The CHAIRMAN pro tempore. The question is on the amendment offered by
the gentleman from Wisconsin (Mr. Green).
The amendment was agreed to.
The CHAIRMAN pro tempore. It is now in order to consider amendment
No. 4 printed in House Report 107-4.
Amendment No. 4 Offered by Mr. Oxley
Mr. OXLEY. Mr. Chairman, I offer amendment No. 4.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 4 offered by Mr. Oxley:
Page 286, line 10, insert ``mortgage'' before ``loan''.
Page 286, line 11, insert ``, and including any repurchase
or reverse repurchase transaction on any such security,
certificate of deposit, loan, interest, group or index, or
option'' before the semicolon at the end.
Page 287, line 10, insert a comma after ``index''.
Page 288, line 18, insert ``or any guarantee or
reimbursement obligation in connection with any agreement or
transaction referred to in this clause'' after ``clause''.
Page 291, line 8, insert ``or any guarantee or
reimbursement obligation in connection with any agreement or
transaction referred to in this clause'' after ``clause''.
Page 293, line 7, insert ``or any guarantee or
reimbursement obligation in connection with any agreement or
transaction referred to in any such subclause'' after
``(III), or (IV)''.
Page 296, line 2, insert ``or any guarantee or
reimbursement obligation in connection with any agreement or
transaction referred to in any such subclause'' after ``(IV),
or (V)''.
Page 297, line 7, insert ``total return,'' before
``credit''.
Page 297, line 15, insert ``that is'' before ``similar''.
Page 297, line 17, strike ``that'' and insert ``and that
has been,''.
Page 297, beginning on line 18, strike ``regularly entered
into in the swap market'' and insert ``the subject of
recurrent dealings in the swap markets''.
Page 298, line 1, insert ``quantitative measures associated
with an occurrence, extent of an occurrence or contingency
associated with a financial, commercial or economic
consequence,'' before ``or''.
Page 298, line 1, insert ``or financial'' after
``economic''.
Page 298, line 2, insert ``or financial'' after
``economic''.
Page 299, beginning on line 4, strike ``subparagraph'' and
insert ``subclause''.
Page 299, line 5, insert ``or any guarantee or
reimbursement obligation in connection with any agreement or
transaction referred to in any such subclause'' before the
period at the end.
Page 299, line 19, insert ``the Gramm-Leach-Bliley Act, the
Legal Certainty for Bank Products Act of 2000,'' before
``and''.
Page 305, line 19, strike ``contract'' and insert
``contracts''.
Page 306, line 18, insert ``cleared by or'' before
``subject''.
Page 307, line 2, insert ``and the term `clearing
organization' means a `clearing organization' as defined in
Section 402 of the Federal Deposit Insurance Corporation
Improvement Act of 1991'' after ``financial institution''.
Page 313, line 2, strike ``or that'' and insert ``, that''.
Page 313, line 4, insert ``or that is a multilateral
clearing organization (as defined in section 408 of this
Act)'' before the closing quotation marks.
Page 317, line 12, strike ``Banks and'' insert ``Banks,''.
Page 317, line 13, insert ``, Certain Uninsured State
Member Banks, and Edge Act Corporations'' before the period.
Page 317, line 21, strike ``banks and'' and insert
``banks,''.
Page 317, line 22, insert ``, certain uninsured state
member banks, and edge act corporations'' before the period.
Page 318, line 2, insert ``or a corporation chartered under
section 25A of the Federal Reserve Act or an uninsured State
member bank which operates, or operates as, a multilateral
clearing organization pursuant to section 409 of this Act,''
after ``agency''.
Page 318, line 7, insert ``in the case of an uninsured
national bank or uninsured Federal branch or agency, or to
the receiver of a corporation chartered under section 25A of
the Federal Reserve Act or an uninsured State member bank
appointed by the Board of Governors of the Federal Reserve
System in the case of a corporation chartered under section
25A of the Federal Reserve Act or an uninsured State member
bank'' before the semicolon at the end.
Page 318, line 15, insert ``in the case of an uninsured
national bank or uninsured Federal branch or agency, or to
the receiver or conservator of a corporation chartered under
section 25A of the Federal Reserve Act or an uninsured State
member bank appointed by the Board of Governors of the
Federal Reserve System in the case of a corporation chartered
under section 25A of the Federal Reserve Act or an uninsured
State member bank'' before ``; and''.
Page 318, line 18, strike ``bank or'' and insert ``bank,''.
Page 318, line 19, insert ``a corporation chartered under
section 25A of the Federal Reserve Act or an uninsured State
member bank which operates, or operates as, a multilateral
clearing organization pursuant to section 409 of this Act''
before the period at the end.
Page 318, line 21, strike ``bank or'' and insert ``bank,''.
Page 318, line 22, insert ``a corporation chartered under
section 25A of the Federal Reserve Act or an uninsured State
member bank which operates, or operates as, a multilateral
clearing organization pursuant to section 409 of this Act,''
after ``agency''.
Page 319, line 3, insert ``and the Board of Governors of
the Federal Reserve System'' after ``Currency''.
Page 319, line 4, insert ``each'' after ``may''.
Page 319, line 8, insert ``and the Board of Governors of
the Federal Reserve System'' after ``Currency''.
Page 319, line 8, insert ``each'' after ``shall''.
Page 321, line 6, insert ``or any guarantee or
reimbursement obligation by or to a forward contract merchant
or financial participant in connection with any agreement or
transaction referred to in any such subparagraph,'' after
``(C), or (D)''.
Page 321, beginning on line 7, strike ``actual value of
such contract on the date of the filing of the petition'' and
insert ``damages in connection with any such agreement or
transaction measured in accordance with Section 562 of this
title''.
Page 323, line 18, insert ``or any guarantee or
reimbursement obligation by or to a repo participant or
financial participant in connection with any agreement or
transaction referred to in any such clause'' after ``(iii),
or (iv)'' .
Page 323, beginning on line 19, strike ``actual value of
such contract on the date of the filing of the petition'' and
insert ``damages in connection with any such agreement or
transaction measured in accordance with section 562 of this
title''.
Page 324, beginning on line 11, strike ``which is an
interest rate swap'' and insert ``which is--
``(I) an interest rate swap''.
Page 324, beginning on line 13, strike ``including--'' and
all that follows through ``a rate floor'' on line 14, and
insert ``including a rate floor''
Page 325, line 3, insert ``total return,'' before ``credit
spread''.
Page 325, line 12, insert ``that is'' before ``similar''.
Page 325, line 13, insert ``and'' before ``that''.
Page 325, line 14, insert ``has been,'' before ``is''.
Page 325, beginning on line 15, strike ``regularly entered
into in the swap market'' and insert ``the subject of
recurrent dealings in the swap markets''.
Page 325, line 23, insert ``quantitative measures
associated with an occurrence, extent of an occurrence or
contingency associated with a financial, commercial or
economic consequence,'' after ``instruments,''.
Page 325, line 24, insert ``or financial'' after
``economic''.
Page 325, line 25, insert ``or financial'' before ``risk''.
Page 326, line 24, insert ``or any guarantee or
reimbursement obligation by or to a swap participant or
financial participant in connection with any agreement or
transaction referred to in any such clause'' after ``through
(v)''.
Page 326, beginning on line 25, strike ``actual value of
such contract on the date of the filing of the petition'' and
insert ``damages in connection with any such agreement or
transaction measured in accordance with section 562 of this
title''.
Page 327, line 14, insert ``the Gramm-Leach-Bliley Act, the
Legal Certainty for Bank Products Act of 2000,'' before
``and''.
Page 328, line 6, insert ``mortgage'' before ``loan''.
Page 328, line 7, insert ``, and including any repurchase
or reverse repurchase transaction on any such security,
certificate of deposit, loan, interest, group or index, or
option'' before the semicolon at the end.
Page 329, line 25, strike the comma.
Page 330, line 2, insert ``or any guarantee or
reimbursement obligation by or to a stockbroker, securities
clearing agency, financial institution or financial
participant
[[Page H580]]
in connection with any agreement or transaction referred to
in this subparagraph'' before the comma after
``subparagraph''.
Page 330, beginning on line 3, strike ``actual value of
such contract on the date of the filing of the petition'' and
insert ``damages in connection with any such agreement or
transaction measured in accordance with section 562 of this
title''.
Page 331, line 12, insert ``or any guarantee or
reimbursement obligation by or to a commodity broker or
financial participant in connection with any agreement or
transaction referred to in this paragraph'' before the comma
after ``paragraph''.
Page 331, beginning on line 12, strike ``actual value of
such contract on the date of the filing of the petition'' and
insert ``damages in connection with any such agreement or
transaction measured in accordance with section 562 of this
title''.
Page 331, after line 18, insert the following new paragraph
(and redesignate subsequent paragraphs accordingly):
(1) by striking paragraph (22) and inserting the following:
``(22) `financial institution' means--
``(A) a Federal reserve bank, or an entity (domestic or
foreign) that is a commercial or savings bank, industrial
savings bank, savings and loan association, trust company, or
receiver or conservator for such entity and, when any such
Federal reserve bank, receiver, conservator or entity is
acting as agent or custodian for a customer in connection
with a securities contract, as defined in section 741, such
customer; or
``(B) in connection with a securities contract, as defined
in section 741, an investment company registered under the
Investment Company Act of 1940;'';
Page 332, line 13, strike ``participant' means an entity''
and insert ``participant' means--
``(A) an entity''.
Page 332, line 15, insert ``swap agreement, repurchase
agreement,'' after ``commodity contract,''.
Page 333, line 3, strike the closing quotation marks and
the second semicolon.
Page 333, after line 3, insert the following new
subparagraph:
``(B) a `clearing organization' (as such term is defined in
section 402 of the Federal Deposit Insurance Corporation
Improvement Act of 1991);''; and
Page 333, line 7, strike the comma after ``entity''.
Page 333, line 9, strike ``or'' after ``merchants''.
Page 334, line 3, insert ``or any guarantee or
reimbursement obligation related to 1 or more of the
foregoing'' before the semicolon.
Page 334, line 24, strike ``and''.
Page 335, line 2, strike ``and''.
Page 335, line 7, insert ``or financial participant'' after
``swap participant''.
Page 335, line 13, insert ``or financial participant''
after ``swap participant''.
Page 335, line 15, strike ``and''.
Page 335, line 17, insert ``or financial participant''
after ``swap participant''.
Page 336, line 10, strike ``and''.
Page 337, strike line 8.
Page 337, after line 11, insert the following new
subparagraph:
(C) by inserting `or financial participant' after `swap
participant' each time such term appears; and
Page 339, strike line 12.
Page 339, line 15, strike the period at the end and insert
``; and''.
Page 339, after line 15, insert the following new
paragraph:
(3) by striking so much of the text of the second sentence
as appears before ``whether'' and inserting ``As used in this
section, the term ``contractual right'' includes a right set
forth in a rule or bylaw of a derivatives clearing
organization (as defined in the Commodity Exchange Act), a
multilateral clearing organization (as defined in the Federal
Deposit Insurance Corporation Improvement Act of 1991), a
national securities exchange, a national securities
association, a contract market designated under the Commodity
Exchange Act, a derivatives transaction execution facility
registered under the Commodity Exchange Act, or a board of
trade (as defined in the Commodity Exchange Act) or in a
resolution of the governing board thereof and a right,''
Page 339, strike line 23.
Page 340, line 3, strike the period at the end and insert
``; and''
Page 340, after line 3, insert the following new paragraph:
(3) by striking so much of the text of the third sentence
as appears before ``whether'' and inserting ``As used in this
section, the term ``contractual right'' includes a right set
forth in a rule or bylaw of a derivatives clearing
organization (as defined in the Commodity Exchange Act), a
multilateral clearing organization (as defined in the Federal
Deposit Insurance Corporation Improvement Act of 1991), a
national securities exchange, a national securities
association, a contract market designated under the Commodity
Exchange Act, a derivatives transaction execution facility
registered under the Commodity Exchange Act, or a board of
trade (as defined in the Commodity Exchange Act) or in a
resolution of the governing board thereof and a right,
Page 340, line 14, strike ``and''.
Page 340, line 18, strike the period and insert ``; and''.
Page 340, after line 18, insert the following new
paragraph:
(4) by striking so much of the text of the second sentence
as appears before ``whether'' and inserting ``As used in this
section, the term `contractual right' includes a right set
forth in a rule or bylaw of a derivatives clearing
organization (as defined in the Commodity Exchange Act), a
multilateral clearing organization (as defined in the Federal
Deposit Insurance Corporation Improvement Act of 1991), a
national securities exchange, a national securities
association, a contract market designated under the Commodity
Exchange Act), a derivatives transaction execution facility
registered under the Commodity Exchange Act, or a board of
trade (as defined in the Commodity Exchange Act) or in a
resolution of the governing board thereof and a right,''.
Page 341, line 3, insert ``; proceedings under chapter 15''
after ``contracts''.
Page 342, line 11, insert ``traded on or subject to the
rules of a contract market designated under the Commodity
Exchange Act or a derivatives transaction execution facility
registered under the Commodity Exchange Act'' after
``contract''.
Page 342, line 22, insert ``and traded on or subject to the
rules of a contract market designated under the Commodity
Exchange Act or a derivatives transaction execution facility
registered under the Commodity Exchange Act'' after
``debtor''.
Page 343, line 5, strike ``agreement'' and insert ``or
similar arrangement''.
Page 343, beginning on line , strike ``section
5a(a)(12)(A)'' and insert ``paragraph (1) or (2) of section
5c(c)''.
Page 343, line 10, strike ``been approved'' and insert
``not been abrogated or rendered ineffective by the Commodity
Futures Trading Commission''.
Page 343, beginning on line 18, strike ``national'' and all
that follows through ``market'' on line 21, and insert
``derivatives clearing organization (as defined in the
Commodity Exchange Act), a multilateral clearing organization
(as defined in the Federal Deposit Insurance Corporation
Improvement Act of 1991), a national securities exchange, a
national securities association, a contract market designated
under the Commodity Exchange Act, a derivatives transaction
execution facility registered under the Commodity Exchange
Act, or a board of trade (as defined in the Commodity
Exchange Act)''.
Page 344, strike the item following line 18, and insert the
following new item:
``561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across contracts;
proceedings under chapter 15.''.
Page 345, line 21, insert ``financial participants'' before
``securities''.
Page 346, line 9, insert ``in subsection (a)(2)(B)(ii), by
inserting before the semicolon, and'' after ``(1)''.
Page 346, line 10, insert a comma after ``period'',
Page 346, after line 22, insert the following new paragraph
(and redesignate the subsequent paragraphs as paragraphs (3),
(4), (7), and (8), respectively):
(2) in sections 362(b)(7) and 546(f), by inserting ``or
financial participant'' after ``repo participant'' each time
such term appears;
Page 347, after line 2, insert the following new
paragraphs:
(5) in section 548(d)(2)(C), by inserting ``or financial
participant'' after ``repo participant'';
(6) in section 548(d)(2)(D), by inserting ``or financial
participant'' after ``swap participant'';
Page 347, beginning on line 6, strike ``by inserting'' and
all that follows through ``contract market'' on line 8, and
insert ``by striking the second sentence and inserting `As
used in this section, the term ``contractual right'' includes
a right set forth in a rule or bylaw of a derivatives
clearing organization (as defined in the Commodity Exchange
Act), a multilateral clearing organization (as defined in the
Federal Deposit Insurance Corporation Improvement Act of
1991), a national securities exchange, a national securities
association, a contract market designated under the Commodity
Exchange Act, a derivatives transaction execution facility
registered under the Commodity Exchange Act, or a board of
trade (as defined in the Commodity Exchange Act)' ''.
Page 347, line 12, strike ``and''.
Page 347, line 14, strike the period and insert a
semicolon.
Page 347, after line 14, insert the following new
paragraphs:
(9) in section 559, by inserting ``or financial
participant'' after ``repo participant'' each time such term
appears; and
(10) in section 560, by inserting ``or financial
participant'' after ``swap participant''.
Page 348, strike the item following line 4, and insert the
following new item:
``767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
financial participants, securities clearing agencies,
swap participants, repo participants, and master netting
agreement participants.'';
Page 348, strike the item following line 7, and insert the
following new item:
``753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
financial participants, securities clearing agencies,
swap participants, repo participants, and master netting
agreement participants.''.
[[Page H581]]
Page 348, after the item following line 7, insert the
following new section:
SEC. 907A. SECURITIES BROKER AND COMMODITY BROKER
LIQUIDATION.
The Securities and Exchange Commission and the Commodity
Futures Trading Commission may consult with each other with
respect to--
(1) whether, under what circumstances, and the extent to
which security futures products will be treated as commodity
contracts or securities in a liquidation of a person that is
both a securities broker and a commodity broker; and
(2) the treatment in such a liquidation of accounts in
which both commodity contracts and securities are carried.
Page 352, line 1, insert a comma after ``101''.
Page 352, line 2, strike ``and 741'' and insert ``741, and
761''.
The CHAIRMAN pro tempore. Pursuant to House Resolution 71, the
gentleman from Ohio (Mr. Oxley) and a Member opposed each will control
5 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Oxley).
{time} 1245
Mr. OXLEY. Mr. Chairman, I yield myself 3 minutes.
(Mr. OXLEY asked and was given permission to revise and extend his
remarks.)
Mr. OXLEY. Mr. Chairman, I rise today in support of the amendment
offered by the ranking minority member of the Committee on Financial
Services, the gentleman from New York (Mr. LaFalce), and myself.
Our amendment makes several technical and conforming changes to Title
IX of H.R. 333. Currently Title IX contains the provisions of H.R. 1161
which passed the House three times in the 106th Congress but did not
make it to the President.
That legislation was based upon recommendations of the Clinton
administration. It had broad bipartisan support, and was sought by the
financial services industry and the regulatory community.
I am very pleased we have brought this bill back to the floor so
quickly and successfully. The majority leader and the chairman, the
gentleman from Wisconsin (Mr. Sensenbrenner), both deserve high praise
for their work on this legislation.
Unfortunately, the bill before the House today does not make changes
to these provisions necessitated by the later enactment of the
Commodities Futures Modernization Act of 2000 sponsored by our good
friend, Mr. Ewing. Without the changes in this amendment, similar kinds
of financial contracts and market participants could be treated
differently under the banking laws and the bankruptcy laws, where I
come from.
Mr. Chairman, this does not make any sense. To my knowledge, this
amendment is noncontroversial and has the support of the Treasury
Department, the President's Working Group on Financial Markets, and the
financial services industry. I am unaware of any opposition to the
substance of this amendment.
We look forward to continuing to work with the administration and our
colleagues in conference to address the remaining issues that were not
included in this amendment. Mr. Chairman, this bill is a good bill and
enjoys broad support.
I also want to thank my ranking minority member, the gentleman from
New York (Mr. LaFalce), for his assistance in developing this amendment
which is so important to the smooth operation of our financial markets.
Mr. Chairman, this is a good amendment and a good bill. I urge all of
my colleagues to support both.
Mr. Chairman, I am including for the Record some material explaining
the provisions of title IX and the changes made by this amendment to
provide needed technical background. This is a good amendment and a
good bill, and I urge all of my colleagues to support both.
Section-by-Section Analysis of Title IX of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2001 (H.R. 333)
i. introduction
Title IX of H.R. 333 is based on the work of an interagency
working group under the auspices of the President's Working
Group on Financial Markets following a review of current
statutory provisions governing the treatment of qualified
financial contracts and similar financial contracts upon the
insolvency of a counterparty.
ii. purpose
Title IX amends the U.S. Bankruptcy Code, the Federal
Deposit Insurance Act (FDIA), as amended by the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989
(FIRREA), the payment system risk reduction and meeting
provisions of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA), and the Securities Investor
Protection Act of 1970 (SIPA). These amendments address the
treatment of certain financial transactions following the
insolvency of a party to such transactions. The amendments
are designed to clarify and improve the consistency between
the applicable statutes and to minimize the risk of a
disruption within or between financial markets upon the
insolvency of a market participant.
iii. background
Since its adoption in 1978, the Bankruptcy Code has been
amended several times to afford different treatment for
certain financial transactions upon the bankruptcy of a
debtor, as compared with the treatment of other commercial
contracts and transactions. These amendments were designed to
further the policy goal of minimizing the systemic risks
potentially arising from certain interrelated financial
activities and markets. Similar amendments have been made to
the FDIA and FDICIA, and both the Federal Deposit Insurance
Corporation (FDIC) and the Securities Investor Protection
Corporation (SIPC) have issued policy statements and letters
clarifying general issues in this regard.
Systemic risk has been defined as the risk that a
disruption--at a firm, in a market segment, to a settlement
system, etc--can cause widespread difficulties at other
firms, in other market segments or in the financial system as
a whole. If participants in certain financial activities are
unable to enforce their rights to terminate financial
contracts with an insolvent entity in a timely manner, to
offset or net payment and other transfer obligations and
entitlements arising under such contracts, and to foreclose
on collateral securing such contracts, the resulting
uncertainty and potential lack of liquidity could increase
the risk of an inter-market disruption.
Congress has in the past taken steps to ensure that the
risk of such systemic events is minimized. For example, both
the Bankruptcy Code and the FDIA contain provisions that
protect the rights of financial participants to terminate
swap agreements, forward contracts, securities contracts,
commodity contracts and repurchase agreements following the
bankruptcy or insolvency of a counterparty to such contracts
or agreements. Furthermore, other provisions prevent
transfers made under such circumstances from being avoided as
preferences or fraudulent conveyances (except when made with
actual intent to defraud and taken in bath faith).
Protections also are afforded to ensure that the
acceleration, termination, liquidation, netting, setoff and
collateral foreclosure provisions of such transactions and
master agreements for such transactions are enforceable.
In addition, FDICIA was enacted in 1991 to protect the
enforceability of close-out netting provisions in ``netting
contracts'' between ``financial institutions.'' FDICIA states
that the goal of enforcing netting arrangements is to reduce
systemic risk within the banking system and financial
markets.
The orderly resolution of insolvencies involving
counterparties to such contracts also is an important element
in the reduction of systemic risk. The FDIA allows the
receiver for an insolvent insured depository institution the
opportunity to review the status of certain contracts to
determine whether to terminate or transfer the contracts to
new counterparties. These provisions provide the receiver
with flexibility in determining the most appropriate
resolution for the failed institution and facilitate the
reduction of systemic risk by permitting the transfer, rather
than termination, of such contracts.
iv. summary and section-by-section analysis
In general, Title IX is designed to clarify the treatment
of certain financial contracts upon the insolvency of a
counterparty and to promote the reduction of systemic risk.
It furthers the goals of prior amendments to the Bankruptcy
Code and the FDIA regarding the treatment of those financial
contracts and of the payment system risk reduction provisions
in FDICIA. It has four principal purposes:
1. To strengthen the provisions of the Bankruptcy Code and
the FDIA that protect the enforceability of acceleration,
termination, liquidation, close-out netting, collateral
foreclosure and related provisions of certain financial
agreements and transactions.
2. To harmonize the treatment of these financial agreements
and transactions under the Bankruptcy Code and the FDIA.
3. To amend the FDIA and FDICIA to clarify that certain
rights of the FDIC acting as conservator or receiver for a
failed insured depository institution (and in some
situations, rights of SIPC and receivers of certain uninsured
institutions) cannot be defeated by operation of the terms of
FDICIA.
4. To make other substantive and technical amendments to
clarify the enforceability of financial agreements and
transactions in bankruptcy or insolvency.
All these changes are designed to further minimize systemic
risk to the banking system and the financial markets.
Section 901
Subsections (a) through (f) amend the FDIA definitions of
``qualified financial contract,'' ``securities contract,''
``commodity
[[Page H582]]
contract,'' ``forward contract,'' ``repurchase agreement''
and ``swap agreement'' to make them consistent with the
definitions in the Bankruptcy Code and to reflect the
enactment of the Commodity Futures Modernization Act of 2000
(CFMA). It is intended that the legislative history and case
law surrounding those terms, to the date of this amendment,
be incorporated into the legislative history of the FDIA.
Subsection (b) amends the definition of ``securities
contract'' expressly to encompass margin loans, to clarify
the coverage of securities options and to clarify the
coverage of repurchase and reverse repurchase transactions.
The inclusion of ``margin loans'' in the definition is
intended to encompass only those loans commonly known in the
securities industry as ``margin loans,'' such as arrangements
where a securities broker or dealer extends credit to a
customer in connection with the purchase, sale or trading of
securities, and does not include loans that are not commonly
referred to as ``margin loans,'' however documented. The
reference in subsection (b) to a ``guarantee by or to any
securities clearing agency'' is intended to cover other
arrangements, such as novation, that have an effect similar
to a guarantee. The reference to a ``loan'' of a security in
the definition is intended to apply to loans of securities,
whether or not for a ``permitted purpose'' under margin
regulations. The reference to ``repurchase and reverse
repurchase transactions'' is intended to eliminate any
inquiry under the qualified financial contract provisions of
the FDIA as to whether a repurchase or reverse repurchase
transaction is a purchase and sale transaction or a secured
financing. Repurchase and reverse repurchase transactions
meeting certain criteria are already covered under the
definition of ``repurchase agreement'' in the FDIA (and a
regulation of the FDIC). Repurchase and reverse repurchase
transactions on all securities (including, for example,
equity securities, asset-backed securities, corporate bonds
and commercial paper) are included under the definition of
``securities contract''.
Subsection (b) also specifies that purchase, sale and
repurchase obligations under a participation in a commercial
mortgage loan do not constitute ``securities contracts.''
While a contract for the purchase, sale or repurchase of a
participation may constitute a ``securities contract,'' the
purchase, sale or repurchase obligation embedded in a
participation agreement does not make that agreement a
``securities contract.''
A number of terms used in the qualified financial contract
provisions, but not defined therein, are intended to have the
meanings set forth in the analogous provisions of the
Bankruptcy Code or FDICIA (for example, ``securities clearing
agency''). The term ``person,'' however, is not intended to
be so interpreted. Instead, ``person'' is intended to have
the meaning set forth in 1 U.S.C. Sec. 1.
Subsection (e) amends the definition of ``repurchase
agreement'' to codify the substance of the FDIC's 1995
regulation defining repurchase agreement to include those on
qualified foreign government securities. See 12 C.F.R.
Sec. 360.5 The term ``qualified foreign government
securities'' is defined to include those that are direct
obligations of, or fully guaranteed by, central governments
of members of the Organization for Economic Cooperation and
Development (OECD). Subsection (e) reflects developments in
the repurchase agreement markets, which increasingly use
foreign government securities as the underlying asset. The
securities are limited to those issued by or guaranteed by
full members of the OECD, as well as countries that have
concluded special lending arrangements with the International
Monetary Fund associated with the Fund's General Arrangements
to Borrow.
Subsection (e) also amends the definition of ``repurchase
agreement'' to include those on mortgage-related securities,
mortgage loans and interests therein, and expressly to
include principal and interest-only U.S. government and
agency securities as securities that can be the subject of a
``repurchase agreement.'' The reference in the definition to
United States government- and agency-issued or fully
guaranteed securities is intended to include obligations
issued or guaranteed by Fannie Mae and the Federal Home Loan
Mortgage Corporation (Freddie Mac) as well as all obligations
eligible for purchase by Federal Reserve banks under the
similar language of section 14(b) of the Federal Reserve Act.
This amendment is not intended to affect the status of
repos involving securities or commodities as securities
contracts, commodity contracts, or forward contracts, and
their consequent eligibility for similar treatment under the
qualified financial contract provisions. In particular, an
agreement for the sale and repurchase of a security would
continue to be a securities contract as defined in the FDIA,
even if not a ``repurchase agreement'' as defined in the
FDIA. Similarly, an agreement for the sale and repurchase of
a commodity, even though not a ``repurchase agreement'' as
defined in the FDIA, would continue to be a forward contract
for purposes of the FDIA.
Subsection (e), like subsection (b) for ``securities
contracts,'' specifies that repurchase obligations under a
participation in a commercial mortgage loan do not make the
participation agreement a ``repurchase agreement.'' Such
repurchase obligations embedded in participations in
commercial loans (such as recourse obligations) do not
constitute a ``repurchase agreement.'' However, a repurchase
agreement involving the transfer of participations in
commercial mortgage loans with a simultaneous agreement to
repurchase the participation on demand or at a date certain
one year or less after such transfer would constitute a
``repurchase agreement'' (as well as a ``securities
contract'').
Subsection (f) amends the definition of ``swap agreement''
to include an ``interest rate swap, option, future, or
forward agreement, including a rate floor, rate cap, rate
collar, cross-currency rate swap, and basis swap; a spot,
same day-tomorrow, tomorrow-next, forward, or other foreign
exchange or precious metals agreement; a currency swap,
option, future, or forward agreement; an equity index or
equity swap, option, future, or forward agreement; a debt
index or debt swap, option, future, or forward agreement; a
total return, credit spread or credit swap, option, future,
or forward agreement; a commodity index or commodity swap,
option, future, or forward agreement; or a weather swap,
weather derivative, or weather option.'' As amended, the
definition of ``swap agreement'' will update the statutory
definition and achieve contractual netting across
economically similar transactions.
The definition of ``swap agreement'' originally was
intended to provide sufficient flexibility to avoid the need
to amend the definition as the nature and uses of swap
transactions matured. To that end, the phrase ``or any other
similar agreement'' was included in the definition. (The
phrase ``or any similar agreement'' has been added to the
definitions of ``forward contract,'' ``commodity
contract,'' ``repurchase agreement'' and ``securities
contract'' for the same reason.) To clarify this,
subsection (f) expands the definition of ``swap
agreement'' to include ``any agreement or transactions
that is similar to any other agreement or transaction
referred to in [subsection (f)] . . . that has been, is
presently, or in the future becomes, the subject of
recurrent dealings in the swap markets and that is a
forward, swap, future, or option on one or more rates,
currencies, commodities, equity securities or other equity
instruments, debt securities or other debt instruments,
quantitative measures associated with an occurrence,
extent of an occurrence or contingency associated with a
financial, commercial or economic consequence, or economic
or financial indices or measures of economic or financial
risk or value.''
The definition of ``swap agreement,'' however, should not
be interpreted to permit parties to document non-swaps as
swap transactions. Traditional commercial arrangements, such
as supply agreements, or other non-financial market
transactions, such as commercial, residential or consumer
loans, cannot be treated as ``swaps'' under either the FDIA
or the Bankruptcy Code simply because the parties purport to
document or label the transactions as ``swap agreements.'' In
addition, these definitions apply only for purposes of the
FDIA and the Bankruptcy Code. These definitions, and the
characterization of a certain transaction as a ``swap
agreement,'' are not intended to affect the characterization,
definition, or treatment of any instruments under any other
statute, regulation, or rule including, but not limited to,
the statutes, regulations or rules enumerated in subsection
(f). Similarly, the definition of ``securities contract,''
``repurchase agreement,'' ``forward contract,'' and
``commodity contract,'' and the characterization of certain
transactions as such a contract or agreement, are not
intended to affect the characterization, definition, or
treatment of any instruments under any other statute,
regulation, or rule including, but not limited to, the
statutes, regulations or rules enumerated in subsection (f).
The definition also includes any security agreement or
arrangement, or other credit enhancement, related to a swap
agreement, and any guarantee or reimbursement obligation
related to a swap agreement. This ensures that any such
agreement, arrangement or enhancement is itself deemed to be
a swap agreement, and therefore eligible for treatment as
such for purposes of termination, liquidation, acceleration,
offset and netting under the FDIA and the Bankruptcy Code.
Similar changes are made in the definitions of ``forward
contract,'' ``commodity contract,'' ``repurchase agreement''
and ``securities contract.''
The use of the term ``forward'' in the definition of ``swap
agreement'' is not intended to refer only to transactions
that fall within the definition of ``forward contract.''
Instead, a ``forward'' transaction could be a ``swap
agreement'' even if not a ``forward contract.''
Subsection (g) amends the FDIA by adding a definition for
``transfer,'' which is a key term used in the FDIA, to ensure
that tit is broadly construed to encompass dispositions of
property or interests in property. The definition tracks that
in section 101 of the Bankruptcy Code.
Subsection (h) makes clarifying technical changes to
conform the receivership and conservatorship provisions of
the FDIA. This subsection (h) also clarifies that the FDIA
expressly protects rights under security agreements,
arrangements or other credit enhancements related to one or
more qualified financial contracts (QFCs). An example of a
security arrangement is a right of setoff, and examples of
other credit enhancements are letters of credit, guarantees,
reimbursement obligations and other similar agreements.
[[Page H583]]
Subsection (i) clarifies that no provision of Federal or
state law relating to the avoidance of preferential or
fraudulent transfers (including the anti-preference provision
of the National Bank Act) can be invoked to avoid a transfer
made in connection with any QFC of an insured depository
institution in conservatorship or receivership, absent actual
fraudulent intent on the part of the transferee.
Section 902
Section 902 provides that no provision of law, including
FDICIA, shall be construed to limit the power of the FDIC to
transfer or to repudiate any QFC in accordance with its
powers under the FDIA. As discussed below, there has been
some uncertainty regarding whether or not FDICIA limits the
authority of the FDIC to transfer or to repudiate QFCs of an
insolvent financial institution. Section 902--as well as
other provisions in the Act--clarify that FDICIA does not
limit the transfer powers of the FDIC with respect to QFCs.
Section 902 denies enforcement to ``walkaway'' clauses in
QFCs. A walkaway clause is defined as a provision that, after
calculation of a value of a party's position or an amount due
to or from one of the parties upon termination, liquidation
or acceleration of the QFC, either does not create a payment
obligation of a party or extinguishes a payment obligation of
a party in whole or in part solely because of such party's
status as a non-defaulting party.
Section 903
Subsection (a) amends the FDIA to expand the transfer
authority of the FDIC to permit transfers of QFCs to
``financial institutions'' as defined in FDICIA or in
regulations. This provision will allow the FDIC to transfer
QFCs to a non-depository financial institution, provided the
institution is not subject to bankruptcy or insolvency
proceedings.
The new FDIA provision specifies that when the FDIC
transfers QFCs that are cleared on or subject to the rules of
a particular clearing organization, the transfer will not
require the clearing organization to accept the transferee as
a member of the organization. This provision gives the FDIC
flexibility in resolving QFCs cleared on or subject to the
rules of a clearing organization, while preserving the
ability of such organizations to enforce appropriate risk
reducing membership requirements. The amendment does not
require the clearing organization to accept for clearing any
QFCs from the transferee, except on the terms and conditions
applicable to other [parties permitted to clear through that
clearing organization. ``Clearing organization'' is defined
to mean a ``clearing organization'' within the meaning of
FDICIA (as amended both by the CFMA and by Section 906 of the
Act).
The new FDIA provision also permits transfers to an
eligible financial institution that is a non-U.S. person, or
the branch or agency of a non-U.S. person or a U.S. financial
institution that is not an FDIC-insured institution if,
following the transfer, the contractual rights of the parties
would be enforceable substantially to the same extent as
under the FDIA. It is expected that the FDIC would not
transfer QFCs to such a financial institution if there were
an impending change of law that would impair the
enforceability of the parties' contractual rights.
Subsection (b) amends the notification requirements
following a transfer of the QFCs of a failed depository
institution to require the FDIC to notify any party to a
transferred QFC of such transfer by 5:00 p.m. (Eastern Time)
on the business day following the date of the appointment of
the FDIC acting as receiver or following the date of such
transfer by the FDIC acting as a conservator. This amendment
is consistent with the policy statement on QFCs issued by the
FDIC on December 12, 1989.
Subsection (c) amends the FDIA to clarify the relationship
between the FDIA and FDICIA. There has been some uncertainty
whether FDICIA permits counterparties to terminate or
liquidate a QFC before the expiration of the time period
provided by the FDIA during which the FDIC may repudiate or
transfer a QFC in a conservatorship or receivership.
Subsection (c) provides that a party may not terminate a QFC
based solely on the appointment of the FDIC as receiver until
5:00 p.m. (Eastern Time) on the business day following the
appointment of the receiver or after the person has received
notice of a transfer under FDIA section 11(d)(9), or based
solely on the appointment of the FDIC as conservator,
notwithstanding the provisions of FDICIA. This provides the
FDIC with an opportunity to undertake an orderly resolution
of the insured depository institution.
The amendment also prohibits the enforcement of rights of
termination or liquidation that arise solely because of the
insolvency of the institution or are based on the ``financial
condition'' of the depository institution in receivership or
conservatorship. For example, termination based on a cross-
default provision in a QFC that is triggered upon a default
under another contract could be rendered ineffective if such
other default was caused by an acceleration of amounts due
under that other contract, and such acceleration was based
solely on the appointment of a conservator or receiver for
that depository institution. Similarly, a provision in a QFC
permitting termination of the QFC based solely on a
downgraded credit rating of a party will not be enforceable
in an FDIC receivership or conservatorship because the
provision is based solely on the financial condition of the
depository institution in default. However, any payment,
delivery or other performance-based default, or breach of a
representation or covenant putting in question the
enforceability of the agreement, will not be deemed to be
based solely on financial condition for purposes of this
provision. The amendment is not intended to prevent
counterparties from taking all actions permitted and
recovering all damages authorized upon repudiation of any QFC
by a conservator or receiver, or from taking actions based
upon a receivership or other financial condition-triggered
default in the absence of a transfer (as contemplated in
Section 11(e)(10) of the FDIA).
The amendment allows the FDIC to meet its obligation to
provide notice to parties to transferred QFCs by taking steps
reasonably calculated to provide notice to such parties by
the required time. This is consistent with the existing
policy statement on QFCs issued by the FDIC on December 12,
1989.
Finally, the amendment permits the FDIC to transfer QFCs of
a failed depository institution to a bridge bank or a
depository institution organized by the FDIC for which a
conservator is appointed either (i) immediately upon the
organization of such institution or (ii) at the time of a
purchase and assumption transaction between the FDIC and the
institution. This provision clarifies that such institutions
are not to be considered financial institutions that are
ineligible to receive such transfers under FDIA section
11(e)(9). This is consistent with the existing policy
statement on QFCs issued by the FDIC on December 12, 1989.
Section 904
Section 904 limits the disaffirmance and repudiation
authority of the FDIC with respect to QFCs so that such
authority is consistent with the FDIC's transfer authority
under FDIA section 11(e)(9). This ensures that no
disaffirmance, repudiation or transfer authority of the FDIC
may be exercised to ``cherry-pick'' or otherwise treat
independently all the QFCs between a depository institution
in default and a person or any affiliate of such person. The
FDIC has announced that its policy is not to repudiate or
disaffirm QFCs selectively. This unified treatment is
fundamental to the reduction of systemic risk.
Section 905
Section 905 states that a master agreement for one or more
securities contracts, commodity contracts, forward contracts,
repurchase agreements or swap agreements will be treated as a
single QFC under the FDIA. This provision ensures that cross-
product netting pursuant to a master agreement, or pursuant
to an umbrella agreement for separate master agreements
between the same parties, each of which is used to document
one or more qualified financial contracts, will be
enforceable under the FDIA. Cross-product meeting permits a
wide variety of financial transactions between two parties to
be netted, thereby maximizing the present and potential
future risk-reducing benefits of the netting arrangement
between the parties. Express recognition of the
enforceability of such cross-product master agreements
furthers the policy of increasing legal certainty and
reducing systemic risks in the case of an insolvency of a
large financial participant.
Section 906
Subsection (a)(1) amends the definition of ``clearing
organization'' to include clearing-houses that are subject to
exemptions pursuant to orders of the Securities and Exchange
Commission or the Commodity Futures Trading Commission and to
include multilateral clearing organizations (the definition
of which was added to FDICIA by the CFMA).
Subsection (a)(2). FDICIA provides that a netting
arrangement will be enforced pursuant to its terms,
notwithstanding the failure of a party to the agreement.
However, the current netting provisions of FDICIA limit this
protection to ``financial institutions,'' which include
depository institutions. This subsection amends the FDICIA
definition of covered institutions to include (i) uninsured
national and State member banks, irrespective of
their eligibility for deposit insurance and (ii) foreign
banks (including the foreign bank and its branches or
agencies as a combined group, or only the foreign bank
parent of a branch or agency). The latter change will
extend the protections of FDICIA to ensure that U.S.
financial organizations participating in netting
agreements with foreign banks are covered by the Act,
thereby enhancing the safety and soundness of these
arrangements. It is intended that a non-defaulting foreign
bank and its branches and agencies be considered to be a
single financial institution for purposes of the bilateral
netting provisions of FDICIA (except to the extent that
the non-defaulting foreign bank and its branches and
agencies on the one hand, and the defaulting financial
institution, on the other, have entered into agreements
that clearly evidence an intention that the non-defaulting
foreign bank and its branches and agencies be treated as
separate financial institutions for purposes of the
bilateral netting provisions of FDICIA).
Subsection (a)(3) amends FDICIA to provide that, for
purposes of FDICIA, two or more clearing organizations that
enter into a netting contract are considered ``members'' of
each other. This assures the enforceability of netting
arrangements involving two or more clearing organizations and
a member common to all such organizations, thus reducing
systemic risk in the event of
[[Page H584]]
the failure of such a member. Under the current FDICIA
provisions, the enforceability of such arrangements depends
on a case-by-case determination that clearing organizations
could be regarded as members of each other for purposes of
FDICIA.
Subsection (a)(4) amends the FDICIA definition of netting
contract and the general rules applicable to netting
contracts. The current FDICIA provisions require that the
netting agreement must be governed by the law of the United
States or a State to receive the protections of FDICIA.
However, many of these agreements, particularly netting
arrangements covering positions taken in foreign exchange
dealings, are governed by the laws of a foreign country. This
subsection broadens the definition of ``netting contract'' to
include those agreements governed by foreign law, and
preserves the FDICIA requirement that a netting contract not
be invalid under, or precluded by, Federal law.
Subsections (b) and (c) establish two exceptions to
FDICIA's protection of the enforceability of the provisions
of netting contracts between financial institutions and among
clearing organization members.
First, the termination provisions of netting contracts will
not be enforceable based solely on (i) the appointment of a
conservator for an insolvent depository institution under the
FDIA or (ii) the appointment of a receiver for such
institution under the FDIA, if such receiver transfers or
repudiates QFCs in accordance with the FDIA and gives notice
of a transfer by 5:00 p.m. on the business day following the
appointment of a receiver. This change is made to confirm the
FDIC's flexibility to transfer or repudiate the QFCs of an
insolvent depository institution in accordance with the terms
of the FDIA. This modification also provides important legal
certainty regarding the treatment of QFCs under the FDIA,
because the current relationship between the FDIA and FDICIA
is unclear.
The second exception provides that FDICIA does not override
a stay order under SIPA with respect to foreclosure on
securities (but not cash) collateral of a debtor (section 911
makes a conforming change to SIPA). There is also an
exception relating to insolvent commodity brokers.
Subsections (b) and (c) also clarify that a security
agreement or other credit enhancement related to a netting
contract is enforceable to the same extent as the underlying
netting contract.
Subsection (d) adds a new section 407 to FDICIA. This new
section provides that, notwithstanding any other law, QFCs
with uninsured national banks or uninsured Federal branches
or agencies or uninsured State member banks or Edge Act
corporations that operate, or operate as, a multilateral
clearing organization and that are placed in receivership or
conservatorship will be treated in the same manner as if the
contract were with an insured national bank or insured
Federal branch for which a receiver or conservator was
appointed. This provision will ensure that parties to QFCs
with these institutions will have the same rights and
obligations as parties entering into the same agreements with
insured depository institutions. The new section specifically
limits the powers of a receiver or conservator for such an
institution to those contained in 12 U.S.C.
Sec. Sec. 1821(e)(8), (9), (10), and (11), which address
QFCs.
While the amendment would apply the same rules to such
institutions that apply to insured institutions, the
provision would not change the rules that apply to insured
institutions. Nothing in this section would amend the
International Banking Act, the Federal Deposit Insurance Act,
the National Bank Act, or other statutory provisions with
respect to receiverships of insured national banks or Federal
branches.
Section 907
Subsection (a)(1) amends the Bankruptcy Code definitions of
``repurchase agreement'' and ``swap agreement'' to conform
with the amendments to the FDIA contained in sections 901(e)
and 901(f) of the Act.
In connection with the definition of ``repurchase
agreement,'' the term ``qualified foreign government
securities'' is defined to include securities that are direct
obligations of, or fully guaranteed by, central governments
of members of the Organization for Economic Cooperation and
Development (OECD). This language reflects developments in
the repurchase agreement markets, which increasingly use
foreign government securities as the underlying asset. The
securities are limited to those issued by or guaranteed by
full members of the OECD, as well as countries that have
concluded special lending arrangements with the International
Monetary Fund associated with the Fund's General Arrangements
to Borrow.
Subsection (a)(1) also amends the definition of
``repurchase agreement'' to include those on mortgage-related
securities, mortgage loans and interests therein, and
expressly to include principal and interest-only U.S.
government and agency securities as securities that can be
the subject of a ``repurchase agreement.'' The reference
in the definition to United States government- and agency-
issued or fully guaranteed securities is intended to
include obligations issued or guaranteed by Fannie Mae and
the Federal Home Loan Mortgage Corporation (Freddie Mac)
as well as all obligations eligible for purchase by
Federal Reserve banks under the similar language of
section 14(b) of the Federal Reserve Act.
This amendment is not intended to affect the status of
repos involving securities or commodities as securities
contracts, commodity contracts, or forward contracts, and
their consequent eligibility for similar treatment under
other provisions of the Bankruptcy Code. In particular, an
agreement for the sale and repurchase of a security would
continue to be a securities contract as defined in the
Bankruptcy Code and thus also would be subject to the
Bankruptcy Code provisions pertaining to securities
contracts, even if not a ``repurchase agreement'' as defined
in the Bankruptcy Code. Similarly, an agreement for the sale
and repurchase of a commodity, even though not a ``repurchase
agreement'' as defined in the Bankruptcy Code, would continue
to be a forward contract for purposes of the Bankruptcy Code
and would be subject to the Bankruptcy Code provisions
pertaining to forward contracts.
Subsection (a)(1) specifies that repurchase obligations
under a participation in a commercial mortgage loan do not
make the participation agreement a ``repurchase agreement.''
Such repurchase obligations embedded in participations in
commercial loans (such as recourse obligations) do not
constitute a ``repurchase agreement.'' However, a repurchase
agreement involving the transfer of participations in
commercial mortgage loans with a simultaneous agreement to
repurchase the participation on demand or at a date certain
one year or less after such transfer would constitute a
``repurchase agreement'' (as well as a ``securities
contract'').
The definition of ``swap agreement'' is amended to include
an ``interest rate swap, option, future, or forward
agreement, including a rate floor, rate cap, rate collar,
cross-currency rate swap, and basis swap; a spot, same day-
tomorrow, tomorrow-next, forward, or other foreign exchange
or precious metals agreement; a currency swap, option,
future, or forward agreement; an equity index or equity swap,
option, future, or forward agreement; a debt index or debt
swap, option, future, or forward agreement; a total return,
credit spread or credit swap, option, future, or forward
agreement; a commodity index or commodity swap, option,
future, or forward agreement; or a weather swap, weather
derivative, or weather option.'' As amended, the definition
of ``swap agreement'' will update the statutory definition
and achieve contractual netting across economically similar
transactions.
The definition of ``swap agreement'' originally was
intended to provide sufficient flexibility to avoid the need
to amend the definition as the nature and uses of swap
transactions matured. To that end, the phrase ``or any other
similar agreement'' was included in the definition. (The
phrase ``or any similar agreement'' has been added to the
definitions of ``forward contract,'' ``commodity contract,''
``repurchase agreement,'' and ``securities contract'' for the
same reason.) To clarify this, subsection (a)(1) expands the
definition of ``swap agreement'' to include ``any agreement
or transactions that is similar to any other agreement or
transaction referred to in [subsection (a)(1)] and that has
been, is presently, or in the future becomes, the subject of
recurrent dealing sin the swap markets and that is a forward,
swap, future, or option on one or more rates, currencies,
commodities, equity securities or other equity instruments,
debt securities or other debt instruments, quantitative
measures associated with an occurrence, extent of an
occurrence or contingency associated with a financial,
commercial or economic consequence, or economic or financial
indices or measures of economic or financial risk or value.''
The definition of ``swap agreement'' in this subsection
should not be interpreted to permit parties to document non-
swaps as swap transactions. Traditional commercial
arrangements, such as supply agreements, or other non-
financial market transactions, such as commercial,
residential or consumer loans, cannot be treated as ``swaps''
under either the FDIA or the Bankruptcy Code because the
parties purport to document or label the transactions as
``swap agreements.'' These definitions, and the
characterization of a certain transaction as a ``swap
agreement,'' are not intended to affect the characterization,
definition, or treatment of any instruments under any other
statute, regulation, or rule including, but not limited to,
the statutes, regulations or rules enumerated in subsection
(a)(1)(C). Similarly, the definitions of ``securities
contract,'' ``repurchase agreement,'' ``forward contract,''
and ``commodity contract,'' and the characterization of
certain transactions as such a contract or agreement, are not
intended to affect the characterization, definition, or
treatment of any instruments under any other statute,
regulation, or rule including, but not limited to, the
statutes, regulations or rules enumerated in subsection (f).
The definition also includes any security agreement or
arrangement, or other credit enhancement, related to a swap
agreement and any guarantee or reimbursement obligation
related to a swap agreement. This ensures that any such
agreement, arrangement or enhancement is itself deemed to be
a swap agreement, and therefore eligible for treatment as
such for purposes of termination, liquidation, acceleration,
offset and netting under the Bankruptcy Code and the FDIA.
Similar changes are made in the definitions of ``forward
contract,'' ``commodity contract,'' ``repurchase agreement,''
and ``securities contract.'' An example of a security
arrangement is a right of setoff; examples of
[[Page H585]]
other credit enhancements are letters of credit and other
similar agreements. A security agreement or arrangement or
guarantee or reimbursement obligation related to a ``swap
agreement,'' ``forward contract,'' ``commodity contract,''
``repurchase agreement'' or ``securities contract'' will be
such an agreement or contract only to the extent of the
damages in connection with such agreement measured in
accordance with Section 562 of the Bankruptcy Code (added by
the Act). This limitation does not affect, however, the other
provisions of the Bankruptcy Code (including Section 362(b))
relating to security arrangements in connection with
agreements or contracts that otherwise qualify as ``swap
agreements,'' ``forward contracts,'' ``commodity contracts,''
``repurchase agreements'' or ``securities contracts.''
The use of the term ``forward'' in the definition of ``swap
agreement'' is not intended to refer only to transactions
that fall within the definition of ``forward contract.''
Instead, a ``forward'' transaction could be a ``swap
agreement'' even if not a ``forward contract.''
Subsections (a)(2) and (a)(3) amend the Bankruptcy Code
definitions of ``securities contract'' and ``commodity
contract,'' respectively, to conform them to the definition
in the FDIA.
Subsection (a)(2), like the amendments to the FDIA, amends
the definition of ``securities contract'' expressly to
encompass margin loans, to clarify the coverage of securities
options and to clarify the coverage of repurchase and reverse
repurchase transactions. The inclusion of ``margin loans'' in
the definition is intended to encompass only those loans
commonly known in the securities industry as ``margin
loans,'' such as arrangements where a securities broker or
dealer extends credit to a customer in connection with the
purchase, sale or trading of securities, and does not include
loans that are not commonly referred to as ``margin loans,''
however documented. The reference in subsection (b) to a
``guarantee'' by or to a ``securities clearing agency'' is
intended to cover other arrangements, such as novation, that
have an effect similar to a guarantee. The reference to a
``loan'' of a security in the definition is intended to apply
to loans of securities, whether or not for a ``permitted
purpose'' under margin regulations. The reference to
``repurchase and reverse repurchase transactions'' is
intended to eliminate any inquiry under Section 555 and
related provisions as to whether a repurchase or reverse
repurchase transaction is a purchase and sale transaction or
a secured financing. Repurchase and reverse repurchase
transactions meeting certain criteria are already covered
under the definition of ``repurchase agreement'' in the
Bankruptcy Code. Repurchase and reverse repurchase
transactions on all securities (including, for example,
equity securities, asset-backed securities, corporate bonds
and commercial paper) are included under the definition of
``securities contract''. A repurchase or reverse repurchase
transaction which is a ``securities contract'' but not a
``repurchase agreement'' would thus be subject to the
``counterparty limitations'' contained in Section 555 of the
Bankruptcy Code (i.e., only stockbrokers, financial
institutions, securities clearing agencies and financial
participants can avail themselves of Section 555 and related
provisions).
Subsection (a)(2) also specifies that purchase, sale and
repurchase obligations under a participation in a commercial
mortgage loan do not constitute ``securities contracts.''
While a contract for the purchase, sale or repurchase of a
participation may constitute a ``securities contract,'' the
purchase, sale or repurchase obligation embedded in a
participation agreement does not make that agreement a
``securities contract.''
Subsection (b) amends the Bankruptcy Code definitions of
``financial institution'' and ``forward contract merchant.''
The definition for ``financial institution'' includes Federal
Reserve Banks and the receivers or conservators of insolvent
depository institutions. With respect to securities
contracts, the definition of ``financial institution''
expressly includes investment companies registered under the
Investment Company Act of 1940.
Subsection (b) also adds a new definition of ``financial
participant'' to limit the potential impact of insolvencies
upon other major market participants. This definition will
allow such market participants to close-out and net
agreements with insolvent entities under sections 362(b)(6),
555, and 556 even if the creditor could not qualify as, for
example, a commodity broker. Sections 326(b)(6), 555 and 556
preserve the limitations of the right to close-out and net
such contracts, in most cases, to entities who qualify under
the Bankruptcy Code's counterparty limitations. However,
where the counterparty has transactions with a total gross
dollar value of at least $1 billion in notional or actual
principal amount outstanding on any day during the previous
15-month period, or has gross mark-to-market positions of at
least $100 million (aggregated across counterparties) in one
or more agreements or transactions on any day during the
previous 15-month period, sections 362(b)(6), 555 and 556 and
corresponding amendments would permit it to exercise netting
and related rights irrespective of its inability otherwise to
satisfy those counterparty limitations. This change will help
prevent systemic impact upon the markets from a single
failure, and is derived from threshold tests contained in
Regulation EE promulgated by the Federal Reserve Board in
implementing the netting provisions of the Federal Deposit
Insurance Corporation Improvement Act. It is intended that
the 15-month period be measured with reference to the 15
months preceding the filing of a petition by or against the
debtor.
``Financial participant'' is also defined to include
``clearing organizations'' within the meaning of FDICIA (as
amended by the CFMA and Section 906 of the Act). This
amendment, together with the inclusion of ``financial
participants'' as eligible counterparties in connection with
``commodity contracts,'' ``forward contracts'' and
``securities contracts'' and the amendments made in other
Sections of the Act to include ``financial participants'' as
counterparties eligible for the protections in respect of
``swap agreements'' and ``repurchase agreements'', take into
account the CFMA and will allow clearing organizations to
benefit from the protections of all of the provisions of the
Bankruptcy Code relating to these contracts and agreements.
This will further the goal of promoting the clearing of
derivatives and other transactions as a way to reduce
systemic risk. The definition of ``financial participant''
(as with the other provisions of the Bankruptcy Code relating
to ``securities contracts,'' ``forward contracts,''
``commodity contracts,'' ``repurchase agreements'' and ``swap
agreements'') is not mutually exclusive, i.e., an entity that
qualifies as a ``financial participant'' could also be a
``swap participant,'' ``repo participant,'' ``forward
contract merchant,'' ``commodity broker,'' ``stockbroker,''
``securities clearing agency'' and/or ``financial
institution.''
Subsection (c) adds to the Bankruptcy Code new definitions
for the terms ``master netting agreement'' and ``master
netting agreement participant.''
The definition of ``master netting agreement'' is designed
to protect the termination and close-out netting provisions
of cross-product master agreements between parties. Such an
agreement may be used (i) to document a wide variety of
securities contracts, commodity contracts, forward contracts,
repurchase agreements and swap agreements or (ii) as an
umbrella agreement for separate master agreements between the
same parties, each of which is used to document a discrete
type of transaction. The definition includes security
agreements or arrangements or other credit enhancements
related to one or more such agreements and clarifies that a
master netting agreement will be treated as such even if it
documents transactions that are not within the enumerated
categories of qualifying transactions (but the provisions of
the Bankruptcy Code relating to master netting agreements and
the other categories of transactions will not apply to such
other transactions).
A ``master netting agreement participant'' is any entity
that is a party to an outstanding master netting agreement
with a debtor before the filing of a bankruptcy petition.
Subsection (d) amends section 362(b) of the Bankruptcy Code
to protect enforcement, free from the automatic stay, of
setoff or netting provisions in swap agreements and in
master netting agreements and security agreements or
arrangements related to one or more swap agreements or
master netting agreements. This provision parallels the
other provisions of the Bankruptcy Code that protect
netting provisions of securities contracts, commodity
contracts, forward contracts, and repurchase agreements.
Because the relevant definitions include related security
agreements, the references to ``setoff'' in these
provisions, as well as in section 362(b)(6) and (7) of the
Bankruptcy Code, are intended to refer also to rights to
foreclose on, and to set off against-obligations to
return, collateral securing swap agreements, master
netting agreements, repurchase agreements, securities
contracts, commodity contracts, or forward contracts.
Collateral may be pledged to cover the cost of replacing
the defaulted transactions in the relevant market, as well
as other costs and expenses incurred or estimated to be
incurred for the purpose of hedging or reducing the risks
arising out of such termination. Enforcement of these
agreements and arrangements is consistent with the policy
goal of minimizing systemic risk.
Subsection (d) also clarifies that the provisions
protecting setoff and foreclosure in relation to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, and master netting agreements
free from the automatic stay apply to collateral pledged by
the debtor but that cannot technically be ``held by'' the
creditor, such as receivables and book-entry securities, and
to collateral that has been repledged by the creditor and
securities re-sold pursuant to repurchase agreements.
The current codification of section 546 of the Bankruptcy
Code contains two subsections designated as ``(g)';
subsection (e) corrects this error.
Subsections (e) and (f) amend sections 546 and 548(d) of
the Bankruptcy Code to provide that transfers made under or
in connection with a master netting agreement may not be
avoided by a trustee except where such transfer is made with
actual intent to hinder, delay or defraud and not taken in
good faith. This amendment provides the same protections for
a transfer made under, or in connection with, a master
netting agreement as currently is provided for margin
payments, settlement payments and other transfers received by
commodity brokers, forward contract merchants, stockbrokers,
financial institutions, securities
[[Page H586]]
clearing agencies, repo participants, and swap participants
under Sections 546 and 548(d), except to the extent the
trustee could otherwise avoid such a transfer made under an
individual contract covered by such master netting agreement.
Subsections (g), (h), (i) and (j) clarify that the
provisions of the Bankruptcy Code that protect (i) rights of
liquidation under securities contracts, commodity contracts,
forward contracts and repurchase agreements also protect
rights of termination or acceleration under such contracts,
and (ii) rights to terminate under swap agreements also
protect rights of liquidation and acceleration.
Subsection (k) adds a new section 561 to the Bankruptcy
Code to protect the contractual right of a master netting
agreement participant to enforce any rights of termination,
liquidation, acceleration, offset or netting under a master
netting agreement. Such rights include rights arising (i)
from the rules of a derivatives clearing organization,
multilateral clearing organization, securities exchange,
securities association, contract market, derivatives
transaction execution facility or board of trade, (ii) under
common law, law merchant or (iii) by reason of normal
business practice. This reflects the enactment of the CFMA
and the current treatment of rights under swap agreements
under section 560 of the Bankruptcy Code. Similar changes to
reflect the enactment of the CFMA have been made to the
definition of ``contractual right'' for purposes of Sections
555, 556, 559 and 560 of the Bankruptcy Code.
Subsections (b)(2)(A) and (b)(2)(B) of new Section 561
limit the exercise of contractual rights to net or to offset
obligations where the debtor is a commodity broker and one
leg of the obligations sought to be netted relates to
commodity contracts traded on or subject to the rules of a
contract market designated under the Commodity Exchange Act
or a derivatives transaction execution facility registered
under the Commodity Exchange Act. Under subsection (b)(2)(A)
netting or offsetting is not permitted in these circumstances
if the party seeking to net or to offset has no positive net
equity in the commodity accounts at the debtor. Subsection
(b)(2)(B) applies only if the debtor is a commodity broker,
acting on behalf of its own customer, and is in turn a
customer of another commodity broker. In that case, the
latter commodity broker may not net or offset obligations
under such commodity contracts with other claims against its
customer, the debtor. Subsections (b)(2)(A) and (b)(2)(B)
limit the depletion of assets available for distribution to
customers of commodity brokers. This is consistent with the
principle of subchapter IV of chapter 7 of title 11 that
gives priority to customer claims in the bankruptcy of a
commodity broker. Subsection (b)(2)(C) provides an exception
to subsections (b)(2)(A) and (b)(2)(B) for cross-margining
and other similar arrangements approved by, or submitted to
and not rendered ineffective by, the Commodity Futures
Trading Commission, as well as certain other netting
arrangements.
For the purposes of Bankruptcy Code sections 555, 556, 559,
560 and 561, it is intended that the normal business practice
in the event of a default of a party based on bankruptcy or
insolvency is to terminate, liquidate or accelerate
securities contracts, commodity contracts, forward contracts,
repurchase contracts, repurchase agreements, swap agreements
and master netting agreements with the bankrupt or insolvent
party.
The protection of netting and offset rights in sections 560
and 561 is in addition to the protections afforded in
sections 362(b)(6), (b)(7), (b)(17) and (b)(28).
Under the Act, the termination, liquidation or acceleration
rights of a master netting agreement participant are subject
to limitations contained in other provisions of the
Bankruptcy Code relating to securities contracts and
repurchase agreements. In particular, if a securities
contract or repurchase agreement is documented under a master
netting agreement, a party's termination, liquidation and
acceleration rights would be subject to the provisions of the
Bankruptcy Code relating to orders authorized under the
provisions of SIPA or any statute administered by the SEC. In
addition, the netting rights of a party to a master netting
agreement would be subject to any contractual terms between
the parties limiting or waiving netting or set off rights.
Similarly, a waiver by a bank or a counterparty of netting or
set off rights in connection with QFCs would be enforceable
under the FDIA.
Section 502 of the Act clarifies that, with respect to
municipal bankruptcies, all the provisions of the Bankruptcy
Code relating to securities contracts, commodity contracts,
forward contracts, repurchase agreements, swap agreements and
master netting agreements (which by their terms are intended
to apply in all proceedings under title 11) will apply in
a Chapter 9 proceeding for a municipality. Although
sections 555, 556, 559 and 560 provide that they apply in
any proceeding under the Bankruptcy Code, Section 502
makes a technical amendment in Chapter 9 to clarify the
applicability of these provisions.
New Section 561 of the Bankruptcy Code clarifies that the
provisions of the Bankruptcy Code related to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements and master netting agreements
apply in a proceeding ancillary to a foreign insolvency
proceeding under new Chapter 15.
Subsections (l) and (m) clarify that the exercise of
termination and netting rights will not otherwise affect the
priority of the creditor's claim after the exercise of
netting, foreclosure and related rights.
Subsection (n) amends section 553 of the Bankruptcy Code to
clarify that the acquisition by a creditor of setoff rights
in connection with swap agreements, repurchase agreements,
securities contracts, forward contracts, commodity contracts
and master netting agreements cannot be avoided as a
preference.
This subsection also adds setoff of the kinds described in
sections 555, 556, 559, 560, and 561 of the Bankruptcy Code
to the types of setoff excepted from section 553(b).
Subsection (o), as well as other subsections of the Act,
adds references to ``financial participant'' in all the
provisions of the Bankruptcy Code relating to securities,
forward and commodity contracts and repurchase and swap
agreements.
Section 908
Section 908 amends section 11(e)(8) of the Federal Deposit
Insurance Act to explicitly authorize the FDIC, in
consultation with appropriate Federal banking agencies, to
prescribe regulations on recordkeeping with respect to QFCs.
Adequate recordkeeping for such transactions is essential to
effective risk management and to the reduction of systemic
risk permitted by the orderly resolution of depository
institutions utilizing QFCs.
Section 909
Section 909 amends FDIA section 13(e)(2) to provide that an
agreement for the collateralization of governmental deposits,
bankruptcy estate funds, Federal Reserve Bank or Federal Home
Loan Bank extensions of credit or one or more QFCs shall not
be deemed invalid solely because such agreement was not
entered into contemporaneously with the acquisition of the
collateral or because of pledges, delivery or substitution of
the collateral made in accordance with such agreement.
The amendment codifies portions of policy statements issued
by the FDIC regarding the application of section 13(e), which
codifies the ``D'Oench Duhme'' doctrine. With respect to
QFCs, this codification recognizes that QFCs often are
subject to collateral and other security arrangements that
may require posting and return of collateral on an ongoing
basis based on the mark-to-market values of the
collateralized transactions. The codification of only
portions of the exiting FDIC policy statements on these and
related issues should not give rise to any negative
implication regarding the continued validity of these policy
statements.
Section 910
Section 910 adds a new section 562 to the Bankruptcy Code
providing that damages under any swap agreement, securities
contract, forward contract, commodity contract, repurchase
agreement or master netting agreement will be calculated as
of the earlier of (i) the date of rejection of such agreement
by a trustee or (ii) the date of liquidation, termination or
acceleration of such contract or agreement.
New section 562 provides important legal certainty and
makes the Bankruptcy Code consistent with the current
provisions related to the timing of the calculation of
damages under QFCs in the FDIA.
Section 911
Section 911 amends SIPA to provide that an order or decree
issued pursuant to SIPA shall not operate as a stay of any
right of liquiation, termination, acceleration, offset or
netting under one or more securities contracts, commodity
contracts, forward contracts, repurchase agreements, swap
agreements or master netting agreements (as defined in the
Bankruptcy Code and including rights of foreclosure on
collateral), except that such order or decree may stay any
right to foreclose on or dispose of securities (but not cash)
collateral pledged by the debtor or sold by the debtor under
a repurchase agreement or lent by the debtor under a
securities lending agreement. (A corresponding amendment to
FDICIA is made by section 906). A creditor that was stayed in
exercising rights against such securities would be entitled
to post-insolvency interest to the extent of the value of
such securities.
Section 912
Section 912 generally protects asset-backed securitization
transactions from legal uncertainties and disruptions related
to the bankruptcies of certain parties and allows for the
further development of structured finance. Asset
securitization involves the issuance of securities supported
by assets having an ascertainable cash flow or market value.
Securitization of receivables, such as small-business loans,
commercial and multifamily mortgages, and car loans, allows
for the funding of such loans from capital market sources.
The process generally enlarges the pool of capital available
and reduces financing costs for vital lending purposes such
as the financing of small-business operations and home
ownership.
Through a number of definitions designed to ensure that the
exclusion from property of the estate applies only to the
intended type of transaction, new section 541(b)(5) of the
Bankruptcy Code excludes from the property of a debtor's
estate any ``eligible asset'' (and proceeds thereof) to the
extent that such eligible asset was ``transferred'' by the
debtor, before the date of commencement of the case, to an
``eligible entity'' in connection
[[Page H587]]
with an ``asset-backed securitization.'' Each term is
explicitly defined to reflect its specific role or
application in the securitization process to ensure that only
bona fide securitizations are eligible for the safe harbor
exclusion. All defined elements of a securitization must
be present for the safe harbor to apply. Other commercial
transactions lacking any of the defined elements, such as
transactions documented and structured as collateralized
lending arrangements and other commercial asset sales or
financings that are unrelated to securitization
transactions, would be ineligible for the safe harbor
provided by section 541(b)(5).
The phrase ``to the extent'' in new section 541(b)(5) makes
clear that a portion of the eligible asset may remain part of
the debtor's estate, for example, where the eligible entity
obtains the right to receive only interest payments on the
first 10 percent of payments due on a receivable in
connection with an asset-backed securitization. In addition,
the reference to section 548(a) in new section 541(b)(5) will
make clear that the safe harbor does not supersede a
trustee's power to avoid fraudulent transfers.
New section 541(b)(5) is not intended to override state law
requirements, if any, regarding ``perfection'' of an asset
sale. However, regardless of strict compliance with such
state law requirements, new section 541(b)(5) is intended to
provide an exclusion of the debtor's interest in eligible
assets (and proceeds thereof) from the debtor's estate, upon
compliance with section 541(b)(5). Thus, despite an eligible
entity's failure to have properly perfected a sale for state
law purposes, the eligible assets in question would remain
excluded from the debtor's estate. In such event, however, a
third party creditor with an interest in such eligible assets
under state law would not be precluded from asserting,
outside of the bankruptcy proceedings, such interest against
the issuer or any other party purporting to have an interest
in those assets. In other words, the amendments do not
purport to extinguish any party's interest in the securitized
assets other than the debtor's interest to the extent
transferred by the debtor to the securitization vehicle. In
order to provide certainty to participants in the asset-
backed securities market (including both issuers and
purchasers of such securities), it is noted that the
``strong-arm'' provisions of section 544 of the Bankruptcy
Code are not intended to override the general rule set forth
in new section 541(b)(5) so as to bring such assets back into
the debtor's estate.
Frequently, asset securitizations involve the issuance of
more than one class of securities with differing payment
priorities subordination provisions and other
characteristics. The definition of ``asset-backed
securitization'' contained in new section 541(e)(1) requires
that at least one tranche of the asset-backed securities
backed by the eligible assets in question be rated investment
grade, thereby requiring that each asset-backed
securitization as to which eligible assets are excluded from
the debtor's estate be a carefully reviewed transaction
subjected to third party scrutiny by a nationally recognized
statistical rating organization. The investment-grade rating
requirement applies only when the security is initially
issued. In view of the cost and time associated with
obtaining an investment-grade rating such ratings are
generally not pursued for smaller transactions. These and
other burdens of the rating process add further protection
against potential abuse of the safe harbor for sham
transactions and ensure its application for its intended
purpose--to preserve payments on asset-backed securities
issued in the public and private markets.
New section 541(e)(2) defines the term ``eligible asset.''
This definition is based upon the definition provided in rule
3a-7 under the Investment Company Act of 1940, which provides
an exemption from registration under the Investment Company
Act for issuers of asset-backed securities (i.e., issuers in
the business of purchasing, or otherwise acquiring, and
holding eligible assets). The phrase ``or other assets'' is
intended to cover assets often conveyed in connection with
securitization transactions such as letters of credit,
guarantees, cash collateral accounts, and other assets that
are provided as additional credit support. This phrase would
also cover other assets, such as swaps, hedge agreements,
etc., that are provided to protect bondholders against
interest rate, currency and other market risks. The inclusion
of cash and securities as eligible assets allows so-called
market-value based securitizations of equity and other non-
amortizing securities to fall within the purview of the
amendment, although securitizations of such securities are
not included under Rule 3a-7 and therefore would be subject
to regulation under the Investment Company Act if another
exemption therefrom were not available.
New sections 541(e)(3) and (4) define the terms ``eligible
entity'' and ``issuer,'' respectively. The definitions
exclude operating companies by encompassing only single
purpose entities. Because securitization transactions often
involve intermediary transferees, an eligible entity can be
either an issuer or an entity engaged exclusively in the
business of acquiring and transferring eligible assets
directly or indirectly to an issuer.
New section 541(e)(5) defines the term ``transferred.'' In
order for the eligible assets to be excluded from the
debtor's estate under section 541, the debtor must represent
and warrant in a written agreement that such eligible assets
were sold, contributed or otherwise conveyed with the
intention of removing them from the debtor's estate pursuant
to section 541 (whether or not reference is made to section
541 in the written agreement). The definition makes clear
that the debtor's written intention as to the exclusion of
the eligible assets will be honored, regardless of the state
law characterization of the transfer as a sale, contribution
or other conveyance, and regardless of any other aspect of
the transaction (such as the debtor's holding an interest in
the issuer or any securities issued by the issuer, the
ongoing servicing obligation of the debtor; the tax and
accounting characterization; or any recourse to the debtor,
whether relating to a breach of a representation, warranty or
covenant, or otherwise) which may affect a state law analysis
as to the true sale.
Section 913
Subsection (a) provides that the amendments made under
Title IX take effect on the date of enactment.
Subsection (b) provides that the amendments made under
Title IX shall not apply with respect to cases commenced, or
to conservator/receiver appointments made, before the date of
enactment.
Mr. Chairman, I reserve the balance of my time.
The CHAIRMAN pro tempore. Does any Member claim the time in
opposition?
Ms. JACKSON-LEE of Texas. I claim the time in opposition, Mr.
Chairman.
The CHAIRMAN pro tempore. The gentlewoman from Texas (Ms. Jackson-
Lee) is recognized for 5 minutes.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I yield such time as he may
consume to the gentleman from New York (Mr. LaFalce), ranking member of
the Committee on Financial Services.
Mr. LaFALCE. Mr. Chairman, I thank the gentlewoman for yielding time
to me.
Mr. Chairman, I have difficulties with the bankruptcy bill and
believe that it needs significant improvements in the amendatory
process; amendments that we, unfortunately, for the most part will not
be able to offer.
However, there are some technical matters in the bill within the
jurisdiction of the Committee on Financial Services which require
adjustments, and one of which has been allowed as an amendment by the
gentleman from Ohio (Mr. Oxley) and myself.
That title is solely concerned with changes to the current system for
quickly netting the obligations of financial institutions in bankruptcy
or receivership situations in order to prevent destabilizing
disruptions in our clearing and settlement systems.
The provision now in the bill has passed the House repeatedly and
without objection in the last Congress. The adjustments that the
gentleman from Ohio (Mr. Oxley) and I offer are largely technical and
are necessitated by enactment of the Commodities Exchange Modernization
Act during the last Congress.
Our amendment also includes some minor substantive changes which have
been rendered advisable due to transitions in market structure since
the President's Working Group on Financial Markets recommended the
original text of Title IX in 1998.
The Justice Department and all regulatory departments and agencies
which might be affected by these changes have been consulted, in
detail, and offer no objections. These regulators include the
Department of the Treasury, Federal Reserve, Securities and Exchange
Commission, Federal Deposit Insurance Corporation, and the Commodities
Futures Trading Commission. This group essentially mirrors the
President's Working Group on Financial Markets as it was constituted in
1998.
Title IX contains provisions which are of central importance to the
stability of our financial system. Their potential importance is
magnified in a time of possible economic downturn. There is no
opposition to these changes. Indeed, there is broad support. They could
have, and should have, passed the House and Senate and been enacted
into law last Congress. Unfortunately, they became unnecessarily caught
up in the far more contentious bankruptcy debate.
If H.R. 333 again becomes caught up in a long and contentious debate,
I will urge that Title IX be quickly pursued as an independent measure.
If there were a major problem with the machinery of the securities
system, the country would be hard pressed to resolve it expeditiously
and easily without the enactment of these netting provisions.
Instability and delay in such a circumstance could prove a recipe for
major economic trouble. Our financial system has undergone such
fundamental change that existing legal structures are woefully
inadequate for handling an emergency--
[[Page H588]]
particularly if they involve new instruments for managing risk and
transferring value, such as swaps.
The updating amendments Mr. Oxley and I are proposing ensure that
Title IX will be better tailored for the present and well-integrated
with the Commodities Exchange Modernization Act of 2000. They will also
establish a ready template for translating Title IX into an independent
bill should that become necessary.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I yield back the balance of
my time.
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, let me thank again the chairman of the Committee on the
Judiciary, the gentleman from Wisconsin (Mr. Sensenbrenner), for his
leadership on this issue, as well as my colleague, the gentleman from
New York (Mr. LaFalce), and the ranking member of the Committee.
Mr. Chairman, I am pleased to yield such time as he may consume to
the gentleman from Alabama (Mr. Bachus).
Mr. BACHUS. Mr. Chairman, I rise in support of the amendment offered
by the distinguished chairman and by his colleague, the ranking member,
the gentleman from New York (Mr. LaFalce).
Among other things, the amendment modifies the bill's so-called
netting provisions to conform them to important changes made to Federal
law in the Commodities Futures Modernization Act which was signed into
law December 21, 2000.
I might point out to my colleagues that the provisions in this
amendment were passed by this House in a bipartisan overwhelming vote
last year, but they never made it into law. What they do is promote an
orderly unwinding of financial contracts in those instances in which
one party to a derivative contract becomes insolvent and those
contracts go into a bankruptcy proceeding. This avoids that
possibility.
We all found out from the long-term capital management situation, and
that was 1998, a major hedge fund, what a situation that was. We want
to avoid that in the future, tying these contracts up in a long
bankruptcy proceeding.
The Commodity Futures Modernization Act made a number of important
changes to the regulation of over-the-counter derivatives. The law
expressly excluded certain derivative contracts from the Commodities
Exchange Act, and allowed for the formation of new clearing entities.
The amendment before the House now would update the ``financial
contracts'' definition and the netting provisions to reflect new market
developments in the swaps industry and the changes made in the
Commodity Futures Modernization Act.
Let me again commend the chairman and the ranking member for bringing
this important amendment to the floor today, and I urge my colleagues
to support its adoption. If we do not do it, the next time we have a
major financial player threatened with insolvency we will find
ourselves needing to pass this, and we might as well get ahead of the
game.
Mr. OXLEY. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I again thank the chairman of the Subcommittee on
Financial Institutions of the Committee on Financial Services for his
good work in this area.
Mr. Chairman, in summary, there were some other changes that the
President's working group had requested that are not contained in this
amendment, but we will hopefully reserve the right to seek those
changes in conference, working very closely with all of the major
players in this historic legislation.
Mr. OXLEY. Mr. Speaker, I yield back the balance of my time.
The CHAIRMAN pro tempore. The question is on the amendment offered by
the gentleman from Ohio (Mr. Oxley).
The amendment was agreed to.
The CHAIRMAN pro tempore. It is now in order to consider amendment
No. 6 printed in House Report 107-4.
Amendment No. 6 Offered by Ms. Jackson-Lee of Texas
Ms. JACKSON-LEE of Texas. Mr. Chairman, I offer an amendment.
The CHAIRMAN pro tempore. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 6 offered by Ms. Jackson-Lee of Texas:
Page 8, after line 11, insert the following (and make such
technical and conforming changes as may be appropriate):
(III) by striking ``whose debts are primarily consumer
debts'';
Page 10, line 7, strike ``the continuation of''.
Page 10, after line 22, insert the following (and make such
technical and conforming changes as may be appropriate):
``(II) In addition, if the debtor does have health
insurance benefits the debtor's monthly expenses shall
include an allowance to pay for reasonable medical expenses,
as circumstances require, not covered by the insurance for
the debtor, the dependents of the debtor, and the spouse of
the debtor.
Page 10, beginning on line 24, strike ``actual
administrative expenses'' and insert ``reasonable expense''.
Page 11, line 1, insert ``or public'' after ``private''.
Page 11, after line 4, insert the following:
``(V) In addition, the debtor's monthly expenses shall
include expenses necessary for the care of foster children in
the custody of the debtor.
Page 11, beginning on line 1, strike ``if'' and all that
follows through ``why'' on line 3.
Page 12, strike lines 2 through 6, and insert the
following:
``(B)(i) In any proceeding brought under this subsection,
the presumption of abuse may be overcome if the court finds
special circumstances indicating by a preponderance of the
evidence that the debtors income should be adjusted to less
than the current monthly income, that the debtors reasonably
necessary expenses are greater than those allowed by the
Internal Revenue Service guidelines, or that the debtors
financial difficulties were caused by circumstances beyond
the debtors control including medical problems.
Page 13, after line 3, insert the following:
``(v) A debtor whose current monthly income is equal to or
less than the Federal Income Poverty Guidelines and has been
for the 1-year period preceding the date of the filing of the
petition may, in lieu of the requirements of clauses (iv) and
(v) of section 521(a)(1)(B) and subsections (e), (f), and (g)
of section 521, file with the court written evidence showing
the debtors income for the 1-year period before the date of
the filing of the petition and a declaration under penalty of
perjury that the debtors income meets the test of this clause
for that period.
Page 24, line 2, strike ``current monthly income'' and
insert ``projected disposable income''.
Page 17, lines 6, 11, and 16, insert ``(adjusted to reflect
the percentage change in the Consumer Price Index for All
Urban Consumers, published by the Department of Labor, for
each subsequent year during which such median family income
is not reported by the Bureau of the Census)'' after
``Census''.
Page 18, lines 2, 7, and 12, insert ``(adjusted to reflect
the percentage change in the Consumer Price Index for All
Urban Consumers, published by the Department of Labor, for
each subsequent year during which such median family income
is not reported by the Bureau of the Census)'' after
``Census''.
Page 20, lines 18 and 23, insert ``(adjusted to reflect the
percentage change in the Consumer Price Index for All Urban
Consumers, published by the Department of Labor, for each
subsequent year during which such median family income is not
reported by the Bureau of the Census)'' after ``Census''.
Page 21, lines 9 and 14, insert ``(adjusted to reflect the
percentage change in the Consumer Price Index for All Urban
Consumers, published by the Department of Labor, for each
subsequent year during which such median family income is not
reported by the Bureau of the Census)'' after ``Census''.
Page 25, lines 9, 14, and 19, insert ``(adjusted to reflect
the percentage change in the Consumer Price Index for All
Urban Consumers, published by the Department of Labor, for
each subsequent year during which such median family income
is not reported by the Bureau of the Census)'' after
``Census''.
Page 160, lines 14, 19, and 24, insert ``(adjusted to
reflect the percentage change in the Consumer Price Index for
All Urban Consumers, published by the Department of Labor,
for each subsequent year during which such median family
income is not reported by the Bureau of the Census)'' after
``Census''.
Page 161, lines 9, 14, and 19, insert ``(adjusted to
reflect the percentage change in the Consumer Price Index for
All Urban Consumers, published by the Department of Labor,
for each subsequent year during which such median family
income is not reported by the Bureau of the Census)'' after
``Census''.
Page 162, lines 17 and 23, insert ``(adjusted to reflect
the percentage change in the Consumer Price Index for All
Urban Consumers, published by the Department of Labor, for
each subsequent year during which such median family income
is not reported by the Bureau of the Census)'' after
``Census''.
Page 163, line 4, insert ``(adjusted to reflect the
percentage change in the Consumer Price Index for All Urban
Consumers, published by the Department of Labor, for each
subsequent year during which such median family income is not
reported by the Bureau of the Census)'' after ``Census''.
[[Page H589]]
Beginning on page 45, strike line 24 and all that follows
through line 9 on page 61, and insert the following:
(1) in subsection (c)(2)--
(A) in subparagraph (A) by striking ``and'' at the end;
(B) in subparagraph (B) by adding ``and'' at the end; and
(C) by adding at the end the following:
``(C) such agreement contains a clear and conspicuous
statement which advises the debtor what portion of the debt
to be reaffirmed is attributable to principal, interest, late
fees, creditors attorney fees, expenses or other costs
relating to the collection of the debt;'';
(2) in subsection (c)(6)(B), by inserting ``or is a debt
described in subsection (c)(7)'' after ``real property''; and
(3) in subsection (c)--
(A) in paragraph (5) by striking ``and'' at the end;
(B) in paragraph (6) by striking the period and inserting
``; and'' at the end; and
(C) by adding at the end the following:
``(7) in a case concerning an individual, if the
consideration for such agreement is based in whole or in part
on an unsecured consumer debt, or is based in whole or in
part upon a debt for an item of personalty the value of which
at point of purchase was $1,000 or less, and in which the
creditor asserts a purchase money interest, the court,
approves such agreement as--
``(A) in the best interest of the debtor in light of the
debtors income and expenses;
``(B) not imposing an undue hardship on the debtors future
ability to pay for the needs of children and other dependents
(including court ordered support);
``(C) not requiring the debtor to pay the creditors
attorneys fees, expenses or other costs relating to the
collection of debt;
``(D) not entered into to protect property that is
necessary for the care and maintenance of children or other
dependents that would have nominal value on repossession;
``(E) not entered into after coercive threats or actions by
the creditor in the creditors course of dealings with the
debtor; and
``(F) not unfair because excessive in amount based upon the
value of the collateral.'';
(4) in subsection (d)(2)--
(A) by striking ``subsection (c)(6)'' and inserting
``paragraphs (6) and (7) of subsection (c)'', and
(B) by striking ``, if the consideration for such agreement
is based in whole or in part on a consumer debt that is not
secured by real property of the debtor after of this section
and adding at the end as applicable''.
Page 86, strike lines 1 through 5 (and make such technical
and conforming changes as may be appropriate).
Page 121, after line 16, insert (and make such technical
and conforming changes as may be appropriate):
SEC. 231. PRIVACY POLICY ENFORCEMENT.
(a) FTC and State Attorneys General Authority To Protect
Personal Privacy.--
(1) In general.--Chapter 3 of title 11, United States Code,
is amended by inserting after section 307 the following new
section:
``Sec. 308. Personally identifiable information; authority of
Federal Trade Commission and State attorneys general
``(a) FTC Authority.--The Federal Trade Commission may
appear and be heard in any case or proceeding under this
title in which personally identifiable information is, or is
proposed to be, used, sold, leased, or otherwise disclosed in
violation of section 363(b)(3).
``(b) Authority of State Attorneys General.--A State, as
parens patriae, may appear and be heard in any case or
proceeding under this title in which--
``(1) the attorney general of a State has reason to believe
that the personally identifiable information of the residents
of that State has been or is threatened or adversely
affected; and
``(2) personally identifiable information is, or is
proposed to be, used, sold, leased, or otherwise disclosed in
violation of section 363(b)(3).
``(c) No Affect on Other Authority.--Nothing in this
section shall be construed to limit the authority of the
Federal Trade Commission or a State to appear and be heard in
any case or proceeding--
``(1) as a creditor where the Federal Trade Commission or a
State asserts a claim against a debtor based on alleged
violations of statutes within the enforcement jurisdiction of
the Federal Trade Commission or the State; or
``(2) as a party in interest concerning other matters or
issues within the jurisdiction of the Federal Trade
Commission or the State.''.
(2) Clerical amendment.--The table of sections for chapter
3 of title 11, United States Code, is amended by inserting
after the item relating to section 307 the following:
``308. Personally identifiable information; authority of Federal Trade
Commission and State attorneys general.''.
(b) Limitation On Sale, Use, or Lease of Certain Personally
Identifiable Information.--Section 363(b) of title 11, United
States Code, is amended by adding at the end the following:
``(3)(A) If the debtor is not an individual, personally
identifiable information in the possession of the debtor that
relates to any other person may only--
``(i) be used by the debtor--
``(I) in accordance with the terms of the debtor's privacy
policy in effect at the time of the bankruptcy filing; or
``(II) if no such privacy policy relating to the personally
identifiable information was in effect at the time of the
bankruptcy filing, in accordance with subparagraph (B); and
``(ii) be sold, leased, or otherwise disclosed by the
debtor--
``(I) to a nondebtor party; and
``(II) in accordance with subparagraph (B).
``(B) In the case of the use, sale, lease, or other
disclosure of personally identifiable information, as
described in clause (i)(II) or (ii) of subparagraph (A), the
debtor shall provide prior clear and conspicuous notice to
the person to whom the personally identifiable information
relates of--
``(i) the proposed use, sale, lease, or other disclosure of
the information;
``(ii) the identity of the purchaser, lessee, or other
recipient of the information, if applicable;
``(iii) the privacy policy of the purchaser, lessee, or
other recipient of the information, if applicable; and
``(iv) the right of that person to choose not to have the
information used or transferred, and an opportunity to choose
not to have the information used or transferred.
``(C) The bankruptcy court, after notice to all parties in
interest and the Federal Trade Commission and hearing--
``(i) shall establish mechanisms for providing clear and
conspicuous notice and choice referred to in subparagraph
(B); and
``(ii) may tailor such mechanisms to the specific
circumstances of a case, as determined by the bankruptcy
court.''.
(c) Definition of Personally Identifiable Information.--
Section 101 of title 11, United States Code, is amended by
inserting after paragraph (41) the following:
``(41A) `personally identifiable information' means, with
respect to the person to whom the information relates--
``(A) a first name, initials, and last name of that person,
whether given at birth or adoption, assumed, or legally
changed;
``(B) a home or other physical address for that person,
including street name and name of city or town;
``(C) an e-mail address for that person;
``(D) a telephone number for that person;
``(E) a social security account number for that person;
``(F) a credit card account number for that person;
``(G) a birth date, birth certificate number, or place of
birth for that person;
``(H) information concerning that person that the debtor
collects and combines with any other identifier described in
this paragraph; and
``(I) any other identifying information relating to that
person that permits the physical or electronic contacting or
identification of that person, as determined by the
bankruptcy court.''.
Page 198, strike lines 3 and 4 and insert the following:
308, as added by this Act, the following:
``Sec. 309. Debtor reporting requirements
Page 199, strike line 15 and all that follows through the
end of the material between lines 15 and 16 and insert the
following:
section 308, as added by this Act, the following:
``309. Debtor reporting requirements.''.
Page 254, after line 4, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 605. PROTECTION OF PERSONAL PRIVACY IN BANKRUPTCY CASES.
(a) Personal Privacy Protection.--Section 107 of title 11,
United States Code, is amended by adding at the end the
following:
``(c) Electronic Access.--
``(1) In general.--The clerk of the bankruptcy court, the
United States trustee, and the trustee in a case under this
title may provide electronic access to a paper filed in a
case under this title, to any of the information contained in
a paper filed in such a case, and to the dockets of a
bankruptcy court only as permitted in this subsection.
``(2) Limitations on access.--Except as provided in
paragraph (3), the clerk of the bankruptcy court, the United
States trustee, and the trustee in the case may not provide
electronic access--
``(A) to the debtor's social security number, date of
birth, mother's maiden name, telephone number, or account
numbers (including bank account and credit card account
numbers);
``(B) to any of the single line items in the debtor's
schedule of assets or statement of income and expenditures;
or
``(C) to any personal, medical, or financial information
regarding the debtor or a relative of the debtor.
``(3) Permissible access.--The clerk of the bankruptcy
court, the United States trustee, and the trustee in the case
may provide electronic access to the information specified in
paragraph (2) to--
``(A) a party in interest in the case;
``(B) an entity that requires any such information to
determine whether it is a party in interest in the case;
``(C) the trustee in the case;
``(D) the United States trustee; or
``(E) a governmental unit that requires any such
information for a bona fide law enforcement purpose.
``(4) Certification required.--A party or entity whose only
basis for obtaining electronic access to information in a
case under this title is under subparagraph (A) or (B) of
[[Page H590]]
paragraph (3) shall, as a condition to obtaining electronic
access to any of the information listed in paragraph (2),
certify, in writing or in electronic form, to the clerk of
the bankruptcy court, the United States trustee, or the
trustee in the case, as the case may be, that the party or
entity--
``(A) properly qualifies for electronic access to
information under paragraph (3);
``(B) will use the information obtained through electronic
access only for the purpose of--
``(i) participating or determining whether to participate
in the case;
``(ii) the entity's own internal credit evaluation of the
debtor; or
``(iii) providing the information to a governmental unit
for a bona fide law enforcement purpose;
``(C) will use reasonable means to secure the information
obtained from unauthorized access and disclosure; and
``(D) will comply with the requirements of paragraph (6).
``(5) Maintenance of records.--The clerk of the bankruptcy
court, the United States trustee, or the trustee in the case,
as the case may be, shall maintain a record of, and shall
make available to the debtor, the identity of and contact
information for any entity that has obtained electronic
access to information in a case under this title.
``(6) Duties of recipient.--Upon written request by the
debtor, an entity that has obtained electronic information
under this subsection shall promptly inform the debtor of the
content of the information stored by the entity and shall
correct any such information to the extent that it differs
from the information contained in the records of the
bankruptcy court.
``(7) Liability.--A party or entity that is required to
make the certification required under paragraph (4), that
obtains electronic access to information in a case, and that
does not provide or does not comply with the certification is
liable to the debtor for--
``(A) any actual damages;
``(B) the debtor's attorney's fees and costs in enforcing
compliance with this subsection;
``(C) $500 per violation; and
``(D) punitive damages, if the violation is willful or part
of a pattern or practice of violations of this subsection.
``(8) Use by official recipients.--An entity that obtains
electronic access to information under subparagraph (C), (D),
or (E) of paragraph (3)--
``(A) may use the information concerning an individual
debtor only in connection with carrying out the official
duties of that entity in connection with the administration
of the case or the administration of the bankruptcy system in
general; and
``(B) may not provide electronic access to any such
information concerning an individual debtor, except in
accordance with the provisions of this subsection.
``(9) Access to statistical information.--The clerk of the
bankruptcy court may provide electronic access to statistical
information concerning cases and information concerning
particular cases without regard to the restrictions of this
subsection, but only if the information does not include any
means of identifying a particular debtor's name, social
security number, date of birth, mother's maiden name,
telephone number, address, or account numbers (including bank
account and credit card account numbers).
``(10) Definition.--For purposes of this subsection,
`electronic access' means access through electronic means,
such as through a computer or telephone, to a database or to
court or other electronic records, without human
intervention.
``(11) Applicability to individuals.--This subsection
applies only in a case in which the debtor is an
individual.''.
(b) Conforming Amendment.--Section 107(a) of title 11,
United States Code, is amended by striking ``subsection (b)''
and inserting ``subsections (b) and (c)''.
(c) Clerical Amendments.--Section 107 of title 11, United
States Code, is amended--
(1) by inserting ``General Access.--'' after ``(a)''; and
(2) by inserting ``Protected Matter.--'' after ``(b)''.
(d) Effective Date.--The amendments made by this section
shall become effective 180 days after the date of enactment
of this Act.
Page 145, strike lines 19 through 23 (and make such
technical and conforming changes as may be appropriate).
Beginning on page 147, strike line 6 and all that follows
through line 16 on page 148, and insert the following:
``(4)(A) For purposes of paragraph (1)(B), the term
`household goods' includes tangible personal property
normally found in or around a residence, but does not include
motorized vehicles used for transportation purposes.''.
Page 159, line 12, insert ``, or on a showing of good cause
such longer period as the court considers to be reasonable,''
after ``45 days''.
Page 167, strike lines 21 through 24 (and make such
technical and conforming changes as may be appropriate).
Page 236, line 8, strike ``described in section 523(a)(2)
or''.
Page 182, line 3, strike the close quotation marks and the
period at the end.
Page 182, after line 3, insert the following (and make such
technical and conforming changes as may be appropriate):
``(iii) The court may extend the time periods specified in
this paragraph if the debtor establishes by clear and
convincing evidence that an extension is justified by
circumstances beyond the debtor's control that were not
foreseeable on the date of the order for relief.''.
Page 186, line 18, strike ``The'' and insert ``Unless the
debtor establishes by clear and convincing evidence that
there are circumstances beyond the debtor's control that were
not foreseeable on the date of the order of relief, the''.
Page 186, line 21, strike ``The'' and insert ``Unless the
debtor establishes by clear and convincing evidence that
there are circumstances beyond the debtor's control that were
not foreseeable on the date of the order of relief, the''.
Page 191, after line 24, insert the following (and make
such technical and conforming changes as may be appropriate):
``(4) The court may extend the time period specified in
paragraph (2) if the debtor establishes by clear and
convincing evidence that an extension is justified by
circumstances beyond the debtor's control that were not
foreseeable on the date the assurance of payment was due.
Page 201, line 7, insert ``(a)'' before ``In''.
Page 202, line 25, strike the close quotation marks and the
period at the end.
Page 202, after line 25, insert the following:
``(b) The court may extend the time periods specified in
paragraphs (1) and (3) of subsection (a) if the debtor
establishes by clear and convincing evidence that an
extension is justified by circumstances that there are beyond
the debtor's control that were not foreseeable on the date of
the order of relief.''.
Page 204, line 5, strike ``and'' at the end.
Page 204, line 7, strike the close quotation marks and the
period at the end.
Page 204, after line 7, insert the following (and make such
technical and conforming changes as may be appropriate):
``(D) the debtor establishes by clear and convincing
evidence that an extension is justified by circumstances
beyond the debtor's control that were not foreseeable on the
date of the order of relief.''.
Page 204, line 14, insert ``or the debtor establishes by
clear and convincing evidence that an extension is justified
by circumstances beyond the debtor's control that were not
foreseeable on the date of the order for relief'' after
``1121(e)(3)''.
Page 353, line 19, insert ``of this title or the transfer
of the asset-backed securitization would not be a true
transfer, conveyance or sale under nonbankruptcy law'' after
``548(a)''.
Page 194, after line 8, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 420. CLARIFICATION OF POSTPETITION WAGES AND BENEFITS.
Section 503(b)(1)(A) of title 11, United States Code, is
amended to read as follows:
``(A) The actual, necessary costs and expenses of
preserving the estate, including wages, salaries, or
commissions for services rendered after the commencement of
the case, and wages awarded as backpay and benefits
attributable to any period of time after commencement of the
case as a result of the debtor's violation of Federal or
State law, without regard to when the original unlawful act
occurred or to whether any services were rendered.''.
Page 194, before line 9, insert the following (and make
such technical and conforming changes as may be appropriate):
SEC. 421. CLARIFICATION OF DEBTOR'S DUTIES.
(a) Duties.--Section 521 of title 11, United States Code,
as amended by this Act, is amended by inserting after
paragraph (6) the following:--
``(7) unless a trustee is serving in the case, the debtor
who, at the time of the commencement of the case, served as
the administrator or plan sponsor of an employee benefit
plan, pursuant to section 1002(16) of title 29, United States
Code, shall continue to perform the obligations required of
the plan administrator or plan sponsor; and
``(8) unless a trustee is serving in the case, where a
proof of claim is filed on behalf of employees or retirees of
the debtor by a labor organization serving as the collective
bargaining representative of such employees or retirees, the
debtor shall, for the purpose of facilitating the location
of, and distribution to the employees and retirees of the
allowed amount of the claim, provide to such collective
bargaining representative a complete list of such employees
or retirees and their current addresses as listed on the
books and records of the debtor, and such other information
as may reasonably be requested for the purpose of aiding in
the claims distribution.''.
(b) Chapter 7.--Section 704 of title 11, United States
Code, as amended by this Act, is amended by adding at the end
the following:
``(12) where, at the time of the commencement of the case,
the debtor served as the administrator or plan sponsor of an
employee benefit plan, pursuant to section 1002(16) of title
29, United States Code, continue to perform the obligations
required of the plan administrator or plan sponsor;
``(13) where a proof of claim is filed on behalf of
employees or retirees of the debtor by a labor organization
serving as the collective bargaining representative of such
employees or retirees, provide to such collective bargaining
representative a complete list of such employees or retirees
and their current addresses as listed on the books and
records of the debtor, and such other information as
[[Page H591]]
may reasonably be requested for the purpose of aiding in the
distribution of allowed claims to such employees or retirees;
and
``(14) assume the obligations of the debtor to withhold,
report, and pay withholding taxes to the appropriate taxing
authority with respect to the distribution of allowed claims
for employee compensation and prepare and submit the reports
and returns required by such authorities.''.
(c) Chapter 11.--Section 1106(a)(1) of title 11, United
States Code, is amended to read as follows:
``(1) perform the duties of the trustee as specified in
section 704(2), (5), (7), (8), (9), (10), (11), and (12);''.
(d) Official Form.--The Advisory Committee on Bankruptcy
Rules of the Judicial Conference of the United States shall
propose for adoption an Official Bankruptcy Form to be used
to file a proof of multiple claim for wages owed to employees
of the debtor.
Page 358, after line 18, insert the following (and make
such technical and conforming changes as may be appropriate):
SEC. 1004. EXPANDED DEFINITION OF FAMILY FARMER.
Section 101(18) of title 11, United States Code, is
amended--
(1) in subparagraph (A)--
(A) by striking ``$1,500,000'' and inserting
``$3,000,000'';
(B) by striking ``80'' and inserting ``65''; and
(C) by striking ``the taxable year preceding the taxable
year'' and inserting ``at least 1 of the 3 taxable years
preceding the taxable year''; and
(2) in subparagraph (B)--
(A) in clause (ii), by striking ``80'' and inserting
``65''; and
(B) in clause (ii), by striking ``$1,500,000'' and
inserting ``$3,000,000''.
Page 393, after line 13, insert the following (and make
such technical and conforming changes as may be appropriate):
SEC. 1236. TECHNICAL CORRECTIONS TO THE COLLEGE SCHOLARSHIP
FRAUD PREVENTION ACT OF 2000.
(a) Sentencing Enhancement Guidelines.--Section 3 of the
College Scholarship Fraud Prevention Act of 2000 (Public Law
106-420) is amended--
(1) by striking ``obtaining or providing of'' and inserting
``the obtaining of, the offering of assistance in
obtaining''; and
(2) by striking ``base offense level for
misrepresentation'' and inserting ``enhanced penalties
provided for in the Federal sentencing guidelines for an
offense involving fraud or misrepresentation''.
(b) Limitation on Exempt Property.--Section 522(c)(4) of
title 11, United States Code, as added by section 4 of the
College Scholarship Fraud Prevention Act of 2000 (Public Law
106-420), is amended--
(1) by striking ``in the obtaining or providing of'' and
inserting ``or misrepresentation in the providing of, the
offering of assistance in obtaining, or the furnishing of
information to a consumer on,''; and
(2) by striking ``(20 U.S.C. 1001)''.
(c) Effective Date; Application of Amendments.--
(1) Effective date.--Except as provided in paragraph (2),
this section and the amendments made by this section shall
take effect on November 1, 2000.
(2) Application of section 552(c)(4) of title 11, united
states code.--Section 522(c)(4) of title 11, United States
Code, as added by section 4 of the College Scholarship Fraud
Prevention Act of 2000 (Public Law 106-420) and as amended by
subsection (b) of this section, shall apply only with respect
to cases commenced under title 11, United States Code, on or
after November 1, 2000.
Beginning on page 419, strike lines 5 through 23 (and make
such technical and conforming changes as may be appropriate).
The CHAIRMAN pro tempore. Pursuant to House Resolution 71, the
gentlewoman from Texas (Ms. Jackson-Lee) and the gentleman from
Wisconsin (Mr. Sensenbrenner) each will control 30 minutes.
The Chair recognizes the gentlewoman from Texas (Ms. Jackson-Lee).
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Chairman, I yield myself such time as I
may consume.
Mr. Chairman, the Democratic substitute makes a number of technical
improvements to this bill. It modifies some of the most onerous
provisions on lower-income debtors and struggling businesses. We had
hoped that most of these amendments could have been accepted by the
bill's supporters during the committee markup on the bill. However, the
majority have objected to each and every amendment that we were able to
offer, no matter how obvious, technical, or noncontroversial.
I think, as the ranking member began his remarks, the gentleman from
Michigan (Mr. Conyers), we noted that this bill has moved at a very
fast and very unmeasured speed, so the collaborative efforts have
fallen short.
We would hope our colleagues would join us in understanding some of
the sensitivities that we are trying to express that H.R. 333 needs to
correct: the recognition, of course, of catastrophic illnesses and how
it impacts those who file for bankruptcy; how those who are senior
citizens fall upon hard times and need to file for bankruptcy; how
women and children are negatively impacted and have to file for
bankruptcy as it relates to alimony and child support of the particular
debtor; that they are now seeking their alimony and child support and
cannot do so, and it leads to catastrophic events in their lives.
If they realize, as well, or if the authors of the bill recognize
that there are some indications that our economy has some weaknesses,
this would be the absolute wrong time not to enhance legislation, of
course, and to begin to acknowledge that in fact some of the provisions
of this bill actually close or slam the door in the faces of hard-
working Americans. That is why we have the AFL-CIO and so many women's
groups who oppose this particular amendment, representing millions of
Americans, this particular legislation.
While the provisions in the amendment are too numerous to describe in
detail, here are a few examples to illustrate the point.
First, our amendment contains provisions clarifying the deductibility
of health care costs from the means test. Without this amendment, a
single mother could not claim as an expense the cost of medical care
for a child who was seriously injured in a car accident after the date
that the bankruptcy petition was filed.
The ability to claim medical costs as an expense under the means test
should not turn on whether the condition occurred before the petition
has been filed. One is still seriously injured.
Second, our amendment seeks to correct an oversight in the bill is
that would directly impact on children. Although the bill allows
parents to list the costs of caring for their dependent children as a
monthly expense, the costs of caring for foster children are not
included.
Parents who volunteer to become foster parents should not have a
harder time making ends meet during a bankruptcy than biological
parents.
Interestingly enough, Mr. Chairman, I work with foster parents in
Harris County in Texas. In fact, we work to solicit, recruit foster
parents to provide sort of an interlude for foster parents who never
get vacations, sort of say to them that we thank them.
I can assure the Members that this is a real aspect of this bill that
need to be corrected. It goes without saying that we should not be
passing laws in this Congress that penalize children who have to be in
foster homes and, as well, the loving foster parents.
Third, our amendment seeks to correct obvious shortcomings in the
bill. For example, the bill says that for purposes of the means test,
median income is based upon Census Bureau figures.
As we all know, the census only occurs once every 10 years, and
obviously the economy is one that changes precipitously, as we have
noted over the last couple of weeks, days, and months, which means that
under this bill, in its current form, a debtor in 2009 would not pass
the means test if her monthly income falls below the median income from
2000.
How ridiculous. How much of a difficulty would that debtor be placed
in? All that our provision says is that those census figures should be
adjusted periodically by Consumer Price Index updates.
The last position in our amendment that I am going to address is
intended to respond to the arbitrary nature of the business bankruptcy
provisions. The bill imposes all kind of bright line rules and firm
deadlines on businesses seeking to reorganize. We would think that, at
this time of economic uncertainty, we would want to be doing all that
we can to ensure that Americans keep their jobs. We know some are
losing them as we speak, but the business bankruptcy provisions do just
the opposite. If a small business cannot complete its Chapter 11
reorganization plan under the bill's draconian timetable, then the
business will be forced to liquidate.
Let me say to the thousands and millions of small businesses and
medium-sized businesses, and maybe even large businesses all over
America, they should be listening. We have not heard from them as to
their understanding
[[Page H592]]
that what I have just said is that their doors will be closing, even if
a delay is caused through no fault of the small business, such as when
the reorganization is delayed pending the completion of a regulatory
proceeding. We are slamming the doors shut on business all over
America, and we are putting people on the streets without jobs.
{time} 1300
Once the deadline passes, the businesses will have to simply shut
their doors. That means jobs will be lost, and this bill will
contribute to increased unemployment in America, not reinforcing the
value of holding your head up high, paying off your responsibilities,
but yet what it will do is undermine hard-working Americans, and
certainly our wonderful entrepreneurs who keep this economy running.
Although time allows me to discuss only a sampling of the provisions,
I would like to emphasize that this amendment and this substitute is an
extremely important bill that adds to H.R. 333. Mr. Chairman, I would
like my colleagues to join me in supporting this legislation.
Mr. Chairman, I am pleased to come before you today with my fellow
colleagues to offer the Conyers-Nadler-Scott-Watt-Jackson Lee-Baldwin-
LaFalce-Tierney Democratic Substitute that would make a number of
technical improvements to the Bankruptcy bill and modify some of the
most onerous provisions on lower income debtors and struggling
businesses.
Mr. Chairman, some of the important modifications that the Democratic
Substitute would make to the Bankruptcy bill would be to amend page 10,
line 14 of H.R. 333 to merely add a debtor's monthly public school
expenses as an allowable expense under the means test. This is
important because it would put public school expenses at an equal
footing with that of private school expenses which is already included
in the bill.
The principal problem with the means test is that the rigid one-size-
fits-all test in determining eligibility for Chapter 7 and the
operation of Chapter 13 will often operate in an arbitrary fashion.
Access to bankruptcy would be more difficult, especially for low-
income filers who are not able to meet the requirements because they
cannot list public school expenses as an allowable expense as would
their private school counterparts. The ``safe harbor'' provision that
is supposed to protect some low-income families from the application of
the IRS standards will not protect many single mothers, because it is
based on the combined income of the debtor and the debtor's spouse--
even if they are separated and the mother who is filing for bankruptcy
is receiving no support from the non-debtor spouse from whom she is
separated. As the Committee knows, the majority of low-income families
send their children to public schools (as opposed to higher-income
people) because they cannot afford the private school tuition. It would
seem that if the true intent of this bill were to assist all Americans,
a provision recognizing public school tuition would have accompanied
the recognition of private school tuition as an allowable expense under
the ``means test,'' however, this is not the case.
Under this important amendment, low-income people will have a more
flexible standard (that is consistent with that of high-income people)
that would allow the debtor to have a fair opportunity to financial
recourse, which is not possible under the legislation as written. I
think such a change in the standard would be warmly welcomed for
middle-income and low-income filers.
The Democratic Substitute would also address one of the real flaws of
H.R. 333, the means test approach as it relates to business debtors. It
is well known that business debtors enjoy considerable favorable
treatment are accorded under the means-test contained when compared to
non-business debtors under H.R. 333.
H.R. 333's means-testing, regrettably, is known to be arbitrary and
unworkable in practice. A one-size fits-all test will simply hurt low
and middle-income filers disproportionately. Accordingly, the
Democratic Substitute would ensure that business debtors are treated as
favorably as non-business debtors within the framework of the means-
testing standard contained in the bill by essentially expanding the
means-test to apply to business debts.
Let me explain a few of the glaring difficulties with treatment of
business debtors under H.R. 333. First, the bill relies upon IRS
collection standards, which lay out no comprehensive or specific
standards for the deduction of living expenses. In fact, the bill even
fails to provide specific guidance concerning the appropriateness of
deducting part or all of the funds a debtor may expend for items such
as health care (both medical expenses and health insurance), taxes, and
accounting and legal fees, among other things.
The 1973 Commission on Bankruptcy Laws similarly considered and
rejected industry calls for mandatory Chapter 13s, noting that Congress
itself rejected similar proposals in 1967, and observed: ``[b]usiness
debtors are not subject to any limitation on the availability of
straight bankruptcy relief, including discharge from debts, and it was
pointed out, quite apart from bankruptcy, business debtors are able to
incorporate and to limit their liability to their investments in
corporate assets . . .'' See Report of the Commission on Bankruptcy
Laws, H.R. Doc. No. 137, Part I, 93rd Congress, 15859 (1973).
The bottom line is that business debtors incur a windfall if the
legislation is not amended. There are several consumer provisions in
the bill that will exact hardships on all debtors, regardless of income
level or degree of culpability. This will harm consumers, especially
low-income filers and place them on an unfair playing field when
compared to business debtors. For example, by allowing landlords to
continue eviction or unlawful detainer actions even after debtors have
obtained an automatic stay, the bill will force many battered women and
families with children and seniors out on the streets, without ever
having an opportunity to use bankruptcy to catch up on their rents.
Mr. Chairman, there is a sense that the approach regarding business
and non-debtors within H.R. 333 must be revisited if bankruptcy reform
is realized this year. The Democratic Substitute would solve this
problem.
The Democratic Substitute would also address an important aspect of
H.R. 333, disaster relief for debtors. Disaster relief is not
recognizable as something you can write off in H.R. 333 as income. The
Democratic Substitute would include disaster relief as part of
allowable deductions within means-testing under H.R. 333. This would
restore some fundamental fairness to the legislation, particularly when
we think of the tragic accidents that occur with regular frequency in
America.
If means-testing and other consumer provisions will harm low-income
and middle-income people, then H.R. 333 is sure to have an undesirable
effect on consumers that are victims of disasters. While it is unclear
how such costs will affect the overall bankruptcy system, it is clear
that excluding disaster assistance from allowable expenses under the
means-test in H.R. 333 is an unfortunate and unnecessary component of
the bill.
The Democratic Substitute also modifies some of the most onerous
provisions on lower income debtors and struggling businesses by
excluding persons below the poverty line from having to fulfill
burdensome paperwork requirements that would otherwise be necessary to
demonstrate that the debtor does not meet the requirements of means
test. Under the provisions of the bill before the Rules Committee today
these individuals would be prevented from having a fair and justifiable
opportunity to file for bankruptcy due to financial restraints.
The Democratic Substitute would also discourage creditors from
attempting to secure repayment of debts by entering into abusive
reaffirmation agreements with debtors by providing safeguards so that
debtors are made aware of exactly what debts they are agreeing to
repay, whether they are secured or unsecured, and provides an
opportunity for the court to determine whether the amendment is in the
debtor's best interest and would eliminate the provision in the bill
that expands the exception to discharge for student loans to cover a
wide range of student loans, not just government insured loans and
loans from nonprofit organizations.
Mr. Chairman, we can not risk the creation of a ``two-tier'' credit
system in this country that generally ignores the interests of
individuals at lower income levels. The significant problems that are
present within H.R. 333 will be addressed if you allow the Democratic
Substitute to be debated on the floor. We must press forward and work
together to find the best way to accomplish these goals for the greater
benefit of all of the parties involved in this process.
Mr. Chairman, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, I rise in opposition to the substitute amendment
offered by the gentlewoman from Texas (Ms. Jackson-Lee), my colleague,
and others. This amendment is problematic for several very important
reasons.
First, it eviscerates more than 3 years of careful consideration,
analysis, negotiation and compromise embodied in H.R. 333's needs-based
reforms.
For example, one provision of this amendment completely rewrites the
standard for overcoming the presumption of abuse in cases where debtors
have the ability to pay debts. Although I did not participate in the
negotiations that transpired between the
[[Page H593]]
House and the Senate last year, I am informed that H.R. 333's
provisions are the product of intense analysis and exhaustive
negotiation.
Second, the substitute amendment introduces truly novel concepts that
have, to my knowledge, not been the subject of any oversight hearing by
the House Committee on the Judiciary. These provisions, although
perhaps well-intentioned, attempt to address various privacy issues
perceived to be present in the bankruptcy system.
Under current law, most information filed in connection with a
bankruptcy case is available to the public. Both the Justice Department
and the Judicial Conference of the United States, however, have
recently begun to consider whether unlimited public access to such
information through the Internet and other electronic means should
somehow be restricted.
Nevertheless, the substitute imposes a broad array of restrictions
and requirements with regard to this matter and provides for the award
of punitive damages for their violation under certain circumstances.
Rather than slip these substantive provisions in in an amendment
filed on the eve of floor consideration of this bill, they should be
the subject of an oversight hearing where they can be aired in the
light of day and the public should be given an opportunity to be heard.
Third, this amendment attempts to include in the bill amendments that
were roundly defeated during the Committee on the Judiciary's markup of
H.R. 333 last month.
Out of 18 amendments considered during the markup, the bill was
reported with only one modest amendment making minor technical and
conforming revisions.
The bill as reported clearly reflects the considered judgment of the
Committee on the Judiciary that H.R. 333 is the product of an
exhaustive and mandatory process, as well as extensive negotiation, and
does not need to be further amended.
Accordingly, I urge my colleagues to oppose this substitute amendment
Mr. Chairman, I reserve the balance of my time.
Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, the Democratic substitute is an effort to make a number
of improvements to the bill and to modify and take the sting out of
some of the most onerous provisions on lower income debtors and
struggling small businesses.
We had hoped that some of these, if not even most of the amendments,
would have been accepted by the bill's supporters during the markup in
the Committee on the Judiciary, but they have been all with great
regularity rejected, and every amendment that we were able to offer was
technical. No matter what happened, we were not able to get our message
through.
While the provisions in the amendment are too numerous to describe
here, a few details illustrate the fact that we have a clarification of
the deductibility of health care costs from the means tests.
We correct an oversight in the bill that would directly impact on
children, which allows parents to list the costs of caring for their
dependent children as a monthly expense, but the costs of caring for
foster children are not included at all.
Parents who voluntary become foster parents will have a harder time
making ends meet during bankruptcy than biological parents. Obviously,
we do not think this was intended by even the Members of the House
Committee on the Judiciary, and we wanted to correct it.
We have other shortcomings that are dealt with. The bill says that
for purposes of a means test, the medium income is based on Census
figures, but that only occurs every 10 years. We need something a
little more periodically adjusted, for example, by Consumer Price Index
updates.
Finally, the arbitrary nature of business banking provisions seems to
be in order. A small business cannot complete its chapter 11
reorganization plan under the bill's very, very tough timetable. We
have asked that we have a little bit more flexibility in that area.
Small businesses are the place where more jobs are created in this
country than anywhere else, and so it is very important that these and
other mentioned remedies and corrections be included, which have been
previously mentioned.
I am hoping that the substitute amendment offered by myself and
several of our colleagues would be accepted by the majority of the
Members in the House.
Mr. Chairman, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Chairman, I yield 4 minutes to the gentleman
from Pennsylvania (Mr. Gekas).
(Mr. GEKAS asked and was given permission to revise and extend his
remarks.)
Mr. GEKAS. Mr. Chairman, I thank the gentleman from Wisconsin (Mr.
Sensenbrenner) for yielding the time to me, and I rise in opposition to
the substitute offered by the gentleman from Michigan (Mr. Conyers).
If we were to adopt the tenets of the substitute that has been
offered here, and that is what the intention is in the offering in the
first place, we would be wiping out the tremendous advances in reform
of bankruptcy that we have made up to now.
For instance, the gentleman from Virginia (Mr. Boucher) outlined in
his presentation how we have changed the priorities for alimony and
women's rights in support matters from what now exists as being a
number 7 position, behind attorneys fees, I believe, in priorities,
that is the existing system, to a situation where we place women,
alimony, support, all the women's and children's issues, at the first
priority.
What it means is if my colleagues vote for the substitute, my
colleagues are reverting back to the current situation which places
women number 7. We want them to be number 1.
The bankruptcy reform measure which is before my colleagues permits
that, mandates that, brings women up to a number 1 position in claims
under bankruptcy. If my colleagues want to go back to the system, make
women number 7, then vote for the substitute.
The other situation that is obvious about the substitute is that it
will not honor what we have tried to do with reform of small business
and the business bankruptcies under chapter 11. Everyone should
recognize that what we did in this bill was to adopt the
recommendations of the Bankruptcy Commission with respect to business,
reorganizations and bankruptcies.
If my colleagues vote for the substitute, my colleagues are erasing
the recommendations of the Bankruptcy Commission, which this Congress
authorized in the first place, to develop reforms in business
bankruptcies.
Mr. Chairman, I say to my colleagues, if my colleagues want to go
back to the primitive stages of bankruptcy which have caused this flood
of bankruptcies or want to enter into a new phase of more
responsibility for all phases of bankruptcy, then my colleagues too can
argue about what my colleagues want to argue about.
The other phase to show my colleagues is the lack of foresight on the
part of the people who are supporting the substitute.
Mr. Chairman, I would like to ask a question of the gentleman from
Michigan (Mr. Conyers), does the substitute include the recommendations
for a change in homestead exemption?
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. GEKAS. I yield to the gentleman from Michigan.
Mr. CONYERS. No, sir, it does not.
Mr. GEKAS. Mr. Chairman, then I will skip that part of the argument.
Mr. WATT of North Carolina. Mr. Chairman, will the gentleman yield?
Mr. GEKAS. I yield to the gentleman from North Carolina.
Mr. WATT of North Carolina. Mr. Chairman, I appreciate the gentleman
from Pennsylvania (Mr. Gekas) yielding to me.
Mr. Chairman, I was going to suggest to the gentleman that he skip
the first part of the argument, too, because this amendment does not do
anything about the priorities. I was wondering whether he was debating
another amendment possibly.
Mr. GEKAS. Mr. Chairman, I want to thank the gentleman from North
Carolina (Mr. Watt) for setting me right on this.
Mr. Chairman, the point is that the substitute wrecks bankruptcy
reform. What I am trying to get across, and what I hope is the message
to all the
[[Page H594]]
Members is that any amendments practically that would harm the basic
reforms that we put into this measure are unacceptable.
Mr. Chairman, I ask that we vote down this substitute, as well as the
other amendments.
Mr. WATT of North Carolina. Mr. Chairman, I ask unanimous consent to
control the time for our side.
The CHAIRMAN. Is there objection to the request of the gentleman from
North Carolina?
There was no objection.
Mr. WATT of North Carolina. Mr. Chairman, I yield myself 30 seconds.
Mr. Chairman, I just want to say that it is very magnanimous of the
gentleman from Pennsylvania (Mr. Gekas) to say that they are following
a set of recommendations that were put forward by the Commission. This
actually is the only one recommendation in their bill that they
followed. They threw out 95 percent of the rest of the recommendations
of that Commission, and nothing in this bill really follows the
recommendations of the Commission.
Mr. Chairman, I yield 4 minutes to the gentleman from Virginia (Mr.
Scott).
Mr. SCOTT. Mr. Chairman, I thank the gentleman from North Carolina
(Mr. Watt) for yielding the time to me.
Mr. Chairman, I rise to speak in support of the amendment, which
would add several improvements to H.R. 333. While the proponents of the
underlying legislation portray this as a compromised bill, the approach
in this bill is, in fact, a significant departure from well-established
sound principles and procedures designed to protect consumers. It
eliminates the tradition of a fresh start for those who are willing to
cash in all of their chips to get the fresh start.
The underlying bill prevents most Americans from getting access to
that fresh start and creates more people in our communities who will be
financially desperate with nothing to lose.
There are several amendments that I would like to speak to in the
substitute. One, the underlying bill directs the debtor to pay all that
they can after food and rent towards their debts. In calculating what
they can pay, it is only reasonable that we base the determination on
the actual monthly income.
The underlying bill, however, counts all of your income for the last
6 months to determine what your average monthly income is, and that
could include money that we received from a job that we have lost,
money from an inheritance, or a gift, or an automobile accident
settlement, things that are not going to be there. The court ought to
have the opportunity to adjust your income to fit actual reality.
This amendment would allow the court to disregard one-time
nonrecurring funds or take into consideration the fact that you lost
the job, and that is what put you into financial distress to begin
with.
Second, the amendment deals with illnesses for family members. The
underlying bill allows you to consider ongoing expenses involved in
illnesses or disabilities of family members, but it does not recognize
new illnesses that may come about during the next 5 years. The
amendment would allow those to be considered, too.
{time} 1315
Another amendment prevents landlords from evicting tenants pending
bankruptcy. The tradition of bankruptcy is that tenants have a stay of
all proceedings and they have an opportunity to work out some
arrangement so that they can stay in their house. This underlying bill
allows for immediate eviction. This would retain the tradition of
automatic stay.
Mr. Chairman, administrative expenses, they are limited to 10 percent
to what is being paid in. If very much is not being paid in, a debtor
may not have a reasonable amount to hire attorneys. This would allow
for reasonable expenses which is usually the standard that is used.
Mr. Chairman, another amendment would deal with the assumption under
the private school expenses. The underlying bill says private school
expenses are paid if documentation and an explanation is provided. It
does not say that the documentation is meaningful. A ridiculous
explanation could be given. The amendment says that the trustee would
determine whether expenses are reasonable and necessary, not whether an
explanation was provided.
Mr. Chairman, these are just some of the much-needed changes. It will
not fix the bill totally, but it would at least make a bad bill a
little better.
Mr. SENSENBRENNER. Mr. Chairman, I yield 3 minutes to the very
distinguished gentleman from Virginia (Mr. Moran).
(Mr. MORAN of Virginia asked and was given permission to revise and
extend his remarks.)
Mr. MORAN of Virginia. Mr. Chairman, this is not a perfect bill, the
underlying bill; but I think it is an important bill to pass. It is a
bill that received the overwhelming bipartisan support of this House
and of the Senate last year. Last year, because this bill is almost
identical, it is relevant to recognize 96 Democrats voted for this bill
last year. That is bipartisan. The reason that they did so was that
they recognized that the American public wants a fair system. They want
people to be able to get a new fresh start. They do not want a system
that lends itself to abuse. That is basically the problem that we face
today.
Mr. Chairman, back in 1980 there were only about 300,000 people that
filed for bankruptcy. In 1998, 1.4 million people filed for bankruptcy.
That is an enormous number. Something is wrong. What is wrong is that
it has become too easy to wipe out your debts.
What is particularly galling is that this cost does not go away. It
is not just limited to the bankruptcy court. We all pay for it. The
American family today pays about $400 more per year to cover the cost
of these bankruptcies. That is $400 that families who are paying their
bills get stuck with that they ought not to. Approximately 100,000
people file for bankruptcy each year who could in fact pay off their
debt, but they are avoiding about $1 billion annually of debt that they
could pay off that they do not because the system has not been fixed.
That is what this bill would do. It would fix the system. It is a
needs-based bankruptcy plan.
Mr. Chairman, I have to tell my colleagues when there is a bill that
is able to put child support and spousal support ahead of lawyer's
fees, you had better get it passed immediately because once the trial
lawyers find out that it is even ahead of lawyer's fees I do not know
how long it will last, but we ought to do it.
We have a debtor's bill of rights here that addresses a number of the
problems that we have had in terms of credit cards. Some people are
taking these credit cards in, they sign up, they max it out whatever
they can charge. They pile debt up, and then they get themselves
relieved from paying off their debt; and oftentimes they can go right
back to doing it all over again. It needs to be fixed.
Mr. Chairman, this bill is a good, balanced, bipartisan bill to fix
it. I think we ought to vote for the underlying bill.
Mr. WATT of North Carolina. Mr. Chairman, would the Chair advise us
of the time remaining on both sides.
The CHAIRMAN pro tempore (Mr. Hood). The gentleman from North
Carolina (Mr. Watt) has 15 minutes remaining; the gentleman from
Wisconsin (Mr. Sensenbrenner) has 20 minutes remaining. The gentleman
from Wisconsin has the right to close.
Mr. WATT of North Carolina. Mr. Chairman, I yield 3 minutes to the
gentlewoman from California (Ms. Waters), a member of the committee.
(Ms. WATERS asked and was given permission to revise and extend her
remarks.)
Ms. WATERS. Mr. Chairman, I would like to address some strong
problems and concerns I have with the proposed legislation. As a whole,
the general consensus has been that we need to overhaul the Bankruptcy
Code. However, H.R. 333 does so at the expense of consumers and small
businesses. It is overly harsh on the honest but unfortunate debtor.
I tried to introduce an amendment which would prevent landlords from
being able to evict domestic violence victims, elderly persons on
limited income, and single parents with minor children on limited
income without going through the bankruptcy court. That protection
already exists under current law, but is absolutely removed by H.R.
333. I was not successful with that amendment.
[[Page H595]]
Mr. Chairman, the Democratic substitute amendment which seeks to
correct the most glaring problems with H.R. 333 deserves support, and I
am here today to try to make a bad bill just a little bit better. The
fifth provision of the Democratic substitute, for example, would allow
debtors to exclude up to $1,500 for expenses for a child's schooling,
whether those expenses are for a public or private school. The proposed
legislation only allows for expenses from private schools. This
discriminates against low-income debtors and has no logical rationale.
I understand the gentlewoman from Texas (Ms. Jackson-Lee) has taken
this up. We have had two attempts to correct this in the bill.
Provision 12 of the Democratic substitute deals with reaffirmations.
It would discourage creditors from entering into abusive reaffirmation
agreements with debtors. H.R. 333 purports to protect women and
children. However, when debtors enter into reaffirmation agreements,
they are increasing the number of debts they must pay. Each time
another debt is added to the list, it becomes more and more unlikely
that child support and alimony will be paid. It does not matter that
domestic support obligations are given first priority under this bill.
Women and children do not have the resources to defend their rights
over the rights of credit card companies. We should not ignore the fact
that numerous women and children's organizations have spoken out in
strong opposition to this bill.
Mr. Chairman, the Democratic substitute would provide an opportunity
for court review of proposed reaffirmations, an essential measure to
protect from abusive reaffirmations.
The Democratic substitute also addresses problems with medical
expenses and health insurance premiums, exempts debtors who fall below
the poverty line from burdensome reporting requirements, and ensures
that governmental education loans are not placed in competition with
higher interest rate loans from private institutions.
Passage of this amendment is crucial if we are to avoid a crisis in
the bankruptcy system. We must not pass a bill merely because the time
is right; we must pass a bill when the bill is right.
Mr. Chairman, I would like to address some strong problems and
concerns I have with the proposed legislation as a whole. The general
consensus has been that we need to overhaul the Bankruptcy Code.
However, H.R. 333 does so at the expense of consumers and small
businesses. It is overly harsh on the honest but unfortunate debtor.
I tried to introduce an amendment that would prevent landlords from
being able to evict domestic violence victims, elderly persons on
limited income, and single parents with minor children on limited
income without going through bankruptcy court. That protection already
exists under current law, but is removed by H.R. 333.
I was not successful with that amendment. However, I am here to
support the Democratic Substitute amendment, which seeks to correct the
most glaring problems with H.R. 333.
The fifth provision of the Democratic Substitute, for example, would
allow debtors to exclude up to $1500 for expenses for a child's
schooling, whether those expenses are for public or private school. The
proposed legislation only allows for expenses from private school. This
discriminates against low-income debtors and has no logical rationale.
Provision 12 of the Democratic Substitute deals with reaffirmations.
It would discourage creditors from entering into abusive reaffirmation
agreements with debtors.
H.R. 333 purports to protect women and children. However, when
debtors enter into reaffirmation agreements, they are increasing the
number of debts they must pay. Each time another debt is added to the
list, it becomes more and more unlikely that child support and alimony
will be paid.
It does not matter that domestic support obligations are given first
priority under H.R. 333. Women and children do not have the resources
to defend their rights over the rights of credit card companies. We
should not ignore the fact that numerous women and children's
organizations have spoken out in strong opposition to H.R. 333. The
Democratic Substitute would provide an opportunity for court review of
proposed reaffirmations, an essential measure to protect from abusive
reaffirmations.
The Democratic Substitute also addresses problems with medical
expenses and health insurance premiums; exempts debtors who fall below
the poverty line from burdensome reporting requirements; and ensures
that governmental education loans are not placed in competition with
higher-interest rate loans from private institutions. Passage of this
amendment is crucial if we are to avoid a crisis in the bankruptcy
system.
We must not pass a bill merely because the time is right. We must
pass a bill when the bill is right.
Mr. SENSENBRENNER. Mr. Chairman, I yield 5 minutes to the other very
distinguished gentleman from Virginia (Mr. Goodlatte).
Mr. GOODLATTE. Mr. Chairman, I thank my chairman for yielding me this
time.
Mr. Chairman, I rise today in strong support of H.R. 333, the
Bankruptcy Abuse Prevention and Consumer Protection Act, and in strong
opposition to this substitute amendment. This important legislation,
which is similar to the bankruptcy reform legislation passed out of the
House last year by a vote of 313 to 108, is an honest compromise that
is pro-personal responsibility and antibankruptcy abuse.
With a record high 1.4 million bankruptcy filings in 1998, every
American must pay more for credit, goods and services when others go
bankrupt. I worked to pass H.R. 833 last year and cosponsored H.R. 333
this year because it is high time that we relieve consumers from the
burden of paying for the debts of others.
The Bankruptcy Abuse Prevention and Consumer Protection Act restores
personal responsibility, fairness, and accountability to our bankruptcy
laws and will be of great benefit to consumers. For too long, our
bankruptcy laws have allowed individuals to walk away from their debts
even though many are able to repay them. That is not fair to millions
of hard-working families who pay their bills, mortgages, car loans,
student loans, and credit card bills every month.
The loopholes in our bankruptcy laws have led to a 400 percent
increase in personal bankruptcy filings since 1980 at a cost of $40
billion per year. These losses have been passed directly to consumers,
costing every household that pays its bills an average of $400 in
hidden taxes each year. In real terms, that is a year's supply of
diapers or 20 tanks of gas.
The bill under consideration today retains the strong income-based
means test that will distinguish between those who need the fresh start
available under chapter 7 and those who can afford to file under
chapter 13, which requires a 5-year repayment plan.
This important provision, which bases a debtor's ability to pay on
clear and well-defined standards, will give a fresh start to those who
need it, while ensuring that those who can afford to pay back some of
their debt do so.
Under the current system, some irresponsible people filing for
bankruptcy run up their credit card debt immediately prior to filing,
knowing that their debts will soon be wiped away. These debts, however,
do not just disappear. They are passed along to hard-working folks who
play by the rules and pay their own bills on time.
The Bankruptcy Abuse Prevention and Consumer Protection Act ends this
practice by requiring bankruptcy filers to pay back nondischargeable
debts made in the period immediately prior to their filing.
While ending the abuses of our bankruptcy laws, the act is strongly
pro-consumer in other ways as well. This legislation, for example,
helps children by strengthening protections in the law that prioritize
child support and alimony payments.
Additionally, H.R. 333 protects consumers from bankruptcy mills that
encourage folks to file for bankruptcy without fully informing them of
their rights and the potential harms that bankruptcy can cause.
This legislation also includes language that I strongly support to
restore fairness and equity to the relationship between the U.S.
Trustee and private-standing bankruptcy trustees. Specifically, the
language will provide private trustees the right to seek judicial
review in court in certain cases following an administrative hearing on
the record of U.S. Trustee actions related to trustee expenses and
trustee removal.
This compromise, worked out between the U.S. Trustee's office and
representatives of the private bankruptcy trustees, will provide
fairness to those who dedicate themselves to their duties as private
trustees while ensuring that the U.S. Trustee is subject to the
[[Page H596]]
same checks and balances as other government agencies.
Mr. Chairman, bankruptcy should remain available to the folks who
truly need it. But those who can afford to repay their debts should not
be able to stick other folks with the tab. Enactment of this carefully
crafted legislation will send a big signal toward those who would abuse
our bankruptcy system that the free ride is over.
I want to commend the gentleman from Wisconsin (Mr. Sensenbrenner),
the chairman of the Committee on the Judiciary, for moving this
important legislation quickly to the floor, as well as the gentleman
from Pennsylvania (Mr. Gekas) for his outstanding work on this issue.
I urge my colleagues to support this fair and reasonable bill and to
oppose the Democratic substitute.
Mr. WATT of North Carolina. Mr. Chairman, I yield 2 minutes to the
gentleman from New York (Mr. LaFalce).
Mr. LaFALCE. Mr. Chairman, I thank the gentleman for yielding me this
time.
Mr. Chairman, this is the wrong bill at the wrong time. It is driven,
not by the public interest, it is driven by lobbyists primarily for the
creditor industry that exists and walks the halls of the Capitol and
has for years and years and years.
Most individuals who go into bankruptcy go there because they have
lost a job, they have accumulated huge medical expenses, they have been
through a divorce, et cetera, and for another major reason, because of
the predatory practices of the credit industry; predatory practices
with respect to the purchase and mortgage of one's home or a home
equity loan; predatory practices with respect to the car that one buys
or leases; predatory practices with respect to the credit card that one
uses for almost everything in life today; predatory practices even with
respect to one's virtual identity, the most personal information about
oneself.
{time} 1330
This Congress, for 6 years now, has not done a single thing about
those predatory practices, has not even looked at them in hearings,
refuses to take them up on the floor of the House, refuses to make
amendments in order to rectify them; and yet our colleagues come before
us with the bill basically drafted by the credit card industry.
I called some friends of mine, referees in bankruptcy and asked them
what they thought of the bill before us. Terrible. I called some
friends of mine, attorneys for major lending institutions specializing
in one issue and one issue only, bankruptcy; and I asked them what they
thought of it. They said, terrible.
This bill today in the House will pass, it will probably go before
President Bush for his signature; but it is a terrible bill. And what
is even more terrible is that my Republican colleagues have not even
attempted to deal with the real problems that exist in the real world,
the predatory practices of the credit industry.
Mr. WATT of North Carolina. Mr. Chairman, I yield 3\1/2\ minutes to
the gentleman from Massachusetts (Mr. Delahunt), a member of the
Committee on the Judiciary.
Mr. DELAHUNT. Mr. Chairman, I thank the gentleman for yielding me
this time.
I keep hearing from the proponents how the benefits of this bill will
flow to the American people. Well, if they believe that, I have a
bridge that I want to sell them.
At one of our subcommittee hearings on this legislation last year I
asked each of the panelists, and there were nine, whether the bill
would result in lower interest rates to consumers. Every single one of
them admitted probably not. Well, I appreciated their honesty. By the
way, there is ample empirical evidence, hard evidence, to suggest that
consumers will not benefit at all by this bill.
The American people should know that in 1996, a Harvard University
study pointed out that between 1980 and 1982 the Federal funds rate
fell from 13.4 percent to 3.5 percent, a drop of nearly 10 percentage
points. The average credit card interest rates went the other way. It
rose from nearly 17.3 percent to 17.9 percent. The bottom line, the
credit card industry will be the only beneficiary of this proposal, and
to suggest otherwise does not hold water.
So if my colleagues' concern is about credit card company profits, by
all means vote for this bill. Be assured, however, if there is a
concern that these companies are doing very well, if there are any
doubts, pick up a copy of the January 26, 2001, edition of USA Today.
The headline reads, and I am quoting, ``Adding fees, new ones, raising
old ones, and credit card profits are soaring.'' Credit card industry
profit rose to a 5-year high last year. In fact, credit cards are one
of the most profitable businesses in banking, according to a CEO in a
consulting firm that advises credit card issuers.
The American people should also know that as profits rose, several
major credit card issuers, including Chase and Providian, agreed to pay
hefty penalties to settle complaints related to unfair late fees and
other practices. And just this past week in Business Week, that
liberal, liberal magazine, an article reflects how MBNA not only
provided substantial contributions to both parties and to individual
Members, but the MBNA credit card, which I understand is the third
largest in the country, recently paid about $8 million for unfair
practices and deceptive advertising.
So given that the credit card companies will be the chief
beneficiaries of this public subsidy, because that is exactly what it
is, exactly what it is, it seems to me there ought to be at least a
quid pro quo. Let us require responsible corporate behavior and
continue the decline that we have witnessed over the past 2 years in
bankruptcy filings, the 170,000 fewer in 2000 than existed in 1998; and
let us support the substitute.
Mr. SENSENBRENNER. Mr. Chairman, I yield 1 minute to the gentleman
from California (Mr. Royce).
Mr. ROYCE. Mr. Chairman, the time has come for bankruptcy reform.
This will be the third time that Congress has passed a bankruptcy
reform bill in our effort to get this through.
Our bankruptcy laws do play an important and necessary role in
protecting Americans who really need them, and that is the key. That
should be the key: need. And this bill makes the existing bankruptcy
system a needs-based system addressing the flaw in the current system
that encourages people to file for bankruptcy and walk away from their
debts regardless of whether they are able to repay any portion of what
they owe. It does this while protecting those who truly need
protection. They are exempted under the bill.
The cost to all of us in terms of what is going on in these filings
is great. This is a cost borne not only by the business community and
the property owners but by the consumers who pay their bills
responsibly. By some estimates, it takes 33 responsible consumers to
pay for just one bankruptcy of convenience.
Mr. WATT of North Carolina. Mr. Chairman, I yield 2 minutes to the
gentleman from Massachusetts (Mr. Tierney).
Mr. TIERNEY. Mr. Chairman, I thank the gentleman for yielding me this
time. I also thank the gentleman from Michigan (Mr. Conyers) and the
gentleman from New York (Mr. Nadler), as well as their staffs, for
including language on an amendment that I submitted on health care to
this bill.
We have heard for some time now supporters of this bill urging us to
believe that we face a bankruptcy fraud epidemic, with an exponentially
increasing number of debtors who, but for the fact they are in
bankruptcy, otherwise would pay their debts. Instead we find out, as
one study says, that some 3.6 percent of chapter 7 debtors would hardly
be able to pay any more of their bills if bankruptcy were not an
option. That hardly constitutes a bankruptcy fraud epidemic, as
advocates of the bill claim. More often, filing for bankruptcy is not a
way out for scam artists, but a critical source of relief for common
people trapped in unfortunate, and sometimes dire, circumstances.
Among the many egregious shortcomings of this particular bill is the
absence of a definitive provision to allow the coverage of reasonable
medical expenses whether a debtor does or does not have health
insurance coverage. Certainly we all share the goal
[[Page H597]]
of ensuring that the bankruptcy system is not used as a shield for
irresponsible spending decisions. But debt repayment should not preempt
reasonable and necessary medical expenses. Currently, H.R. 333 in fact
does that.
The health language contained in our substitute would allow debtors
to cover reasonable medical expenses in the event of bankruptcy.
Without this amendment, this protection is not guaranteed. The IRS
guidelines that form the basis for the means test in this reform
legislation can change from year to year. Right now these guidelines
make it possible but do not guarantee allowance of reasonable medical
expenses. In fact, three out of four debtors cite serious medical
problems or exorbitant health care costs as the reason for their filing
for bankruptcy. In 1999, a half million middle-class families were
forced into bankruptcy for these reasons alone.
It does not make sense to deny people who have the financial
wherewithal to pay for these medical expenses, when they should be able
to file bankruptcy in the first place and be able to afford vital
health care costs. This is a vital component of this bill, Mr.
Chairman. Real bankruptcy reform should be about not eliminating
opportunity but making sure people can stop having themselves
financially devastated particularly because of medical problems.
Mr. WATT of North Carolina. Mr. Chairman, I yield 1 minute to the
gentlewoman from California (Mrs. Davis).
(Mrs. DAVIS of California asked and was given permission to revise
and extend her remarks.)
Mrs. DAVIS of California. Mr. Chairman, I rise in strong support of
the well-fashioned Democratic alternative and to clarify also a
mistake.
Unfortunately, Mr. Chairman, staff inadvertently added me as a
cosponsor rather than the correct Davis. As the chairman knows, there
are several of us here now. I respectfully request the record show I am
not a cosponsor.
Mr. Chairman, I rise in strong support of the well fashioned
Democratic alternative and to clarify my intentions with regard to H.R.
333, the Bankruptcy Abuse Prevention and Consumer Protection Act. On
January 31, due to a clerical error, I was added as a cosponsor to H.R.
333. Evidently, it was intended to list my like-named colleague from
Virginia. I was never contacted by the sponsor regarding cosponsorship
and did not wish to do so.
It is somewhat rare that there are more members with the name Davis--
five this term--than Smith, Lee or Jones, the usual winners.
With that confusion behind us, I want to express my strong support
for the Democratic alternative fashioned and sponsored by several of my
colleagues. There is no doubt that the bankruptcy system needs reform,
however, we must ensure that we do not handicap well-meaning members of
our society who have fallen on hard times. Most consumers who file for
bankruptcy are not deadbeats, but instead are working families who have
experienced a catastrophic event such as illness, job loss, or a recent
divorce. The Democratic alternative seeks to remove many of the
provisions of the original bill that may hurt lower and middle income
families who are in financial difficulty by tilting the playing field
against working families and small businesses in favor of creditors.
Mr. WATT of North Carolina. Would the chairman advise us of the
amount of time remaining?
The CHAIRMAN pro tempore (Mr. LaHood). The gentleman from North
Carolina (Mr. Watt) has 4 minutes remaining, and the gentleman from
Wisconsin (Mr. Sensenbrenner) has 14 minutes remaining.
Mr. WATT of North Carolina. Mr. Chairman, I yield 3 minutes to the
gentleman from New York (Mr. Nadler).
Mr. NADLER. Mr. Chairman, earlier today I spoke of my general views
on this terrible bill. I want to comment on a remark the chairman of
the committee made during the debate on this technical amendment
concerning language proposed by the gentleman from California (Mr.
Schiff) and initially accepted by the majority that would protect
legally separated spouses from having the income of their spouses
attributed to them in calculating how much they can repay their
creditors.
The gentleman from California (Mr. Schiff) testified in support of
the Sensenbrenner amendment in front of the Committee on Rules
yesterday because of the inclusion of his language and what he thought
was a simple clarification. In fact, his language, unknown to him, had
been dropped from the amendment. The members of the majority on the
Committee on Rules sat silently while he testified in favor of the
amendment and never once disclosed to him or to any member of the
Committee on Rules minority or the Committee on the Judiciary minority
that in fact that language was removed from the manager's amendment.
Now the chairman tells us the Schiff amendment is not technical or
clarifying but is in fact a controversial and substantive change. That
is a startling admission. Is it really his intent that a woman who has
been abused and is now separated from her husband and is living in fear
and poverty must still count her abuser's income as a resource to be
given to her creditors? I can see why some people in the banking
industry might support this, but is there a single member of the
majority who thinks that making it clear that the victim cannot be
charged with the income of her abuser is anything more than a
clarification or that it in fact reflects a controversial proposition?
If they really do think so, why did they fail at least to do the
minority the courtesy of being honest about dropping the Schiff
amendment rather than allowing our colleague from California to testify
in support of the manager's amendment thinking his language was still
included within it?
Mr. Chairman, our substitute attempts to make this bill a little more
humane, or a little less inhumane I should say, by softening the
inflexible means test which the former chairman of the committee, the
gentleman from Illinois (Mr. Hyde), objected to and attempted to change
last year. Evidently, the IRS is more popular on the other side of the
aisle than the rhetoric would indicate since they would put into this
bill the IRS guidelines to determine how much a debtor can afford to
repay, the same IRS guidelines they found too harsh and instructed the
IRS not to use with respect to tax cheats.
The substitute amendment drops the special interest amendment that
benefits those wealthy investors I mentioned earlier. It makes sure the
debtor has funds to support a foster child and pay for needed medical
care. It modifies the bill to take up provisions that were secretly
inserted into last year's conference report without any hearings or
discussion that would hinder business reorganizations at a time when
many more businesses are turning to chapter 11 to stay alive and
preserve jobs and communities. It protects the privacy of the public
from having their personal information disclosed or resold when a
company goes into bankruptcy.
Earlier, we agreed to an amendment to strike the names of children
from online bankruptcy information. We did not have hearings on that.
We have not had hearings on most of the special interest provisions in
this bill. Why so much interest in hearings now? I sympathize with the
chairman, who says he was not part of the deliberations in conference
on this bill. Neither was I, and I was a conferee.
One last word on child support. I do not want to hear again that this
bill makes child support the first priority. No bankruptcy practitioner
thinks that this bill in any way benefits children. At worst it will
hinder the administration of the case. At best, it will do nothing. In
ch. 13, all priority debts must be paid in full. In ch. 7, 98 percent
of all cases are zero asset cases, so priority debts are almost never
paid. It does nothing to help women whose debts are made non-
dischargeable by this bill, and it does nothing to help them compete in
state court if the non-custodial parents' debts to Visa survive
bankruptcy. It does give a new and perverse meaning to the phrase,
``women and children first.''
I urge adoption of this amendment which will somewhat improve this
bill. I urge adoption of the motion to instruct which would provide
basic privacy protections for individuals in the bankruptcy system
while we wait for the bureaucracy to get off its keister, and I urge
rejection of this terrible bill.
Mr. WATT of North Carolina. Mr. Chairman, I yield myself the balance
of my time.
{time} 1345
Mr. Chairman, I am not going to belabor this. I do not have time to
belabor it any further. There are a number of us who believe that the
bankruptcy system has been abused, but we also know that it is abused
by people who are above the means test in this bill and people who are
below the means test in this bill. So why would
[[Page H598]]
you impose an arbitrary means test rather than going directly for the
abusers of the system? And if it is not about setting up an arbitrary
system, then why would you not make an exception for those who really
can show by whatever burden of proof you want to impose that they got
into financial straits that result in bankruptcy by no fault of their
own because that is what bankruptcy was always about, and that is what
it should continue to be about.
We have tried to, in this amendment, soften the provisions. That has
not occurred. The charade is over. We can now go forward.
Mr. SENSENBRENNER. Mr. Chairman, I yield myself the balance of my
time.
Mr. Chairman, this bill has been percolated through the Congress for
the last 4 years. It has probably been one of the most debated, amended
and negotiated bills that have come before the Congress of the United
States in the last 25 years. At the end of the last Congress,
overwhelming majorities in both Houses approved this bill. It was a
voice vote in the House, and the vote in the other body was 70-28. I
think that shows that the vast majority of Members of both political
parties are happy with the compromises that have been reached as a
result of almost 4 years of painstaking and seemingly never ending
negotiations.
We hear an awful lot about the fact that bankruptcy reform is
necessary. My friends on the other side of the aisle say, yes, we
support bankruptcy reform but not this bill. That argument to me seems
to be that the perfect is the enemy of the good. In any legislative
body where compromise is the rule in order to pass legislation, the
perfect is probably never attainable. This bill is a good bill. It is a
bill that will make a dent on the $400 that every family in this
country who pays their bills has to pay in increased taxes, increased
costs for goods, increased costs for services as a result of about $44
billion a year being written off in debt and bankruptcy.
I think probably the best statement that was made during the debate
came early on several hours ago, where our present bankruptcy laws are
now being used by some as a financial planning tool. Bankruptcy should
never be an item of financial planning. What it should be is a system
of last resort, to allow people who have gotten in over their heads in
debts to wipe the slate clean and to have a fresh start. This bill
takes care of most of the abuses in the present bankruptcy system. It
is a good bill. It is one that has been vetted by practically everybody
who has been interested in this piece of legislation. It is not a
perfect bill. I will be the first one to admit it. But it is a
significant improvement.
I would urge support for this bill and opposition to this last
amendment that goes back to some of the practices of the bad old days.
The CHAIRMAN pro tempore (Mr. LaHood). The question is on the
amendment offered by the gentlewoman from Texas (Ms. Jackson-Lee).
The question was taken; and the Chairman pro tempore announced that
the noes appeared to have it.
Recorded Vote
Mr. WATT of North Carolina. Mr. Chairman, I demand a recorded vote.
A recorded vote was ordered.
The CHAIRMAN pro tempore. Pursuant to clause 6 of rule XVIII, the
Chair will reduce to 5 minutes the period of time within which a vote,
if ordered, will be taken on amendment No. 1 offered by the gentleman
from Wisconsin (Mr. Sensenbrenner).
The vote was taken by electronic device, and there were--ayes 160,
noes 258, not voting 14, as follows:
[Roll No. 23]
AYES--158
Abercrombie
Allen
Andrews
Baca
Baldacci
Baldwin
Barcia
Barrett
Becerra
Berkley
Berman
Bishop
Blagojevich
Blumenauer
Bonior
Borski
Brady (PA)
Brown (FL)
Brown (OH)
Capps
Capuano
Cardin
Carson (IN)
Clay
Clayton
Clyburn
Conyers
Costello
Coyne
Cummings
Davis (CA)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Frank
Gephardt
Gonzalez
Green (TX)
Gutierrez
Hall (OH)
Harman
Hastings (FL)
Hilliard
Hinchey
Hinojosa
Hoeffel
Holden
Honda
Hooley
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kildee
Kilpatrick
Kind (WI)
Kleczka
Kucinich
LaFalce
Lampson
Langevin
Lantos
Larson (CT)
Lee
Levin
Lewis (GA)
Lowey
Luther
Maloney (NY)
Markey
Mascara
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McGovern
McIntyre
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Miller, George
Mink
Moakley
Moore
Murtha
Nadler
Napolitano
Neal
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Pomeroy
Price (NC)
Rahall
Ramstad
Rangel
Reyes
Rivers
Rodriguez
Roybal-Allard
Rush
Sabo
Sanders
Sawyer
Schakowsky
Schiff
Scott
Serrano
Sherman
Slaughter
Solis
Spratt
Stark
Stupak
Thompson (CA)
Thompson (MS)
Thurman
Tierney
Towns
Udall (CO)
Udall (NM)
Velazquez
Visclosky
Waters
Watt (NC)
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NOES--251
Aderholt
Akin
Armey
Bachus
Baker
Ballenger
Barr
Bartlett
Barton
Bass
Bentsen
Bereuter
Berry
Biggert
Bilirakis
Blunt
Boehlert
Boehner
Bonilla
Bono
Boswell
Boucher
Boyd
Brady (TX)
Brown (SC)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Cantor
Capito
Carson (OK)
Castle
Chabot
Chambliss
Clement
Coble
Collins
Combest
Condit
Cooksey
Cox
Crane
Crenshaw
Crowley
Cubin
Culberson
Cunningham
Davis (FL)
Davis, Jo Ann
Davis, Tom
DeLay
DeMint
Diaz-Balart
Dooley
Doolittle
Everett
Ferguson
Flake
Fletcher
Foley
Ford
Fossella
Frelinghuysen
Frost
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Gordon
Goss
Graham
Granger
Graves
Green (WI)
Greenwood
Grucci
Gutknecht
Hall (TX)
Hansen
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill
Hilleary
Hobson
Hoekstra
Holt
Horn
Hostettler
Houghton
Hoyer
Hulshof
Hunter
Hutchinson
Hyde
Isakson
Issa
Istook
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kerns
King (NY)
Kirk
Knollenberg
Kolbe
LaHood
Largent
Larsen (WA)
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren
Lucas (KY)
Lucas (OK)
Maloney (CT)
Manzullo
Matheson
McCrery
McHugh
McInnis
McKeon
Mica
Miller (FL)
Miller, Gary
Mollohan
Moran (KS)
Moran (VA)
Morella
Myrick
Nethercutt
Ney
Northup
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pence
Peterson (MN)
Peterson (PA)
Petri
Phelps
Pickering
Pitts
Platts
Pombo
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Regula
Rehberg
Reynolds
Riley
Roemer
Rogers (KY)
Rogers (MI)
Rohrabacher
Ross
Roukema
Royce
Ryan (WI)
Ryun (KS)
Sanchez
Sandlin
Saxton
Scarborough
Schaffer
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shows
Simmons
Simpson
Sisisky
Skeen
Skelton
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Souder
Spence
Stearns
Stenholm
Strickland
Stump
Sununu
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thornberry
Thune
Tiahrt
Tiberi
Traficant
Turner
Upton
Vitter
Walden
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson
Wolf
Young (AK)
Young (FL)
NOT VOTING--13
Ackerman
Baird
Cannon
Cramer
Deal
Inslee
Kingston
McDermott
Norwood
Ros-Lehtinen
Rothman
Snyder
Toomey
{time} 1415
Mrs. KELLY, Ms. GRANGER, Messrs. BASS, GOSS, SHOWS, PORTMAN,
CUNNINGHAM, TANCREDO, GARY MILLER of California, OSE, HOLT and SMITH of
Michigan changed their vote from ``aye'' to ``no.''
Messrs. BLAGOJEVICH, CUMMINGS, COSTELLO and HOLDEN changed their vote
from ``no'' to ``aye.''
So the amendment was rejected.
The result of the vote was announced as above recorded.
Stated against:
Mr. RAMSTAD. Mr. Chairman, on rollcall No. 23 I inadvertently pressed
the ``yea'' button. I meant to vote ``no.''
[[Page H599]]
Amendment No. 1 Offered by Mr. Sensenbrenner
The CHAIRMAN pro tempore (Mr. LaHood). The pending business is the
demand for a recorded vote on amendment No. 1 offered by the gentleman
from Wisconsin (Mr. Sensenbrenner) on which further proceedings were
postponed and on which the ayes prevailed by voice vote.
The Clerk will redesignate the amendment.
The Clerk redesignated the amendment.
{time} 1415
Mr. CONYERS. Mr. Chairman, I withdraw my demand for a recorded vote.
The CHAIRMAN pro tempore (Mr. LaHood). The demand for a recorded vote
on amendment No. 1 is withdrawn and the amendment is adopted by the
previous voice vote.
So the amendment was agreed to.
The CHAIRMAN pro tempore. Under the rule, the Committee rises.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Hansen) having assumed the chair, Mr. LaHood, Chairman pro tempore of
the Committee of the Whole House on the State of the Union, reported
that that Committee, having had under consideration the bill (H.R. 333)
to amend title 11, United States Code, and for other purposes, pursuant
to House Resolution 71, he reported the bill back to the House with
sundry amendments adopted in the Committee of the Whole.
The SPEAKER pro tempore. Under the rule, the previous question is
ordered.
Is a separate vote demanded on any amendment? If not, the Chair will
put them en gros.
The amendments were agreed to.
The SPEAKER pro tempore. The question is on the engrossment and third
reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit Offered by Mr. Conyers
Mr. CONYERS. Mr. Speaker, I offer a motion to recommit the bill, H.R.
333, with instructions.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. CONYERS. Yes, sir.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Mr. Conyers moves to recommit the bill (H.R. 333) to the
Committee on the Judiciary, with instructions to report the
bill back to the House forthwith, with the following
amendment.
Page 393, strike line 16 and all that follows through page
403, line 3, and insert the following (and conform the table
of contents accordingly):
SEC. 1301. ISSUANCE OF CREDIT CARDS TO UNDERAGE CONSUMERS.
Section 127(c) of the Truth in Lending Act (15 U.S.C.
1637(c)) is amended by inserting after paragraph (6) (as
added by section 1303 of this title) the following new
paragraph:
``(7) Applications from underage consumers.--
``(A) Prohibition on issuance.--No credit card may be
issued to, or open end credit plan established on behalf of,
any consumer who has not attained the age of 21, except in
response to a written request or application to the card
issuer that meets the requirements of subparagraph (B).
``(B) Application requirements.--An application to open a
credit card account by a consumer who has not reached the age
of 21 as of the date of submission of the application shall
require--
``(i) the signature of the parent or guardian of the
consumer indicating joint liability for debts incurred by the
consumer in connection with the account before the consumer
has reached the age of 21; or
``(ii) submission by the consumer of financial information
indicating an independent means of repaying any obligation
arising from the proposed extension of credit in connection
with the account.''.
Mr. CONYERS (during the reading). Mr. Speaker, I ask unanimous
consent that the motion be considered as read and printed in the
Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Michigan?
There was no objection.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Michigan (Mr. Conyers) is recognized for 5 minutes in support of the
motion.
Mr. CONYERS. Mr. Speaker, I offer the motion to recommit on behalf of
myself and the gentleman from New York (Mr. LaFalce).
Our amendment would simply prohibit the issuance of credit cards to
persons under age 21 unless a parent acts as co-signer or the minor can
demonstrate an independent source to pay the debt.
Right now, our credit card companies are sending millions of credit
card solicitations to teenagers every year with sometimes $10,000 lines
of credit. The credit cards offer these young people free gifts, toys,
tee shirts. It is outrageous.
Financial troubles caused by reckless lending to teens haunt some of
them for the rest of their lives, costing them far more when they try
to buy a car or home or take out future loans as they become
responsible citizens.
So this is not about fingerpointing. It is all our moral
responsibility, our children's, ours as parents, Congress', and yes,
even the credit card companies, too. This is a moral responsibility
that none of us can shirk.
So this commonsense amendment imposes a reasonable requirement on
credit card companies that will help our young people immeasurably.
Mr. Speaker, I yield to the gentleman from New York (Mr. LaFalce),
the ranking member of the Committee on Financial Services.
Mr. LaFALCE. Mr. Speaker, I thank the gentleman for yielding to me.
Mr. Speaker, motions to recommit are usually considered fairly
partisan in nature, and usually there are enormous differences between
a motion to recommit and the main bill.
This is not partisan, and the differences are not enormous. I hope
Members would vote their consciences on this.
We take the main bill, and I do not like the main bill, I think it is
pretty bad. I think there are dozens of predatory practices of the
credit card industry we should have dealt with and we did not.
But there is one in particular that is particularly offensive. That
is preying on our youth, entering into agreements with colleges where
the colleges will get money so they can come onto campus and market to
these youth, flooding them with credit card solicitations, $3.5 billion
totally. I cannot tell the Members exactly how many went to our college
students under 21.
These students are going to gambling establishments, they are going
into their rooms using their laptop computers, they are engaging in
Internet gambling. They are suffering enormous stress, financial and
emotional, and there have been suicides, dropouts from colleges,
because the credit card industry deviated from the standards they had
just a few years ago: that is, show sufficient income yourself, or have
your parents sign the applications. It is as simple as that.
That is all we do. That is all we do in this motion to recommit, say
if one is under 21, show independent means or have your parent co-sign.
That is the least we could do to deal with the multitudinous predatory
practices that exist in the credit card industry.
Mr. SENSENBRENNER. Mr. Speaker, I rise in opposition to the motion to
recommit.
The SPEAKER pro tempore. The gentleman from Wisconsin (Mr.
Sensenbrenner) is recognized for 5 minutes.
Mr. SENSENBRENNER. Mr. Speaker, I rise in opposition to the motion to
recommit and ask the Members to vote no on this motion.
This motion to recommit proposes an amendment that does not deal with
the Bankruptcy Code whatsoever, but amends the truth-in-lending act, as
has been described by its proponents.
In most States of this country, including my home State of Wisconsin,
the age of majority is 18. When one achieves the age of 18, one is
responsible for one's contracts, one can sue and be sued, one can vote,
and in many cases can run for and be elected to public office.
What this amendment proposes to say is that in terms of receiving
solicitations for credit cards and receiving applications for credit
cards, these adults are considered children for 3 more years. What it
does is it paints with a broad brush every 18-, 19-, and 20-year-old
and says, ``You have to go run to your parents or show independent
financial means before you can apply for a credit card.''
So the good kids who would use credit responsibly and learn how to
use credit responsibly are not able to get credit cards, just like the
bad kids who would use credit irresponsibly.
I would submit to each Member of the House of Representatives that we
[[Page H600]]
should not be tarring kids with this broad brush; we should not be
telling 18-, 19-, and 20-year-olds that they are adults for every
purpose except just this one.
I think what we should be doing is empowering our young people and
giving them the educational tools to make good credit decisions, rather
than simply saying, The door is shut for you.
Mr. Speaker, I yield to the gentleman from Ohio (Mr. Oxley).
Mr. OXLEY. I thank the gentleman for yielding.
Mr. Speaker, I also rise in opposition to the motion.
First let me associate myself with the remarks of the gentleman from
Wisconsin, the chairman of the Committee on the Judiciary. As chairman
of the Committee on Financial Services, I find some of the same
concerns that the gentleman from Wisconsin has. We are again talking
about people who are of legal age, 18.
I thought it was interesting that the title is, issuance of credit
cards to underage consumers. By whose definition are they under age? By
Federal law, they can vote. By most State laws, as the gentleman from
Wisconsin (Mr. Sensenbrenner) indicated, they can engage in contracts.
These are, for the most part, responsible people. We are really
dealing here with stereotypes that are unfortunate because many of
these people are responsible and treat credit in a responsible way, and
they learn from their experience.
In Ohio, we had a young fellow just elected to the Ohio General
Assembly just out of high school; he was 18 years old, a member of the
Ohio General Assembly. Can Members imagine if he wanted to get a credit
card to use, he would have to get his parents' consent. Here is a
person who was duly elected by the people of Ohio to serve in the
General Assembly.
This is I think a well-meaning amendment, but certainly wrongly
directed. I would ask that the motion be defeated.
The SPEAKER pro tempore. Without objection, the previous question is
ordered on the motion to recommit.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Recorded Vote
Mr. CONYERS. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. Pursuant to clause 9 of rule XX, the Chair
will reduce to 5 minutes the minimum time for any electronic vote on
the question of final passage.
The vote was taken by electronic device, and there were--ayes 165,
noes 253, not voting 14, as follows:
[Roll No. 24]
AYES--165
Abercrombie
Allen
Andrews
Baca
Baldacci
Barcia
Becerra
Berkley
Berman
Blagojevich
Blumenauer
Bonior
Borski
Brady (PA)
Brown (FL)
Brown (OH)
Capps
Capuano
Cardin
Carson (IN)
Clay
Clayton
Clyburn
Conyers
Costello
Coyne
Cummings
Davis (CA)
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Doggett
Doyle
Duncan
Edwards
Emerson
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Frank
Frost
Gonzalez
Green (TX)
Gutierrez
Hall (OH)
Hastings (FL)
Hill
Hilliard
Hinchey
Hoeffel
Holden
Holt
Honda
Hooley
Hoyer
Israel
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kildee
Kilpatrick
Kleczka
Kucinich
LaFalce
Lampson
Langevin
Lantos
Larson (CT)
LaTourette
Lee
Levin
Lewis (GA)
Lipinski
Lowey
Luther
Maloney (NY)
Markey
Mascara
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McGovern
McIntyre
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Millender-McDonald
Miller, George
Mink
Moakley
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Phelps
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rodriguez
Roemer
Roybal-Allard
Rush
Sabo
Sanders
Sawyer
Schakowsky
Schiff
Scott
Serrano
Sherman
Slaughter
Solis
Stark
Strickland
Stupak
Thompson (CA)
Thompson (MS)
Thurman
Tierney
Towns
Udall (CO)
Udall (NM)
Velazquez
Visclosky
Waters
Watt (NC)
Waxman
Weiner
Weldon (PA)
Wexler
Woolsey
Wu
Wynn
NOES--253
Aderholt
Akin
Armey
Bachus
Baker
Baldwin
Ballenger
Barr
Barrett
Bartlett
Barton
Bass
Bentsen
Bereuter
Berry
Biggert
Bilirakis
Bishop
Blunt
Boehlert
Boehner
Bonilla
Bono
Boswell
Boucher
Boyd
Brady (TX)
Brown (SC)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Cannon
Cantor
Capito
Carson (OK)
Castle
Chabot
Chambliss
Clement
Coble
Collins
Combest
Condit
Cooksey
Cox
Crane
Crenshaw
Crowley
Cubin
Culberson
Cunningham
Davis, Jo Ann
Davis, Tom
DeLay
DeMint
Diaz-Balart
Dooley
Doolittle
Dreier
Ehlers
Ehrlich
English
Everett
Ferguson
Flake
Fletcher
Foley
Ford
Fossella
Frelinghuysen
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Gordon
Goss
Graham
Granger
Graves
Green (WI)
Greenwood
Grucci
Gutknecht
Hall (TX)
Hansen
Harman
Hart
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hilleary
Hinojosa
Hobson
Hoekstra
Horn
Hostettler
Houghton
Hulshof
Hunter
Hutchinson
Hyde
Isakson
Issa
Istook
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kerns
Kind (WI)
King (NY)
Kirk
Knollenberg
Kolbe
LaHood
Largent
Larsen (WA)
Latham
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lofgren
Lucas (KY)
Lucas (OK)
Maloney (CT)
Manzullo
Matheson
McCrery
McHugh
McInnis
McKeon
Menendez
Mica
Miller (FL)
Miller, Gary
Mollohan
Moran (KS)
Morella
Myrick
Nethercutt
Ney
Northup
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pence
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pombo
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Reynolds
Riley
Rivers
Rogers (KY)
Rogers (MI)
Rohrabacher
Ross
Roukema
Royce
Ryan (WI)
Ryun (KS)
Sanchez
Sandlin
Saxton
Scarborough
Schaffer
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shows
Simmons
Simpson
Sisisky
Skeen
Skelton
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Souder
Spence
Spratt
Stearns
Stenholm
Stump
Sununu
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thornberry
Thune
Tiahrt
Tiberi
Traficant
Turner
Upton
Vitter
Walden
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weller
Whitfield
Wicker
Wilson
Wolf
Young (AK)
Young (FL)
NOT VOTING--14
Ackerman
Baird
Cramer
Deal
Dunn
Gephardt
Inslee
Kingston
McDermott
Norwood
Ros-Lehtinen
Rothman
Snyder
Toomey
{time} 1449
Messrs. Horn, McCrery and Regula changed their vote from ``aye'' to
``no.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore (Mr. Hansen). The question is on the passage
of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. SENSENBRENNER. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. This is a 5-minute vote.
The vote was taken by electronic device, and there were--yeas 306,
nays 108, not voting 18, as follows:
[Roll No. 25]
YEAS--306
Aderholt
Akin
Andrews
Armey
Baca
Bachus
Baker
Ballenger
Barcia
Barr
Bartlett
Barton
Bass
Bentsen
Bereuter
Berkley
Berry
Biggert
Bilirakis
Bishop
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bono
Boswell
Boucher
Boyd
Brady (TX)
Brown (FL)
Brown (SC)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Cannon
Cantor
Capito
[[Page H601]]
Capps
Carson (OK)
Castle
Chabot
Chambliss
Clement
Clyburn
Coble
Collins
Combest
Condit
Cooksey
Costello
Cox
Crane
Crenshaw
Crowley
Cubin
Culberson
Cunningham
Davis (FL)
Davis, Jo Ann
Davis, Tom
DeLay
DeMint
Deutsch
Diaz-Balart
Dicks
Dooley
Doolittle
Dreier
Duncan
Edwards
Ehlers
Ehrlich
Emerson
English
Etheridge
Everett
Ferguson
Flake
Fletcher
Foley
Ford
Fossella
Frelinghuysen
Frost
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gonzalez
Goode
Goodlatte
Gordon
Goss
Graham
Granger
Graves
Green (TX)
Green (WI)
Greenwood
Grucci
Gutknecht
Hall (TX)
Hansen
Harman
Hart
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill
Hilleary
Hinojosa
Hobson
Hoekstra
Holden
Holt
Hooley
Horn
Hostettler
Houghton
Hoyer
Hulshof
Hunter
Hutchinson
Hyde
Isakson
Israel
Issa
Istook
Jefferson
Jenkins
John
Johnson (CT)
Johnson (IL)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Keller
Kelly
Kennedy (MN)
Kennedy (RI)
Kerns
Kind (WI)
King (NY)
Kirk
Kleczka
Knollenberg
Kolbe
LaHood
Lampson
Langevin
Largent
Larsen (WA)
Larson (CT)
Latham
LaTourette
Leach
Lewis (CA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lucas (KY)
Lucas (OK)
Maloney (CT)
Manzullo
Matheson
McCarthy (MO)
McCarthy (NY)
McCrery
McHugh
McInnis
McIntyre
McKeon
Meek (FL)
Meeks (NY)
Menendez
Mica
Miller (FL)
Miller, Gary
Mollohan
Moore
Moran (KS)
Moran (VA)
Morella
Myrick
Nethercutt
Ney
Northup
Nussle
Ortiz
Osborne
Ose
Otter
Oxley
Pallone
Pascrell
Pastor
Paul
Pence
Peterson (PA)
Petri
Phelps
Pickering
Pitts
Platts
Pombo
Pomeroy
Portman
Price (NC)
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Reyes
Reynolds
Riley
Rivers
Roemer
Rogers (KY)
Rogers (MI)
Rohrabacher
Ross
Roukema
Royce
Ryan (WI)
Ryun (KS)
Sandlin
Saxton
Scarborough
Schaffer
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shows
Simmons
Simpson
Sisisky
Skeen
Skelton
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Solis
Souder
Spence
Spratt
Stearns
Stenholm
Strickland
Stump
Sununu
Sweeney
Tancredo
Tanner
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thornberry
Thune
Tiahrt
Tiberi
Traficant
Turner
Upton
Velazquez
Vitter
Walden
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson
Wolf
Wu
Wynn
Young (AK)
Young (FL)
NAYS--108
Abercrombie
Allen
Baldacci
Baldwin
Barrett
Becerra
Berman
Blagojevich
Bonior
Borski
Brady (PA)
Brown (OH)
Capuano
Cardin
Carson (IN)
Clay
Clayton
Conyers
Coyne
Cummings
Davis (CA)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Dingell
Doggett
Doyle
Engel
Eshoo
Evans
Farr
Fattah
Filner
Frank
Gutierrez
Hall (OH)
Hilliard
Hinchey
Hoeffel
Honda
Jackson-Lee (TX)
Jones (OH)
Kanjorski
Kaptur
Kildee
Kilpatrick
Kucinich
LaFalce
Lantos
Lee
Levin
Lewis (GA)
Lofgren
Lowey
Luther
Maloney (NY)
Markey
Mascara
Matsui
McCollum
McGovern
McKinney
McNulty
Meehan
Millender-McDonald
Miller, George
Mink
Moakley
Murtha
Nadler
Napolitano
Neal
Oberstar
Obey
Olver
Owens
Payne
Pelosi
Rahall
Rangel
Rodriguez
Roybal-Allard
Rush
Sabo
Sanchez
Sanders
Sawyer
Schakowsky
Schiff
Scott
Serrano
Slaughter
Stark
Stupak
Thompson (MS)
Thurman
Tierney
Udall (CO)
Udall (NM)
Visclosky
Waters
Watt (NC)
Waxman
Weiner
Wexler
Woolsey
NOT VOTING--18
Ackerman
Baird
Cramer
Deal
Dunn
Gephardt
Gilman
Inslee
Jackson (IL)
Kingston
McDermott
Norwood
Peterson (MN)
Ros-Lehtinen
Rothman
Snyder
Toomey
Towns
{time} 1457
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
Stated for:
Mr. GILMAN. Mr. Speaker, earlier today, I was unavoidably delayed by
official business during the vote on final passage for H.R. 333.
Accordingly, I was unable to vote on rollcall No. 25. If I had been
present I would have voted ``yea.''
Mr. KINGSTON. Mr. Speaker, regrettably, I was unable to be in
Washington on March 1, 2001 to cast a vote on H.R. 333, The Bankruptcy
Abuse Prevention and Consumer Protection Act of 2001, when it came to
the House floor. At President Bush's request, I was attending an event
in my home state of Georgia with the President. Had I been here,
however, I would have voted in favor of the Bankruptcy Reform bill.
____________________