[Congressional Record Volume 150, Number 7 (Wednesday, January 28, 2004)]
[House]
[Pages H148-H222]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2003
The SPEAKER pro tempore (Mr. Sessions). Pursuant to House Resolution
503 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
Senate bill, S. 1920.
{time} 1343
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
Senate bill (S. 1920) to extend for 6 months the period for which
chapter 12 of title 11 of the United States Code is reenacted, with Mr.
LaHood in the chair.
The Clerk read the title of the Senate bill.
The CHAIRMAN. Pursuant to the rule, the Senate bill is considered as
having been read the first time.
Under the rule, the gentleman from Wisconsin (Mr. Sensenbrenner) and
the gentleman from North Carolina (Mr. Watt) each will control 30
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, the amendment in the nature of a substitute to S. 1920
made in order by the rule replaces the text of that bill with the text
of H.R. 975, the bankruptcy bill passed by the House by an overwhelming
bipartisan vote of 315-113 on March 19, 2003.
The administration has without qualification endorsed this
legislation. Nevertheless, this bill has languished in the other body
now for almost a year. The question that has been asked is, why are we
engaged in what admittedly may appear to be a redundant undertaking?
While the other body is often described as the saucer in which the
coffee cools, H.R. 975 has become nearly frozen in that proverbial
saucer.
{time} 1345
Today I seek to reignite congressional consideration of bankruptcy
reform.
Some of my colleagues may also ask, ``Why now? What's the rush?''
There are many answers. A major reason is that the current bankruptcy
system is broken, and it gets worse every day that we fail to act.
Bankruptcy filings continue to break record after record, straining the
system's resources. The proliferation of bankruptcy filings is not just
a temporary event, but part of a consistent upward trend. In 4 years,
the number of bankruptcy filings has jumped by 150 percent to nearly
1.7 million cases as of fiscal year 2003.
Another reason has to do with the growing extent of fraud and abuse
in the current bankruptcy system. Bankruptcy relief should be available
to honest debtors, but current law allows, if not encourages, dishonest
debtors to file abusive bankruptcies that overburden the system.
According to the Justice Department, bankruptcy fraud and abuse is
``serious and far-reaching.''
[[Page H149]]
While some debtors fraudulently conceal assets, others try to
discharge debt despite their ability to repay their obligations. The
current system is overburdened and ill equipped to aggressively detect
and deter identity theft and other basic forms of bankruptcy fraud, let
alone more creative schemes such as the so-called ``credit card bust-
outs.'' The Justice Department reports that debtors are obtaining
credit cards despite having little or no income, incurring huge debts,
paying those debts with worthless checks, and then filing for
bankruptcy relief to discharge their massive liabilities. We need to
give our law enforcement agencies and the judiciary the tools necessary
to fight fraud and abuse in the bankruptcy system.
A third reason, I admit, has to do with money. According to some
analyses, the increase in consumer bankruptcy filings has significant
adverse financial consequences for our Nation's economy and the
economic well-being of our citizens. For instance, it has been
estimated that in 1997 alone, more than $40 billion of debt was
discharged as a result of bankruptcy cases. These losses, according to
one estimate, translate into a $400 annual ``tax'' on every household
in our Nation in the form of higher prices and higher interest rates.
For the sake of our family farmers, we ought to relieve them of this
$400 tax so that they can do a better job in producing food and fiber
for our Nation's tables as well as for export.
More importantly, there are moral reasons for supporting the need for
bankruptcy reform. The current system allows deadbeat parents to use
bankruptcy to avoid their child support obligations. Likewise, it
permits corporate criminals to use bankruptcy to shield their mansions
from the claims of those whom they have defrauded.
Let me be perfectly clear. If this bill is voted down in the
substitute amendment that has been made in order by the Committee on
Rules, deadbeat parents will have a better opportunity to use
bankruptcy to escape their court-ordered child support enforcement
obligations. That means that the people who are opposing this move are
giving these deadbeat parents a get-out-of-obligation-free card so that
they can stiff their custodial former spouses. We plug that loophole.
Furthermore, this bill plugs the so-called ``homestead exemption''
that has allowed corporate criminals to be able to use bankruptcy to
shield their assets and huge mansions in the States that have unlimited
homestead exemptions from bankruptcy and leave employees in the lurch,
employees that could use those assets to be able to allow them to find
new jobs as a result of a corporation going bankrupt as a result of
executive and management abuse.
Perhaps among the most important reasons to support bankruptcy reform
is that it will help some of the most needy and deserving members of
our society. As the title of the bill indicates, these reforms are not
just about preventing abuse, but they also provide long overdue
consumer protections. For example, domestic support claimants will
receive very much-needed, special protections under this legislation.
These reforms will ensure that families with pensions and education
IRAs will not have to use these assets to pay creditors. Those
protections will not be there if this bill is voted down.
As part of their monthly credit card billing statements, consumers
will be given more meaningful disclosures about the consequences of
making minimum monthly payments. It will require the appointment of an
ombudsman to serve as a watchdog for patients in health care facilities
in bankruptcy. It more than doubles employee priority wage claims.
If this bill is voted down, those that vote ``no'' turn their back on
all of these improvements. These are just a few examples of the many
benefits that consumers will finally be able to enjoy once bankruptcy
reforms are enacted.
I urge my colleagues to move forward with bankruptcy reform. This is
a comprehensive bill. It is a good bill. It does not hurt the ability
of somebody who is truly down and out to be able to file for bankruptcy
and get their discharge and start anew. But what it will do is plug the
loophole of those who wish to use the Bankruptcy Code as a financial
planning tool, a financial planning tool that ends up stiffing every
family that pays their bills on time and, as agreed upon, $400 a year
in a hidden tax. That is a hidden tax that the lack of bankruptcy
reform has stuck on all of our constituents who ought to be our special
interest.
I urge my colleagues to support the enactment of the amendment in the
nature of a substitute to S. 1920.
Mr. Chairman, I reserve the balance of my time.
Mr. WATT. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, let me begin by offering my unequivocal support for S.
1920 that would provide for an extension of chapter 12 of the
Bankruptcy Code which expired last December. That piece of legislation
is noncontroversial and necessary to ensure that the farmers in our
country have access to the bankruptcy protections they so earnestly
deserve as they struggle to keep our food supply thriving and to
maintain their farms.
As ranking member of the Subcommittee on Commercial and
Administrative Law and a former conferee on H.R. 975, I continue to
oppose the substance of H.R. 975 and further believe that the current
maneuver to force the hand of the Senate is irresponsible and will only
result in further delay in extending the family farmer protections
everyone agrees should be extended.
The gentleman from Wisconsin's amendment tacks on to this otherwise
noncontroversial bill H.R. 975, the product of a conference on which I
served last term minus the negotiated provision that would prevent
those who commit acts of violence against women and abortion clinics
from avoiding penalties by declaring bankruptcy. This bill did not pass
last year, and I believe it will meet the same fate this year.
Therefore, the only result will be that the family farmer will be held
hostage to efforts to leverage support for the larger bankruptcy
reform.
My opposition to H.R. 975 has not changed. I believe that the omnibus
bankruptcy reform bill is an unfortunate convergence of expedience and
politics. There obviously is abuse in the bankruptcy system and reform
is necessary, but I continue to believe that H.R. 975 is not a rational
way to respond to abuse to set up a separate set of rules for what is,
in effect, a pauper's bankruptcy court system and a different set of
rules for a higher income bankruptcy court system.
Mr. Chairman, I believe that we should stop playing games with the
family farmer. Like the National Farmers Union, and I quote from their
letter to the House leadership, I ``reject this legislative strategy as
an insensitive, cruel and malicious effort that will only serve to
increase the level of distress of farm families who are already
experiencing severe financial difficulties.'' I urge my colleagues to
vote against this bill and for a process that will respect the plight
of the farmers of this country.
In response to the comments of the gentleman from Wisconsin, let me
submit to this body that the primary reason we have an increasing
number of bankruptcies, although there may be some abuse and I do not
argue with that, but the primary reason we are having an increase in
the number of bankruptcies in this country is job loss and economics
which is being driven by this administration.
Second, I want to know how many times the House has to beat itself on
the chest on this issue and try to force this issue. We have got a bill
that is already in conference, I thought, in the other body; and this
bill, if the Senate wanted to take it up, would take it up. So what are
we doing beating our chests again this year saying we support
bankruptcy reform?
And finally, I would just submit that this is an effort to find
someone to blame for the failure to pass the bankruptcy reform
legislation. The last time I checked, the Republicans were in control
of the House, the Republicans were in control of the Senate, the
Republicans were in control of the Presidency. It would seem to me, if
you are in control of this process and you want to pass the bankruptcy
reform bill, you would pass the bankruptcy reform bill and we would not
be here going through this charade, blaming it on somebody else for
failure to pass this bill. It is a convenient way to blame others, but
it is a terrible way to do business.
[[Page H150]]
National Farmers Union,
January 23, 2004.
Hon. Dennis J. Hastert,
Speaker, House of Representatives, Washington, DC.
Hon. Nancy Pelosi,
Democratic Leader, House of Representatives, Washington, DC.
Dear Speaker Hastert and Democratic Leader Pelosi: On
behalf of the family farmer and rancher members of the
National Farmers Union I write to encourage the House of
Representatives to immediately adopt the language contained
in S. 1920 which passed the Senate late last year and
extended the chapter 12 provisions of title 11 of the United
States Code for an additional six months retroactive to
January 1, 2004.
The Chapter 12 provisions, which allow the development of
alternative financial reorganization plans for farmers and
ranchers within the bankruptcy code, expired at the end of
2003 when the House failed to take action on the Senate bill
even though these provisions have been considered non-
controversial by both parties over the course of several
years. Any delay in approving an extension of Chapter 12
places agricultural producers and their families who are
faced with bankruptcy in a serious and untenable position.
We understand there are some in Congress who wish to
utilize the extension of the agriculture provisions as a
means to leverage support for a broader bankruptcy reform
measure that contains highly controversial and divisive
provisions unrelated to the farm bankruptcy law. We reject
this legislative strategy as an insensitive, cruel and
malicious effort that will only serve to increase the level
of distress of farm families who are already experiencing
severe financial difficulties.
Thank you for your attention to this important issue.
Sincerely,
David J. Frederickson,
President.
Mr. Chairman, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may
consume.
There have been times when I have been the chairman of the committee
where we have given the other body a choice. I seem to recall that in
the last Congress the House passed two versions of the visa and border
security bill. One contained provisions extending section 245(i) of the
Immigration and Nationality Act and one did not, and the Senate chose
to take up the bill that did not contain section 245(i) and passed it.
Both bills, I believe, were supported both by the gentleman from North
Carolina and myself. So sometimes giving the other body a choice speeds
things along, and that is what this bill proposes to do.
Mr. Chairman, I yield 1 minute to the gentlewoman from Tennessee
(Mrs. Blackburn).
Mrs. BLACKBURN. Mr. Chairman, I would like to rise in support of the
amendment and to commend the chairman of the Committee on the Judiciary
for offering this important amendment.
As we have noted, last March this body did pass important bankruptcy
reform; and that is very important to my folks in Tennessee, but
unfortunately it has languished over on the Senate side. I have heard
from credit unions and banks in Tennessee. Their message is very clear.
Bankruptcy is all too often used as the first resort instead of the
last resort, and this makes it increasingly difficult for them to
operate in a State where small business is our major employer. As the
number of bankruptcy filings continues to rise, bankruptcy losses have
a heavier impact upon those credit union members and on the banks who
are fiscally responsible. What we have seen since 1998 when
bankruptcies topped 1 million in their filings, they are up over 150
percent. We know the trend is continuing upward.
I do feel this amendment is a compassionate one. People who seek
bankruptcy because of job loss, medical problems, divorce and other
personal problems will be unaffected.
Mr. Chairman, it is time for us to move forward.
Announcement by the Chairman
The CHAIRMAN. Members are reminded not to criticize the Senate.
{time} 1400
Mr. WATT. Mr. Chairman, I yield 4 minutes to the gentleman from New
York (Mr. Nadler).
Mr. NADLER. Mr. Chairman, I rise to plead for our Nation's family
farmers and family fishing operations. And some people may ask why the
representative from Manhattan and Brooklyn is rising to plead for
family farmers. When I was a child, we had a family farm which we lost
to foreclosure because of policies similar to what the majority party
is urging on us today. This is the 11th time we have been here to
debate a temporary extension of chapter 12. To string farmers along,
especially in these very hard times, is simply unconscionable; but this
is even worse. Instead of passing this bill last year, the chapter 12
extension bill, when we could have sent it directly to the President,
the majority refused to act and allow chapter 12 to sunset. Even now
they refuse to act and instead are using family farmers again to try to
pass an overall bankruptcy bill that is not going to pass again because
the Senate will not go along with it; so they are just using it as a
charade and putting at risk all the farmers. But a bill that should not
pass anyway. A bill whose main and essentially only effect is to enable
the big banks and the credit card companies to reach their hands into
the pockets of low- and middle-income people who, because usually of
either a divorce or being laid off from their jobs or health emergency,
are in bankruptcy and at that time to enable the big banks and the
credit card companies to put their hands into these low- and middle-
income pockets and take more money out of it for the big banks and the
credit card companies in 60 or 70 different ways. That is what this
bill does. And this bill is a lot more important, the majority would
have us believe, than extending chapter 12 for the benefits of family
farmers and family fishing operators.
Even if we pass this bill as amended by putting on the entire
bankruptcy reform bill, so-called, on the back of the chapter 12
extension, and even if the Senate agrees to allow the House to
circumvent them entirely, family farmers would still have to sit and
wait while Congress fiddles.
We do have another choice. We could reject this maneuver entirely and
send the 6-month extension to the President today. We could adopt the
gentlewoman from Wisconsin's (Ms. Baldwin) substitute and enact a part
of this bill that is both uncontroversial and necessary immediately to
make chapter 12 permanent and update it to provide needed relief. But
the Republican leadership appears unwilling to do either. They appear
intent on using the plight of family farmers yet again to advance the
agenda of the credit industry and to do so by threatening and hurting
the family farmers by engaging in a legislative maneuver that has
already resulted in chapter 12's expiring and that they know will now
result in its being allowed to lapse further.
This is simply wrong. I urge my colleagues to reject this outrageous
stunt. This bill has been on the verge of passing ``any minute'' since
1997. How much longer must our farmers and fishermen and women wait?
They have waited long enough. I urge my colleagues to support the
gentlewoman from Wisconsin and save our family farms and stop using the
plight of the family farmers to try to put the entire agenda of the
banks and the credit card companies on the backs of the family farmers.
Pass a family farm bill; then bring in a bankruptcy bill. We will
debate it on the merits or demerits of that, I would say the demerits;
but stop trying to put that entire burden on the family farmers' backs
because their backs are already broken.
Mr. SENSENBRENNER. Mr. Chairman, I yield 5 minutes to the gentleman
from Alabama (Mr. Bachus).
Mr. BACHUS. Mr. Chairman, I thank the chairman for yielding me this
time.
Mr. Chairman, I rise in strong support of this bill and would urge
this body to adopt it. I would like to adopt the words of Edith Jones,
who served on the Bankruptcy Commission and is on the Fifth Circuit
Court of Appeals, when she said ``bankruptcy reform legislation is
essential to restoring integrity to personal and business bankruptcies,
redressing the imbalances and opportunities for manipulation that
plague current law, and encouraging individual responsibility in
financial affairs.'' However, and I say this to the gentleman from
Wisconsin (Chairman Sensenbrenner), he has done an outstanding job on
this legislation. It is very much a thankless job, and it is with some
hesitancy that I rise simply to point out one provision that I share
with Judge Jones when she says, however, ``Section 414, in removing
investment bankers from a rigorous standard of disinterestedness, is
out of character
[[Page H151]]
with the rest of this important legislation and should be eliminated.''
Section 414 of the present legislation, I think, is a large snake. It
is the proverbial fox in the henhouse. And what section 414 does is it
eliminates the disinterested rule. That rule has existed in bankruptcy
law for 66 years. Under current law, a person that advises the trustee
must be ``disinterested'' in order to avoid conflicts of interest.
Section 414 eliminates that exclusion. Consequently, section 414 would
allow the same entities that may be engaged in negligence or even fraud
prior to bankruptcy to advise the trustee during the bankruptcy
process.
Our experience alone with the recent wave of corporate scandals means
that we need to carefully examine any provision that would weaken the
conflict of interest standards. Weakening those standards in the
bankruptcy code promotes conflicts of interest rather than corporate
reform.
Let me quote the Wall Street Journal addressing this section 414:
``Relaxing the disinterestedness rules will serve to reward firms that
had some part of the company's demise . . . By allowing firms that
helped the company into bankruptcy continue to stay on the payroll, the
firms are being rewarded for essentially failing at the task for which
they were hired.''
Eliot Spitzer has testified against section 414. He says, ``The
inherent conflict of interest created by section 414 and the perverse
incentives created by such a section ought to be clear to all,'' and I
would agree with him. And here we have the Attorney General of New York
and we have the very conservative Judge Jones agreeing on this point,
as did almost all the bankruptcy commissioners.
No convincing case has been made for drastically weakening the
current standard as section 414 does. Indeed, one would be hard pressed
to offer any public policy rationale for this change. As Judge Jones
said, section 414 is totally out of character with the rest of this
important legislation. And I include a copy of her letter.
Let me conclude by saying that section 414, which is contrary to the
legislation's goal of creating a fair and more streamlined bankruptcy
system, must be addressed at conference. Nonetheless, I strongly
support this much-needed bankruptcy reform legislation which will limit
abuses of the bankruptcy system without affecting bankruptcy protection
to all who truly need it.
U.S. Court of Appeals Fifth Circuit,
March 11, 2003.
Hon. F. James Sensenbrenner, Jr.,
Chairman, House Committee on the Judiciary, Rayburn House
Office Building, Washington, DC.
Dear Mr. Chairman: I understand that the House Committee on
the Judiciary will consider H.R. 975, bankruptcy reform
legislation, on the morning of March 11, 2003. I also
understand that the Committee may consider whether or not to
retain Section 414 of the bill, which would amend the
``disinterested person'' standard codified at 11 U.S.C.
Sec. 101(14). As a former member of the National Bankruptcy
Review Commission and, in that capacity, a consistent
advocate of maintaining strict disinterestedness standards
for bankruptcy professionals, I urge the Committee not to
change existing law. I support Congressman Bachus's effort to
remove Section 414.
The National Bankruptcy Review Commission was asked to
recommend a modification of the disinterestedness standard in
order to accommodate, as I recall, the geographic growth and
increasing sophistication of professional firms of all kinds
involved in Chapter 11 bankruptcy practice. Despite fervent
lobbying by prominent bankruptcy professionals and scholars,
the Commission resisted making such a recommendation. We
voted (by a lopsided majority, I believe) to retain the
standard as it has existed since the 1930's.
The Commission report cites two reasons for retaining a
strict prophylactic standard for all bankruptcy
professionals. These are worth brief restatement. First, such
a standard can alone protect integrity in the bankruptcy
process. If professionals who have previously been associated
with the debtor continue to work for the debtor during a
bankruptcy case, they will often be subject to conflicting
loyalties that undermine their foremost fiduciary duty to
the creditors. Strict disinterestedness, required by
current law, eliminates such conflicts or potential
conflicts.
Second, enforcing a strict standard of disinterestedness is
necessary to maintain public confidence in the integrity of
the bankruptcy system. A bankruptcy case should not be
subject to the criticism that professional fees are generated
to no purpose or for a bad purpose such as delay. The courts'
efforts to ensure that fees remain reasonable are enhanced
when, because of the complete disinterestedness of
participating professionals, no hidden motives may be imputed
to the actors in the case.
One need not focus solely on today's high-profile
bankruptcy cases to realize that the challenge of maintaining
disinterested professional services has permeated modern
corporate reorganization law. The Commission, for instance,
voted to retain the original standard in the wake of the
criminal conviction of a prominent bankruptcy lawyer and
several well-known instances in which law firms were required
to disgorge part of their fees--all for violating
disinterestedness standards. Given the ongoing nature of the
problem, I do not see how any professional group can
advocate, consistent with the public interest, eliminating
the statutory requirement of disinterestedness. Moreover, as
it appears likely that many future complex bankruptcy cases
will arise in which the role of investment bankers will have
to be explored, it seems particularly unwise to grant that
group--alone among bankruptcy professionals--a status
insulated from the strict disinterestedness requirement.
Since the close of the Commission's work in October 1997, I
have been a proponent of the bankruptcy reform legislation
that has been repeatedly passed by Congress. I still believe
the bankruptcy reform legislation is essential to restoring
integrity to personal and business bankruptcies, redressing
the imbalances and opportunities for manipulation that plague
current law, and encouraging individual responsibility in
financial affairs. Section 414, in removing investment
bankers from a rigorous standard of disinterestedness, is out
of character with the rest of this important legislation,
however, and it should be eliminated.
Very truly yours,
Edith H. Jones.
Mr. WATT. Mr. Chairman, I yield myself 30 seconds.
I am a little perplexed by the gentleman's statement. He was yielded
4 minutes. He took 3 minutes and 50 seconds to talk about the problems
with the bill and 10 seconds to praise the bill; yet he is going to
support it. If there is no public policy justification for this
provision, it seems to me that the gentleman would be voting against
this bill.
Mr. Chairman, I yield 4 minutes to the gentlewoman from the District
of Columbia (Ms. Norton).
Ms. NORTON. Mr. Chairman, I thank the gentleman for yielding me this
time, and I want to thank the chairman and all who have worked so hard
on this bill and have been delayed for so long.
I rise to take strong exception to putting this bill once again in
jeopardy by reinserting anti-choice language, language that was agreed
upon in a bipartisan fashion and that again would put this bill in
jeopardy.
As I understand the anti-choice movement, and I respect them for the
view which I believe is sincere, the movement disavows violence. Each
and every time there is violence in their name, the movement is clear
that violence shall not occur in their name. And not only do I not have
any reason to doubt them, I have every reason to believe they are
sincere.
Why in the world then would we want to take out the bipartisan Hatch-
Schumer language that was agreed upon and do so unilaterally? After
all, the point of this bill is to remedy the abuse of the bankruptcy
laws. Is it not an abuse to avoid a lawful judgment of a court of law
rendered through imposition of fines after finding that a party had,
for example, committed violence? Would anybody condone going into
bankruptcy in order to avoid that lawful judgment? I see no reason why
anybody would want to sign up for that, much less jeopardize this bill.
Mr. Chairman, I just want to say at the beginning of this session we
have gotten to the point where bipartisan compromise does not matter
anymore in this House. We know conference reports do not matter. We
know that Democrats did not even get to conference. But the notion that
Mr. Schumer and Mr. Hatch could reach a compromise on something as
controversial in its underlying content as choice and then have that
torn up by the House should be unthinkable. I do not think Mr. Hatch
would have agreed to it, and as I understood it, the gentleman from
Illinois (Mr. Hyde) agreed to it, that it was a kind of compromise. The
gentleman from Wisconsin (Mr. Sensenbrenner), all of them agreed that
this was what should be done to get the bill through. Why throw it in
their face and in our face by taking that compromise out of the bill?
This used to be known as breaking one's word; and one thing I thought
good politicians, let alone ethical men and women, never did was to
[[Page H152]]
break their word. This is a breaking of the word. I ask them to
reconsider. Please let us begin this session, 2004, bright. Let us not
go back to the bad old days of 2003.
Mr. SENSENBRENNER. Mr. Chairman, I yield 2 minutes to the gentlewoman
from Pennsylvania (Ms. Hart).
Ms. HART. Mr. Chairman, I thank the gentleman from Wisconsin
(Chairman Sensenbrenner) for his patience with trying to get this
bankruptcy legislation through in a form that can be supported across
the board and in fact in a form where it deals with the issue of
bankruptcy. The Congress has been working on this legislation for a
number of years, actually since before I got here; and this passage of
this bill is long overdue.
Since Congress began working on this legislation, bankruptcy filings
continue to rise. In fact, data recently released by the Administrative
Office of United States Courts showed personal bankruptcies continued
to rise at a record-setting pace of 7.4 percent last year.
Some of this is necessary. Some of this is abuse of the bankruptcy
system. It has had a negative impact on our economy, amounting to a
loss of $110 million a day. The abuse of the bankruptcy code continues
with opportunistic filings and abusive loopholes in the code. One most
notable, as I serve on the Committee on Financial Services, dealing
with corporate crooks, this bill closes the mansion loophole for greedy
corporate culprits.
{time} 1415
Under current bankruptcy law, debtors living in certain States can
shield from their creditors virtually all of the equity in their homes.
That includes a $3 million estate.
Congress spent a considerable amount of time discussing the issue of
corporate responsibility, and this bill closes that loophole to
continue the work we began last year. Some debtors have moved to
particular States in order to take advantage of this loophole. This
bill closes the loophole. It requires those debtors to reside in the
State for at least 2 years before they can claim a homestead exemption;
they have to have owned that home for at least 40 months; and most
importantly, it caps the amount at $125,000, a reasonable amount for a
family to keep a roof over their heads, but certainly not $3 million
that they can just save from their prosecution.
This legislation also helps women and children in bankruptcy. It
prioritizes the collection and payment of spousal and child support,
giving them the highest payment priority under the bankruptcy law. The
legislation also allows child and domestic violence proceedings to
continue, notwithstanding the debtor's filing for bankruptcy
protection.
Mr. Chairman, it is crazy for us not to move this bill at our,
finally, hopefully, last opportunity.
Mr. WATT. Mr. Chairman, I yield 5 minutes to the gentleman from
Michigan (Mr. Conyers) the ranking member of Committee on the
Judiciary.
Mr. CONYERS. Mr. Chairman, I thank the gentleman from North Carolina,
the manager of the bill, and I rise and take this time not to go over a
piece of legislation that has been around here since 1997, started in
1996 with a commission, has been up and down and around, and here we
are today taking the bill up yet another time.
Well, is it sufficient that 35 national organizations, civil rights
groups, unions, public interest research groups, consumer
organizations, women's organizations, law organizations, the
Neighborhood Assistance Corporation, Legal Defense and Education Fund,
34 organizations, I would appreciate it if anybody could tell me why
they think all of these organizations do not get the picture, do not
understand why this bill should be rejected yet another time?
But my emphasis this evening is upon the parliamentary process by
which the bankruptcy bill was brought to the floor today, and that is
to say that the bill is being brought to a conference and the Senate
has never passed this bill. This bill is being brought on the sham of a
Chapter 12, 6-month, noncontroversial extension entitled ``The Debts of
the Family Farmer,'' and that is being used to force a several-hundred-
page bill into conference.
The Senate has not acted. It is shameful that the leadership, the
Committee on Rules of this House, would permit this bill, as large, as
controversial, as complex as it is, to be taken, that little tale, and
brought in here yet again. In other words, we are holding the farm
families of America hostage by substituting the controversial omnibus
bankruptcy bill to push anticonsumer changes to bankruptcy laws and
bypass the Senate debate on the bill.
So I would like to point out that there happens to be a very big
problem on the other side. Notwithstanding the parliamentary
shenanigans in the House, again with this attempt to end-run around the
Senate, the antichoice lawmakers have to answer this one question: Why
do they oppose the compromise of Hyde-Schumer that would hold people
who illegally harass, intimidate, commit crimes of violence, blockade
and blow up clinics and innocent people, who abuse the bankruptcy
system, to evade their lawful debts?
Will somebody on this floor, to whom I will yield, explain to me why
they would support criminal conduct as a reason not to allow this bill
to go through? I will yield to anybody.
And I would like someone else, further, to explain to me, who has
stronger views on abortion than the gentleman from Illinois (Chairman
Hyde) of the Committee on International Relations? He is the cosponsor
of the bill that you are trying so desperately to keep this provision
out of.
I think this is another example of the disgraceful, dishonest tactics
being used in this House to get through anything by any means
necessary, and I object to it very strenuously.
Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, the gentleman from Michigan (Mr. Conyers) is very right
in saying that there were extensive negotiations relative to the so-
called Hatch-Schumer abortion protestors' amendment during the
conference in the last Congress. Those negotiations lasted the better
part of a year. There were both public and private meetings with the
principals involved.
At the end of the process, the gentleman from Illinois (Mr. Hyde) and
the Senator from New York, Mr. Schumer, reached an agreement on
compromise language that was put into the conference report on H.R.
333, which was the bankruptcy bill in the last Congress.
The gentleman from Illinois (Mr. Hyde) lived up to his word. He
supported the rule that made that conference report in order.
Unfortunately, that rule was rejected on November 14, 2002, by a roll
call vote of 172 ``yes'' to 243 ``no.'' I notice my friend from
Michigan was one of the 243 that voted ``no.'' If he wanted to get that
language enacted into law, he could have supported bringing up the
conference report on H.R. 333. For whatever reason, he chose not to do
so.
But to answer the arguments that he made on the merits, it is that
fines and forfeitures from offenses, both criminal and civil, have
never been dischargeable in bankruptcy, irrespective of the offense
that gave rise to the fine and forfeiture being imposed. So to say that
the omission of language relating to abortion clinic protestors is a
way of shielding criminal activity is a complete red herring. Fines and
forfeitures that are imposed on abortion clinic protestors in a court
of law are not dischargeable in bankruptcy today under the existing law
nor, should this bill be enacted, under the provisions of this bill.
Now, having said that, I feel very strongly that abortion really
should not become an issue in the debate on a bankruptcy bill. The
position of this House has always been that abortion is not a part of
the bankruptcy debate. There is a time and place to debate issues
relating to abortion, but this is not it.
The other body has always disagreed. At some times in the last
Congress we had a provision in the conference report that did reach a
compromise on this issue. The House refused to consider it. There are
other times when the conference in previous Congresses omitted the
Schumer language that was passed by the Senate, and the conference
report was passed by the Senate by a vote of 70-to-28 on December 7,
[[Page H153]]
2000. That bill would have become law without the abortion clinic
protestor language, except that President Clinton pocket-vetoed the
bill.
So I just do not like to see the entire issue of abortion being mixed
into it. But I think that the arguments that are made that the omission
of the Hyde-Schumer language is an issue of bad faith is a complete red
herring. We were not able to pass the bill with it in; we were able to
pass it without it.
Mr. Chairman, I yield 1\1/2\ minutes to the gentleman from Michigan
(Mr. Smith).
Mr. SMITH of Michigan. Mr. Chairman, with regard to the original bill
that came over from the Senate, the gentlewoman from Wisconsin (Ms.
Baldwin) and I, have introduced, cosponsored, about six bills either to
make the Chapter 12 permanent or to at least extend it. I would just
like to tell my colleagues that in calling the bankruptcy judges that
handled these farm cases, there has never been a farm case thrown out
because the law expired. Sometimes it has been reacting late, but we
have always made it retroactive in every case so those farmers that
wanted to use the provisions of Chapter 12 have been able to do that.
So I would like to make Chapter 12 permanent, but I would also like
to make some of the corrections that incorporate some of my language in
a larger bankruptcy bill. I hope we can do that. I think it is
important for our financial institutions to have some of the additional
concerns that are addressed in this bill. This bill will also at the
same time expand the availability of loaned money, of available credit
money, to more people.
So I would hope we would pass the bill as provided by the Committee
on Rules and send the bankruptcy bill in total over to the Senate and,
hopefully, resolve it in conference for final passage.
Mr. WATT. Mr. Chairman, I yield myself such time as I may consume.
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. WATT. I yield to the gentleman from Michigan.
Mr. CONYERS. Mr. Chairman, I thank the gentleman for yielding to me.
I would just like to respond to the distinguished chairman of the
Committee on the Judiciary, the gentleman from Wisconsin (Mr.
Sensenbrenner), who feels very strongly that the abortion consideration
has no place in this bill.
Well, I will be happy to report that to the predecessor chairman of
the Committee on the Judiciary, the gentleman from Illinois (Mr. Hyde).
He will be happy to know that you do not feel it does and that a whole
group of Senators, not to mention a fairly substantial number of
Members of the House, all think that it does, and to think that by
running an end-run around this provision with an arcane debt farmers
provision, it is not going to work.
Now, for my friend, the gentleman from Michigan (Mr. Smith), who has
served with great distinction in the Congress, I will be happy to let
his farmers know that everything is okay, that the provision has
expired; but somehow he can get into court, or somebody, and they can
just continue on, that with the judges, even though the provision has
no effect, that the farmers are okay. I am sure they will be very
comforted to hear that.
Mr. WATT. Reclaiming my time, Mr. Chairman, let me also just make a
couple of responses to the statement of the gentleman from Wisconsin
(Mr. Sensenbrenner).
Number one, it is interesting that the chairman thinks that the
abortion issue should not be part of the bankruptcy bill. Seemingly,
everybody who abuses the bankruptcy process other than people who have
had judgments against them for destroying or damaging bankruptcy
clinics would be an appropriate subject for this. I thought this whole
thing was to try to get to people who are abusing the system. If that
is not an abuse, then I am not sure I understand what it is.
Second, in response to the gentleman's comments about this bill
preserving criminal discharges, this is not about criminal discharges,
this is about people who have gotten judgments against abortion clinic
bombers or damagers, civil judgments, and had those defendants thumb
their noses at those judgments by saying ``I am just going to declare
bankruptcy so I do not have to pay this judgment.''
{time} 1430
So if that is not an abuse, then I do not understand what an abuse
is. If this bill is about dealing with abuse, then it seems to me
people who fall into the category of abortion clinic abusers of the
process should be equally accountable.
Mr. Chairman, I yield 4 minutes to the gentleman from Virginia (Mr.
Scott).
Mr. SCOTT of Virginia. Mr. Chairman, I rise in opposition to the bill
in its present form. Instead of passing the bipartisan bill to help
family farmers, we have substituted a controversial bill that violates
traditional bankruptcy principles.
For centuries, American bankruptcy laws had the principle that if
people get over their heads in debt, they can cash in all of their
assets, pay off all the debts they can, and then get a fresh start. For
policy reasons, a few assets have historically been exempted and a few
debts have historically been nondischargeable, especially those that
have been incurred by fraud, a result of crime, or through abuse of the
bankruptcy system. Yet the principle has always been the same: cash in
all you have and get a fresh start.
This bill violates the basic principle. People who incurred debts
because of illness, unemployment, business failure and have debts they
can never pay off will be denied an opportunity to get a fresh start.
They will be stripped of every penny of income after basic expenses of
food and rent without reasonable allowance for unforeseen emergencies
such as automobile repairs, which will inevitably come up. People in
these circumstances will be in economic slavery for 5 years and will
probably be worse off at the end of 5 years than they were before.
The bill has no rational measure of determining a person's ability to
pay off debts. If someone can pay off $10,000 in his debts over 5
years, that is $167 a month, then he is not entitled to a discharge. A
person could cosign a spouse's business loan only to have the spouse
die or disappear. If that person has a $50,000 salary, he may find
himself owing $1 million, never even able to make interest payments,
and that person would be denied relief under this bill. A person with
hospital bills could have hospital bills of hundreds of thousands of
dollars. That person will be denied relief under this bill. This will
cause many Americans who have unforeseen business failures, health
problems, or unemployment to find themselves unable to pay their debts
and be trapped with no way out. And for 5 years that person would have
nothing to lose.
Mr. Chairman, if our goal is to create a situation where people are
stressed out with nothing to lose and to maximize the chances that a
person would totally lose control and terrorize a community or its
coworkers, this is it. Last year in Washington, D.C., we saw the impact
of financial distress. A North Carolina farmer drove his tractor into
the pond near the National Mall and was quoted as saying, ``I am broke.
I am busted. I am out.'' No one in the community is safe when we have
increased the number of neighbors who feel like they have nothing to
lose.
Finally, Mr. Chairman, we have to consider the impact the bill will
have on small business entrepreneurs. How many people will be willing
to take a chance on a new business if any failure will result not just
in bankruptcy but no relief for the family for 5 years? No bank in the
future will lend a business any cash, especially one in financial
distress that actually needs the money without the personal signature
of the owner. And so who will risk not only loss of everything but also
risk family poverty with no relief for 5 years if the business fails?
Long ago we decided that there would be no debtors prisons in
America. This bill represents an effort to take a giant step backwards
towards that bygone era.
So I urge my colleagues to reject this bill in its present form so
that we can return to the original bill and help family farmers.
Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may
consume.
The gentleman from North Carolina (Mr. Watt) seemed to imply that
because this bill does not contain the so-
[[Page H154]]
called Schumer language as compromised, people who protested abortion
clinics will end up being able to stiff the owners and operators and
the folks who work at that clinic of any judgment that might be
obtained.
Now, the current law, Bankruptcy Code section 523(a)(6) makes
nondischargeable debts incurred by willful or malicious injury by the
debtor to another entity or to the property of another entity. That law
is not changed in this bill. So if somebody trashes an abortion clinic
for whatever reason and gets a civil judgment against them, that civil
judgment is nondischargeable because the actions were willful and
malicious.
Mr. Chairman, again, I looked at this roll call when the rule was
voted down to bring up the legislation that did what the gentleman
wanted to do, and that was the compromise Schumer-Hyde language in last
Congress's bankruptcy bill. We did what my colleague asked, and he
still voted ``no.''
So I think that the arguments that have been made are really a red
herring to try to defeat an overall bankruptcy reform that the House
has supported overwhelmingly on many occasions since this issue first
came up at least 7 years ago.
Mr. Chairman, I yield 2 minutes to the gentleman from Utah (Mr.
Cannon).
Mr. CANNON. Mr. Chairman, first of all I would like to associate
myself with the comments of the gentleman from Wisconsin (Mr.
Sensenbrenner) on these two points that he has just made and then point
out in response to the gentleman from Virginia (Mr. Scott) this bill is
about getting money from people who have it. It is not about oppressing
the poor. And I think the structure of the bill, if you look at it
fairly, will show that I rise in support of Senate 1920.
The amendment in the nature of a substitute of the gentleman from
Wisconsin (Mr. Sensenbrenner) merely makes technical corrections to
H.R. 975, which was passed by the House early last year. Given the
uncontroversial nature of these revisions, I urge my colleagues to
support the amendment.
Last March the House passed H.R. 975 by an overwhelming bipartisan
vote of 315 to 113. The administration has endorsed this legislation.
The House has voted affirmatively on five separate occasions to pass
this bill. Today we are reconsidering this bill in an attempt to
reignite a stalled process. We must take action. America's bankruptcy
system is, in fact, broken. It gets worse every day with more filings
that break record after record, putting an enormous strain on the
judiciary's resources. I have seen numbers that indicate the
exponential growth to the number of bankruptcy filings.
I believe the increase in consumer bankruptcy filings will have
adverse financial consequences for the American economy. In 1997 alone,
more than $40 billion was discharged as a result of bankruptcy cases.
This loss translates into a $400 annual tax on every household in our
Nation in the form of higher prices and higher interest rates.
I urge my colleagues to support the enactment of the amendment in the
nature of a substitute to S. 1920.
Mr. SCOTT of Virginia. Mr. Chairman, will the gentleman yield?
Mr. CANNON. I yield to the gentleman from Virginia.
Mr. SCOTT of Virginia. Mr. Chairman, if the gentleman from Utah (Mr.
Cannon) suggested that what I said was not accurate, I ask what did I
say that was not accurate?
Mr. CANNON. Mr. Chairman, reclaiming my time, what I would like to
point out is if you look at the structure of the bill, this is not
intended to keep people in slavery or economic servitude. It is
intended to take money from those people who are gaming the system who
have a large ability to earn income.
Mr. SCOTT of Virginia. If the gentleman would yield, I said that
people who have $2 million in debt that could pay $10,000 of that debt
that they obviously can never pay will not be able to get relief under
this bill. Is that true?
Mr. WATT. Mr. Chairman, I yield as much time as he may consume to the
gentleman from Virginia (Mr. Scott) to pursue this discussion.
Mr. SCOTT of Virginia. Mr. Chairman, I said that somebody who can pay
off $10,000 but can never pay off the $2 million, are they denied
relief under this bill?
Mr. CANNON. Mr. Chairman, if the gentleman will continue to yield,
will they be able to pay off the $10,000?
Mr. SCOTT of Virginia. They can pay $10,000 on a $2 million debt. The
fact is they can never pay off the debt. They will be denied relief
under the bill. Is that right?
Mr. CANNON. If they can pay off $10,000? In other words, is it
possible that someone who owes millions and millions of dollars in debt
may be held responsible for $10,000? We would certainly hope so.
Mr. SCOTT of Virginia. Mr. Chairman, reclaiming my time, so that
someone who owes $2 million in debt can pay $10,000 and can never pay
it will be in economic slavery because every dime they make over food
and rent will go into the fund to help pay the $10,000.
Mr. WATT. Mr. Chairman, I yield such time as he may consume to the
gentleman from New York (Mr. Nadler).
Mr. NADLER. Mr. Chairman, I think the gentleman from Utah (Mr.
Cannon) misunderstands the question of the gentleman from Virginia (Mr.
Scott). The question as I understand it was not if someone owes $2
million and can pay $10,000 should be then forced to pay $10,000. Yes.
The question was, is it not true that under this bill if he owes $2
million, can afford to pay only $10,000, he can never get relief even
if he pays the $10,000 he can afford to.
Mr. CANNON. Mr. Chairman, will the gentleman yield?
Mr. NADLER. I yield to the gentleman from Utah.
Mr. CANNON. Mr. Chairman, it is my understanding of this bill that
the court can impose a structured pay-out. And that is $10,000, and he
can pay $10,000, then he is relieved under the bill.
Mr. SCOTT of Virginia. Mr. Chairman, if the gentleman will yield, so
every dime that they make over food and rent goes into the fund to help
pay the $10,000. If that is all they can pay, they have to pay that so
they are down to food and rent for 5 years although they can only pay
$10,000 on a $2 million debt. They cannot get relief from the $2
million under this bill. And the gentleman agrees with that.
Mr. CANNON. Mr. Chairman, I believe I understand the gentleman's
question, and the point is that the person can get discharged in the
course of bankruptcy including a payment, but that payment is not
related to what his grocery bill is. It is related to what he can earn
and presumably based upon the judgment and discretion of the court what
should be paid in addition to a general discharge.
Mr. WATT. Mr. Chairman, it is obvious that maybe all of my colleagues
need to read this bill. Mr. Chairman, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Chairman, I am prepared to close the general
debate.
Mr. WATT. Mr. Chairman, I yield myself the balance of the time,
although I doubt that I will use it.
Let me just correct a couple of things that have been put out here
that seem to me to need correction. First of all, child support and
alimony are already nondischargeable and all of the women's and
children's advocacy groups oppose this bill. So do not be misled by
this claim that somehow or another this bill is going to do something
to help women's and children's advocacy groups with child support.
Second, the implication has been made that there is somehow a cap on
the homestead exemption in this bill, and that is not the case. We
tried to get one on several occasions. It has never worked. It has
always failed. And so anybody who is proceeding on the assumption that
there is some kind of cap in this bill should dissuade themselves of
that notion.
Having made those corrections and comments, Mr. Chairman, I presume
the gentleman from Wisconsin (Mr. Sensenbrenner) will have the last
word. I encourage my colleagues to vote against the bill on the grounds
that it will play Russian roulette with family farmers. We ought to
proceed with the family farmer bill, which needs to be extended to
protect family farmers and not get them caught up in all of this other
politics about abortion and in a larger bankruptcy reform bill.
Mr. Chairman, I yield back the balance of my time.
[[Page H155]]
Mr. SENSENBRENNER. Mr. Chairman, I yield myself the balance of my
time.
Mr. Chairman, the bill that is in the substitute made in order by the
Committee on Rules, which is the version of the bill that passed the
House last March by about a three to one margin, is better for family
farmers than what the Senate sent over to us. But the Senate sent over
to us what is merely a 6-month extension of chapter 12 of the
bankruptcy code.
The substitute amendment made in order at the Committee on Rules
makes chapter 12 permanent. So you have a choice of saying that the
other body's bill should be on the President's desk tonight, which
means we will go through this entire debate again in 6 months, the end
of June, when the Senate bill's provisions expire, or we will be able
to pass this bill and take care of the chapter 12 problem permanently.
To protect our family farmers and to give them certainty in the law,
let us do the permanent extension, pass the substitute amendment, and
then pass the bill with its other provisions because that will protect
everybody from being stiffed by the $400 per household that is passed
down in the cost of higher goods and services and interest rates as a
result of the current bankruptcy system.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I rise in opposition to S.
1920, the bill to extend for 6 months the period for which Chapter 12
of Title 11 of the United States Code is reenacted. This legislation
covers a significant amount of ground-consumer filings, small business
bankruptcy, ancillary and cross-border cases, financial contract
provisions, amendments to chapter 12 governing family farmer
reorganization, and health care and employee benefits. These issues
affect many constituents; therefore, we as creators of legislation must
not take lightly the consideration of its passage. On its face, S. 1920
temporarily extends Chapter 12, the family farmer bankruptcy protection
provision, for 6 months, retroactive to January 1, 2004 through June
30, 2004.
If we allow the amendment offered by Mr. Sensenbrenner to pass
favorably, it will essentially incorporate H.R. 975, the Bankruptcy
Abuse Prevention and Consumer Protection Act. H.R. 975 passed the House
last March by vote of 315 but did not surpass the Senate by virtue of a
contentious debate related to preventing abortion protesters from
filing for bankruptcy to avoid civil fines and judgment.
H.R. 975 is a significant departure from the current bankruptcy laws
that would make it more difficult for individuals to obtain relief from
their debts through bankruptcy proceedings. Attorneys practicing in
this field would be faced with more complicated technical requirements,
and judgment debtors would be faced with additional filing requirements
and a ``means test.''
The ``means test'' entails the use of a formula for debtors to
determine their eligibility for Chapter 7 or Chapter 13 bankruptcy
relief based on their ability to repay debt, relying in part on
Internal Revenue Service (IRS) calculations of estimated living
expenses. Debtors whose remaining income over a 5-year period--after
allowable expenses are deducted--is sufficient to repay at least 25
percent of their unsecured debt or $100 a month over 5 years, whichever
is greater, or $10,000, would not be eligible for relief under Chapter
7. Under the measure, the current monthly income of the debtor would be
calculated using the 6-month period ending on the last day of the month
immediately before the bankruptcy filing was made. Monthly income would
not include Social Security benefits and payments to victims of war
crimes or crimes against humanity, or victims or international or
domestic terrorism. Under the measure, if a debtor's income meets or
exceeds the means-test threshold, there would be a ``presumption of
abuse.'' Under current law, there is a presumption in favor of granting
the debtor a discharge'' i.e., forgiving the debt, so this proposal
will severely curtail the rights currently enjoyed by taxpayers. Under
this measure, debtors can refute the presumption of abuse by
demonstrating ``special circumstances'' that justify additional
expenses or adjustment to their income to challenge the means-test
formula. The debtors would have to itemize and document each additional
expense or income adjustment--a very onerous and laborious ordeal.
This legislation is simply the wrong measure proffered at the wrong
time. It will do nothing to address the critical problems facing our
country. It will unfairly benefit the credit card and banking
industries, rewarding large financial institutions-those paid for by
those least able to afford it. The bill includes an extreme means test
to determine whether a family can file for bankruptcy protection that
helps them get out of debt, or whether the family must enter into a
stringent repayment plan under Chapter 13 of the IRS Code.
Currenlty, less than one-third of Chapter 13 plans are successfully
completed, and this rigid ``one-size-fits-all'' means test would result
in an even greater number of failed repayment plans, increased
administrative costs to the courts, and unnecessary constraints on
families in genuine need of bankruptcy relief. The bill, along with the
amendment that incorporates H.R. 975 hurts families. The problem with
escalating personal bankruptcy filings is not that families are abusing
the bankruptcy system. Ninety percent of bankruptcies are attributable
to a crisis in the debtor's family such job loss, divorce, or excessive
medical bills. In addition, credit card companies are extending credit
far too easily. Credit card companies want all the benefits of a
deregulated credit industry, with high interest rates and low minimum-
payment requirements. They continue to irresponsibility extend credit
to already debt-laden consumers and then run to Congress for help to
apply pressure to consumers already struggling in this troubled
economy.
While the bill purports to elevate the priority of child support
payments, in reality, credit card companies would receive repayment of
debt at the same rate as child support obligations. Those provisions
would have a severe impact on the most vulnerable members of society,
including women and children who rely on alimony and child support
payments to live. The bill's homestead exemption cap does little to
address the problem of wealthy debtors shielding their assets from
creditors by purchasing million-dollars homes. Sophisticated, wealthy
debtors can easily plan ahead and evade the cap. Under the bill, with a
little planning, chief executive officers like Ken Lay, formerly of
Enron, would be able to keep their homes, while lower-income renters--
the former janitors at Enron, for example--could end up homeless.
The bill also imposes artificial deadlines and cumbersome new
paperwork requirements on small businesses trying to reorganize and
unnecessarily limits the discretion of bankruptcy judges in crafting
the best possible result for small business debtors and creditors. The
overbroad requirements called for will force many viable small
businesses to permanently close their doors. The bill is great for
credit card companies, but bad for everyone else. In fact, it hurts
those who most need the second chance offered by bankruptcy.
I do, however, support amendment No. 2 of House Report No. 108-407
offered by Ms. Baldwin of Wisconsin. This amendment would make Chapter
12 of Title 11 of the U.S. Bankruptcy Code that deals with ``family
farmer'' reorganization permanent and would expand the eligibility
requirements found within that Chapter. The number of Chapter 12
filings has risen in the past two years. Allowing this law to lapse
would be irresponsible for us as legislators. Farmers with debts up to
$1.5 million can qualify for Chapter 12 protection if 80 percent of
that debt is related to farm operations. In normal bankruptcy
proceedings, all assets are subject to liquidation, but under Chapter
12, land and equipment is exempt, allowing a family farmer to keep
farming.
From its incipiency, this has always been a bad bill--one that kicks
honest debtors when they are already down on their luck--but the timing
could not be worse. The policy message that is being conveyed with this
legislative scheme amounts to a slap in the face of the families of our
brave men and women in uniform who fought and are still fighting in the
expensive ``Operation Iraqi Freedom,'' a war that has to date not been
substantially justified. This bill should be defeated so that Congress
instead of using the public's time and money to pay back credit card
companies for their campaign contributions, can get back to work
addressing the very real problems facing our country.
For the reasons stated above, Mr. Chairman, I oppose this bill.
Mr. OXLEY. Mr. Chairman, I rise today in support of S. 1920, and the
amendment offered by the distinguished chairman of the Committee on the
Judiciary, the gentleman from Wisconsin (Mr. Sensenbrenner).
As you know, the gentleman's amendment consists of the text of H.R.
975, the Bankruptcy Abuse Prevention and Consumer Protection Act of
2003. That bill was additionally referred to the Committee on Financial
Services, which I chair, based on its jurisdiction over banks and
banking, credit, and securities and exchanges.
Mr. Chairman, this legislation is vitally important to the Nation. In
particular, those provisions addressing the ``netting'' of financial
contracts are an important part of ensuring that our economic recovery
continues, as the Chairman of the Federal Reserve Board of Governors,
Alan Greenspan, has said time and time again.
Accordingly, I wholeheartedly support any effort to move this
legislation forward to enactment. For the record, I am submitting an
exchange of letters between the Chairman of the Committee on the
Judiciary and myself regarding H.R. 975. I appreciate his willingness
[[Page H156]]
to work constructively with the Committee on Financial Services and
look forward to working with him to achieve enactment of these
important reforms.
House of Representatives,
Committee on Financial Services,
Washington, DC, March 14, 2003.
Hon. F. James Sensenbrenner, Jr.,
Chairman, Committee on the Judiciary
Washington, DC.
Dear Jim: On March 12, 2003, the Committee on the Judiciary
ordered reported H.R. 975, the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2003. As you know, the
Committee on Financial Services was granted an additional
referral upon the bill's introduction pursuant to the
Committee's jurisdiction under Rule X of the Rules of the
House of Representatives over banks and banking, credit, and
securities and exchanges.
Because of your willingness to consult with the Committee
on Financial Services regarding this matter, your continuing
support for our requested changes, and the need to move this
legislation expeditiously, I will waive consideration of the
bill by the Financial Services Committee. By agreeing to
waive its consideration of the bill, the Financial Services
Committee does not waive its jurisdiction over H.R. 975. In
addition, the Committee on Financial Services reserves its
authority to seek conferees on any provisions of the bill
that are within the Financial Services Committee's
jurisdiction during any House-Senate conference that may be
convened on this legislation. I ask your commitment to
support any request by the Committee on Financial Services
for conferees on H.R. 975 or related legislation.
I request that you include this letter and your response as
part of your committee's report on the bill and the
Congressional Record during consideration of the legislation
on the House floor.
Thank you for your attention to these matters.
Sincerely,
Michael G. Oxley,
Chairman.
____
House of Representatives,
Committee on the Judiciary,
Washington, DC, March 17, 2003.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Michael: This letter responds to your letter dated
March 14, 2003, concerning H.R. 975, the ``Bankruptcy Abuse
Prevention and Consumer Protection Act of 2003.''
I agree that the bill contains matters within the Financial
Services Committee's jurisdiction and appreciate your
willingness to be discharged from further consideration of
H.R. 975 so we may proceed to the floor.
Pursuant to your request, a copy of your letter and this
letter will be included in the report of the Committee on the
Judiciary on H.R. 975.
Sincerely,
F. James Sensenbrenner, Jr.
Chairman.
Mr. CANTOR. Mr. Chairman, I rise today to speak in favor of
bankruptcy reform, an issue this body has voted in favor of time and
time again.
This reform is long overdue and will go a long way to stop abuses of
the bankruptcy code.
This measure will permanently extend the agricultural chapter of the
bankruptcy code and will add new protections for the American people,
including a ``bill of rights'' for those who file for bankruptcy.
Additionally, this measure will provide new protections for parents
and will strengthen their ability to collect child support. This
legislation will also fix the system so that high income debtors
attempting to protect their excessive lifestyles will be held
accountable and not continue to live lavishly at the expense of working
families.
By establishing a means test for those who file for bankruptcy, this
legislation will ensure that those who can repay their debts will no
longer be able to abuse the system. These abuses negatively affect the
economy by raising the price of goods while simultaneously lowering the
availability of credit. This measure is a victory for the majority of
Americans who play by the rules over those who choose to play by their
own.
Mr. Chairman, the time has come for us to pass bankruptcy reform.
These reforms are necessary to protect the American people; and I urge
passage of this legislation.
Mr. BISHOP of Georgia. Mr. Chairman, I rise today in support of S.
1920 and for the rule which preserves the institution of bankruptcy,
and provides an important safety net for American families,
individuals, and businesses.
At first glance, the bill before us, S. 1920, provides for a 6 month
extension of Chapter 12 bankruptcy protection for America's family
farmers. I am again happy to support this greatly needed extension, but
there's more to this bill than that.
The rule that we are also considering today substitutes into S. 1920
the text of the much larger bankruptcy reform bill (H.R. 975) which we
in the House passed on March 19, 2003 by a vote of 315-113. This was
great news and progress in preserving the institution of bankruptcy
protection. Unfortunately, the bill has not yet been taken up in the
Senate--not surprisingly since previous House versions of bankruptcy
protection have died on the vine in the Senate when extraneous
provisions were included.
So today we have an opportunity for a second bite at that apple. The
provisions in S. 1920 (and H.R. 975 by incorporation) preserve
bankruptcy by ensuring this protection to those who really need it as a
result of unforeseeable medical bills, unemployment, and other
legitimate needs. I am also extremely pleased that it also includes a
permanent extension of Chapter 12 family farmer bankruptcy protection,
and I'd like to also acknowledge the efforts of Representative Baldwin,
whose amendment we are also considering, similarly makes permanent this
important protection. Importantly, H.R. 975 ensures that more family
farmers will be eligible for Chapter 12 by easing some of the income
and debt limitations that currently restrict access to this type of
bankruptcy relief. While reasonable minds may differ as to the best
vehicle for family farmer bankruptcy protection, currently family
farmers are without the bankruptcy protection they need. This is
completely unacceptable.
Broadly speaking, Mr. Chairman, the bankruptcy system in America is
broken and needs to be fixed. Bankruptcy filings have soared in recent
years, with thousands of filers who are capable of repaying their
debts, simply walking away from their debts and obligations through the
current bankruptcy filing system.
We need a greater and more sustainable safety net for all Americans,
and we need it now. The bill before us protects those who truly need it
most, while also including protections for business so that they can
get back on track and get back to work.
This bill is a good deal for Americans, Mr. Chairman, saving American
taxpayers billions of dollars each and every year. It is a powerful and
greatly needed measure that protects consumers and creditors against
those who would abuse the system, while ensuring a fresh start to those
who legitimately need the safety net that is the bankruptcy system.
Let me be perfectly clear--one way or another, we must pass family
farmer bankruptcy protection now in order to lift up America's farmers
by making this protection permanent. I believe that the bill before us
holds this promise. But if this bill fails for any number of political
obstacles between the House and the Senate, we must still honor our
responsibility to ensure that our family farmers are protected. I know
that I will, and I urge my colleagues to do the same.
Mr. BEREUTER. Mr. Chairman, this Member rises today to express his
support for S. 1920, as amended. The Rules Committee has reported-out a
rule (H. Res. 503) which upon passage, automatically modifies this bill
by substituting the text of H.R. 975 which the House passed on March
19, 2003. This Member was a cosponsor of this earlier passed measure.
It is important to note that bankruptcy reforms bills have passed
both the House and Senate in the 105th, 106th, and 107th Congresses. In
the 105th Congress, the House passed a bankruptcy reform conference
report, while the Senate failed to pass the conference report. In the
106th Congress, former President Bill Clinton pocket vetoed a
bankruptcy reform conference report. During the 107th Congress, the
rule under which the bankruptcy reform conference report was to be
considered was defeated in the House because of a tenuous connection
drawn to the subject of abortion clinics by conferees from the other
body.
This Member would thank the distinguished gentleman from Wisconsin
(Mr. Sensenbrenner), the Chairman of the Judiciary Committee, for his
efforts in bringing, S. 1920, as amended to the House Floor for
consideration. This Member supports S. 1920, as amended, for numerous
reasons; however, the most important reasons include the following:
First, this Member supports the provision 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 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.
[[Page H157]]
As a response to these concerns, the needs-based test of this
legislation 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 this legislation, 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 actual expenses for the care and support of an elderly, chronically
ill, or disabled member of the debtor's household or immediate family.
Third, this Member supports the permanent extension of Chapter 12
bankruptcy in this legislation 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 to reorganize their assets in manner which
balances the interests of creditors and the future success of the
involved farmer.
It is important to note that S. 1920, as passed by the other body on
November 25, 2003, would extend Chapter 12 bankruptcy for family farms
and ranches through July 1, 2004. Chapter 12 bankruptcy expired on
January 1, 2004.
If Chapter 12 bankruptcy provisions are not permanently extended for
family farmers, its expiration on January 1, 2004, would continue to be
a 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.
Lastly, this Member supports the provisions in this legislation,
which requires that people convicted of a felony or who owe a debt from
a securities fraud violation in the 5 years before filing for
bankruptcy cannot claim an unlimited homestead exemption. This Member
believes that this provision in the conference report is imperative in
light of the recent corporate scandals at Enron and WorldCom. For
example, this provision would apply to the $7 million penthouse in
Houston of Kenneth Lay (if he still owns it), the former chairman of
Enron, if he both files for personal bankruptcy in the future and owes
a debt due to any conviction of securities fraud. In addition, this
provision may also be relevant to Scott D. Sullivan, the former chief
financial officer of WorldCom, who at one time was building a $15
million mansion in Boca Raton, Florida.
In closing, for these aforementioned reasons and many others, this
Member urges his colleagues to support S. 1920, as amended.
Mr. SMITH of Texas. Mr. Chairman I support this bill. It allows
consumers to benefit from the changes to the bankruptcy system that
were approved by this House last year.
It's time for Congress to enact permanent meaningful bankruptcy
reform. Recent surveys show that 70 percent of Americans support
reforming our nation's bankruptcy laws. Unless we take action,
consumers will continue to be negatively impacted by the current system
and fraudulent filings will continue to be rewarded rather than
discouraged.
In 1980, 300,000 bankruptcy petitions were filed. This past year,
over 1.2 million were reported during just the first nine months. Many
of these filings are legitimate attempts by debtors to pay their debts
and obtain a fresh start. However, bankruptcy is too often used as a
way to avoid responsibilities.
Unnecessary Bankruptcy filings continue to increase at dramatic
rates. This is bad for consumers and bad for our economy. The costs of
these filings are passed on to America's businesses and consumers, who
should not have to absorb these debts. We must ensure that debtors
actually belong in bankruptcy and are not using the system to avoid
their obligations.
This legislation encourages personal responsibility, protects
consumers, and ensures that bankruptcy is used only as a last resort
and is not abused by those who can afford to repay their debts.
Bankruptcy reform is good for consumers, family farmers, and our
economy. I urge my colleagues to support this bill.
Mr. SENSENBRENNER. Mr. Chairman, I yield back the balance of my time.
{time} 1445
The CHAIRMAN. All time for general debate has expired.
Pursuant to the rule, the amendment in the nature of a substitute
consisting of the text of H.R. 975 as passed by the House shall be
considered as an original bill for the purpose of amendment under the
5-minute rule and shall be considered read.
The text of the amendment in the nature of a substitute is as
follows:
H.R. 975
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 2003''.
(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 agreement practices.
Sec. 204. Preservation of claims and defenses upon sale of predatory
loans.
Sec. 205. GAO study and report on reaffirmation agreement process.
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.
Sec. 231. Protection of personally identifiable information.
Sec. 232. Consumer privacy ombudsman.
Sec. 233. Prohibition on disclosure of name of minor children.
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. Reduction of homestead exemption for fraud.
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.
[[Page H158]]
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.
Sec. 322. Limitations on homestead exemption.
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.
Sec. 329. Clarification of postpetition wages and benefits.
Sec. 330. Delay of discharge during pendency of certain proceedings.
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.
Sec. 446. Duties with respect to a debtor who is a plan administrator
of an employee benefit plan.
Sec. 447. Appointment of committee of retired employees.
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 FDIC and NCUAB 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 law amendments.
Sec. 908. Recordkeeping requirements.
Sec. 909. Exemptions from contemporaneous execution requirement.
Sec. 910. Damage measure.
Sec. 911. SIPC stay.
TITLE X--PROTECTION OF FAMILY FARMERS AND FAMILY FISHERMEN
Sec. 1001. Permanent reenactment of chapter 12.
Sec. 1002. Debt limit increase.
Sec. 1003. Certain claims owed to governmental units.
Sec. 1004. Definition of family farmer.
Sec. 1005. Elimination of requirement that family farmer and spouse
receive over 50 percent of income from farming operation
in year prior to bankruptcy.
Sec. 1006. Prohibition of retroactive assessment of disposable income.
Sec. 1007. Family fishermen.
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. Bankruptcy cases and proceedings.
Sec. 1220. Knowing disregard of bankruptcy law or rule.
Sec. 1221. Transfers made by nonprofit charitable corporations.
Sec. 1222. Protection of valid purchase money security interests.
Sec. 1223. Bankruptcy Judgeships.
Sec. 1224. Compensating trustees.
Sec. 1225. Amendment to section 362 of title 11, United States Code.
Sec. 1226. Judicial education.
Sec. 1227. Reclamation.
Sec. 1228. Providing requested tax documents to the court.
Sec. 1229. Encouraging creditworthiness.
Sec. 1230. Property no longer subject to redemption.
Sec. 1231. Trustees.
Sec. 1232. Bankruptcy forms.
Sec. 1233. Direct appeals of bankruptcy matters to courts of appeals.
[[Page H159]]
Sec. 1234. Involuntary cases.
Sec. 1235. Federal election law fines and penalties as nondischargeable
debt.
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.
TITLE XIV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
Sec. 1401. Effective date; application of amendments.
TITLE XV--PREVENTING CORPORATE BANKRUPTCY ABUSE
Sec. 1501. Employee wage and benefit priorities.
Sec. 1502. Fraudulent transfers and obligations.
Sec. 1503. Payment of insurance benefits to retired employees.
Sec. 1504. 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''.
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 so 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 (or bankruptcy administrator, if
any), 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 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, 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, siblings, children, and
grandchildren 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 less
than 18 years of age, not to exceed $1,500 per year per
child, to attend a private or public elementary or secondary
school if the debtor provides documentation of such expenses
and a detailed explanation of why such expenses are
reasonable and necessary, and why such expenses are not
already accounted for in the National Standards, Local
Standards, or Other Necessary Expenses referred to in
subclause (I).
``(V) In addition, the debtor's monthly expenses may
include an allowance for housing and utilities, in excess of
the allowance specified by the Local Standards for housing
and utilities issued by the Internal Revenue Service, based
on the actual expenses for home energy costs if the debtor
provides documentation of such actual expenses and
demonstrates that such actual expenses are reasonable and
necessary.
``(iii) The debtor's average monthly payments on account of
secured debts shall be calculated as the sum of--
``(I) 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
``(II) 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 60.
``(iv) The debtor's expenses for payment of all priority
claims (including priority child support and alimony claims)
shall be calculated as the total amount of debts entitled to
priority, divided by 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 itemize each additional expense
or adjustment of income and to provide--
``(I) documentation for such expense or adjustment to
income; and
``(II) 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 show 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 arise or is
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, on its own initiative or on the motion
of a party in interest, in accordance with the procedures
described in rule 9011 of the Federal Rules of Bankruptcy
Procedure, may order the attorney for the debtor to reimburse
the trustee for all reasonable costs in prosecuting a motion
filed under section 707(b), including reasonable attorneys'
fees, if--
``(i) a trustee files a motion for dismissal or conversion
under this subsection; and
``(ii) the court--
``(I) grants such motion; and
``(II) finds that the action of the attorney 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, the court, on its own initiative or on the motion
of a party in interest, in accordance with such procedures,
may order--
``(i) the assessment of an appropriate civil penalty
against the attorney for the debtor; and
``(ii) the payment of such civil penalty to the trustee,
the United States trustee (or the bankruptcy administrator,
if any).
[[Page H160]]
``(C) The signature of an attorney on a petition, pleading,
or written motion 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, on its own initiative or on the
motion of a party in interest, in accordance with the
procedures described in rule 9011 of the Federal Rules of
Bankruptcy Procedure, may award a debtor all reasonable costs
(including reasonable attorneys' fees) in contesting a motion
filed by a party in interest (other than a trustee or United
States trustee (or bankruptcy administrator, if any)) 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 filed the motion
violated rule 9011 of the Federal Rules of Bankruptcy
Procedure; or
``(II) the attorney (if any) who filed the motion did not
comply with the requirements of clauses (i) and (ii) of
paragraph (4)(C), and the motion was made 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 fewer than 25 full-time employees as determined
on the date on which 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 or United States trustee (or
bankruptcy administrator, if any) may file a motion under
section 707(b), if the current 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;
``(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; 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, plus
$525 per month for each individual in excess of 4.
``(7)(A) No judge, United States trustee (or bankruptcy
administrator, if any), trustee, or other party in interest
may file 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--
``(i) in the case of a debtor in a household of 1 person,
the median family income of the applicable State for 1
earner;
``(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; 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, plus
$525 per month for each individual in excess of 4.
``(B) In a case that is not a joint case, current monthly
income of the debtor's spouse shall not be considered for
purposes of subparagraph (A) if--
``(i)(I) the debtor and the debtor's spouse are separated
under applicable nonbankruptcy law; or
``(II) the debtor and the debtor's spouse are living
separate and apart, other than for the purpose of evading
subparagraph (A); and
``(ii) the debtor files a statement under penalty of
perjury--
``(I) specifying that the debtor meets the requirement of
subclause (I) or (II) of clause (i); and
``(II) disclosing the aggregate, or best estimate of the
aggregate, amount of any cash or money payments received from
the debtor's spouse attributed to the debtor's current
monthly income.''.
(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
that the debtor receives (or in a joint case the debtor and
the debtor's spouse receive) without regard to whether such
income is taxable income, derived during the 6-month period
ending on--
``(i) the last day of the calendar month immediately
preceding the date of the commencement of the case if the
debtor files the schedule of current income required by
section 521(a)(1)(B)(ii); or
``(ii) the date on which current income is determined by
the court for purposes of this title if the debtor does not
file the schedule of current income required by section
521(a)(1)(B)(ii); 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 for 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, payments to
victims of war crimes or crimes against humanity on account
of their status as victims of such crimes, and payments to
victims of international terrorism (as defined in section
2331 of title 18) or domestic terrorism (as defined in
section 2331 of title 18) on account of their status as
victims of such terrorism;''.
(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 a debtor who is an individual in a
case under this chapter--
``(A) the United States trustee (or the bankruptcy
administrator, if any) 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, if any) 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 the bankruptcy administrator, if any) does not
consider such a motion to be appropriate, if the United
States trustee (or the bankruptcy administrator, if any)
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; 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.''.
(d) Notice.--Section 342 of title 11, United States Code,
is amended by adding at the end the following:
``(d) In a case under chapter 7 of this title in which the
debtor is an individual and in which the presumption of abuse
arises 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 arisen.''.
(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 (or bankruptcy administrator, if any), or trustee.
(f) Dismissal for Certain Crimes.--Section 707 of title 11,
United States Code, is amended by adding at the end the
following:
``(c)(1) In this subsection--
``(A) the term `crime of violence' has the meaning given
such term in section 16 of title 18; and
``(B) the term `drug trafficking crime' has the meaning
given such 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 victim dismiss a voluntary case filed
under this chapter by a debtor who is an individual if such
individual was convicted of such 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 inserting after paragraph (6) 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
[[Page H161]]
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)(i) 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
``(ii) 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 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;
``(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; 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, plus
$525 per month for each individual in excess of 4.''.
(i) Special Allowance for Health Insurance.--Section
1329(a) 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) reduce amounts to be paid under the plan by the
actual amount expended by the debtor to purchase health
insurance for the debtor (and for any dependent of the debtor
if such dependent does not otherwise have health insurance
coverage) if the debtor documents the cost of such insurance
and demonstrates that--
``(A) such expenses are reasonable and necessary;
``(B)(i) if the debtor previously paid for health
insurance, the amount is not materially larger than the cost
the debtor previously paid or the cost necessary to maintain
the lapsed policy; or
``(ii) if the debtor did not have health insurance, the
amount is not materially larger than the reasonable cost that
would be incurred by a debtor who purchases health insurance,
who has similar income, expenses, age, and health status, and
who lives in the same geographical location with the same
number of dependents who do not otherwise have health
insurance coverage; and
``(C) the amount is not otherwise allowed for purposes of
determining disposable income under section 1325(b) of this
title;
and upon request of any party in interest, files proof that a
health insurance policy was purchased.''.
(j) Adjustment of Dollar Amounts.--Section 104(b) of title
11, United States Code, is amended by striking ``and
523(a)(2)(C)'' each place it appears and inserting
``523(a)(2)(C), 707(b), and 1325(b)(3)''.
(k) Definition of `Median Family Income'.--Section 101 of
title 11, United States Code, is amended by inserting after
paragraph (39) the following:
``(39A) `median family income' means for any year--
``(A) the median family income both calculated and reported
by the Bureau of the Census in the then most recent year; and
``(B) if not so calculated and reported in the then current
year, adjusted annually after such most recent year until the
next year in which median family income is both calculated
and reported by the Bureau of the Census, to reflect the
percentage change in the Consumer Price Index for All Urban
Consumers during the period of years occurring after such
most recent year and before such current year;''.
(k) 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.
(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 case under this title shall be
subject to fine, imprisonment, or both; and
``(B) all information supplied by a debtor in connection
with a case under this title 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 serve in cases 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 debtors who are individuals 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 the 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 such
individual has, during the 180-day period preceding the date
of filing of the petition by such 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 such 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 the bankruptcy administrator, if any) determines
that the approved nonprofit budget and credit counseling
agencies for such district are not reasonably able to provide
adequate services to the additional individuals who would
otherwise seek credit counseling from such agencies by reason
of the requirements of paragraph (1).
``(B) The United States trustee (or the bankruptcy
administrator, if any) who makes a determination described in
subparagraph (A) shall review such determination not later
than 1 year after the date of such determination, and not
less frequently than
[[Page H162]]
annually thereafter. Notwithstanding the preceding sentence,
a nonprofit budget and credit counseling agency may be
disapproved by the United States trustee (or the bankruptcy
administrator, if any) 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 filing the petition, the debtor failed to
complete an instructional course concerning personal
financial management described in section 111, except that
this paragraph shall not apply with respect to a debtor who
resides in a district for which the United States trustee (or
the bankruptcy administrator, if any) determines that the
approved instructional courses are not adequate to service
the additional individuals who would otherwise be required to
complete such instructional courses under this section (The
United States trustee (or the bankruptcy administrator, if
any) who makes a determination described in this paragraph
shall review such determination not later than 1 year after
the date of such determination, and not less frequently than
annually thereafter.).''.
(c) Chapter 13 Discharge.--Section 1328 of title 11, United
States Code, is amended by adding at the end the following:
``(g)(1) 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.
``(2) Paragraph (1) shall not apply with respect to a
debtor who resides in a district for which the United States
trustee (or the bankruptcy administrator, if any) determines
that the approved instructional courses are not adequate to
service the additional individuals who would otherwise be
required to complete such instructional course by reason of
the requirements of paragraph (1).
``(3) The United States trustee (or the bankruptcy
administrator, if any) who makes a determination described in
paragraph (2) shall review such determination not later than
1 year after the date of such determination, and not less
frequently than annually 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),
a debtor who is an individual 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. Nonprofit budget and credit counseling agencies;
financial management instructional courses
``(a) The clerk shall maintain a publicly available list
of--
``(1) nonprofit budget and credit counseling agencies that
provide 1 or more services described in section 109(h)
currently approved by the United States trustee (or the
bankruptcy administrator, if any); and
``(2) instructional courses concerning personal financial
management currently approved by the United States trustee
(or the bankruptcy administrator, if any), as applicable.
``(b) The United States trustee (or bankruptcy
administrator, if any) shall only approve a nonprofit budget
and credit counseling agency or an instructional course
concerning personal financial management as follows:
``(1) The United States trustee (or bankruptcy
administrator, if any) shall have thoroughly reviewed the
qualifications of the nonprofit budget and credit counseling
agency or of the provider of the instructional course under
the standards set forth in this section, and the services or
instructional courses that will be offered by such agency or
such provider, and may require such agency or such provider
that has sought approval to provide information with respect
to such review.
``(2) The United States trustee (or bankruptcy
administrator, if any) shall have determined that such agency
or such instructional course fully satisfies the applicable
standards set forth in this section.
``(3) If a nonprofit budget and credit counseling agency or
instructional course did not appear on the approved list for
the district under subsection (a) immediately before approval
under this section, approval under this subsection of such
agency or such instructional course shall be for a
probationary period not to exceed 6 months.
``(4) At the conclusion of the applicable probationary
period under paragraph (3), the United States trustee (or
bankruptcy administrator, if any) may only approve for an
additional 1-year period, and for successive 1-year periods
thereafter, an agency or instructional course that has
demonstrated during the probationary or applicable subsequent
period of approval that such agency or instructional course--
``(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), an interested person may seek judicial review
of such decision in the appropriate district court of the
United States.
``(c)(1) The United States trustee (or the bankruptcy
administrator, if any) shall only approve a nonprofit budget
and 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 relating to
the quality, effectiveness, and financial security of the
services it provides.
``(2) To be approved by the United States trustee (or the
bankruptcy administrator, if any), a nonprofit budget and
credit counseling agency shall, at a minimum--
``(A) have a board of directors the majority of which--
``(i) are not employed by such agency; and
``(ii) will not directly or indirectly benefit financially
from the outcome of the counseling services provided by such
agency;
``(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 a client, including
funding sources, counselor qualifications, possible impact on
credit reports, and any costs of such program that will be
paid by such client and how such costs will be paid;
``(E) provide adequate counseling with respect to a
client's credit problems that includes an analysis of such
client's current financial condition, factors that caused
such financial condition, and how such client can develop a
plan to respond to the problems without incurring negative
amortization of debt;
``(F) provide trained counselors who receive no commissions
or bonuses based on the outcome of the counseling services
provided by such agency, 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 the bankruptcy
administrator, if any) 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
instructional course;
``(C) adequate facilities situated in reasonably convenient
locations at which such instructional course is offered,
except that such facilities may include the provision of such
instructional course by telephone or through the Internet, if
such instructional course 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 instructional
course, including any evaluation of satisfaction of
instructional course requirements for each debtor attending
such instructional course, which shall be available for
inspection and evaluation by the Executive Office for United
States Trustees, the United States trustee (or the bankruptcy
administrator, if any), or the chief bankruptcy judge for the
district in which such instructional course is offered; and
[[Page H163]]
``(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 the
debtor's understanding of personal financial management.
``(e) The district court may, at any time, investigate the
qualifications of a nonprofit budget and credit counseling
agency referred to in subsection (a), and request production
of documents to ensure the integrity and effectiveness of
such agency. The district court may, at any time, remove from
the approved list under subsection (a) a nonprofit budget and
credit counseling agency upon finding such agency does not
meet the qualifications of subsection (b).
``(f) The United States trustee (or the bankruptcy
administrator, if any) shall notify the clerk that a
nonprofit budget and 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 nonprofit budget and credit counseling agency
may provide to a credit reporting agency information
concerning whether a debtor has received or sought
instruction concerning personal financial management from
such agency.
``(2) A nonprofit budget and credit counseling agency 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. Nonprofit budget and credit counseling agencies; 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 an unsecured consumer debt 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 on behalf of the debtor by an approved
nonprofit budget and credit counseling agency described in
section 111;
``(B) the offer of the debtor under subparagraph (A)--
``(i) was made at least 60 days before the date of 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 schedule
between the debtor and any creditor of the debtor created by
an approved nonprofit budget and 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, unless the
order confirming the plan is revoked, the plan is 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 AGREEMENT
PRACTICES.
(a) In General.--Section 524 of title 11, United States
Code, as amended section 202, 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;''; and
(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 specified in subsection (c),
statement, declaration, motion and order described,
respectively, in paragraphs (4) through (8), and shall be the
only disclosures required in connection with entering into
such agreement.
``(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 of debt that the debtor agrees to
reaffirm by entering into an agreement of the kind specified
in subsection (c), and
``(ii) the total of any fees and costs accrued as of the
date of the disclosure statement, related to such total
amount.
``(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 an
extension of credit under an open end credit plan, as the
terms `credit' and `open end credit plan' are defined in
section 103 of the Truth in Lending Act, then--
``(I) the annual percentage rate determined under
paragraphs (5) and (6) of section 127(b) of the Truth in
Lending Act, as applicable, as disclosed to the debtor in the
most recent periodic statement prior to entering into an
agreement of the kind specified in subsection (c) or, if no
such periodic statement has been given to 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 to 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
an extension of credit other than under an open end credit
plan, as the terms `credit' and `open end credit plan' are
defined in section 103 of the Truth in Lending Act, then--
[[Page H164]]
``(I) the annual percentage rate under section 128(a)(4) of
the Truth in Lending Act, as disclosed to the debtor in the
most recent disclosure statement given to the debtor prior to
the entering into an agreement of the kind specified in
subsection (c) with respect to the debt, or, if no such
disclosure statement was given to the debtor, the annual
percentage rate as it would have been so disclosed at the
time the disclosure statement is given to 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 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, 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 debts
the debtor is 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 agreement 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 debts 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 reaffirming a debt or what the law
requires, consult with the attorney who helped you negotiate
this agreement reaffirming a debt. If you don't have an
attorney helping you, the judge will explain the effect of
your reaffirming a debt when the hearing on the reaffirmation
agreement 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 your 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 your 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 your 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 your 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 reaffirmation agreement. The
bankruptcy court must approve your reaffirmation agreement as
consistent with your best interests, except that no court
approval is required if your reaffirmation agreement is for a
consumer debt secured by a mortgage, deed of trust, security
deed, or other lien on your real property, like your home.
`` `Your right to rescind (cancel) your reaffirmation
agreement. You may rescind (cancel) your reaffirmation
agreement at any time before the bankruptcy court enters a
discharge order, or before the expiration of the 60-day
period that begins on the date your reaffirmation agreement
is filed with the court, whichever occurs later. To rescind
(cancel) your reaffirmation agreement, you must notify the
creditor that your reaffirmation agreement is rescinded (or
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 case. That means that if
you default on your reaffirmed debt after your bankruptcy
case 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 that 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 your reaffirmation agreement, your
reaffirmation agreement becomes effective upon filing with
the court.'.
``(4) The form of such agreement required under this
paragraph shall consist of the following:
`` `Part B: Reaffirmation Agreement. I (we) agree to
reaffirm the debts 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 these debts:
`` `Accepted by creditor:
`` `Date of creditor acceptance:'.
``(5) The declaration shall consist of the following:
``(A) The following certification:
`` `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; (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) If a presumption of undue hardship has been
established with respect to such agreement, such
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 such 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 reaffirmation 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 an attorney and is
reaffirming a debt owed to a
[[Page H165]]
creditor defined in section 19(b)(1)(A)(iv) of the Federal
Reserve Act, 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 reaffirmation 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 that may be used if approval of such
agreement by the court is required in order for it to be
effective, shall be signed and dated by the movant and shall
consist of the following:
`` `Part E: Motion for Court Approval (To be completed only
if the debtor is not represented by an attorney.). I (we),
the debtor(s), affirm the following to be true and correct:
`` `I am not represented by an attorney in connection with
this reaffirmation agreement.
`` `I believe this reaffirmation agreement is in my best
interest based on the income and expenses I have disclosed in
my Statement in Support of this reaffirmation agreement, 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 such
agreement, shall consist of the following:
`` `Court Order: The court grants the debtor's motion and
approves the reaffirmation agreement described above.'.
``(l) Notwithstanding any other provision of this title the
following shall apply:
``(1) A creditor may accept payments from a debtor before
and after the filing of an agreement of the kind specified in
subsection (c) with the court.
``(2) A creditor may accept payments from a debtor under
such agreement that 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 an agreement of the kind
specified in subsection (c) is filed with the court (or such
additional period as the court, after notice and a hearing
and for cause, orders before the expiration of such period),
it shall be presumed that such 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 such 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 that identifies additional sources of funds to
make the payments as agreed upon under the terms of such
agreement. If the presumption is not rebutted to the
satisfaction of the court, the court may disapprove such
agreement. No agreement shall be disapproved without notice
and a 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.''.
(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 Attorneys and Agents of the Federal
Bureau of Investigation.--The individuals referred to in
subsection (a) are--
``(1) the United States attorney for each judicial district
of the United States; and
``(2) an agent of the Federal Bureau of Investigation 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 that may contain
a materially fraudulent statement in a bankruptcy schedule to
the individuals designated under this section.''.
(2) Clerical amendment.--The table of sections 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.''.
SEC. 204. PRESERVATION OF CLAIMS AND DEFENSES UPON SALE OF
PREDATORY LOANS.
Section 363 of title 11, United States Code, is amended--
(1) by redesignating subsection (o) as subsection (p), and
(2) by inserting after subsection (n) the following:
``(o) Notwithstanding subsection (f), if a person purchases
any interest in a consumer credit transaction that is subject
to the Truth in Lending Act or any interest in a consumer
credit contract (as defined in section 433.1 of title 16 of
the Code of Federal Regulations (January 1, 2002), as amended
from time to time), and if such interest is purchased through
a sale under this section, then such person shall remain
subject to all claims and defenses that are related to such
consumer credit transaction or such consumer credit contract,
to the same extent as such person would be subject to such
claims and defenses of the consumer had such interest been
purchased at a sale not under this section.''.
SEC. 205. GAO STUDY AND REPORT ON REAFFIRMATION AGREEMENT
PROCESS.
(a) Study.--The Comptroller General of the United States
shall conduct a study of the reaffirmation agreement process
that occurs under title 11 of the United States Code, to
determine the overall treatment of consumers within the
context of such process, and shall include in such study
consideration of--
(1) the policies and activities of creditors with respect
to reaffirmation agreements; and
(2) whether consumers are fully, fairly, and consistently
informed of their rights pursuant to such title.
(b) Report to the Congress.--Not later than 18 months after
the date of the 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 on the results of the study conducted under subsection
(a), together with recommendations for legislation (if any)
to address any abusive or coercive tactics found in
connection with the reaffirmation agreement process that
occurs under title 11 of the United States Code.
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 date of the order for relief in a
case 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 the date of the order for relief in a case 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 of the debtor, or such child's parent, legal
guardian, or responsible relative 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 so redesignated, by striking
``First'' and inserting ``Second'';
(4) in paragraph (3), as so redesignated, by striking
``Second'' and inserting ``Third'';
(5) in paragraph (4), as so 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 so redesignated, by striking
``Fourth'' and inserting ``Fifth'';
(7) in paragraph (6), as so redesignated, by striking
``Fifth'' and inserting ``Sixth'';
(8) in paragraph (7), as so redesignated, by striking
``Sixth'' and inserting ``Seventh''; and
(9) by inserting before paragraph (2), as so redesignated,
the following:
``(1) First:
[[Page H166]]
``(A) Allowed unsecured claims for domestic support
obligations that, as of the date of the filing of the
petition in a case under this title, are owed to or
recoverable by a spouse, former spouse, or child of the
debtor, or such child's parent, legal guardian, or
responsible relative, without regard to whether the claim is
filed by such person or is filed by a governmental unit on
behalf of such person, on the condition that funds received
under this paragraph by a governmental unit under this title
after the date of the 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 of the filing of the petition, 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 governmental 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 the filing of the petition be applied and
distributed in accordance with applicable nonbankruptcy law.
``(C) If a trustee is appointed or elected under section
701, 702, 703, 1104, 1202, or 1302, the administrative
expenses of the trustee allowed under paragraphs (1)(A), (2),
and (6) of section 503(b) shall be paid before payment of
claims under subparagraphs (A) and (B), to the extent that
the trustee administers assets that are otherwise available
for the payment of such claims.''.
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 by statute, to pay a domestic
support obligation, the debtor has paid all amounts payable
under such order or such statute for such obligation that
first become payable after the date of the filing of the
petition.'';
(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 of the
filing of the petition.'';
(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 1228(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) the debtor has paid all amounts that are required to
be paid under a domestic support obligation and that first
become payable after the date of the filing of the petition
if the debtor is required by a judicial or administrative
order, or by statute, to pay such domestic support
obligation.'';
(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, or by
statute, to pay a domestic support obligation, after such
debtor certifies that all amounts payable under such order or
such 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 by 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 of the
filing of the petition.'';
(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 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.'';
(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 section 102, by
inserting after paragraph (7) the following:
``(8) the debtor has paid all amounts that are required to
be paid under a domestic support obligation and that first
become payable after the date of the filing of the petition
if the debtor is required by a judicial or administrative
order, or by statute, to pay such domestic support
obligation; 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, or by
statute, to pay a domestic support obligation, after such
debtor certifies that all amounts payable under such order or
such 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 by 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;
``(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) of 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 or a statute;
``(D) of the withholding, suspension, or restriction of a
driver's license, a professional or occupational license, or
a recreational license, under State law, as specified in
section 466(a)(16) of the Social Security Act;
``(E) of 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;
``(F) of the interception of a tax refund, as specified in
sections 464 and 466(a)(3) of the Social Security Act or
under an analogous State law; or
``(G) of the enforcement of a medical obligation, as
specified under title IV of the Social Security Act;''.
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;''; 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.
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
[[Page H167]]
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.
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 of the filing of
the petition'' 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 section 102, 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 the debtor there is a claim for a
domestic support obligation, provide the applicable notice
specified in subsection (c); and''; and
(2) by adding at the end the following:
``(c)(1) In a case described in subsection (a)(10) to which
subsection (a)(10) applies, the trustee shall--
``(A)(i) provide written notice to the holder of the claim
described in subsection (a)(10) of such claim and of the
right of such holder to use the services of the State child
support enforcement agency established under sections 464 and
466 of the Social Security Act for the State in which such
holder resides, for assistance in collecting child support
during and after the case under this title;
``(ii) include in the notice provided under clause (i) the
address and telephone number of such State child support
enforcement agency; and
``(iii) include in the notice provided under clause (i) an
explanation of the rights of such holder to payment of such
claim under this chapter;
``(B)(i) provide written notice to such State child support
enforcement agency of such claim; and
``(ii) include in the notice provided under clause (i) the
name, address, and telephone number of such holder; and
``(C) at such time as the debtor is granted a discharge
under section 727, provide written notice to such holder and
to such State child support enforcement agency 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) the name of each creditor that holds a claim that--
``(I) is not discharged under paragraph (2), (4), or (14A)
of section 523(a); or
``(II) was reaffirmed by the debtor under section 524(c).
``(2)(A) The holder of a claim described in subsection
(a)(10) or the State child support enforcement agency of the
State in which such holder resides may request from a
creditor described in paragraph (1)(C)(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 by reason of making such
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 the debtor there is a claim for a
domestic support obligation, provide the applicable notice
specified in subsection (c).''; and
(2) by adding at the end the following:
``(c)(1) In a case described in subsection (a)(8) to which
subsection (a)(8) applies, the trustee shall--
``(A)(i) provide written notice to the holder of the claim
described in subsection (a)(8) of such claim and of the right
of such holder to use the services of the State child support
enforcement agency established under sections 464 and 466 of
the Social Security Act for the State in which such holder
resides, for assistance in collecting child support during
and after the case under this title; and
``(ii) include in the notice required by clause (i) the
address and telephone number of such State child support
enforcement agency;
``(B)(i) provide written notice to such State child support
enforcement agency of such claim; and
``(ii) include in the notice required by clause (i) the
name, address, and telephone number of such holder; and
``(C) at such time as the debtor is granted a discharge
under section 1141, provide written notice to such holder and
to such State child support enforcement agency 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) the name of each creditor that holds a claim that--
``(I) is not discharged under paragraph (2), (4), or (14A)
of section 523(a); or
``(II) was reaffirmed by the debtor under section 524(c).
``(2)(A) The holder of a claim described in subsection
(a)(8) or the State child enforcement support agency of the
State in which such holder resides may request from a
creditor described in paragraph (1)(C)(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 by reason of making such
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 the debtor there is a claim for a
domestic support obligation, provide the applicable notice
specified in subsection (c).''; and
(2) by adding at the end the following:
``(c)(1) In a case described in subsection (b)(6) to which
subsection (b)(6) applies, the trustee shall--
``(A)(i) provide written notice to the holder of the claim
described in subsection (b)(6) of such claim and of the right
of such holder to use the services of the State child support
enforcement agency established under sections 464 and 466 of
the Social Security Act for the State in which such holder
resides, for assistance in collecting child support during
and after the case under this title; and
``(ii) include in the notice provided under clause (i) the
address and telephone number of such State child support
enforcement agency;
``(B)(i) provide written notice to such State child support
enforcement agency of such claim; and
``(ii) include in the notice provided under clause (i) the
name, address, and telephone number of such holder; and
``(C) at such time as the debtor is granted a discharge
under section 1228, provide written notice to such holder and
to such State child support enforcement agency 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) the name of each creditor that holds a claim that--
``(I) is not discharged under paragraph (2), (4), or (14A)
of section 523(a); or
``(II) was reaffirmed by the debtor under section 524(c).
``(2)(A) The holder of a claim described in subsection
(b)(6) or the State child support enforcement agency of the
State in which such holder resides may request from a
creditor described in paragraph (1)(C)(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 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 the debtor there is a claim for a
domestic support obligation, provide the applicable notice
specified in subsection (d).''; and
(2) by adding at the end the following:
``(d)(1) In a case described in subsection (b)(6) to which
subsection (b)(6) applies, the trustee shall--
``(A)(i) provide written notice to the holder of the claim
described in subsection (b)(6) of such claim and of the right
of such holder to use the services of the State child support
enforcement agency established under sections 464 and 466 of
the Social Security Act for the State in which such holder
resides, for assistance in collecting child support during
and after the case under this title; and
``(ii) include in the notice provided under clause (i) the
address and telephone number of such State child support
enforcement agency;
``(B)(i) provide written notice to such State child support
enforcement agency of such claim; and
``(ii) include in the notice provided under clause (i) the
name, address, and telephone number of such holder; and
``(C) at such time as the debtor is granted a discharge
under section 1328, provide written notice to such holder and
to such State child support enforcement agency of--
``(i) the granting of the discharge;
[[Page H168]]
``(ii) the last recent known address of the debtor;
``(iii) the last recent known name and address of the
debtor's employer; and
``(iv) the name of each creditor that holds a claim that--
``(I) is not discharged under paragraph (2) or (4) of
section 523(a); or
``(II) was reaffirmed by the debtor under section 524(c).
``(2)(A) The holder of a claim described in subsection
(b)(6) or the State child support enforcement agency of the
State in which such holder resides may request from a
creditor described in paragraph (1)(C)(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 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 defined in section 221(d)(1) of the
Internal Revenue Code of 1986, incurred by a debtor who is an
individual;''.
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 ``or an employee of
an attorney'' and inserting ``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 bankruptcy petition 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 which
shall be on an official form prescribed by the Judicial
Conference of the United States in accordance with rule 9009
of the Federal Rules of Bankruptcy Procedure.
``(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 the debtor and, under penalty of
perjury, by the bankruptcy petition preparer; 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
bankruptcy petition 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 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 so 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 so redesignated--
(i) by striking ``Within 10 days after the date of the
filing of 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 so 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 bankruptcy petition preparer during
the 12-month period immediately preceding the date of the
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 so redesignated, by striking ``or
the United States trustee'' and inserting ``the United States
trustee (or the bankruptcy administrator, if any) 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:
``(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 the motion of the
debtor, trustee, United States trustee (or the bankruptcy
administrator, if any), and after notice and a hearing, 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 on the motion of the
court, the trustee, or the United States trustee (or the
bankruptcy administrator, if any).''; 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
[[Page H169]]
``(D) prepared a document for filing in a manner that
failed to disclose the identity of the bankruptcy petition
preparer.
``(3) A debtor, trustee, creditor, or United States trustee
(or the bankruptcy administrator, if any) may file a motion
for an order imposing a fine on the bankruptcy petition
preparer for any 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, as amended
by section 212, is amended by inserting after paragraph (9)
the following:
``(10) Tenth, allowed claims for death or personal injury
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 filing of the petition in a
case under 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 such 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 such
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 such 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; and
(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(c) 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
under 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) a loan from a thrift savings plan permitted under
subchapter III of chapter 84 of title 5, that satisfies the
requirements of section 8433(g) of such title;
but nothing in this paragraph 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 section 215, is amended by
inserting after paragraph (17) 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 a thrift savings plan permitted under
subchapter III of chapter 84 of title 5, that satisfies the
requirements of section 8433(g) of such title;
but nothing in this paragraph 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; or''.
(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.--
(1) Limitation.--Section 522 of title 11, United States
Code, is amended by adding at the end the following:
``(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 such Code or a simple retirement account
under section 408(p) of such 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 in a case filed by a debtor who is an
individual, except that such amount may be increased if the
interests of justice so require.''.
(2) Adjustment of dollar amounts.--Paragraphs (1) and (2)
of section 104(b) of title 11, United States Code, are
amended by inserting ``522(n),'' after ``522(d),''.
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 (9); 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 the filing of the petition in a case under this title,
but--
``(A) only if the designated beneficiary of such account
was a child, stepchild, grandchild, or stepgrandchild 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
[[Page H170]]
``(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 the filing of the petition in a case under
this title, but--
``(A) only if the designated beneficiary of the amounts
paid or contributed to such tuition program was a child,
stepchild, grandchild, or stepgrandchild 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 in a case
under this title 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 section 106, 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 the value of whose
nonexempt property is 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 who is an officer, director, employee, or
agent of a person who provides such assistance or of the
bankruptcy petition preparer;
``(B) a nonprofit organization that is exempt from taxation
under section 501(c)(3) of the Internal Revenue Code of 1986;
``(C) a creditor of such assisted person, to the extent
that the creditor is assisting such assisted person to
restructure any debt owed by such assisted 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 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) of title 11,
United States Code, is amended by inserting ``101(3),'' after
``sections'' each place it appears.
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--
``(A) the services that such agency will provide to such
person; or
``(B) 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 a 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 attorneys' fees as determined by the
court.
``(4) The district courts of the United States for
districts located in the State shall have concurrent
jurisdiction of any action under subparagraph (A) or (B) of
paragraph (3).
``(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 the 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 after the item relating to section 525, the
following:
``526. Restrictions on debt relief agencies.''.
SEC. 228. DISCLOSURES.
(a) Disclosures.--Subchapter II of chapter 5 of title 11,
United States Code, as amended by section 227, is amended by
adding at the end the following:
[[Page H171]]
``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);
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 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 of this
title, 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 case under this title or other sanction, including a
criminal sanction.
``(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)
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 available under 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. 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 should 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.
``(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
section 227, 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 sections 227 and 228, 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
on which 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 use the following statement
in such advertisement: `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 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
section 227 and 228, is amended by inserting after the item
relating to section 527, the following:
``528. Requirements for debt relief agencies.''.
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 debtors who are
individuals under such title, the names and social security
account 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).
SEC. 231. PROTECTION OF PERSONALLY IDENTIFIABLE INFORMATION.
(a) Limitation.--Section 363(b)(1) of title 11, United
States Code, is amended by striking the period at the end and
inserting the following:
``, except that if the debtor in connection with offering a
product or a service discloses to an individual a policy
prohibiting the
[[Page H172]]
transfer of personally identifiable information about
individuals to persons that are not affiliated with the
debtor and if such policy is in effect on the date of the
commencement of the case, then the trustee may not sell or
lease personally identifiable information to any person
unless--
``(A) such sale or such lease is consistent with such
policy; or
``(B) after appointment of a consumer privacy ombudsman in
accordance with section 332, and after notice and a hearing,
the court approves such sale or such lease--
``(i) giving due consideration to the facts, circumstances,
and conditions of such sale or such lease; and
``(ii) finding that no showing was made that such sale or
such lease would violate applicable nonbankruptcy law.''.
(b) Definition.--Section 101 of title 11, United States
Code, is amended by inserting after paragraph (41) the
following:
``(41A) `personally identifiable information' means--
``(A) if provided by an individual to the debtor in
connection with obtaining a product or a service from the
debtor primarily for personal, family, or household
purposes--
``(i) the first name (or initial) and last name of such
individual, whether given at birth or time of adoption, or
resulting from a lawful change of name;
``(ii) the geographical address of a physical place of
residence of such individual;
``(iii) an electronic address (including an e-mail address)
of such individual;
``(iv) a telephone number dedicated to contacting such
individual at such physical place of residence;
``(v) a social security account number issued to such
individual; or
``(vi) the account number of a credit card issued to such
individual; or
``(B) if identified in connection with 1 or more of the
items of information specified in subparagraph (A)--
``(i) a birth date, the number of a certificate of birth or
adoption, or a place of birth; or
``(ii) any other information concerning an identified
individual that, if disclosed, will result in contacting or
identifying such individual physically or electronically;''.
SEC. 232. CONSUMER PRIVACY OMBUDSMAN.
(a) Consumer Privacy Ombudsman.--Title 11 of the United
States Code is amended by inserting after section 331 the
following:
``Sec. 332. Consumer privacy ombudsman
``(a) If a hearing is required under section 363(b)(1)(B),
the court shall order the United States trustee to appoint,
not later than 5 days before the commencement of the hearing,
1 disinterested person (other than the United States trustee)
to serve as the consumer privacy ombudsman in the case and
shall require that notice of such hearing be timely given to
such ombudsman.
``(b) The consumer privacy ombudsman may appear and be
heard at such hearing and shall provide to the court
information to assist the court in its consideration of the
facts, circumstances, and conditions of the proposed sale or
lease of personally identifiable information under section
363(b)(1)(B). Such information may include presentation of--
``(1) the debtor's privacy policy;
``(2) the potential losses or gains of privacy to consumers
if such sale or such lease is approved by the court;
``(3) the potential costs or benefits to consumers if such
sale or such lease is approved by the court; and
``(4) the potential alternatives that would mitigate
potential privacy losses or potential costs to consumers.
``(c) A consumer privacy ombudsman shall not disclose any
personally identifiable information obtained by the ombudsman
under this title.''.
(b) Compensation of Consumer Privacy Ombudsman.--Section
330(a)(1) of title 11, United States Code, is amended in the
matter preceding subparagraph (A), by inserting ``a consumer
privacy ombudsman appointed under section 332,'' before ``an
examiner''.
(c) Conforming Amendment.--The table of sections for
subchapter II of chapter 3 of title 11, United States Code,
is amended by adding at the end the following:
``332. Consumer privacy ombudsman.''.
SEC. 233. PROHIBITION ON DISCLOSURE OF NAME 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 name of minor
children
``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. The debtor may be
required to disclose the name of such minor child in a
nonpublic record that is maintained by the court and made
available by the court for examination by the United States
trustee, the trustee, and the auditor (if any) serving under
section 586(f) of title 28, in the case. The court, the
United States trustee, the trustee, and such auditor shall
not disclose the name of such minor child maintained in such
nonpublic record.''.
(b) Clerical Amendment.--The table of sections for chapter
1 of title 11, United States Code, as amended by section 106,
is amended by inserting after the item relating to section
111 the following:
``112. Prohibition on disclosure of name of minor children.''.
(c) Conforming Amendment.--Section 107(a) of title 11,
United States Code, is amended by inserting ``and subject to
section 112'' after ``section''.
TITLE III --DISCOURAGING BANKRUPTCY ABUSE
SEC. 301. TECHNICAL AMENDMENTS.
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
debtor who is an individual in a case 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) on the motion of 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 chapters 7,
11, and 13 in which the individual was a debtor was pending
within the preceding 1-year period;
``(II) a previous case under any of chapters 7, 11, and 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 that 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 a debtor who is an individual 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 a 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 the entry of the order allowing the
stay to go into effect; and
``(D) 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) 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
[[Page H173]]
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 provide 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 such 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 property, if the court
finds that the filing of the 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, such real property without the consent of the
secured creditor or court approval; or
``(B) multiple bankruptcy filings affecting such real
property.
If recorded in compliance with applicable State laws
governing notices of interests or liens in real property, an
order entered under paragraph (4) shall be binding in any
other case under this title purporting to affect such real
property filed not later than 2 years after the date of the
entry of such order by the court, except that a debtor in a
subsequent case under this title 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, as amended by section 224, is amended by
inserting after paragraph (19), the following:
``(20) under subsection (a), of any act to enforce any lien
against or security interest in real property following entry
of the order under subsection (d)(4) as to such real property
in any prior case under this title, for a period of 2 years
after the date of the entry of such an order, except that the
debtor, in a subsequent case under this title, may move 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 case under this title; or
``(B) if the case under this title was filed in violation
of a bankruptcy court order in a prior case under this title
prohibiting the debtor from being a debtor in another case
under this title;''.
SEC. 304. DEBTOR RETENTION OF PERSONAL PROPERTY SECURITY.
Title 11, United States Code, is amended--
(1) in section 521(a), as so designated by section 106--
(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 a case under chapter 7 of this title in which the
debtor is an individual, not retain possession of personal
property as to which a creditor has an allowed claim for the
purchase price secured in whole or in part by an interest in
such personal property unless 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) with respect to the claim secured by such
property; or
``(B) redeems such property from the security interest
pursuant to section 722.
If the debtor fails to so act within the 45-day period
referred to in paragraph (6), the stay under section 362(a)
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 filed 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, as amended by section 106--
(A) in subsection (c), by striking ``(e), and (f)'' and
inserting ``(e), (f), and (h)'';
(B) by redesignating subsection (h) as subsection (k) and
transferring such subsection so as to insert it after
subjection (j) as added by section 106; and
(C) by inserting after subsection (g) the following:
``(h)(1) In a case in which the debtor is an individual,
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)--
``(A) to file timely any statement of intention required
under section 521(a)(2) with respect to such personal
property or to indicate in such statement that the debtor
will either surrender such personal property or retain it
and, if retaining such personal property, either redeem such
personal property pursuant to section 722, enter into an
agreement of the kind specified in section 524(c) applicable
to the debt secured by such personal property, or assume such
unexpired lease pursuant to section 365(p) if the trustee
does not do so, as applicable; and
``(B) to take timely the action specified in such
statement, as it may be amended before expiration of the
period for taking action, unless such statement specifies the
debtor's intention to reaffirm such debt on the original
contract terms and the creditor refuses to agree to the
reaffirmation on such 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 personal 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 hearing on the
motion.''; and
(2) in section 521, as amended by sections 106 and 225--
(A) in subsection (a)(2) by striking ``consumer'';
(B) in subsection (a)(2)(B)--
(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)''; and
(ii) by striking ``forty-five day'' and inserting ``30-
day'';
(C) in subsection (a)(2)(C) by inserting ``, except as
provided in section 362(h)'' 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), 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, nothing in this
title shall prevent or limit the operation of a provision in
the underlying lease or agreement that 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:
``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
910-day preceding the date of 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, is amended--
(1) by inserting after paragraph (13) the following:
[[Page H174]]
``(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 property 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) of title 11, United States Code, as so
designated by section 106, is amended--
(1) in subparagraph (A)--
(A) by striking ``180 days'' and inserting ``730 days'';
and
(B) 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''; and
(2) by adding at the end the following:
``If the effect of the domiciliary requirement under
subparagraph (A) is to render the debtor ineligible for any
exemption, the debtor may elect to exempt property that is
specified under subsection (d).''.
SEC. 308. REDUCTION OF HOMESTEAD EXEMPTION FOR FRAUD.
Section 522 of title 11, United States Code, as amended by
section 224, 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;
``(3) a burial plot for the debtor or a dependent of the
debtor; or
``(4) real or personal property that the debtor or a
dependent of the debtor claims as a homestead;
shall be reduced to the extent that such value is
attributable to any portion of any property that the debtor
disposed of in the 10-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 case under chapter 13; 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 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) If the debtor in a case under chapter 7 is an
individual, 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, as amended by section 306, 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 $500 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 terms `consumer', `credit', and `open end credit
plan' have the same meanings as in section 103 of the Truth
in Lending Act; and
``(II) 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.
(a) In General.--Section 362(b) of title 11, United States
Code, as amended by sections 224 and 303, is amended by
inserting after paragraph (21), the following:
``(22) subject to subsection (n), under subsection (a)(3),
of the continuation of any
[[Page H175]]
eviction, unlawful detainer action, or similar proceeding by
a lessor against a debtor involving residential property in
which the debtor resides as a tenant under a lease or rental
agreement and with respect to which the lessor has obtained
before the date of the filing of the bankruptcy petition, a
judgment for possession of such property against the debtor;
``(23) subject to subsection (o), under subsection (a)(3),
of an eviction action that seeks possession of the
residential property in which the debtor resides as a tenant
under a lease or rental agreement based on endangerment of
such property or the illegal use of controlled substances on
such property, but only if the lessor files with the court,
and serves upon the debtor, a certification under penalty of
perjury that such an eviction action has been filed, or that
the debtor, during the 30-day period preceding the date of
the filing of the certification, has endangered property or
illegally used or allowed to be used a controlled substance
on the property;
``(24) under subsection (a), of any transfer that is not
avoidable under section 544 and that is not avoidable under
section 549;''.
(b) Limitations.--Section 362 of title 11, United States
Code, as amended by sections 106 and 305, is amended by
adding at the end the following:
``(l)(1) Except as otherwise provided in this subsection,
subsection (b)(22) shall apply on the date that is 30 days
after the date on which the bankruptcy petition is filed, if
the debtor files with the petition and serves upon the lessor
a certification under penalty of perjury that--
``(A) under nonbankruptcy law applicable in the
jurisdiction, there are circumstances under which the debtor
would be permitted to cure the entire monetary default that
gave rise to the judgment for possession, after that judgment
for possession was entered; and
``(B) the debtor (or an adult dependent of the debtor) has
deposited with the clerk of the court, any rent that would
become due during the 30-day period after the filing of the
bankruptcy petition.
``(2) If, within the 30-day period after the filing of the
bankruptcy petition, the debtor (or an adult dependent of the
debtor) complies with paragraph (1) and files with the court
and serves upon the lessor a further certification under
penalty of perjury that the debtor (or an adult dependent of
the debtor) has cured, under nonbankrupcty law applicable in
the jurisdiction, the entire monetary default that gave rise
to the judgment under which possession is sought by the
lessor, subsection (b)(22) shall not apply, unless ordered to
apply by the court under paragraph (3).
``(3)(A) If the lessor files an objection to any
certification filed by the debtor under paragraph (1) or (2),
and serves such objection upon the debtor, the court shall
hold a hearing within 10 days after the filing and service of
such objection to determine if the certification filed by the
debtor under paragraph (1) or (2) is true.
``(B) If the court upholds the objection of the lessor
filed under subparagraph (A)--
``(i) subsection (b)(22) shall apply immediately and relief
from the stay provided under subsection (a)(3) shall not be
required to enable the lessor to complete the process to
recover full possession of the property; and
``(ii) the clerk of the court shall immediately serve upon
the lessor and the debtor a certified copy of the court's
order upholding the lessor's objection.
``(4) If a debtor, in accordance with paragraph (5),
indicates on the petition that there was a judgment for
possession of the residential rental property in which the
debtor resides and does not file a certification under
paragraph (1) or (2)--
``(A) subsection (b)(22) shall apply immediately upon
failure to file such certification, and relief from the stay
provided under subsection (a)(3) shall not be required to
enable the lessor to complete the process to recover full
possession of the property; and
``(B) the clerk of the court shall immediately serve upon
the lessor and the debtor a certified copy of the docket
indicating the absence of a filed certification and the
applicability of the exception to the stay under subsection
(b)(22).
``(5)(A) Where a judgment for possession of residential
property in which the debtor resides as a tenant under a
lease or rental agreement has been obtained by the lessor,
the debtor shall so indicate on the bankruptcy petition and
shall provide the name and address of the lessor that
obtained that pre-petition judgment on the petition and on
any certification filed under this subsection.
``(B) The form of certification filed with the petition, as
specified in this subsection, shall provide for the debtor to
certify, and the debtor shall certify--
``(i) whether a judgment for possession of residential
rental housing in which the debtor resides has been obtained
against the debtor before the date of the filing of the
petition; and
``(ii) whether the debtor is claiming under paragraph (1)
that under nonbankruptcy law applicable in the jurisdiction,
there are circumstances under which the debtor would be
permitted to cure the entire monetary default that gave rise
to the judgment for possession, after that judgment of
possession was entered, and has made the appropriate deposit
with the court.
``(C) The standard forms (electronic and otherwise) used in
a bankruptcy proceeding shall be amended to reflect the
requirements of this subsection.
``(D) The clerk of the court shall arrange for the prompt
transmittal of the rent deposited in accordance with
paragraph (1)(B) to the lessor.
``(m)(1) Except as otherwise provided in this subsection,
subsection (b)(23) shall apply on the date that is 15 days
after the date on which the lessor files and serves a
certification described in subsection (b)(23).
``(2)(A) If the debtor files with the court an objection to
the truth or legal sufficiency of the certification described
in subsection (b)(23) and serves such objection upon the
lessor, subsection (b)(23) shall not apply, unless ordered to
apply by the court under this subsection.
``(B) If the debtor files and serves the objection under
subparagraph (A), the court shall hold a hearing within 10
days after the filing and service of such objection to
determine if the situation giving rise to the lessor's
certification under paragraph (1) existed or has been
remedied.
``(C) If the debtor can demonstrate to the satisfaction of
the court that the situation giving rise to the lessor's
certification under paragraph (1) did not exist or has been
remedied, the stay provided under subsection (a)(3) shall
remain in effect until the termination of the stay under this
section.
``(D) If the debtor cannot demonstrate to the satisfaction
of the court that the situation giving rise to the lessor's
certification under paragraph (1) did not exist or has been
remedied--
``(i) relief from the stay provided under subsection (a)(3)
shall not be required to enable the lessor to proceed with
the eviction; and
``(ii) the clerk of the court shall immediately serve upon
the lessor and the debtor a certified copy of the court's
order upholding the lessor's certification.
``(3) If the debtor fails to file, within 15 days, an
objection under paragraph (2)(A)--
``(A) subsection (b)(23) shall apply immediately upon such
failure and relief from the stay provided under subsection
(a)(3) shall not be required to enable the lessor to complete
the process to recover full possession of the property; and
``(B) the clerk of the court shall immediately serve upon
the lessor and the debtor a certified copy of the docket
indicating such failure.''.
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 in the
plan or disallowed under section 502, if the debtor has
received a discharge--
``(1) in a case filed under chapter 7, 11, or 12 of this
title during the 4-year period preceding the date of the
order for relief under this chapter, or
``(2) in a case filed under chapter 13 of this title during
the 2-year period preceding the date of such order.''.
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;
(xii) medical equipment and supplies;
``(xiii) furniture exclusively for the use of minor
children, or elderly or disabled dependents of the debtor;
``(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; and
``(xv) 1 personal computer and related equipment.
``(B) The term `household goods' does not include--
``(i) works of art (unless by or of the debtor, or any
relative of the debtor);
``(ii) electronic entertainment equipment with a fair
market value of more than $500 in the aggregate (except 1
television, 1 radio, and 1 VCR);
``(iii) items acquired as antiques with a fair market value
of more than $500 in the aggregate;
``(iv) jewelry with a fair market value of more than $500
in the aggregate (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
[[Page H176]]
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
subsection (a), 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 such section 522(f)(4) has
had on debtors and on the bankruptcy courts. Such report may
include recommendations for amendments to such section
522(f)(4) 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);
``(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 section 102, 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)(A) If, within the 90 days before the commencement of
a voluntary case, a creditor supplies the debtor in at least
2 communications sent to the debtor with the current account
number of the debtor and the address at which such creditor
requests to receive correspondence, then any notice required
by this title to be sent by the debtor to such creditor shall
be sent to such address and shall include such account
number.
``(B) If a creditor would be in violation of applicable
nonbankruptcy law by sending any such communication within
such 90-day period and if such creditor supplies the debtor
in the last 2 communications with the current account number
of the debtor and the address at which such creditor requests
to receive correspondence, then any notice required by this
title to be sent by the debtor to such creditor shall be sent
to such address and shall include such account number.''; and
(2) by adding at the end the following:
``(e)(1) In a case under chapter 7 or 13 of this title of a
debtor who is an individual, a creditor at any time may both
file with the court and serve on the debtor a notice of
address to be used to provide notice in such case to such
creditor.
``(2) Any notice in such case required to be provided to
such creditor by the debtor or the court later than 5 days
after the court and the debtor receive such creditor's notice
of address, shall be provided to such address.
``(f)(1) An entity may file with any bankruptcy court a
notice of address to be used by all the bankruptcy courts or
by particular bankruptcy courts, as so specified by such
entity at the time such notice is filed, to provide notice to
such entity in all cases under chapters 7 and 13 pending in
the courts with respect to which such notice is filed, in
which such entity is a creditor.
``(2) In any case filed under chapter 7 or 13, any notice
required to be provided by a court with respect to which a
notice is filed under paragraph (1), to such entity later
than 30 days after the filing of such notice under paragraph
(1) shall be provided to such address unless with respect to
a particular case a different address is specified in a
notice filed and served in accordance with subsection (e).
``(3) A notice filed under paragraph (1) may be withdrawn
by such entity.
``(g)(1) Notice provided to a creditor by the debtor or the
court other than in accordance with this section (excluding
this subsection) shall not be effective notice until such
notice is brought to the attention of such creditor. If such
creditor designates a person or an organizational subdivision
of such creditor to be responsible for receiving notices
under this title and establishes reasonable procedures so
that such notices receivable by such creditor are to be
delivered to such person or such subdivision, then a notice
provided to such creditor other than in accordance with this
section (excluding this subsection) shall not be considered
to have been brought to the attention of such creditor until
such notice is received by such person or such subdivision.
``(2) A monetary penalty may not be imposed on a creditor
for a violation of a stay in effect under section 362(a)
(including a monetary penalty imposed under section 362(k))
or for failure to comply with section 542 or 543 unless the
conduct that is the basis of such violation or of such
failure occurs after such creditor receives notice effective
under this section of the order for relief.''.
(b) Debtor's Duties.--Section 521 of title 11, United
States Code, as amended by sections 106, 225, and 305, is
amended--
(1) in subsection (a), as so designated by section 106, by
amending paragraph (1) to read as follows:
``(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 section 342(b) applies, a certificate--
``(I) of an attorney whose name is indicated on the
petition as the attorney for the debtor, or a bankruptcy
petition preparer signing the petition under section
110(b)(1), indicating that such attorney or the bankruptcy
petition preparer delivered to the debtor the notice required
by section 342(b); or
``(II) if no attorney is so indicated, and no bankruptcy
petition preparer signed the petition, of the debtor that
such notice was received and read by the debtor;
``(iv) copies of all payment advices or other evidence of
payment received within 60 days before the date of the filing
of the petition, by the debtor from any employer of the
debtor;
``(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 the filing of the petition;''; and
(2) by adding at the end the following:
``(e)(1) If the debtor in a case under chapter 7 or 13 is
an individual and if a creditor files with the court at any
time a request to receive a copy of the petition, schedules,
and statement of financial affairs filed by the debtor, then
the court shall make such petition, such schedules, and such
statement available to such creditor.
``(2)(A) The debtor shall provide--
``(i) not later than 7 days before the date first set for
the first meeting of creditors, to the trustee a copy of the
Federal income tax return required under applicable law (or
at the election of the debtor, a transcript of such return)
for the most recent tax year ending immediately before the
commencement of the case and for which a Federal income tax
return was filed; and
``(ii) at the same time the debtor complies with clause
(i), a copy of such return (or if elected under clause (i),
such transcript) to any creditor that timely requests such
copy.
``(B) If the debtor fails to comply with clause (i) or (ii)
of subparagraph (A), the court shall dismiss the case unless
the debtor demonstrates that the failure to so comply is due
to circumstances beyond the control of the debtor.
``(C) If a creditor requests a copy of such tax return or
such transcript and if the debtor fails to provide a copy of
such tax return or such transcript to such creditor at the
time the debtor provides such tax return or such transcript
to the trustee, then the court shall dismiss the case unless
the debtor demonstrates that the failure to provide a copy of
such tax return or such transcript is due to circumstances
beyond the control of the debtor.
``(3) If a creditor in a case under chapter 13 files with
the court at any time a request to receive a copy of the plan
filed by the debtor, then the court shall make available to
such creditor a copy of the plan--
``(A) at a reasonable cost; and
``(B) not later than 5 days after such request is filed.
``(f) At the request of the court, the United States
trustee, or any party in interest in a case under chapter 7,
11, or 13, a debtor who is an individual shall file with the
court--
``(1) at the same time filed with the taxing authority, a
copy of each Federal income tax return required under
applicable law (or at the election of the debtor, a
transcript of such tax return) with respect to each tax year
of the debtor ending while the case is pending under such
chapter;
``(2) at the same time filed with the taxing authority,
each Federal income tax return required under applicable law
(or at the election of the debtor, a transcript of such tax
return) that had not been filed with such authority as of the
date of the commencement of the case and that was
subsequently filed for any tax year of the debtor ending in
the 3-year period ending on the date of the commencement of
the case;
``(3) a copy of each amendment to any Federal income tax
return or transcript filed with the court under paragraph (1)
or (2); and
``(4) in a case under chapter 13--
``(A) on the date that is either 90 days after the end of
such tax year or 1 year after the date of the commencement of
the case, whichever is later, if a plan is not confirmed
before such later date; and
``(B) annually after the plan is confirmed and until the
case is closed, not later than the date that is 45 days
before the anniversary of the confirmation of the plan;
a statement, under penalty of perjury, of the income and
expenditures of the debtor during the tax year of the debtor
most recently concluded before such statement is filed under
this paragraph, and of the monthly income of the debtor, that
shows how income, expenditures, and monthly income are
calculated.
``(g)(1) A statement referred to in subsection (f)(4) shall
disclose--
[[Page H177]]
``(A) the amount and sources of the 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 subsections (e)(2)(A) and (f)
shall be available to the United States trustee (or the
bankruptcy administrator, if any), the trustee, and any party
in interest for inspection and copying, subject to the
requirements of section 315(c) of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2003.
``(h) If requested by the United States trustee or by the
trustee, 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; or
``(2) such other personal identifying information relating
to the debtor that establishes the identity of the debtor.''.
(c)(1) Not later than 180 days after the date of the
enactment of this Act, 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 540 days after the date of enactment of
this Act, the Director of the Administrative Office of the
United States Courts shall prepare and submit to the
President pro tempore of the Senate and the Speaker of the
House of Representatives a report that--
(A) assesses the effectiveness of the procedures
established 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.
SEC. 316. DISMISSAL FOR FAILURE TO TIMELY FILE SCHEDULES OR
PROVIDE REQUIRED INFORMATION.
Section 521 of title 11, United States Code, as amended by
sections 106, 225, 305, and 315, is amended by adding at the
end the following:
``(i)(1) Subject to paragraphs (2) and (4) and
notwithstanding section 707(a), 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 date of the filing of the petition, the case shall
be automatically dismissed effective on the 46th day after
the date of the filing of the petition.
``(2) Subject to paragraph (4) and 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) Subject to paragraph (4) and upon request of the
debtor made within 45 days after the date of the filing of
the petition 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.
``(4) Notwithstanding any other provision of this
subsection, on the motion of the trustee filed before the
expiration of the applicable period of time specified in
paragraph (1), (2), or (3), and after notice and a hearing,
the court may decline to dismiss the case if the court finds
that the debtor attempted in good faith to file all the
information required by subsection (a)(1)(B)(iv) and that the
best interests of creditors would be served by administration
of the case.''.
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), unless
the court determines that it would be in the best interests
of the creditors and the estate to hold such hearing at an
earlier date and there is no objection to such earlier
date.''.
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;
``(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; 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, 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;
``(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; 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, 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 section 102, 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;
``(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; 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, 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 attorneys be submitted only
after the debtors or the debtors' attorneys have 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 a case under
chapter 7, 11, or 13 in which the debtor is an individual,
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) such 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 in which the debtor is an individual,
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
subchapter I of chapter 11 of
[[Page H178]]
title 11, United States Code, is amended by adding at the end
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 in which the debtor is an individual,
provide for the payment to creditors under 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, as amended by
section 213, is amended by adding at the end the following:
``(15) In a case in which the debtor is an individual and
in which the holder of an allowed unsecured claim objects to
the confirmation of the plan--
``(A) the value, as of the effective date of the plan, of
the property to be distributed under the plan on account of
such claim is 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 projected disposable income of the
debtor (as 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 period for which
the plan provides payments, 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 in which the debtor is an individual,
the debtor may retain property included in the estate under
section 1115, subject to the requirements of subsection
(a)(14) of this section''.
(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
who is an individual''; and
(2) by adding at the end the following:
``(5) In a case in which the debtor is an individual--
``(A) unless after notice and a hearing the court orders
otherwise for cause, confirmation of the plan does not
discharge any debt provided for in the plan until the court
grants a discharge on completion of all payments under the
plan;
``(B) at any time after the confirmation of the plan, and
after notice and a hearing, the court may grant a discharge
to the debtor who has not completed payments under the plan
if--
``(i) the value, as of the effective date of the plan, of
property actually distributed under the plan on account of
each allowed unsecured 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 on such date; and
``(ii) modification of the plan under section 1127 is not
practicable; and''.
(e) Modification of Plan.--Section 1127 of title 11, United
States Code, is amended by adding at the end the following:
``(e) If the debtor is 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 and the requirements of
section 1129 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. LIMITATIONS ON HOMESTEAD EXEMPTION.
(a) Exemptions.--Section 522 of title 11, United States
Code, as amended by sections 224 and 308, 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, 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 1215-day period
preceding the date of the filing of the petition that exceeds
in the aggregate $125,000 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;
``(C) a burial plot for the debtor or a dependent of the
debtor; or
``(D) real or personal property that the debtor or
dependent of the debtor claims as a homestead.
``(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 such 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 such 1215-day period) into the
debtor's current principal residence, if the debtor's
previous and current residences are located in the same
State.
``(q)(1) 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 an interest in property described in
subparagraphs (A), (B), (C), and (D) of subsection (p)(1)
which exceeds in the aggregate $125,000 if--
``(A) the court determines, after notice and a hearing,
that the debtor has been convicted of a felony (as defined in
section 3156 of title 18), which under the circumstances,
demonstrates that the filing of the case was an abuse of the
provisions of this title; or
``(B) the debtor owes a debt arising from--
``(i) any violation of the Federal securities laws (as
defined in section 3(a)(47) of the Securities Exchange Act of
1934), any State securities laws, or any regulation or order
issued under Federal securities laws or State securities
laws;
``(ii) fraud, deceit, or manipulation in a fiduciary
capacity or in connection with the purchase or sale of any
security registered under section 12 or 15(d) of the
Securities Exchange Act of 1934 or under section 6 of the
Securities Act of 1933;
``(iii) any civil remedy under section 1964 of title 18; or
``(iv) any criminal act, intentional tort, or willful or
reckless misconduct that caused serious physical injury or
death to another individual in the preceding 5 years.
``(2) Paragraph (1) shall not apply to the extent the
amount of an interest in property described in subparagraphs
(A), (B), (C), and (D) of subsection (p)(1) is reasonably
necessary for the support of the debtor and any dependent of
the debtor.''.
(b) Adjustment of Dollar Amounts.--Paragraphs (1) and (2)
of section 104(b) of title 11, United States Code, as amended
by section 224, are amended by inserting ``522(p), 522(q),''
after ``522(n),''.
SEC. 323. EXCLUDING EMPLOYEE BENEFIT PLAN PARTICIPANT
CONTRIBUTIONS AND OTHER PROPERTY FROM THE
ESTATE.
Section 541(b) of title 11, United States Code, as amended
by section 225, is amended by adding after paragraph (6), as
added by section 225(a)(1)(C), the following:
``(7) any amount--
``(A) withheld by an employer from the wages of employees
for payment as contributions--
``(i) to--
``(I) an employee benefit plan that is subject to title I
of the Employee Retirement Income Security Act of 1974 or
under an employee benefit plan which is a governmental plan
under section 414(d) of the Internal Revenue Code of 1986;
``(II) a deferred compensation plan under section 457 of
the Internal Revenue Code of 1986; or
``(III) a tax-deferred annuity under section 403(b) of the
Internal Revenue Code of 1986;
except that such amount under this subparagraph shall not
constitute disposable income as defined in section
1325(b)(2); or
``(ii) to a health insurance plan regulated by State law
whether or not subject to such title; or
``(B) received by an employer from employees for payment as
contributions--
``(i) to--
``(I) an employee benefit plan that is subject to title I
of the Employee Retirement Income Security Act of 1974 or
under an employee benefit plan which is a governmental plan
under section 414(d) of the Internal Revenue Code of 1986;
``(II) a deferred compensation plan under section 457 of
the Internal Revenue Code of 1986; or
``(III) a tax-deferred annuity under section 403(b) of the
Internal Revenue Code of 1986;
except that such amount under this subparagraph shall not
constitute disposable income, as defined in section
1325(b)(2); or
``(ii) to a health insurance plan regulated by State law
whether or not subject to such title;''.
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 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.
[[Page H179]]
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 all that follows through
``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) If the debtor is an individual in a case under
chapter 7 or 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 the
filing of the petition without deduction for costs of sale or
marketing. With respect to property acquired for personal,
family, or household purposes, 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 this paragraph;''; 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
(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) 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 nonresidential 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''.
SEC. 329. 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--
``(i) wages, salaries, and commissions for services
rendered after the commencement of the case; and
``(ii) wages and benefits awarded pursuant to a judicial
proceeding or a proceeding of the National Labor Relations
Board as back pay attributable to any period of time
occurring after commencement of the case under this title, as
a result of a violation of Federal or State law by the
debtor, without regard to the time of the occurrence of
unlawful conduct on which such award is based or to whether
any services were rendered, if the court determines that
payment of wages and benefits by reason of the operation of
this clause will not substantially increase the probability
of layoff or termination of current employees, or of
nonpayment of domestic support obligations, during the case
under this title;''.
SEC. 330. DELAY OF DISCHARGE DURING PENDENCY OF CERTAIN
PROCEEDINGS.
(a) Chapter 7.--Section 727(a) of title 11, United States
Code, as amended by section 106, is amended--
(1) in paragraph (10), by striking ``or'' at the end;
(2) in paragraph (11) by striking the period at the end and
inserting ``; or''; and
(3) by inserting after paragraph (11) the following:
``(12) the court after notice and a hearing held not more
than 10 days before the date of the entry of the order
granting the discharge finds that there is reasonable cause
to believe that--
``(A) section 522(q)(1) may be applicable to the debtor;
and
``(B) there is pending any proceeding in which the debtor
may be found guilty of a felony of the kind described in
section 522(q)(1)(A) or liable for a debt of the kind
described in section 522(q)(1)(B).''.
(b) Chapter 11.--Section 1141(d) of title 11, United States
Code, as amended by section 321, is amended by adding at the
end the following:
``(C) unless after notice and a hearing held not more than
10 days before the date of the entry of the order granting
the discharge, the court finds that there is no reasonable
cause to believe that--
``(i) section 522(q)(1) may be applicable to the debtor;
and
``(ii) there is pending any proceeding in which the debtor
may be found guilty of a felony of the kind described in
section 522(q)(1)(A) or liable for a debt of the kind
described in section 522(q)(1)(B).''.
(c) Chapter 12.--Section 1228 of title 11, United States
Code, is amended--
(1) in subsection (a) by striking ``As'' and inserting
``Subject to subsection (d), as'',
(2) in subsection (b) by striking ``At'' and inserting
``Subject to subsection (d), at'', and
(3) by adding at the end the following:
``(f) The court may not grant a discharge under this
chapter unless the court after notice and a hearing held not
more than 10 days before the date of the entry of the order
granting the discharge finds that there is no reasonable
cause to believe that--
``(1) section 522(q)(1) may be applicable to the debtor;
and
``(2) there is pending any proceeding in which the debtor
may be found guilty of a felony of the kind described in
section 522(q)(1)(A) or liable for a debt of the kind
described in section 522(q)(1)(B).''.
(d) Chapter 13.--Section 1328 of title 11, United States
Code, as amended by section 106, is amended--
(1) in subsection (a) by striking ``As'' and inserting
``Subject to subsection (d), as'',
(2) in subsection (b) by striking ``At'' and inserting
``Subject to subsection (d), at'', and
(3) by adding at the end the following:
``(h) The court may not grant a discharge under this
chapter unless the court after notice and a hearing held not
more than 10 days before the date of the entry of the order
granting the discharge finds that there is no reasonable
cause to believe that--
``(1) section 522(q)(1) may be applicable to the debtor;
and
``(2) there is pending any proceeding in which the debtor
may be found guilty of a felony of the kind described in
section 522(q)(1)(A) or liable for a debt of the kind
described in section 522(q)(1)(B).''.
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, 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 or a national securities
exchange registered with the Securities and Exchange
Commission under section 6 of the Securities Exchange Act of
1934;''.
(b) Automatic Stay.--Section 362(b) of title 11, United
States Code, as amended by
[[Page H180]]
sections 224, 303, and 311, is amended by inserting after
paragraph (24) the following:
``(25) 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 such
securities self regulatory organization to enforce such
organization's regulatory power; or
``(C) any act taken by such 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), 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 on the 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), 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 (g) (as added by
section 222(a) of Public Law 103-394) as subsection (h);
(2) in subsection (h), as so redesignated, by inserting
``and subject to the prior rights of holders of security
interests in such goods or the proceeds of such goods'' after
``consent of a creditor''; and
(3) by adding at the end the following:
``(i)(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 State statute applicable to
such lien 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
2003, or any successor to such section 7-209.''.
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.''.
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 debt (excluding a consumer 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,''.
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, is
amended--
[[Page H181]]
(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) The court shall resolve any dispute arising out of an
election described in subparagraph (A).''.
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) and (4), 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
the 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 the filing
of the petition;
``(ii) the payment by the debtor of charges for utility
service in a timely manner before the date of the 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 the 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 individual 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 Judicial Conference of the United
States, in accordance with section 2075 of title 28 of the
United States Code and after consideration of the views of
the Director of the Executive Office for United States
Trustees, shall propose amended Federal Rules of Bankruptcy
Procedure and in accordance with rule 9009 of the Federal
Rules of Bankruptcy Procedure shall prescribe official
bankruptcy forms directing debtors under chapter 11 of title
11 of 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
25 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, 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
date of the order for relief in an amount not more than
$2,000,000 (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 $2,000,000
(excluding debt owed to 1 or more affiliates or insiders);''.
(b) Conforming Amendment.--Section 1102(a)(3) of title 11,
United States Code, is amended by inserting ``debtor'' after
``small business''.
(c) Adjustment of Dollar Amounts.--Section 104(b) of title
11, United States Code, as amended by section 226, is amended
by inserting ``101(51D),'' after ``101(3),'' each place it
appears.
SEC. 433. STANDARD FORM DISCLOSURE STATEMENT AND PLAN.
Within a reasonable period of time after the date of
enactment of this Act, the Judicial Conference of the United
States shall prescribe in accordance with rule 9009 of the
Federal Rules of Bankruptcy Procedure official 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--
[[Page H182]]
``(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
expenses 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 Judicial Conference
of the United States shall propose in accordance with section
2073 of title 28 of the United States Code amended Federal
Rules of Bankruptcy Procedure, and shall prescribe in
accordance with rule 9009 of the Federal Rules of Bankruptcy
Procedure official bankruptcy forms, directing 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 expenses 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) a 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 such debtor to understand such debtor's financial
condition and plan the such debtor's future.
SEC. 436. DUTIES IN SMALL BUSINESS CASES.
(a) Duties in Chapter 11 Cases.--Subchapter I of chapter 11
of title 11, United States Code, as amended by section 321,
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, after notice and a hearing, waives that
requirement 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 taxes
entitled to administrative expense priority 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, as amended by section
321, is amended by inserting after the item relating to
section 1115 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 a hearing; or
``(B) the court, for cause, orders otherwise;
``(2) the plan and a disclosure statement (if any) 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 court shall confirm a
plan that complies with the applicable provisions of this
title and that is filed in accordance with section 1121(e)
not later than 45 days after the plan is filed unless the
time for confirmation is extended in accordance with 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 date of the 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, 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 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
sections 106, 305, and 311, is amended--
(1) in subsection (k), as so redesignated by section 305--
(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:
``(n)(1) Except as provided in paragraph (2), subsection
(a) does 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
[[Page H183]]
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 acquired substantially all of
the assets or business of a small business debtor described
in subparagraph (A), (B), or (C), unless such entity
establishes by a preponderance of the evidence that such
entity acquired substantially all of the assets or business
of such small business debtor in good faith and not for the
purpose of evading this paragraph.
``(2) Paragraph (1) 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 the 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, absent unusual circumstances
specifically identified by the court that establish that the
requested conversion or dismissal is not in the best
interests of creditors and the estate, 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 interests of creditors and the estate, if the movant
establishes cause.
``(2) The relief provided in paragraph (1) shall not be
granted absent unusual circumstances specifically identified
by the court that establish that such relief is not in the
best interests of creditors and the estate, if the debtor or
another party in interest objects and establishes that--
``(A) there is a reasonable likelihood that a plan will be
confirmed within the timeframes established in sections
1121(e) and 1129(e) of this title, or if such sections do not
apply, within a reasonable period of time; and
``(B) the grounds for granting such relief include an act
or omission of the debtor other than under paragraph (4)(A)--
``(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 a 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 such 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 and the absence of a reasonable likelihood of
rehabilitation;
``(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 substantially
harmful to 1 or more creditors;
``(E) failure to comply with an order of the court;
``(F) unexcused failure to satisfy timely 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 without
good cause shown by the debtor;
``(H) failure timely to provide information or attend
meetings reasonably requested by the United States trustee
(or the bankruptcy administrator, if any);
``(I) failure timely to pay taxes owed after the date of
the order for relief or to file tax returns due after the
date of 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 of the
filing of the petition.
``(5) The court shall commence the hearing on a 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 such 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 Executive Office for 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 a penalty provision, 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 an entity other than the debtor, 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);''.
SEC. 446. DUTIES WITH RESPECT TO A DEBTOR WHO IS A PLAN
ADMINISTRATOR OF AN EMPLOYEE BENEFIT PLAN.
(a) In General.--Section 521(a) of title 11, United States
Code, as amended by sections 106 and 304, 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 ``; and''; and
(3) by adding after paragraph (6) the following:
``(7) unless a trustee is serving in the case, continue to
perform the obligations required of the administrator (as
defined in section 3 of the Employee Retirement Income
Security Act of 1974) of an employee benefit plan if at the
time of the commencement of the case the debtor (or any
entity designated by the debtor) served as such
administrator.''.
(b) Duties of Trustees.--Section 704(a) of title 11, United
States Code, as amended by sections 102 and 219, is amended--
(1) in paragraph (10), by striking ``and'' at the end; and
(2) by adding at the end the following:
``(11) if, at the time of the commencement of the case, the
debtor (or any entity designated by the debtor) served as the
administrator (as defined in section 3 of the Employee
Retirement Income Security Act of 1974) of an employee
benefit plan, continue to perform the obligations required of
the administrator; and''.
(c) Conforming Amendment.--Section 1106(a)(1) of title 11,
United States Code, is amended to read as follows:
[[Page H184]]
``(1) perform the duties of the trustee, as specified in
paragraphs (2), (5), (7), (8), (9), (10), and (11) of section
704;''.
SEC. 447. APPOINTMENT OF COMMITTEE OF RETIRED EMPLOYEES.
Section 1114(d) of title 11, United States Code, is
amended--
(1) by striking ``appoint'' and inserting ``order the
appointment of'', and
(2) by adding at the end the following: ``The United States
trustee shall appoint any such committee.''.
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--
(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 the district court, or the clerk of the
bankruptcy court if one is certified pursuant to section
156(b) of this title, shall collect statistics regarding
debtors who are individuals with primarily consumer debts
seeking relief under chapters 7, 11, and 13 of title 11.
Those statistics shall be in a standardized format 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 July 1, 2006, 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 debtors;
``(B) the current monthly income, average income, and
average expenses of 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 cases
filed during 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 date of the
filing of the petition and the closing of the case for cases
closed during the reporting period;
``(E) for cases closed during the reporting period--
``(i) the number of cases in which a reaffirmation
agreement was filed; and
``(ii)(I) the total number of reaffirmation agreements
filed;
``(II) of those cases in which a reaffirmation agreement
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 agreement
was filed, the number of cases in which the reaffirmation
agreement 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 entered determining the
value of property securing a claim;
``(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 attorney 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
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.--The uniform forms for final reports
required under subsection (a) for use 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.--The uniform forms for periodic
reports required under subsection (a) for use 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 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 for chapter
39 of title 28, United
[[Page H185]]
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
that the debtor is required to provide under sections 521 and
1322 of title 11, United States Code, and, if applicable,
section 111 of such title, in cases filed under chapter 7 or
13 of such title in which the debtor is an individual. 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 of schedules of income and expenses that
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
(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 2003;''; 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
2003.
``(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 district court (or the clerk of the bankruptcy
court if one is certified under section 156(b) of this title)
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
section 106, is amended in each of paragraphs (3) and (4) by
inserting ``or an auditor serving 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 that arise after the date of the filing of the
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 such 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 (as defined in section 31701 of title 49) 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 shall maintain a list 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 such governmental unit does not designate an
address and provide such address to the clerk under
subparagraph (A), 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 such
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
[[Page H186]]
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
subchapter I of chapter 5 of title 11, United States Code, is
amended by adding at the end 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 the filing of
the petition'' after ``gross receipts'';
(B) in clause (i), by striking ``for a taxable year ending
on or before the date of the 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 any period during which a
governmental unit is prohibited under applicable
nonbankruptcy law from collecting a tax as a result 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 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, 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 sections 321 and 330, 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--
``(A) of a kind specified in paragraph (2)(A) or (2)(B) of
section 523(a) that is owed to a domestic governmental unit,
or owed to a person as the result of an action filed under
subchapter III of chapter 37 of title 31 or any similar State
statute; or
``(B) for a tax or customs duty with respect to which the
debtor--
``(i) made a fraudulent return; or
``(ii) willfully attempted in any manner to evade or to
defeat such tax or such customs 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 the tax
liability of a debtor who is an individual for a taxable
period ending before the date of 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 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 by 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 under section 554 of title 11,
within a reasonable period of time after the lien attaches,
by the trustee in a case under 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 sections 215 and 224, 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 section 703, 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 sections 102, 213, and 306, is amended by
inserting after paragraph (8) 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
[[Page H187]]
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) After notice and a 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 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 for
subchapter I of chapter 13 of title 11, United States Code,
is amended by adding at the end 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 Judicial Conference of the
United States should, as soon as practicable after the date
of enactment of this Act, propose amended Federal Rules of
Bankruptcy Procedure that provide--
(1) notwithstanding the provisions of Rule 3015(f), in
cases under chapter 13 of title 11, United States Code, that
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, that no
objection to a claim for 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, as amended
by sections 224, 303, 311, and 401, is amended by inserting
after paragraph (25) the following:
``(26) 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
date of the order for relief against an income tax liability
for a taxable period that also ended before the date of 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, on the motion of the trustee and
after notice and a hearing, grants the taxing authority
adequate protection (within the meaning of section 361) for
the secured claim of such authority in the setoff under
section 506(a);''.
SEC. 719. SPECIAL PROVISIONS RELATED TO THE TREATMENT OF
STATE AND LOCAL TAXES.
(a) In General.--
(1) Special provisions.--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 such 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.
[[Page H188]]
``(3) The estate may carry back any loss or tax attribute
to a taxable period of the debtor that ended before the date
of 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.''.
(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.''.
(b) Conforming Amendments.--Title 11 of the United States
Code is amended--
(1) by striking section 728;
(2) in the table of sections for chapter 7 by striking the
item relating to section 728;
(3) in section 1146--
(A) by striking subsections (a) and (b); and
(B) by redesignating subsections (c) and (d) as subsections
(a) and (b), respectively; and
(4) in section 1231--
(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
sections 106, 225, 305, 315, and 316, is amended by adding at
the end the following:
``(j)(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) courts of the United States, 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 pending 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
pending 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, pending 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
[[Page H189]]
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.
``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,
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, such notification shall--
``(1) indicate the time period for filing proofs of claim
and specify the place for filing such proofs of claim;
``(2) indicate whether secured creditors need to file
proofs of claim; and
``(3) contain any other information required to be included
in such 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 proof of 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 a 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 such
foreign proceeding and appointing the foreign representative;
``(2) a certificate from the foreign court affirming the
existence of such 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 such 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 and that the person or body is a foreign
representative, 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) such foreign proceeding for which recognition is
sought is a foreign main proceeding or foreign nonmain
proceeding within the meaning of section 1502;
[[Page H190]]
``(2) the foreign representative applying for recognition
is a person or body; and
``(3) the petition meets the requirements of section 1515.
``(b) Such foreign proceeding shall be recognized--
``(1) as a foreign main proceeding if it is pending 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. A 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 a
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 such 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, 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 (27) of section 362(b) or pursuant to section 362(n)
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 the property of the debtor that is within the territorial
jurisdiction of the United States;
``(2) sections 363, 549, and 552 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 (27) of section 362(b) or pursuant to section 362(n)
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), 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 a 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 a foreign court
or a foreign representative, either directly or through the
trustee.
``(b) The court is entitled to communicate directly with,
or to request information or assistance directly from, a
foreign court or a foreign representative, subject to the
rights of a party 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
[[Page H191]]
supervision of the court, cooperate to the maximum extent
possible with a foreign court or a foreign representative.
``(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 a
foreign court or a foreign representative.
``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 pending 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 pending at the time
the petition for recognition of such foreign proceeding is
filed--
``(A) any relief granted under section 1519 or 1521 must be
consistent with the relief granted in the case in the United
States; and
``(B) section 1520 does not apply even if such foreign
proceeding is recognized as a foreign main proceeding.
``(2) If a case in the United States under this title
commences after recognition, or after the date of the filing
of the petition for recognition, of such foreign proceeding--
``(A) 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 case in the United States; and
``(B) if such 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(n), 555
through 557, and 559 through 562 apply in a case under
chapter 15''; and
(2) by adding at the end the following:
``(k) 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 such 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 of the United States 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.--Title 11 of the United
States Code is amended--
(1) in section 109(b), by striking paragraph (3) and
inserting the following:
``(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 in the
United States.'';
(2) in section 303, by striking subsection (k);
(3) by striking section 304;
(4) in the table of sections for chapter 3 by striking the
item relating to section 304;
(5) in section 306 by striking ``, 304,'' each place it
appears;
(6) in section 305(a) by striking paragraph (2) and
inserting the following:
``(2)(A) a petition under section 1515 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.''; and
(7) in section 508--
(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.--
[[Page H192]]
(1) FDIC-insured depository institutions.--Section
11(e)(8)(D) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)) is amended--
(A) by striking ``subsection--'' and inserting
``subsection, the following definitions shall apply:''; and
(B) in clause (i), by inserting ``, resolution, or order''
after ``any similar agreement that the Corporation determines
by regulation''.
(2) Insured credit unions.--Section 207(c)(8)(D) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(8)(D)) is
amended--
(A) by striking ``subsection--'' and inserting
``subsection, the following definitions shall apply:''; and
(B) in clause (i), by inserting ``, resolution, or order''
after ``any similar agreement that the Board determines by
regulation''.
(b) Definition of Securities Contract.--
(1) FDIC-insured depository institutions.--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, mortgage loan, interest, group or index, or option,
and including any repurchase or reverse repurchase
transaction on any such security, certificate of deposit,
mortgage 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, mortgage 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 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, including any guarantee or
reimbursement obligation in connection with any agreement or
transaction referred to in this clause.''.
(2) Insured credit unions.--Section 207(c)(8)(D)(ii) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(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, mortgage loan, interest, group or index, or option,
and including any repurchase or reverse repurchase
transaction on any such security, certificate of deposit,
mortgage 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 Board 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, mortgage 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 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, including any guarantee or
reimbursement obligation in connection with any agreement or
transaction referred to in this clause.''.
(c) Definition of Commodity Contract.--
(1) FDIC-insured depository institutions.--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, including any guarantee or reimbursement
obligation in connection with any agreement or transaction
referred to in this clause.''.
(2) Insured credit unions.--Section 207(c)(8)(D)(iii) of
the Federal Credit Union Act (12 U.S.C. 1787(c)(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
suchclearing 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),
[[Page H193]]
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, including any guarantee or reimbursement
obligation in connection with any agreement or transaction
referred to in this clause.''.
(d) Definition of Forward Contract.--
(1) FDIC-insured depository institutions.--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), including any
guarantee or reimbursement obligation in connection with any
agreement or transaction referred to in any such
subclause.''.
(2) Insured credit unions.--Section 207(c)(8)(D)(iv) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(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), including any
guarantee or reimbursement obligation in connection with any
agreement or transaction referred to in any such
subclause.''.
(e) Definition of Repurchase Agreement.--
(1) FDIC-insured depository institutions.--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, mortgage loans, or interests with a
simultaneous agreement by such transferee to transfer to the
transferor thereof certificates of deposit, eligible bankers'
acceptances, securities, mortgage 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), including
any guarantee or reimbursement obligation in connection with
any agreement or transaction referred to in any such
subclause.
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).''.
(2) Insured credit unions.--Section 207(c)(8)(D)(v) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(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, mortgage loans, or interests with a
simultaneous agreement by such transferee to transfer to the
transferor thereof certificates of deposit, eligible bankers'
acceptances, securities, mortgage 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 Board
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), including
any guarantee or reimbursement obligation in connection with
any agreement or transaction referred to in any such
subclause.
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
[[Page H194]]
by the appropriate Federal banking authority).''.
(f) Definition of Swap Agreement.--
(1) FDIC-insured depository institutions.--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 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;
``(II) any agreement or transaction that is similar to any
other agreement or transaction referred to in this clause and
that is of a type that has been, is presently, or in the
future becomes, the subject of recurrent dealings in the swap
markets (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, 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;
``(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 subclause (I), (II), (III), (IV), or (V),
including any guarantee or reimbursement obligation in
connection with any agreement or transaction referred to in
any such subclause.
Such term is applicable for purposes of this subsection 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,
the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank
Products Act of 2000.''.
(2) Insured credit unions.--Section 207(c)(8)(D) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(8)(D)) is amended
by adding at the end the following new clause:
``(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 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;
``(II) any agreement or transaction that is similar to any
other agreement or transaction referred to in this clause and
that is of a type that has been, is presently, or in the
future becomes, the subject of recurrent dealings in the swap
markets (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, 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;
``(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 subclause (I), (II), (III), (IV), or (V),
including any guarantee or reimbursement obligation in
connection with any agreement or transaction referred to in
any such subclause.
Such term is applicable for purposes of this subsection 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,
the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank
Products Act of 2000.''.
(g) Definition of Transfer.--
(1) FDIC-insured depository institutions.--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 foreclosure of the depository
institution's equity of redemption.''.
(2) Insured credit unions.--Section 207(c)(8)(D) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(8)(D)) (as
amended by subsection (f) of this section) is amended by
adding at the end the following new clause:
``(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 foreclosure of the depository
institution's equity of redemption.''.
(h) Treatment of Qualified Financial Contracts.--
(1) FDIC-insured depository institutions.--Section 11(e)(8)
of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8))
is amended--
(A) in subparagraph (A)--
(i) by striking ``paragraph (10)'' and inserting
``paragraphs (9) and (10)'';
(ii) in clause (i), by striking ``to cause the termination
or liquidation'' and inserting ``such person has to cause the
termination, liquidation, or acceleration''; and
(iii) by striking clause (ii) and inserting the following
new clause:
``(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
(B) 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);''.
(2) Insured credit unions.--Section 207(c)(8) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(8)) is amended--
(A) in subparagraph (A)--
(i) by striking ``paragraph (12)'' and inserting
``paragraphs (9) and (10)'';
(ii) in clause (i), by striking ``to cause the termination
or liquidation'' and inserting ``such person has to cause the
termination, liquidation, or acceleration''; and
(iii) by striking clause (ii) and inserting the following
new clause:
``(ii) any right under any security agreement or
arrangement or other credit enhancement related to 1 or more
qualified financial contracts described in clause (i);''; and
(B) in subparagraph (E), by striking clause (ii) and
inserting the following new clause:
``(ii) any right under any security agreement or
arrangement or other credit enhancement related to 1 or more
qualified financial contracts described in clause (i);''.
(i) Avoidance of Transfers.--
(1) FDIC-insured depository institutions.--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 or any
other Federal or State law relating to the avoidance of
preferential or fraudulent transfers,'' before ``the
Corporation''.
(2) Insured credit unions.--Section 207(c)(8)(C)(i) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(8)(C)(i)) is
amended by inserting ``section 5242 of the Revised Statutes
of the United States or any other Federal or
[[Page H195]]
State law relating to the avoidance of preferential or
fraudulent transfers,'' before ``the Board''.
SEC. 902. AUTHORITY OF THE FDIC AND NCUAB WITH RESPECT TO
FAILED AND FAILING INSTITUTIONS.
(a) Federal Deposit Insurance Corporation.--
(1) In general.--Section 11(e)(8) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)(8)) is amended--
(A) 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
(B) 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.''.
(2) 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''.
(b) National Credit Union Administration Board.--
(1) In general.--Section 207(c)(8) of the Federal Credit
Union Act (12 U.S.C. 1787(c)(8)) is amended--
(A) in subparagraph (E) (as amended by section 901(h)), by
striking ``other than paragraph (12) of this subsection,
subsection (b)(9)'' and inserting ``other than subsections
(b)(9) and (c)(10)''; and
(B) 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 Board, or
authorizing any court or agency to limit or delay, in any
manner, the right or power of the Board 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 (c)(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 credit union 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.''.
(2) Technical and conforming amendment.--Section
207(c)(12)(A) of the Federal Credit Union Act (12 U.S.C.
1787(c)(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) FDIC-Insured Depository Institutions.--
(1) 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 contracts 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 cleared by or
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) Definitions.--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, and the term
`clearing organization' has the same meaning as in section
402 of the Federal Deposit Insurance Corporation Improvement
Act of 1991.''.
(2) 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.''.
(3) Rights against receiver and conservator and treatment
of bridge banks.--Section 11(e)(10) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)(10)) is amended--
(A) by redesignating subparagraph (B) as subparagraph (D);
and
(B) 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 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 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
[[Page H196]]
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.''.
(b) Insured Credit Unions.--
(1) Transfers of qualified financial contracts to financial
institutions.--Section 207(c)(9) of the Federal Credit Union
Act (12 U.S.C. 1787(c)(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 credit union in default which includes any
qualified financial contract, the conservator or liquidating
agent for such credit union shall either--
``(i) transfer to 1 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 credit union in
default;
``(II) all claims of such person or any affiliate of such
person against such credit union 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 credit union);
``(III) all claims of such credit union 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 contracts and related claims and property under
subparagraph (A)(i), the conservator or liquidating agent for
the credit union 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 1 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
liquidating agent transfers any qualified financial contract
and related claims, property, and credit enhancements
pursuant to subparagraph (A)(i) and such contract is cleared
by or 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) Definitions.--For purposes of this paragraph--
``(i) the term `financial institution' means a broker or
dealer, a depository institution, a futures commission
merchant, a credit union, or any other institution, as
determined by the Board by regulation to be a financial
institution; and
``(ii) the term `clearing organization' has the same
meaning as in section 402 of the Federal Deposit Insurance
Corporation Improvement Act of 1991.''.
(2) Notice to qualified financial contract
counterparties.--Section 207(c)(10)(A) of the Federal Credit
Union Act (12 U.S.C. 1787(c)(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 liquidating
agent 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
liquidating agent in the case of a liquidation, or the
business day following such transfer in the case of a
conservatorship.''.
(3) Rights against liquidating agent and conservator and
treatment of bridge banks.--Section 207(c)(10) of the Federal
Credit Union Act (12 U.S.C. 1787(c)(10)) is amended--
(A) by redesignating subparagraph (B) as subparagraph (D);
and
(B) by inserting after subparagraph (A) the following new
subparagraphs:
``(B) Certain rights not enforceable.--
``(i) Liquidation.--A person who is a party to a qualified
financial contract with an insured credit union 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 liquidating
agent for the credit union institution (or the insolvency or
financial condition of the credit union for which the
liquidating agent has been appointed)--
``(I) until 5:00 p.m. (eastern time) on the business day
following the date of the appointment of the liquidating
agent; 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 credit union may
not exercise any right that such person has to terminate,
liquidate, or net such contract under paragraph (8)(E) 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 conservator
for the credit union or the insolvency or financial condition
of the credit union for which the conservator has been
appointed).
``(iii) Notice.--For purposes of this paragraph, the Board
as conservator or liquidating agent of an insured credit
union shall be deemed to have notified a person who is a
party to a qualified financial contract with such credit
union if the Board 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 credit union organized by the Board, for which a
conservator is appointed either--
``(I) immediately upon the organization of the credit
union; or
``(II) at the time of a purchase and assumption transaction
between the credit union and the Board as receiver for a
credit union in default.''.
SEC. 904. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION
OF QUALIFIED FINANCIAL CONTRACTS.
(a) FDIC-Insured Depository Institutions.--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;
(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).'';
and
(3) by adding at the end the following new paragraph:
``(17) Savings clause.--The meanings of terms used in this
subsection are applicable for purposes of this subsection
only, and shall not be construed or applied so as to
challenge or affect the characterization, definition, or
treatment of any similar terms under any other statute,
regulation, or rule, including the Gramm-Leach-Bliley Act,
the Legal Certainty for Bank Products Act of 2000, the
securities laws (as that term is defined in section 3(a)(47)
of the Securities Exchange Act of 1934), and the Commodity
Exchange Act.''.
(b) Insured Credit Unions.--Section 207(c) of the Federal
Credit Union Act (12 U.S.C. 1787(c)) is amended--
(1) by redesignating paragraphs (11), (12), and (13) as
paragraphs (12), (13), and (14), respectively;
(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 liquidating agent with
respect to any qualified financial contract to which an
insured credit union is a party, the conservator or
liquidating agent for such credit union shall either--
``(A) disaffirm or repudiate all qualified financial
contracts between--
``(i) any person or any affiliate of such person; and
``(ii) the credit union 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).'';
and
(3) by adding at the end the following new paragraph:
``(15) Savings clause.--The meanings of terms used in this
subsection are applicable for purposes of this subsection
only, and
[[Page H197]]
shall not be construed or applied so as to challenge or
affect the characterization, definition, or treatment of any
similar terms under any other statute, regulation, or rule,
including the Gramm-Leach-Bliley Act, the Legal Certainty for
Bank Products Act of 2000, the securities laws (as that term
is defined in section (a)(47) of the Securities Exchange Act
of 1934), and the Commodity Exchange Act.''.
SEC. 905. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.
(a) FDIC-Insured Depository Institutions.--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.''.
(b) Insured Credit Unions.--Section 207(c)(8)(D) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(8)(D)) is amended
by inserting after clause (vi) (as added by section 901(f))
the following new clause:
``(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 ``,
that has been granted an exemption under section 4(c)(1) of
the Commodity Exchange Act, or that is a multilateral
clearing organization (as defined in section 408 of this
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), so 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
close out 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, paragraphs (8)(E), (8)(F), and (10)(B) of section 207(c)
of the Federal Credit Union 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,
paragraphs (8)(E), (8)(F), and (10)(B) of section 207(c) of
the Federal Credit Union 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, paragraphs (8)(E), (8)(F), and (10)(B) of section 207(c)
of the Federal Credit Union 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, paragraphs (8)(E), (8)(F), and (10)(B) of
section 207(c) of the Federal Credit Union Act, and section
5(b)(2) of the Securities Investor Protection Act of
1970).''.
(d) Enforceability of Contracts With Uninsured National
Banks, Uninsured Federal Branches and Agencies, Certain
Uninsured State Member Banks, and Edge Act Corporations.--The
Federal Deposit Insurance Corporation Improvement Act of 1991
(12 U.S.C. 4401 et seq.) is amended--
(1) by redesignating section 407 as section 407A; and
(2) by inserting after section 406 the following new
section:
``SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL
BANKS, UNINSURED FEDERAL BRANCHES AND AGENCIES,
CERTAIN UNINSURED STATE MEMBER BANKS, AND EDGE
ACT CORPORATIONS.
``(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,
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, except that
for such purpose--
``(1) any reference to the `Corporation as receiver' or
`the receiver or the Corporation' shall refer to the receiver
appointed by the Comptroller of the Currency in the case of
an uninsured national bank or uninsured Federal branch or
agency, or to the receiver 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;
``(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
appointed by the Comptroller of the Currency in the case of
an uninsured national bank or uninsured Federal branch or
agency, or to the receiver or conservator 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; and
``(3) any reference to an `insured depository institution'
or `depository institution' shall refer to an uninsured
national bank, an uninsured Federal branch or Federal agency,
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.
``(b) Liability.--The liability of a receiver or
conservator of an uninsured national bank, uninsured Federal
branch or agency, a corporation chartered under section 25A
of
[[Page H198]]
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, 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 the
case of an uninsured national bank or uninsured Federal
branch or agency and 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 that operates, or operates as, a multilateral
clearing organization pursuant to section 409 of this Act, in
consultation with the Federal Deposit Insurance Corporation,
may each promulgate regulations solely to implement this
section.
``(2) Specific requirement.--In promulgating regulations,
limited solely to implementing paragraphs (8), (9), (10), and
(11) of section 11(e) of the Federal Deposit Insurance Act,
the Comptroller of the Currency and the Board of Governors of
the Federal Reserve System each 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 LAW 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 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), including
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, but not to exceed the damages in connection
with any such agreement or transaction, measured in
accordance with section 562;'';
(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, mortgage loans, or
interests, with a simultaneous agreement by such transferee
to transfer to the transferor thereof certificates of
deposit, eligible bankers' acceptance, securities, mortgage
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), including 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, but
not to exceed the damages in connection with any such
agreement or transaction, measured in accordance with section
562 of this title; 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--
``(I) an interest rate swap, option, future, or forward
agreement, including 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 equity swap, option, future, or
forward agreement;
``(V) a debt index or debt swap, option, future, or forward
agreement;
``(VI) a total return, credit spread or 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 that is similar to any
other agreement or transaction referred to in this paragraph
and that--
``(I) is of a type that has been, is presently, or in the
future becomes, the subject of recurrent dealings in the swap
markets (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, 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;
``(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), including 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, but
not to exceed the damages in connection with any such
agreement or transaction, measured in accordance with section
562; 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,
the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank
Products Act of 2000;'';
(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
[[Page H199]]
of the foregoing, including an option to purchase or sell any
such security, certificate of deposit, mortgage loan,
interest, group or index, or option, and including any
repurchase or reverse repurchase transaction on any such
security, certificate of deposit, mortgage 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, mortgage 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, including any guarantee or
reimbursement obligation by or to a stockbroker, securities
clearing agency, financial institution, or financial
participant in connection with any agreement or transaction
referred to in this subparagraph, but not to exceed the
damages in connection with any such agreement or transaction,
measured in accordance with section 562; 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, including 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, but not to exceed
the damages in connection with any such agreement or
transaction, measured in accordance with section 562;''.
(b) Definitions of Financial Institution, Financial
Participant, and Forward Contract Merchant.--Section 101 of
title 11, United States Code, is amended--
(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,
federally-insured credit union, or receiver, liquidating
agent, or conservator for such entity and, when any such
Federal reserve bank, receiver, liquidating agent,
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;'';
(2) by inserting after paragraph (22) the following:
``(22A) `financial participant' means--
``(A) an entity that, at the time it enters into a
securities contract, commodity contract, swap agreement,
repurchase agreement, or forward contract, or at the time of
the date 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;
or
``(B) a clearing organization (as defined in section 402 of
the Federal Deposit Insurance Corporation Improvement Act of
1991);''; and
(3) 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 in a commodity (as defined 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 close out, 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,
including any guarantee or reimbursement obligation related
to 1 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 date of 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 sections 224, 303, 311, 401, and 718, is
amended--
(A) in paragraph (6), by inserting ``, pledged to, under
the control of,'' after ``held by'';
(B) in paragraph (7), by inserting ``, pledged to, 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 or financial 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 or
financial participant under or in connection with any swap
agreement or against cash, securities, or other property held
by, pledged to, under the control of, or due from such swap
participant or financial participant to margin, guarantee,
secure, or settle any swap agreement;''; and
(D) by inserting after paragraph (26) the following:
``(27) 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, 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; and''.
(2) Limitation.--Section 362 of title 11, United States
Code, as amended by sections 106, 305, 311, and 441, is
amended by adding at the end the following:
``(o) The exercise of rights not subject to the stay
arising under subsection (a) pursuant to paragraph (6), (7),
(17), or (27) 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, is
amended--
(1) in subsection (g) (as added by section 103 of Public
Law 101-311)--
(A) by striking ``under a swap agreement'';
[[Page H200]]
(B) by striking ``in connection with a swap agreement'' and
inserting ``under or in connection with any swap agreement'';
and
(C) by inserting ``or financial participant'' after ``swap
participant''; and
(2) by adding at the end the following:
``(j) 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'';
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''; and
(3) in the second sentence, by striking ``As used'' and all
that follows through ``right,'' 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 securities clearing agency, 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,''.
(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'';
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''; and
(3) in the third sentence, by striking ``As used'' and all
that follows through ``right,'' 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 securities clearing agency, 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,''.
(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'';
(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''; and
(4) in the second sentence, by striking ``As used'' and all
that follows through ``right,'' 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 securities clearing agency, 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,''.
(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; proceedings under chapter 15
``(a) 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)(1) A party may exercise a contractual right described
in subsection (a) 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) 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 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 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 such subchapter; 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 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 against any claim
arising under, or in connection with, other instruments,
contracts, or agreements listed in subsection (a).
``(3) 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 or similar arrangement
that has been approved by the Commodity Futures Trading
Commission or submitted to the Commodity Futures Trading
Commission under paragraph (1) or (2) of section 5c(c) of the
Commodity Exchange Act and has not been abrogated or rendered
ineffective by the Commodity Futures Trading Commission; 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) 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 securities clearing
agency, 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,
whether or not evidenced in writing, arising under common
law, under law merchant, or by reason of normal business
practice.
``(d) 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, 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
[[Page H201]]
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;
proceedings under chapter 15.''.
(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, 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.''.
(n) Setoff.--Section 553 of title 11, United States Code,
is amended--
(1) in subsection (a)(2)(B)(ii), by inserting before the
semicolon the following: ``(except for a setoff of a kind
described in section 362(b)(6), 362(b)(7), 362(b)(17),
362(b)(27), 555, 556, 559, 560, or 561)'';
(2) 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)(27), 555,
556, 559, 560, or 561)''; and
(3) in subsection (b)(1), by striking ``362(b)(14),'' and
inserting ``362(b)(17), 362(b)(27), 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 sections 362(b)(7) and 546(f), by inserting ``or
financial participant'' after ``repo participant'' each place
such term appears;
(3) in section 546(e), by inserting ``financial
participant,'' after ``financial institution,'';
(4) in section 548(d)(2)(B), by inserting ``financial
participant,'' after ``financial institution,'';
(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'';
(7) in section 555--
(A) by inserting ``financial participant,'' after
``financial institution,''; and
(B) by striking the second sentence and inserting the
following: ``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 securities clearing
agency, 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,
whether or not in writing, arising under common law, under
law merchant, or by reason of normal business practice.'';
(8) in section 556, by inserting ``, financial
participant,'' after ``commodity broker'';
(9) in section 559, by inserting ``or financial
participant'' after ``repo participant'' each place such term
appears; and
(10) in section 560, by inserting ``or financial
participant'' after ``swap participant''.
(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,
financial participants, 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,
financial participants, securities clearing agencies,
swap participants, repo participants, and master netting
agreement participants.''.
SEC. 908. RECORDKEEPING REQUIREMENTS.
(a) FDIC-Insured Depository Institutions.--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 by any insured depository institution with
respect to qualified financial contracts (including market
valuations) only if such insured depository institution is in
a troubled condition (as such term is defined by the
Corporation pursuant to section 32).''.
(b) Insured Credit Unions.--Section 207(c)(8) of the
Federal Credit Union Act (12 U.S.C. 1787(c)(8)) is amended by
adding at the end the following new subparagraph:
``(H) Recordkeeping requirements.--The Board, in
consultation with the appropriate Federal banking agencies,
may prescribe regulations requiring more detailed
recordkeeping by any insured credit union with respect to
qualified financial contracts (including market valuations)
only if such insured credit union is in a troubled condition
(as such term is defined by the Board pursuant to section
212).''.
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 section
907, the following:
``Sec. 562. Timing of damage measurement in connection with
swap agreements, securities contracts, forward contracts,
commodity contracts, repurchase agreements, and master
netting agreements
``(a) 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 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 or dates of such liquidation, termination,
or acceleration.
``(b) If there are not any commercially reasonable
determinants of value as of any date referred to in paragraph
(1) or (2) of subsection (a), damages shall be measured as of
the earliest subsequent date or dates on which there are
commercially reasonable determinants of value.
``(c) For the purposes of subsection (b), if damages are
not measured as of the date or dates of rejection,
liquidation, termination, or acceleration, and the forward
contract merchant, stockbroker, financial institution,
securities clearing agency, repo participant, financial
participant, master netting
[[Page H202]]
agreement participant, or swap participant or the trustee
objects to the timing of the measurement of damages--
``(1) the trustee, in the case of an objection by a forward
contract merchant, stockbroker, financial institution,
securities clearing agency, repo participant, financial
participant, master netting agreement participant, or swap
participant; or
``(2) the forward contract merchant, stockbroker, financial
institution, securities clearing agency, repo participant,
financial participant, master netting agreement participant,
or swap participant, in the case of an objection by the
trustee,
has the burden of proving that there were no commercially
reasonable determinants of value as of such date or dates.'';
and
(2) in the table of sections for chapter 5, by inserting
after the item relating to section 561 (as added by section
907) the following new item:
``562. Timing of 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 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, 741,
and 761 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.''.
TITLE X--PROTECTION OF FAMILY FARMERS AND FAMILY FISHERMEN
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
the date of the enactment of this Act.
(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, as amended
by section 226, is amended by inserting ``101(18),'' after
``101(3),'' each place it appears.
SEC. 1003. CERTAIN CLAIMS OWED TO GOVERNMENTAL UNITS.
(a) Contents of Plan.--Section 1222(a)(2) of title 11,
United States Code, as amended by section 213, 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 section 719, is
amended by striking ``a State or local governmental unit''
and inserting ``any governmental unit''.
(c) Effective Date; Application of Amendments.--This
section and the amendments made by this section shall take
effect on the date of the enactment of this Act and shall not
apply with respect to cases commenced under title 11 of the
United States Code before such date.
SEC. 1004. 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
``$3,237,000''; and
(B) by striking ``80'' and inserting ``50''; and
(2) in subparagraph (B)(ii)--
(A) by striking ``$1,500,000'' and inserting
``$3,237,000''; and
(B) by striking ``80'' and inserting ``50''.
SEC. 1005. ELIMINATION OF REQUIREMENT THAT FAMILY FARMER AND
SPOUSE RECEIVE OVER 50 PERCENT OF INCOME FROM
FARMING OPERATION IN YEAR PRIOR TO BANKRUPTCY.
Section 101(18)(A) of title 11, United States Code, is
amended by striking ``for the taxable year preceding the
taxable year'' and inserting the following:
``for--
``(i) the taxable year preceding; or
``(ii) each of the 2d and 3d taxable years preceding;
the taxable year''.
SEC. 1006. PROHIBITION OF RETROACTIVE ASSESSMENT OF
DISPOSABLE INCOME.
(a) Confirmation of Plan.--Section 1225(b)(1) 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 value of the property to be distributed under the
plan in the 3-year period, or such longer period as the court
may approve under section 1222(c), beginning on the date that
the first distribution is due under the plan is not less than
the debtor's projected disposable income for such period.''.
(b) Modification of Plan.--Section 1229 of title 11, United
States Code, is amended by adding at the end the following:
``(d) A plan may not be modified under this section--
``(1) to increase the amount of any payment due before the
plan as modified becomes the plan;
``(2) by anyone except the debtor, based on an increase in
the debtor's disposable income, to increase the amount of
payments to unsecured creditors required for a particular
month so that the aggregate of such payments exceeds the
debtor's disposable income for such month; or
``(3) in the last year of the plan by anyone except the
debtor, to require payments that would leave the debtor with
insufficient funds to carry on the farming operation after
the plan is completed.''.
SEC. 1007. FAMILY FISHERMEN.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended--
(1) by inserting after paragraph (7) the following:
``(7A) `commercial fishing operation' means--
``(A) the catching or harvesting of fish, shrimp, lobsters,
urchins, seaweed, shellfish, or other aquatic species or
products of such species; or
``(B) for purposes of section 109 and chapter 12,
aquaculture activities consisting of raising for market any
species or product described in subparagraph (A);
``(7B) `commercial fishing vessel' means a vessel used by a
family fisherman to carry out a commercial fishing
operation;''; and
(2) by inserting after paragraph (19) the following:
``(19A) `family fisherman' means--
``(A) an individual or individual and spouse engaged in a
commercial fishing operation--
``(i) whose aggregate debts do not exceed $1,500,000 and
not less than 80 percent of whose aggregate noncontingent,
liquidated debts (excluding a debt for the principal
residence of such individual or such individual and spouse,
unless such debt arises out of a commercial fishing
operation), on the date the case is filed, arise out of a
commercial fishing operation owned or operated by such
individual or such individual and spouse; and
``(ii) who receive from such commercial fishing operation
more than 50 percent of such individual's or such
individual's and spouse's gross income for the taxable year
preceding the taxable year in which the case concerning such
individual or such individual and spouse was filed; or
``(B) a corporation or partnership--
``(i) in which more than 50 percent of the outstanding
stock or equity is held by--
``(I) 1 family that conducts the commercial fishing
operation; or
``(II) 1 family and the relatives of the members of such
family, and such family or such relatives conduct the
commercial fishing operation; and
``(ii)(I) more than 80 percent of the value of its assets
consists of assets related to the commercial fishing
operation;
``(II) its aggregate debts do not exceed $1,500,000 and not
less than 80 percent of its aggregate noncontingent,
liquidated debts
[[Page H203]]
(excluding a debt for 1 dwelling which is owned by such
corporation or partnership and which a shareholder or partner
maintains as a principal residence, unless such debt arises
out of a commercial fishing operation), on the date the case
is filed, arise out of a commercial fishing operation owned
or operated by such corporation or such partnership; and
``(III) if such corporation issues stock, such stock is not
publicly traded;
``(19B) `family fisherman with regular annual income' means
a family fisherman whose annual income is sufficiently stable
and regular to enable such family fisherman to make payments
under a plan under chapter 12 of this title;''.
(b) Who May Be a Debtor.--Section 109(f) of title 11,
United States Code, is amended by inserting ``or family
fisherman'' after ``family farmer''.
(c) Chapter 12.--Chapter 12 of title 11, United States
Code, is amended--
(1) in the chapter heading, by inserting ``OR FISHERMAN''
after ``FAMILY FARMER'';
(2) in section 1203, by inserting ``or commercial fishing
operation'' after ``farm''; and
(3) in section 1206, by striking ``if the property is
farmland or farm equipment'' and inserting ``if the property
is farmland, farm equipment, or property used to carry out a
commercial fishing operation (including a commercial fishing
vessel)''.
(d) Clerical Amendment.--In the table of chapters for title
11, United States Code, the item relating to chapter 12, is
amended to read as follows:
``12. Adjustments of Debts of a Family Farmer or Family Fisherman with
Regular Annual Income...................................1201''.....
(e) Applicability.--Nothing in this section shall change,
affect, or amend the Fishery Conservation and Management Act
of 1976 (16 U.S.C. 1801 et seq.).
TITLE XI--HEALTH CARE AND EMPLOYEE BENEFITS
SEC. 1101. DEFINITIONS.
(a) Health Care Business Defined.--Section 101 of title 11,
United States Code, as amended by section 306, is amended--
(1) by redesignating paragraph (27A) 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;
``(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 individual 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 most recent 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
subchapter III of chapter 3 of title 11, United States Code,
is amended by adding at the end 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 section 445, 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 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; and''.
SEC. 1104. APPOINTMENT OF OMBUDSMAN TO ACT AS PATIENT
ADVOCATE.
(a) Ombudsman To Act as Patient Advocate.--
(1) Appointment of ombudsman.--Title 11, United States
Code, as amended by section 232, is amended by inserting
after section 332 the following:
``Sec. 333. Appointment of patient care ombudsman
``(a)(1) If the debtor in a case under chapter 7, 9, or 11
is a health care business, the court shall order, not later
than 30 days after the commencement of the case, the
appointment of an ombudsman to monitor the quality of patient
care and to represent the interests of the patients of the
health care business unless the court finds that the
appointment of such ombudsman is not necessary for the
protection of patients under the specific facts of the case.
``(2)(A) If the court orders the appointment of an
ombudsman under paragraph (1), the United States trustee
shall appoint 1 disinterested person (other than the United
States trustee) to serve as such ombudsman.
``(B) If the debtor is a health care business that provides
long-term care, then the United States trustee may appoint
the State Long-Term Care Ombudsman appointed under the Older
Americans Act of 1965 for the State in which the case is
pending to serve as the ombudsman required by paragraph (1).
``(C) If the United States trustee does not appoint a State
Long-Term Care Ombudsman under subparagraph (B), the court
shall notify the State Long-Term Care Ombudsman appointed
under the Older Americans Act of 1965 for the State in which
the case is pending, of the name and address of the person
who is appointed under subparagraph (A).
``(b) An ombudsman appointed under subsection (a) shall--
``(1) monitor the quality of patient care provided to
patients of the debtor, 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 at 60-day intervals thereafter,
report to the court after notice to the parties in interest,
at a hearing or in writing, regarding the quality of patient
care provided to patients of the debtor; and
``(3) if such ombudsman determines that the quality of
patient care provided to patients of the debtor is declining
significantly or is otherwise being materially compromised,
file with the court a motion or a written report, with notice
to the parties in interest immediately upon making such
determination.
``(c)(1) An ombudsman appointed under subsection (a) shall
maintain any information obtained by such ombudsman under
this section that relates to patients (including information
relating to patient records) as confidential information.
Such ombudsman may not review confidential patient records
unless the court approves such review in advance and imposes
restrictions on such ombudsman to protect the confidentiality
of such records.
[[Page H204]]
``(2) An ombudsman appointed under subsection (a)(2)(B)
shall have access to patient records consistent with
authority of such ombudsman under the Older Americans Act of
1965 and under non-Federal laws governing the State Long-Term
Care Ombudsman program.''.
(2) Clerical amendment.--The table of sections for
subchapter II of chapter 3 of title 11, United States Code,
as amended by section 232, is amended by adding at the end
the following:
``333. Appointment of ombudsman.''.
(b) Compensation of Ombudsman.--Section 330(a)(1) of title
11, United States Code, is amended--
(1) in the matter preceding subparagraph (A), by inserting
``an ombudsman appointed under section 333, 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 sections 102, 219, and 446, is amended by
adding at the end the following:
``(12) 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, as amended by section 446, is amended by
striking ``and (11)'' and inserting ``(11), and (12)''.
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 (27), as amended by sections
224, 303, 311, 401, 718, and 907, the following:
``(28) 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 pursuant to title XI or XVIII of such
Act).''.
TITLE XII--TECHNICAL AMENDMENTS
SEC. 1201. DEFINITIONS.
Section 101 of title 11, United States Code, as
hereinbefore 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 and inserting a
semicolon;
(6) by striking paragraph (54) and inserting the following:
``(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;'';
(7) by indenting the left margin of paragraph (54A) 2 ems
to the right; and
(8) in each of paragraphs (1) through (35), in each of
paragraphs (36), (37), (38A), (38B) and (39A), 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, 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
redesignated by section 221, 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
sections 215 and 314, 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)(14A);
(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 section 201, 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, 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. 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. 1220. 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. 1221. 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 of Reorganization.--Section
1129(a) of title 11, United States Code, as amended by
sections 213 and
[[Page H205]]
321, 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 section 225, is amended by adding
at the end the following:
``(f) 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 filing 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. 1222. 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. 1223. BANKRUPTCY JUDGESHIPS.
(a) Short Title.--This section may be cited as the
``Bankruptcy Judgeship Act of 2003''.
(b) Temporary Judgeships.--
(1) Appointments.--The following bankruptcy judges shall be
appointed 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 judge for the eastern
district of California.
(B) Three additional bankruptcy judges for the central
district of California.
(C) Four additional bankruptcy judges for the district of
Delaware.
(D) Two additional bankruptcy judges for the southern
district of Florida.
(E) One additional bankruptcy judge for the southern
district of Georgia.
(F) Three additional bankruptcy judges for the district of
Maryland.
(G) One additional bankruptcy judge for the eastern
district of Michigan.
(H) One additional bankruptcy judge for the southern
district of Mississippi.
(I) One additional bankruptcy judge for the district of New
Jersey.
(J) One additional bankruptcy judge for the eastern
district of New York.
(K) One additional bankruptcy judge for the northern
district of New York.
(L) One additional bankruptcy judge for the southern
district of New York.
(M) One additional bankruptcy judge for the eastern
district of North Carolina.
(N) One additional bankruptcy judge for the eastern
district of Pennsylvania.
(O) One additional bankruptcy judge for the middle district
of Pennsylvania.
(P) One additional bankruptcy judge for the district of
Puerto Rico.
(Q) One additional bankruptcy judge for the western
district of Tennessee.
(R) One additional bankruptcy judge for the eastern
district of Virginia.
(S) One additional bankruptcy judge for the district of
South Carolina.
(T) One additional bankruptcy judge for the district of
Nevada.
(2) Vacancies.--
(A) Districts with single appointments.--Except as provided
in subparagraphs (B), (C), (D), and (E), the first vacancy
occurring in the office of bankruptcy judge in each of the
judicial districts set forth in paragraph (1)--
(i) occurring 5 years or more after the appointment date of
the bankruptcy judge appointed under paragraph (1) to such
office; and
(ii) resulting from the death, retirement, resignation, or
removal of a bankruptcy judge;
shall not be filled.
(B) Central district of california.--The 1st, 2d, and 3d
vacancies in the office of bankruptcy judge in the central
district of California--
(i) occurring 5 years or more after the respective 1st, 2d,
and 3d appointment dates of the bankruptcy judges appointed
under paragraph (1)(B); and
(ii) resulting from the death, retirement, resignation, or
removal of a bankruptcy judge;
shall not be filled.
(C) District of delaware.--The 1st, 2d, 3d, and 4th
vacancies in the office of bankruptcy judge in the district
of Delaware--
(i) occurring 5 years or more after the respective 1st, 2d,
3d, and 4th appointment dates of the bankruptcy judges
appointed under paragraph (1)(F); and
(ii) resulting from the death, retirement, resignation, or
removal of a bankruptcy judge;
shall not be filled.
(D) Southern district of florida.--The 1st and 2d vacancies
in the office of bankruptcy judge in the southern district of
Florida--
(i) occurring 5 years or more after the respective 1st and
2d appointment dates of the bankruptcy judges appointed under
paragraph (1)(D); and
(ii) resulting from the death, retirement, resignation, or
removal of a bankruptcy judge;
shall not be filled.
(E) District of maryland.--The 1st, 2d, and 3d vacancies in
the office of bankruptcy judge in the district of Maryland--
(i) occurring 5 years or more after the respective 1st, 2d,
and 3d appointment dates of the bankruptcy judges appointed
under paragraph (1)(F); and
(ii) resulting from the death, retirement, resignation, or
removal of a bankruptcy judge;
shall not be filled.
(c) Extensions.--
(1) In general.--The temporary office of bankruptcy judges
authorized for the northern district of Alabama, the district
of Delaware, the district of Puerto Rico, and the eastern
district of Tennessee under paragraphs (1), (3), (7), 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 5
years after the date of the enactment of this Act.
(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 the temporary
office of bankruptcy judges 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 court of appeals of the United
States 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 Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 1224. 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
case 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. 1225. 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 date of the filing of the
petition;''.
SEC. 1226. 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 under section 707(b),
[[Page H206]]
and reaffirmation agreements under section 524, of title 11
of the United States Code, as amended by this Act.
SEC. 1227. 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 in section 507(c), and subject to the prior
rights of a holder of a security interest 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, within 45 days before 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)(9).''.
(b) Administrative Expenses.--Section 503(b) of title 11,
United States Code, as amended by sections 445 and 1103, is
amended by adding at the end the following:
``(9) the value of any goods received by the debtor within
20 days before 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. 1228. PROVIDING REQUESTED TAX DOCUMENTS TO THE COURT.
(a) Chapter 7 Cases.--The court shall not grant a discharge
in the case of an individual who is a debtor in a case 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 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. 1229. 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. 1230. PROPERTY NO LONGER SUBJECT TO REDEMPTION.
Section 541(b) of title 11, United States Code, as amended
by sections 225 and 323, is amended by adding after paragraph
(7), as added by section 323, the following:
``(8) 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--
``(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); or''.
SEC. 1231. 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 district court of the United
States for the district for which the panel to which the
trustee is appointed under subsection (a)(1), or in the
district court of the United States 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 district court of the United
States for 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. 1232. 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. 1233. DIRECT APPEALS OF BANKRUPTCY MATTERS TO COURTS OF
APPEALS.
(a) Appeals.--Section 158 of title 28, United States Code,
is amended--
(1) in subsection (c)(1), by striking ``Subject to
subsection (b),'' and inserting ``Subject to subsections (b)
and (d)(2),''; and
(2) in subsection (d)--
(A) by inserting ``(1)'' after ``(d)''; and
(B) by adding at the end the following:
``(2)(A) The appropriate court of appeals shall have
jurisdiction of appeals described in the first sentence of
subsection (a) if the bankruptcy court, the district court,
or the bankruptcy appellate panel involved, acting on its own
motion or on the request of a party to the judgment, order,
or decree described in such first sentence, or all the
appellants and appellees (if any) acting jointly, certify
that--
``(i) the judgment, order, or decree involves a question of
law as to which there is no controlling decision of the court
of appeals for the circuit or of the Supreme Court of the
United States, or involves a matter of public importance;
``(ii) the judgment, order, or decree involves a question
of law requiring resolution of conflicting decisions; or
``(iii) an immediate appeal from the judgment, order, or
decree may materially advance the progress of the case or
proceeding in which the appeal is taken;
and if the court of appeals authorizes the direct appeal of
the judgment, order, or decree.
``(B) If the bankruptcy court, the district court, or the
bankruptcy appellate panel--
``(i) on its own motion or on the request of a party,
determines that a circumstance specified in clause (i), (ii),
or (iii) of subparagraph (A) exists; or
``(ii) receives a request made by a majority of the
appellants and a majority of appellees (if any) to make the
certification described in subparagraph (A);
then the bankruptcy court, the district court, or the
bankruptcy appellate panel shall make the certification
described in subparagraph (A).
``(C) The parties may supplement the certification with a
short statement of the basis for the certification.
``(D) An appeal under this paragraph does not stay any
proceeding of the bankruptcy court, the district court, or
the bankruptcy appellate panel from which the appeal is
taken, unless the respective bankruptcy court, district
court, or bankruptcy appellate panel, or the court of appeals
in which the appeal in pending, issues a stay of such
proceeding pending the appeal.
``(E) Any request under subparagraph (B) for certification
shall be made not later than 60 days after the entry of the
judgment, order, or decree.''.
(b) Procedural Rules.--
(1) Temporary application.--A provision of this subsection
shall apply to appeals under section 158(d)(2) of title 28,
United States Code, until a rule of practice and procedure
relating to such provision and such
[[Page H207]]
appeals is promulgated or amended under chapter 131 of such
title.
(2) Certification.--A district court, a bankruptcy court,
or a bankruptcy appellate panel may make a certification
under section 158(d)(2) of title 28, United States Code, only
with respect to matters pending in the respective bankruptcy
court, district court, or bankruptcy appellate panel.
(3) Procedure.--Subject to any other provision of this
subsection, an appeal authorized by the court of appeals
under section 158(d)(2)(A) of title 28, United States Code,
shall be taken in the manner prescribed in subdivisions
(a)(1), (b), (c), and (d) of rule 5 of the Federal Rules of
Appellate Procedure. For purposes of subdivision (a)(1) of
rule 5--
(A) a reference in such subdivision to a district court
shall be deemed to include a reference to a bankruptcy court
and a bankruptcy appellate panel, as appropriate; and
(B) a reference in such subdivision to the parties
requesting permission to appeal to be served with the
petition shall be deemed to include a reference to the
parties to the judgment, order, or decree from which the
appeal is taken.
(4) Filing of petition with attachment.--A petition
requesting permission to appeal, that is based on a
certification made under subparagraph (A) or (B) of section
158(d)(2) shall--
(A) be filed with the circuit clerk not later than 10 days
after the certification is entered on the docket of the
bankruptcy court, the district court, or the bankruptcy
appellate panel from which the appeal is taken; and
(B) have attached a copy of such certification.
(5) References in rule 5.--For purposes of rule 5 of the
Federal Rules of Appellate Procedure--
(A) a reference in such rule to a district court shall be
deemed to include a reference to a bankruptcy court and to a
bankruptcy appellate panel; and
(B) a reference in such rule to a district clerk shall be
deemed to include a reference to a clerk of a bankruptcy
court and to a clerk of a bankruptcy appellate panel.
(6) Application of rules.--The Federal Rules of Appellate
Procedure shall apply in the courts of appeals with respect
to appeals authorized under section 158(d)(2)(A), to the
extent relevant and as if such appeals were taken from final
judgments, orders, or decrees of the district courts or
bankruptcy appellate panels exercising appellate jurisdiction
under subsection (a) or (b) of section 158 of title 28,
United States Code.
SEC. 1234. INVOLUNTARY CASES.
(a) Amendments.--Section 303 of title 11, United States
Code, is amended--
(1) in subsection (b)(1), by--
(A) inserting ``as to liability or amount'' after ``bona
fide dispute''; and
(B) striking ``if such claims'' and inserting ``if such
noncontingent, undisputed claims''; and
(2) in subsection (h)(1), by inserting ``as to liability or
amount'' before the semicolon at the end.
(b) Effective Date; Application of Amendments.--This
section and the amendments made by this section shall take
effect on the date of the enactment of this Act and shall
apply with respect to cases commenced under title 11 of the
United States Code before, on, and after such date.
SEC. 1235. FEDERAL ELECTION LAW FINES AND PENALTIES AS
NONDISCHARGEABLE DEBT.
Section 523(a) of title 11, United States Code, as amended
by section 314, is amended by inserting after paragraph (14A)
the following:
``(14B) incurred to pay fines or penalties imposed under
Federal election law;''.
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 2003, a toll-free telephone number, or 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),
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 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--
[[Page H208]]
``(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 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
[[Page H209]]
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 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 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.--
(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 cases filed under title 11
of the 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.
[[Page H210]]
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.--
(1) In general.--Except as otherwise provided in this Act
and paragraph (2), 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.
(2) Certain limitations applicable to debtors.--The
amendments made by sections 308, 322, and 330 shall apply
with respect to cases commenced under title 11, United States
Code, on or after the date of the enactment of this Act.
TITLE XV--PREVENTING CORPORATE BANKRUPTCY ABUSE
SEC. 1501. EMPLOYEE WAGE AND BENEFIT PRIORITIES.
Section 507(a) of title 11, United States Code, is
amended--
(1) in paragraph (3) by striking ``90'' and inserting
``180'', and
(2) in paragraphs (3) and (4) by striking ``$4,000'' and
inserting ``$10,000''.
SEC. 1502. FRAUDULENT TRANSFERS AND OBLIGATIONS.
Section 548 of title 11, United States Code, is amended--
(1) in subsections (a) and (b) by striking ``one year'' and
inserting ``2 years'',
(2) in subsection (a)--
(A) by inserting ``(including any transfer to or for the
benefit of an insider under an employment contract)'' after
``transfer'' the 1st place it appears, and
(B) by inserting ``(including any obligation to or for the
benefit of an insider under an employment contract)'' after
``obligation'' the 1st place it appears, and
(3) in subsection (a)(1)(B)(ii)--
(A) in subclause (II) by striking ``or'' at the end,
(B) in subclause (III) by striking the period at the end
and inserting ``; or'', and
(C) by adding at the end the following:
``(IV) made such transfer to or for the benefit of an
insider, or incurred such obligation to or for the benefit of
an insider, under an employment contract and not in the
ordinary course of business.''.
SEC. 1503. PAYMENT OF INSURANCE BENEFITS TO RETIRED
EMPLOYEES.
Section 1114 of title 11, United States Code, is amended--
(1) by redesignating subsection (l) as subsection (m), and
(2) by inserting after subsection (k) the following:
``(l) If the debtor, during the 180-day period ending on
the date of the filing of the petition--
``(1) modified retiree benefits; and
``(2) was insolvent on the date such benefits were
modified;
the court, on motion of a party in interest, and after notice
and a hearing, shall issue an order reinstating as of the
date the modification was made, such benefits as in effect
immediately before such date unless the court finds that the
balance of the equities clearly favors such modification.''.
SEC. 1504. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date.--Except as provided in subsection (b),
this Act and the amendments made by this Act shall take
effect on the date of the enactment of this Act.
(b) Application of Amendments.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this Act shall apply only with respect to
cases commenced under title 11 of the United States Code on
or after the date of the enactment of this Act.
(2) Avoidance period.--The amendment made by section 3(1)
shall apply only with respect to cases commenced under title
11 of the United States Code more than 1 year after the date
of the enactment of this Act.
The CHAIRMAN. No amendments to the amendment in the nature of a
substitute are in order except the amendments printed in House Report
108-407. Each amendment may be offered only in the order printed in the
report, by a Member designated in the report, shall be considered read,
shall be 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 108-407.
Amendment No. 1 Offered by Mr. Sensenbrenner
Mr. SENSENBRENNER. Mr. Chairman, I offer an amendment.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 1 offered by Mr. Sensenbrenner:
Strike ``Bankruptcy Abuse Prevention and Consumer
Protection Act of 2003'' each place it appears and insert
``Bankruptcy Abuse Prevention and Consumer Protection Act of
2004''.
In section 204 strike ``2002'' and insert ``2003''.
Strike section 1001 and insert the following:
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), and as in
effect on December 31, 2003, is hereby reenacted.
(2) Effective date of reenactment.--Paragraph (1) shall
take effect on January 1, 2004.
(b) Amendments--Chapter 12 of title 11, United States Code,
as reenacted by subsection (a), is amended by this Act.
(c) 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).
In section 1201--
(1) strike paragraph (2) and insert the following:
(2) in each paragraph (other than paragraph (54A)), by
inserting ``The term'' after the paragraph designation;
and
(2) strike paragraph (7) and insert the following:
(7) in paragraph (54A)--
(A) by striking ``the term'' and inserting ``The term'';
and
(B) by indenting the left margin of paragraph (54A) 2 ems
to the right; and
Strike titles XIV and XV, and insert the following:
TITLE XIV--PREVENTING CORPORATE BANKRUPTCY ABUSE
SEC. 1401. EMPLOYEE WAGE AND BENEFIT PRIORITIES.
Section 507(a) of title 11, United States Code, as amended
by section 212, is amended--
(1) in paragraph (4) by striking ``90'' and inserting
``180'', and
(2) in paragraphs (4) and (5) by striking ``$4,000'' and
inserting ``$10,000''.
SEC. 1402. FRAUDULENT TRANSFERS AND OBLIGATIONS.
Section 548 of title 11, United States Code, is amended--
(1) in subsections (a) and (b) by striking ``one year'' and
inserting ``2 years'',
(2) in subsection (a)--
(A) by inserting ``(including any transfer to or for the
benefit of an insider under an employment contract)'' after
``transfer'' the 1st place it appears, and
(B) by inserting ``(including any obligation to or for the
benefit of an insider under an employment contract)'' after
``obligation'' the 1st place it appears, and
(3) in subsection (a)(1)(B)(ii)--
(A) in subclause (II) by striking ``or'' at the end,
(B) in subclause (III) by striking the period at the end
and inserting ``; or'', and
(C) by adding at the end the following:
``(IV) made such transfer to or for the benefit of an
insider, or incurred such obligation to or for the benefit of
an insider, under an employment contract and not in the
ordinary course of business.''.
SEC. 1403. PAYMENT OF INSURANCE BENEFITS TO RETIRED
EMPLOYEES.
Section 1114 of title 11, United States Code, is amended--
(1) by redesignating subsection (l) as subsection (m), and
(2) by inserting after subsection (k) the following:
``(l) If the debtor, during the 180-day period ending on
the date of the filing of the petition--
``(1) modified retiree benefits; and
``(2) was insolvent on the date such benefits were
modified;
the court, on motion of a party in interest, and after notice
and a hearing, shall issue an order reinstating as of the
date the modification was made, such benefits as in effect
immediately before such date unless the court finds that the
balance of the equities clearly favors such modification.''.
SEC. 1404. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date.--Except as provided in subsection (b),
this title and the amendments made by this title shall take
effect on the date of the enactment of this Act.
(b) Application of Amendments.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this title shall apply only with respect
to cases commenced under title 11 of the United States Code
on or after the date of the enactment of this Act.
(2) Avoidance period.--The amendment made by section
1402(1) shall apply only with respect to cases commenced
under title 11 of the United States Code more than 1 year
after the date of the enactment of this Act.
TITLE XV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
SEC. 1501. 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.--
(1) In general.--Except as otherwise provided in this Act
and paragraph (2), the
[[Page H211]]
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.
(2) Certain limitations applicable to debtors.--The
amendments made by sections 308, 322, and 330 shall apply
with respect to cases commenced under title 11, United States
Code, on or after the date of the enactment of this Act.
SEC. 1502. TECHNICAL CORRECTIONS.
(a) Conforming Amendments to Title 11 of the United States
Code.--Title 11 of the United States Code, as amended by the
preceding provisions of this Act, is amended--
(1) in section 507--
(A) in subsection (a)--
(i) in paragraph (5)(B)(ii) by striking ``paragraph (3)''
and inserting ``paragraph (4)''; and
(ii) in paragraph (8)(D) by striking ``paragraph (3)'' and
inserting ``paragraph (4)'';
(B) in subsection (b) by striking ``subsection (a)(1)'' and
inserting ``subsection (a)(2)''; and
(C) in subsection (d) by striking ``subsection (a)(3)'' and
inserting ``subsection (a)(1)'';
(2) in section 523(a)(1)(A) by striking ``507(a)(2)'' and
inserting ``507(a)(3)'';
(3) in section 752(a) by striking ``507(a)(1)'' and
inserting ``507(a)(2)'';
(4) in section 766--
(A) in subsection (h) by striking ``507(a)(1)'' and
inserting ``507(a)(2)''; and
(B) in subsection (i) by striking ``507(a)(1)'' each place
it appears and inserting ``507(a)(2)'';
(5) in section 901(a) by striking ``507(a)(1)'' and
inserting ``507(a)(2)'';
(6) in section 943(b)(5) by striking ``507(a)(1)'' and
inserting ``507(a)(2)'';
(7) in section 1123(a)(1) by striking ``507(a)(1),
507(a)(2)'' and inserting ``507(a)(2), 507(a)(3)'';
(8) in section 1129(a)(9)--
(A) in subparagraph (A) by striking ``507(a)(1) or
507(a)(2)'' and inserting ``507(a)(2) or 507(a)(3)''; and
(B) in subparagraph (B) by striking ``507(a)(3)'' and
inserting ``507(a)(1)'';
(9) in section 1226(b)(1) by striking ``507(a)(1)'' and
inserting ``507(a)(2)''; and
(10) in section 1326(b)(1) by striking ``507(a)(1)'' and
inserting ``507(a)(2)''.
(b) Related Conforming Amendment.--Section 6(e) of the
Securities Investor Protection Act of 1970 (15 U.S.C.
78fff(e)) is amended by striking ``507(a)(1)'' and inserting
``507(a)(2)''.
In the table of contents strike the items relating to
titles XIV and XV, and insert the following items:
TITLE XIV--PREVENTING CORPORATE BANKRUPTCY ABUSE
Sec. 1401. Employee wage and benefit priorities.
Sec. 1402. Fraudulent transfers and obligations.
Sec. 1403. Payment of insurance benefits to retired employees.
Sec. 1404. Effective date; application of amendments.
TITLE XV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
Sec. 1501. Effective date; application of amendments.
Sec. 1502. Technical corrections.
The CHAIRMAN. Pursuant to House Resolution 503, the gentleman from
Wisconsin (Mr. Sensenbrenner) and a Member opposed 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 very straightforward. It simply makes
several minor corrections to the text of H.R. 975 that was passed by
the House, which according to the rule has been substituted as the text
of Senate 1920.
The technical revisions consist of the following:
The short title of the bill is revised to reflect the current year.
Section 1001 of the bill is amended to clarify that the reenactment of
Chapter 12 is made retroactively; this ensures that cases filed by
family farmers during the lapsed period can simply be converted to
Chapter 12 once it is reenacted. Titles XIV and XV of the bill are
renumbered as titles XV and XIV, respectively, to clarify the bill's
overall effective date. An erroneous drafting instruction in section
1201 of the bill is corrected. And a new provision is added to correct
statutory cross-references in current law.
This is technical and noncontroversial, and I urge my colleagues to
support the amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. WATT. Mr. Chairman, I claim the time in opposition to the
amendment, and I yield myself such time as I may consume.
Mr. Chairman, I rise solely to advise that we have had no indication
from our side that there is anybody who opposes these technical
amendments and we, therefore, concur in the amendments.
Mr. Chairman, I yield back the balance of my time.
Mr. SENSENBRENNER. Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Wisconsin (Mr. Sensenbrenner).
The amendment was agreed to.
The CHAIRMAN. It is now in order to consider Amendment No. 2 printed
in House Report 108-407.
Amendment In The Nature Of A Substitute No. 2 Offered by Ms. Baldwin
Ms. BALDWIN. Mr. Chairman, I offer an amendment in the nature of a
substitute.
The CHAIRMAN. The Clerk will designate the amendment in the nature of
a substitute.
The text of the amendment in the nature of a substitute is as
follows:
Amendment in the nature of a substitute No. 2 offered by
Ms. Baldwin:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protection of Family Farmers
and Family Fishermen Act of 2004''.
SEC. 2. PERMANENT REENACTMENT OF CHAPTER 12.
(a) Permanent Reenactment.--
(1) Reenactment.--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), and as in
effect on December 31, 2003, is hereby reenacted.
(2) 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).
(b) Effective Date of Reenactment.--Subsection (a) shall
take effect on January 1, 2004.
SEC. 3. DEBT LIMIT INCREASE.
Section 104(b) of title 11, United States Code, as amended
by section 226, is amended by inserting ``101(18),'' after
``101(3),'' each place it appears.
SEC. 4. 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 section 719, is
amended by striking ``a State or local governmental unit''
and inserting ``any governmental unit''.
(c) Effective Date; Application of Amendments.--This
section and the amendments made by this section shall take
effect on the date of the enactment of this Act and shall not
apply with respect to cases commenced under title 11 of the
United States Code before such date.
SEC. 5. 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
``$3,237,000''; and
(B) by striking ``80'' and inserting ``50''; and
(2) in subparagraph (B)(ii)--
(A) by striking ``$1,500,000'' and inserting
``$3,237,000''; and
(B) by striking ``80'' and inserting ``50''.
SEC. 6. ELIMINATION OF REQUIREMENT THAT FAMILY FARMER AND
SPOUSE RECEIVE OVER 50 PERCENT OF INCOME FROM
FARMING OPERATION IN YEAR PRIOR TO BANKRUPTCY.
Section 101(18)(A) of title 11, United States Code, is
amended by striking ``for the taxable year preceding the
taxable year'' and inserting the following:
``for--
``(i) the taxable year preceding; or
``(ii) each of the 2d and 3d taxable years preceding;
the taxable year''.
SEC. 7. PROHIBITION OF RETROACTIVE ASSESSMENT OF DISPOSABLE
INCOME.
(a) Confirmation of Plan.--Section 1225(b)(1) 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 value of the property to be distributed under the
plan in the 3-year period, or
[[Page H212]]
such longer period as the court may approve under section
1222(c), beginning on the date that the first distribution is
due under the plan is not less than the debtor's projected
disposable income for such period.''.
(b) Modification of Plan.--Section 1229 of title 11, United
States Code, is amended by adding at the end the following:
``(d) A plan may not be modified under this section--
``(1) to increase the amount of any payment due before the
plan as modified becomes the plan;
``(2) by anyone except the debtor, based on an increase in
the debtor's disposable income, to increase the amount of
payments to unsecured creditors required for a particular
month so that the aggregate of such payments exceeds the
debtor's disposable income for such month; or
``(3) in the last year of the plan by anyone except the
debtor, to require payments that would leave the debtor with
insufficient funds to carry on the farming operation after
the plan is completed.''.
SEC. 8. FAMILY FISHERMEN.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended--
(1) by inserting after paragraph (7) the following:
``(7A) `commercial fishing operation' means--
``(A) the catching or harvesting of fish, shrimp, lobsters,
urchins, seaweed, shellfish, or other aquatic species or
products of such species; or
``(B) for purposes of section 109 and chapter 12,
aquaculture activities consisting of raising for market any
species or product described in subparagraph (A);
``(7B) `commercial fishing vessel' means a vessel used by a
family fisherman to carry out a commercial fishing
operation;''; and
(2) by inserting after paragraph (19) the following:
``(19A) `family fisherman' means--
``(A) an individual or individual and spouse engaged in a
commercial fishing operation--
``(i) whose aggregate debts do not exceed $1,500,000 and
not less than 80 percent of whose aggregate noncontingent,
liquidated debts (excluding a debt for the principal
residence of such individual or such individual and spouse,
unless such debt arises out of a commercial fishing
operation), on the date the case is filed, arise out of a
commercial fishing operation owned or operated by such
individual or such individual and spouse; and
``(ii) who receive from such commercial fishing operation
more than 50 percent of such individual's or such
individual's and spouse's gross income for the taxable year
preceding the taxable year in which the case concerning such
individual or such individual and spouse was filed; or
``(B) a corporation or partnership--
``(i) in which more than 50 percent of the outstanding
stock or equity is held by--
``(I) 1 family that conducts the commercial fishing
operation; or
``(II) 1 family and the relatives of the members of such
family, and such family or such relatives conduct the
commercial fishing operation; and
``(ii)(I) more than 80 percent of the value of its assets
consists of assets related to the commercial fishing
operation;
``(II) its aggregate debts do not exceed $1,500,000 and not
less than 80 percent of its aggregate noncontingent,
liquidated debts (excluding a debt for 1 dwelling which is
owned by such corporation or partnership and which a
shareholder or partner maintains as a principal residence,
unless such debt arises out of a commercial fishing
operation), on the date the case is filed, arise out of a
commercial fishing operation owned or operated by such
corporation or such partnership; and
``(III) if such corporation issues stock, such stock is not
publicly traded;
``(19B) `family fisherman with regular annual income' means
a family fisherman whose annual income is sufficiently stable
and regular to enable such family fisherman to make payments
under a plan under chapter 12 of this title;''.
(b) Who May Be a Debtor.--Section 109(f) of title 11,
United States Code, is amended by inserting ``or family
fisherman'' after ``family farmer''.
(c) Chapter 12.--Chapter 12 of title 11, United States
Code, is amended--
(1) in the chapter heading, by inserting ``OR FISHERMAN''
after ``FAMILY FARMER'';
(2) in section 1203, by inserting ``or commercial fishing
operation'' after ``farm''; and
(3) in section 1206, by striking ``if the property is
farmland or farm equipment'' and inserting ``if the property
is farmland, farm equipment, or property used to carry out a
commercial fishing operation (including a commercial fishing
vessel)''.
(d) Clerical Amendment.--In the table of chapters for title
11, United States Code, the item relating to chapter 12, is
amended to read as follows:
``12. Adjustments of Debts of a Family Farmer or Family Fisherman with
Regular Annual Income...................................1201''.....
(e) Applicability.--Nothing in this section shall change,
affect, or amend the Fishery Conservation and Management Act
of 1976 (16 U.S.C. 1801, et seq.).
The CHAIRMAN. Pursuant to House Resolution 503, the gentlewoman from
Wisconsin (Ms. Baldwin) and the gentleman from Wisconsin (Mr.
Sensenbrenner) each will control 30 minutes.
The gentlewoman from Wisconsin (Ms. Baldwin) is recognized for 30
minutes.
Ms. BALDWIN. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, as you know, Chapter 12 family farmers bankruptcy
protection is an effective and noncontroversial part of our Nation's
Bankruptcy Code. Since its creation in 1986, it has allowed our
Nation's family farmers who face economic hardship a greater
opportunity to reorganize their debts and continue in farming.
As with many laws that we pass, the benefits of the direct impact,
which can be easily measured, are often exceeded by the indirect
benefits. Chapter 12 does not just benefit those using its protections.
Many farmers who face the possibility of a bankruptcy never get to the
point of a court filing. Bankruptcy trustees and bankruptcy attorneys
are quick to point out that the very existence of the option of Chapter
12 filing promotes negotiations between farmers and their creditors,
thus preventing bankruptcy filings altogether.
Chapter 12 protection is currently unavailable to our Nation's
farmers. It expired on December 31, 2003. The House should have taken
up the 6-month extension bill, Senate bill 1920, passed without
amendment, and sent it to the President immediately. However, by
approving the rule earlier today, we have foreclosed that option;
therefore, I am offering this substitute amendment.
Mr. Chairman, my amendment provides the House with a clear policy
choice by allowing a vote on passing a permanent Chapter 12
authorization instead of continuing to keep it tied to the
controversial larger bankruptcy bill. My amendment simply uses the
Chapter 12 language that was agreed to by bipartisan, bicameral
conferees during the 107th Congress. It is the same as the bipartisan
bill, Senate bill 2004, introduced by Members of the other body.
The amendment does the following: It makes Chapter 12 farm bankruptcy
protections a permanent part of our Bankruptcy Code; it would increase
the debt limits that a family farm can hold to qualify for Chapter 12
from $1.5 million to $3.2 million; and it would index those debt limits
to the consumer price index. It would reduce from 80 percent to 50
percent the percentage of family farm liabilities that are due to
farming operations; it would look at the previous 3 years, instead of
only the previous year when determining whether 50 percent of income is
from farming operations; and it would expand this type of bankruptcy
protection to family fishermen.
These changes to Chapter 12 are not controversial and enjoy
widespread bipartisan support.
Since I was first elected to Congress 5 years ago, we have passed
eight, eight temporary extensions to Chapter 12. It is time to end this
repetitive cycle of extensions and extensions. Our struggling family
farmers should not be used as leverage. They should not have to
continue to wait while we play games with Chapter 12 protections. This
bill provides a textbook example that what we do here in Washington
directly affects the lives of people facing real financial challenges.
In Wisconsin recently, a farmer from Columbus filed for Chapter 12
bankruptcy. He works day and night to make his farm a success.
Unfortunately, like many farmers, the weather and the market conspired
to disrupt his cash flow. Filing Chapter 12 bankruptcy gave his family
time to negotiate with his creditors while he switched production from
corn and soybeans to vegetables, which he now sells in local markets.
He sells his produce in farmers markets in Madison and in Princeton,
Wisconsin, and he is paying his debts.
Under Chapter 12, it was not only the Columbus farmer that benefited,
his family and his creditors now are receiving their money. The people
in my district can purchase his bounty, and he can continue to support
his farm, his family and his obligations.
Every time we come to the floor to extend Chapter 12, we are told
that a permanent extension cannot be passed separately from the big
bill because taking out this terribly popular item would slow the
bill's momentum. We were told that we had to strip the permanent
extension of Chapter 12 from last year's farm bill because it would
[[Page H213]]
slow down the progress of the bankruptcy bill. We were told in June
when we extended Chapter 12 again that we had to wait. Our farmers have
been waiting for more than 5 years, and it is time to get this done.
Let us end the uncertainty these extensions cause by passing a
permanent authorization. That is what my amendment would do. I sort of
feel like I am in the middle of the movie ``Groundhog Day.'' Every 6
months we go through a process of extending Chapter 12 extensions
again. Every session of Congress we go through a drawn-out debate
regarding a larger overhaul of our bankruptcy laws. My amendment would
break us out of that cycle.
It is time to stop using our farmers as pawns to push for bankruptcy
reform and it is time to restore this important protection. We should
not be playing politics with the livelihood of our farmers by putting
the special interests who want the bankruptcy overhaul ahead of the
real needs of struggling family farmers.
I urge my colleagues to pass the Baldwin substitute amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may
consume.
Mr. Chairman, with all due respect to my colleague from Wisconsin
(Ms. Baldwin), she had an opportunity to advance the bankruptcy bill on
November 14, 2002, but voted against the rule to bring up the
conference report that contained the compromise language relative to
the abortion clinic protestors judgment discharge, and that vote was
rejected, 172 to 243. Had that rule passed, obviously the conference
report would have passed, the President would have signed the bill at
the end of 2002, and we would not be here talking about any of these
issues here today.
But I rise in opposition to this amendment because as we begin this
debate, I want to make it perfectly clear that by opposing this
amendment we are not in any respect jeopardizing the financial well-
being of family farmers, or as proponents of this amendment have tried
to construe the issue, holding farmers hostage. Nothing could be
further from the truth.
The reality is that Senate 1920, as it will be voted on today,
already accomplishes everything this amendment does and, indeed, much
more. Since its enactment, Chapter 12 has lapsed on six occasions. The
shortest lapse periods was 20 days; the longest was approximately 10
months. As with prior measures reenacting Chapter 12, the bill before
us is retroactive, which will protect family farmers.
Mr. Chairman, you should know that the amendments simply extract one
series of reforms from pending bankruptcy legislation. But what
opponents of the amendment fail to include, however, are literally
hundreds of other reforms in Senate 1920 that would benefit farmers in
many other ways and nearly all Americans as well.
Although my colleague on the other side of the aisle essentially
asserts that farmers are being held hostage to bankruptcy reform, the
reality is that bankruptcy reform is being held hostage. Just look at
the roll calls and who voted which way in the eight or nine votes that
the House has had since 1998.
Here are just a small sample of the reforms being held up by
opponents of overall reforms: First, reforms giving the Justice
Department and the courts the tools they need to deal with fraud and
abuse in the current bankruptcy system. Voting for this amendment and
against the bill means that the Justice Department and the courts will
not have those tools to deal with fraud and abuse.
Second, remedies addressing the so-called ``mansion loophole'' by
which corporate criminals and other wrongdoers can shield their million
dollar homes from the just claims of their creditors. And that includes
employees of major corporations that had their 401(k)s looted as a
result of stock prices tanking and they could not diversify what was in
the 401(k)s.
So try telling that to an Enron or WorldCom employee that we are
going to allow future corporate wrongdoers to be able to stiff their
employees as well. The amendment offered by the gentlewoman from
Wisconsin (Ms. Baldwin) would allow that to happen. The base bill does
not.
Third, reforms representing deadbeat parents from using bankruptcy as
a means of avoiding their child support obligation. This bill increases
the priority of child support obligations in bankruptcy. The Baldwin
amendment does not do that. The National Child Support Enforcement
Association states that these reforms are crucial to the collection of
child support during bankruptcy. Do not turn your back on custodial
parents who have to file bankruptcy because they cannot collect their
support.
{time} 1500
Fourth, authorization for the appointment of additional bankruptcy
judges in districts where there is a huge backlog of bankruptcy cases.
Voting for the Baldwin amendment will mean justice delayed being
justice denied. Voting against it and passing the bill will allow more
judges to prosecute these cases to a conclusion.
Fifth, protections for victims of crimes of violence from being
further victimized by criminals who file for bankruptcy relief.
Sixth, reforms requiring consumers to receive important information
about the alternatives to, and consequences of, bankruptcy before they
file for relief. Is it not better that people not file for bankruptcy
because they can get better information and counseling to prevent them
from having a scarlet letter being attached to their name because they
had to go through bankruptcy?
There are also provisions waiving the filing of bankruptcy fees for
the indigent. If my colleagues vote for the Baldwin amendment and
against the bill, those provisions are not there.
There are reforms requiring millions of consumers to receive a
monthly credit card billing statement that would include specific
disclosures about the increased interest and repayment time associated
with making minimum payments. A lot of people end up having to file for
bankruptcy because they get themselves further and further in the hole
with revolving credit card payments. If there is a warning on that and
some information on that on the statements maybe not as many people
will end up getting in that hole.
Also, the enactment of long-overdue reforms intended to reduce
systemic risk in the banking and financial marketplace by minimizing
the risk of disruption when parties to certain financial transactions
become bankrupt or insolvent, the so-called netting provision. Federal
Reserve Board Chairman Alan Greenspan has said these reforms are
extremely important. They are extremely important for economic
stability. The authors and supporters of the Baldwin amendment turn
their backs on these reforms.
Also, protections against the disclosure of the name of a debtor's
minor children in public bankruptcy files. Apparently, the people who
want to strip these reforms out want anybody to go into a courthouse
and see the names of minor children in a parent's bankruptcy file and
let that become a matter of public discussion. There are also
provisions preventing debtors from selling their customers' personally
identifiable information.
The bill has reforms requiring the appointment of an ombudsman to
safeguard the interests of patients in health care facilities that are
in bankruptcy. Support the amendment and vote down the bill; there is
no ombudsman to help out those patients in the bankrupt health care
facility.
In light of the disastrous impact that bankruptcy cases like WorldCom
and Enron have had on their employees, reforms that more than double
the current monetary cap on wage and employee benefit claims entitled
to priority under the bankruptcy code are included in my bill, but not
the amendment that is before the House.
Other provisions would protect retirees in cases where chapter 11
debtors unilaterally modify their benefits, such as health insurance.
We protect as best as possible retirees of a bankrupt company in
forcing the company to try to uphold their health insurance obligation
to those retirees.
Vote for the Baldwin amendment; those are not in there. My bill has
got them.
[[Page H214]]
These reforms would make it easier to recover excessive pre-petition
compensation such as bonuses paid to insiders of a debtor that can be
used to pay unpaid employee wage claims. My bill has got that. The
amendment does not.
I should also point out that chapter 12 is rarely utilized by family
farmers. Last year, less than 700 chapter 12 cases were filed out of
the nearly 1.7 million bankruptcy cases filed during the same period.
When chapter 12 lapses, as it has in the past, farmers can still seek
bankruptcy relief under other chapters of the bankruptcy code; so we do
not leave farmers that need to file for bankruptcy out in the cold.
Merely what we do is enact chapter 12 on a permanent basis, and because
of the provision in retroactivity and the amendment that was just
adopted, their cases can be converted to chapter 12 once that chapter
is reenacted.
While we obviously care about family farmers, we also care about the
indigent, the patient, the single moms with unpaid support claims,
retired employees who have lost their health benefits and the financial
well-being of millions of consumers. Accordingly, Mr. Chairman, I urge
my colleagues to vote against this amendment.
Mr. Chairman, I reserve the balance of my time.
Ms. BALDWIN. Mr. Chairman, I yield myself such time as I may consume.
This House has already debated and voted on H.R. 975. My amendment
does nothing to change that. This is truly a matter between the
Republican leadership of the two bodies.
The gentleman notes that the chapter 12 provisions have expired six
times of varying length, most recently on December 31, 2003.
I would note that June 23, 2003, the same gentleman said on this
floor that ``it is crucial that this specialized form of bankruptcy
relief for farmers not be allowed to sunset for two fundamental
reasons. First, family farmers absent chapter 12 would be forced to
file for bankruptcy relief under the bankruptcy code's other
alternatives, none of which work as well for them as does chapter 12.''
We started the day with a bill before us that was simply a 6-month
extension of chapter 12 bankruptcy. We can end the day with a permanent
authorization of that bankruptcy code if my colleagues support my
substitute amendment.
Mr. Chairman, I yield 2\1/2\ minutes to the gentleman from
Pennsylvania (Mr. Holden), who has been extraordinarily active on this
issue in fighting for family farmers.
Mr. HOLDEN. Mr. Chairman, I thank the gentlewoman for yielding me the
time.
Mr. Chairman, I rise in support of the Baldwin amendment, which
simply seeks to extend chapter 12 of the bankruptcy code on a permanent
basis once and for all. This amendment represents an achievable
solution to a problem that has existed for more than 6 years.
In 1997, the National Bankruptcy Review Commission recommended that
chapter 12 of the Federal Bankruptcy Code, the chapter that contains
bankruptcy protection for family farmers, be made permanent.
Chapter 12 is by no means a controversial issue. It was enacted in
1986 as a measure to allow family farmers to repay their debts
according to a plan under court supervision. Chapter 12 prevents a
situation from occurring where a few bad crop years result in the loss
of the family farm.
In the absence of chapter 12, family farmers are forced to file for
bankruptcy relief under the bankruptcy code's other alternatives, none
of which work quite as well for farmers as chapter 12 does. Chapter 11,
for example, will require a farmer to sell the family farm to pay the
claims of creditors. How can a farmer be expected to come up with the
money to pay off his debts without his farm? Chapter 11 is an expensive
process that does not accommodate the special needs of farmers.
This Congress, just as in previous Congresses, the larger Bankruptcy
Reform Act, H.R. 975, includes a provision that permanently extends
chapter 12. Also in this Congress, just as in previous Congresses, the
larger Bankruptcy Reform Act, while enjoying a majority of support in
the House, remains a controversial bill whose consideration by the
other body remains a question. Simply substituting the text of H.R. 975
into this bill and sending it back over to the other body will not
bring us any closer to extending chapter 12, even on a temporary basis.
For years now, family farmers have been held hostage by the
contentious debate surrounding the larger bankruptcy issue. Since at
least the 105th Congress, they have been made to sit on pins and
needles waiting to see if we will extend these protections for another
few months as we try to work out the larger bankruptcy issue.
Mr. Chairman, the family farmers have waited long enough. Family
farmers cannot make long-term financial plans based on 6-month
extensions. Permanently extending chapter 12 will give farmers the kind
of protection they desperately need, the kind of protections we have
already voted for time and time again since the 1997 National
Bankruptcy Review Commission recommendation.
I urge my colleagues to accept the Baldwin amendment.
Mr. SENSENBRENNER. Mr. Chairman, how much time remains on each side?
The CHAIRMAN. The gentleman from Wisconsin (Mr. Sensenbrenner) has
20\1/2\ minutes remaining. The gentlewoman from Wisconsin (Ms. Baldwin)
has 18\1/2\ minutes remaining.
Mr. SENSENBRENNER. Mr. Chairman, I yield 3 minutes to the gentleman
from Utah (Mr. Cannon).
Mr. CANNON. Mr. Chairman, I think it is important here to agree where
things are agreeable and to be clear about what the disagreements are.
I think it is very clear that we have had a number of extensions to
the farm bill. I think it is clear that those extensions have all been
retroactive. I think it is clear that every Member of this body wants
to make sure that this noncontroversial provision continues in place. I
think everyone should agree here that it is important that farmers are
able to get credit, and balancing the issues before us are important so
that that credit system stays in place and so that we also enhance, by
the way, the rest of our economy.
The fact is the bill before us is a bipartisan bill. We have heard
special interests uttered numerous times here, and perhaps we ought to
have the same kind of response to that that we have in the Bible
because it is so misleading. The fact is this is not a special interest
bill. This is a bill that passed 315 to 115. This is a bipartisan bill
that solves problems that we need to resolve in our economy.
On the other hand, those people who are passionate about prosecuting
possible acts of people who are against abortion, that represents I
believe a special interest that should not be one that sets aside this
bill and allows it to go forward.
Another thing that we apparently disagree on is that this bill can be
passed or not. The fact is this is a passable bill. It can be passed
very quickly. It can solve the problems of our family farmers. It can
reinstate chapter 12, which we all agree is very, very important, and
it can move through a conference with the Senate and to the President
for signature very quickly. We have done a number of things in this
bill to make it helpful for Americans and for American consumers, and I
would urge opposition to the amendment and support for the underlying
bill.
Ms. BALDWIN. Mr. Chairman, I yield 5 minutes to the gentleman from
North Carolina (Mr. Watt).
Mr. WATT. Mr. Chairman, I thank the gentlewoman for yielding me the
time; and, Mr. Chairman, I do not think I will take 5 minutes, but I
wanted to make a couple of comments because the chairman of the full
committee has chided me on one or more occasions about voting against
the rule that would have allowed the old bankruptcy bill that had the
abortion clinics provisions in it to come to the floor and has made it
sound like I did something that was inappropriate.
Now the chairman of the committee is going to have the opportunity to
show how committed he is to a permanent extension of the family farms
because the gentlewoman from Wisconsin's (Ms. Baldwin) amendment would
make the family farms provisions of the bankruptcy law permanent, and
he has gone out of his way to talk about how he would like to see those
provisions be permanent. I will be anxious to see how he plans to vote
on this
[[Page H215]]
amendment because this is the clear way to make the provisions that
protect family farmers permanent in the law, to keep it away from all
of this abortion clinic politics, to keep it completely away from
bankruptcy reform politics. This is the vote that will show either my
colleagues are committed to protecting family farmers in this country
or they are not.
I am anxiously awaiting how my colleagues are going to cast their
vote on this, since the gentleman from Wisconsin (Mr. Sensenbrenner)
has made such a point of pointing out that I voted against the rule
that would have allowed the prior bill to come to the floor last year.
So this amendment is on the floor. There will be a recorded vote. I
will be anxious to see how my chairman votes on it.
It is clear that farmers in this country are having a difficult time.
Whereas there was a 7 percent, almost-8 percent decline in small
business or business bankruptcies in 2003 and a 7 percent increase in
individual bankruptcy filings in 2003, there was a 116.8 percent
increase in bankruptcy filings by farmers in this country.
{time} 1515
So it is clear that farmers have been in distress.
This bill started out being a noncontroversial, farmer-friendly bill
that would have passed this House on the suspension calendar had the
leadership decided that it would put it on the suspension calendar. It
had broad bipartisan support. We have extended on several occasions
before the family-farm provisions.
It is not tied up in the politics of bankruptcy reform. It is not
tied up in the politics of abortion clinics and whether there ought to
be abortion provisions in the bankruptcy bill. This is a clear, clear-
cut vote on whether we want to permanently extend the family-farm
provisions.
So let there be no mistake about it, family farmers ought to hold
Members of this body accountable on this vote. It is not trapped with
any kind of political agenda. It is what we all have fought for. It is
what we say we all believe in. This is our opportunity to vote on it.
So I want to encourage my colleagues to support the Baldwin amendment.
Mr. SENSENBRENNER. Mr. Chairman, I yield 2 minutes to the gentleman
from Virginia (Mr. Goodlatte), the chairman of the Committee on
Agriculture.
Mr. GOODLATTE. Mr. Chairman, I want to thank the chairman, the
gentleman from Wisconsin (Mr. Sensenbrenner), for yielding me this
time, and as chairman of the House Committee on Agriculture, I thank
him for his leadership in bringing this legislation to the floor to
help not only America's farmers and ranchers, but all small businesses
dealing with the problems that exist in our current Bankruptcy Code.
The Baldwin amendment seeks to pick apart the comprehensive reforms
by addressing farm and ranch bankruptcy only, which may be a popular
proposal at first glance to many of us who represent farm country, but
it is one the House should turn down this afternoon. If the House wants
to enact full Chapter 12 reforms, including a permanent authorization,
then Members should adopt the Sensenbrenner substitute, which contains
these reforms.
Unfortunately, the Baldwin amendment is another cynical attempt to
pit farmers and ranchers against other small-business owners and
consumers. The bottom line is, adopting the Sensenbrenner comprehensive
package protects family farmers, single moms, small businesses and
millions of consumers. I would ask Members to vote ``no'' on the
Baldwin amendment and keep bankruptcy reforms in a single bipartisan
package of long overdue reforms to the Bankruptcy Code.
Ms. BALDWIN. Mr. Chairman, I yield myself such time as I may consume;
and in closing, I would only reiterate what I said earlier, which is
that we started the day, this morning, with a very simple bill before
us, a bill to extend by 6 months the Chapter 12 protections for family
farmers. We could end the day, if we pass this substitute amendment,
with permanent authorization of Chapter 12 bankruptcy protections for
our family farmers and family fishermen who are struggling today in the
United States.
Instead, we have before us a massive bankruptcy overhaul that we have
already debated and voted on in this House. These parliamentary
maneuvers are most unfair to the farmers across America who woke up
today hoping we would provide them relief. That is what we should do,
and I urge Members to support the Baldwin substitute amendment.
Mr. Chairman, I yield back the balance of my time.
Mr. SENSENBRENNER. Mr. Chairman, I yield myself the balance of my
time.
Mr. Chairman, I do not think that Chapter 12 is controversial. It is
also not utilized very much in bankruptcy filings. The statistical
report of the Administrative Office of the U.S. Courts, for example,
show that in the fiscal year that ended last September 30, there were
only 19 Chapter 12 filings for the entire State of Wisconsin. So we are
dealing with 19 family farmers, which is important, but there are still
thousands of family farmers in my State and elsewhere that end up
having to pay this $400 per household hidden tax and higher cost of
goods and services and higher interest on the money that they have to
borrow because of the abuses of the bankruptcy system that my amendment
seeks to plug.
Now, the major reform of all of those that we have talked about in
the bankruptcy bill, that this House has voted to approve eight times
in various forms and motions, is that someone who is able to repay all
or part of their debts through future earning cannot get a Chapter 7
liquidation and have all those debts discharged.
So this so-called ``means test'' means that someone who is really
down and out and does not have the prospect of future earnings being
able to repay a significant part of their debts, my bill does not
impact on what their legal options are. They will still be able to file
for Chapter 7, get a discharge, and be able to try to put their lives
together and start anew. But somebody who does have the potential of
future earnings, and, yes, a lot of these people use the bankruptcy
system as a financial planning tool, my bill will allow a court to
order a repayment of all or part of those debts.
Remember, every penny that is recovered this way is one less penny
that has to be passed on to the 98 percent of the people of this
country who pay their bills on time or as agreed to. The abuses of the
bankruptcy system amount to about a $40 billion cost shift from people
who do not pay their bills to people who do pay their bills.
I ask the Members to vote down the Baldwin amendment to give us
another shot at getting a conference report passed and on the
President's desk, because that is the vote in the interest of saving as
much money as possible for the people who do pay their bills rather
than allowing continued abuses of the bankruptcy system.
Vote ``no'' on the Baldwin amendment, pass the underlying bill, the
substitute amendment, as authorized by the Committee on Rules.
Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN. All time has expired. The question is on the amendment
in the nature of a substitute offered by the gentlewoman from Wisconsin
(Ms. Baldwin).
The question was taken; and the Chairman announced that the noes
appeared to have it.
Recorded Vote
Ms. BALDWIN. Mr. Chairman, I demand a recorded vote.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 158,
noes 204, answered ``present'' 1, not voting 70, as follows:
[Roll No. 8]
AYES--158
Allen
Andrews
Baird
Baldwin
Ballance
Becerra
Berkley
Berman
Berry
Bishop (NY)
Blumenauer
Boswell
Brady (PA)
Brown (OH)
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Case
Clay
Clyburn
Conyers
Cooper
Costello
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (IL)
Davis (TN)
DeFazio
DeLauro
Deutsch
Dicks
Dingell
Dooley (CA)
Doyle
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Filner
Ford
Frank (MA)
Frost
Gonzalez
Green (TX)
Grijalva
[[Page H216]]
Harman
Hill
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Hooley (OR)
Hoyer
Inslee
Jackson (IL)
Jefferson
John
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind
Kleczka
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lofgren
Lowey
Lynch
Majette
Maloney
Markey
Marshall
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McNulty
Meehan
Menendez
Michaud
Millender-McDonald
Miller (NC)
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Pomeroy
Price (NC)
Rahall
Rangel
Ross
Rothman
Rush
Ryan (OH)
Sabo
Sanchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Sherman
Skelton
Smith (WA)
Snyder
Solis
Spratt
Stark
Stenholm
Strickland
Stupak
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Tierney
Towns
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Watt
Waxman
Weiner
Wexler
Woolsey
Wu
Wynn
NOES--204
Aderholt
Akin
Baca
Baker
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Boozman
Boucher
Boyd
Bradley (NH)
Brady (TX)
Brown (SC)
Burgess
Burns
Burr
Burton (IN)
Calvert
Cannon
Cantor
Capito
Carter
Castle
Chabot
Chocola
Coble
Cole
Collins
Cox
Cramer
Crenshaw
Cubin
Culberson
Davis (FL)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Doolittle
Dreier
Duncan
Dunn
Edwards
Ehlers
Emerson
English
Feeney
Ferguson
Flake
Foley
Fossella
Franks (AZ)
Frelinghuysen
Garrett (NJ)
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Hall
Harris
Hart
Hastert
Hastings (WA)
Hayes
Hayworth
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Hulshof
Isakson
Issa
Istook
Johnson (CT)
Johnson (IL)
Johnson, Sam
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
LaHood
Latham
LaTourette
Lewis (KY)
Linder
LoBiondo
Lucas (KY)
Lucas (OK)
Manzullo
Matheson
McCotter
McCrery
McHugh
McKeon
Meek (FL)
Mica
Miller (FL)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pence
Peterson (MN)
Peterson (PA)
Pickering
Pitts
Platts
Porter
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Renzi
Rogers (AL)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ryan (WI)
Saxton
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shuster
Simmons
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Stearns
Sullivan
Sweeney
Tancredo
Tauzin
Taylor (NC)
Terry
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (FL)
ANSWERED ``PRESENT''--1
Ruppersberger
NOT VOTING--70
Abercrombie
Ackerman
Alexander
Bachus
Ballenger
Bell
Bereuter
Bishop (GA)
Bono
Brown, Corrine
Brown-Waite, Ginny
Buyer
Camp
Carson (OK)
Crane
Cunningham
DeGette
Delahunt
Doggett
Everett
Fattah
Forbes
Gallegly
Gephardt
Gerlach
Gutierrez
Hastings (FL)
Hefley
Honda
Houghton
Hunter
Hyde
Israel
Jackson-Lee (TX)
Jenkins
Johnson, E. B.
Jones (NC)
Kolbe
Kucinich
Leach
Lewis (CA)
Lipinski
McInnis
McIntyre
Meeks (NY)
Miller (MI)
Miller, George
Mollohan
Ortiz
Petri
Pombo
Reyes
Reynolds
Rodriguez
Rogers (KY)
Roybal-Allard
Royce
Ryun (KS)
Sandlin
Serrano
Shimkus
Slaughter
Souder
Tanner
Thomas
Turner (TX)
Waters
Watson
Weldon (PA)
Young (AK)
{time} 1550
Mr. SAXTON and Mr. MEEK of Florida changed their vote from ``aye'' to
``no.''
Mrs. LOWEY changed her vote from ``no'' to ``aye.''
So the amendment in the nature of a substitute was rejected.
The result of the vote was announced as above recorded.
Stated against:
Mr. BEREUTER. Mr. Chairman, on rollcall No. 8, I was attending the
Memorial Service for former Member Barber Conable. Had I been present,
I would have voted ``no.''
Mr. REYNOLDS. Mr. Speaker, on rollcall Number 8, I was unable to be
in the Chamber to cast a vote on the Baldwin Substitute Amendment to S.
1920 before time elapsed on the vote. My absence was due to my
attendance at the Memorial Service for former Representative Barber
Conable of New York.
Had I been present for the vote, I would have voted ``no,'' on the
Baldwin Substitute Amendment.
The CHAIRMAN. The question is on the committee amendment in the
nature of a substitute, as amended.
The committee amendment in the nature of a substitute, as amended,
was agreed to.
The CHAIRMAN. Under the rule, the Committee rises.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Simpson) having assumed the chair, Mr. LaHood, Chairman of the
Committee of the Whole House on the State of the Union, reported that
that Committee, having had under consideration the Senate bill (S.
1920) to extend for 6 months the period for which chapter 12 of title
11 of the United States Code is reenacted, pursuant to House Resolution
503, he reported the Senate bill back to the House with an amendment
adopted by the Committee of the Whole.
The SPEAKER pro tempore. Under the rule, the previous question is
ordered.
Is a separate vote demanded on the amendment to the committee
amendment in the nature of a substitute adopted by the Committee of the
Whole? If not, the question is on the committee amendment in the nature
of a substitute.
The committee amendment in the nature of a substitute was agreed to.
The SPEAKER pro tempore. The question is on the third reading of the
Senate bill.
The Senate bill was ordered to be read a third time, and was read the
third time.
Motion to Recommit Offered by Ms. Schakowsky
Ms. SCHAKOWSKY. Mr. Speaker, I offer a motion to recommit.
The SPEAKER pro tempore. Is the gentlewoman opposed to the Senate
bill?
Ms. SCHAKOWSKY. I am, Mr. Speaker, in its present form.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Ms. Schakowsky moves to recommit the bill (S. 1920) to the
Committee on the Judiciary, with instructions to report the
bill back to the House forthwith, with the following
amendment:
After section 102 insert the following:
SEC. 102A. PROTECTING MEMBERS OF THE MILITARY, VETERANS, AND
THEIR FAMILIES.
Section 707(b)(7) of title 11, United States Code, as
amended by section 102, is amended--
(1) in subparagraph (B) by striking the close quotation
marks and the period at the end; and
(2) by adding at the end the following:
``(C) No judge, United States trustee (or bankruptcy
administrator, if any), trustee, or other party in interest
may file a motion under paragraph (2) if--
``(i) the debtor or the debtor's spouse is a servicemember
(as defined in section 101 of the Servicemembers Civil Relief
Act);
``(ii) the debtor or the debtor's spouse is a veteran (as
defined in section 101(2) of title 38); or
``(iii) the debtor's spouse dies while in military service
(as defined in section 101 of the Servicemembers Civil Relief
Act).''.
In the table of contents, after the item relating to
section 102, insert the following item:
Sec. 102A. Protecting members of the military, veterans, and their
families.
Mr. SENSENBRENNER (during the reading). Mr. Speaker, I ask unanimous
consent that the motion to recommit be considered as read and printed
in the Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Wisconsin?
There was no objection.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
Illinois (Ms. Schakowsky) is recognized for 5 minutes in support of her
motion to recommit.
[[Page H217]]
Ms. SCHAKOWSKY. Mr. Speaker, I yield myself 2 minutes.
I rise today with the gentlewoman from California (Ms. Loretta
Sanchez) and the gentleman from Ohio (Mr. Strickland) to offer this
motion to recommit on behalf of our brave soldiers and their families
and veterans across the country. My motion to recommit would provide
basic protections to financially distressed military families and
veterans from the harsher aspects of the means test found in the newly
added text of S. 1920. This motion would provide safe harbor from the
bill's means test for military and veterans' families and safe harbor
for the widows of our servicewomen and men.
Without changing the bill, military personnel, veterans and their
families could be dragged into court by their creditors. They could be
harassed because of an arbitrary standard, the means test, that has no
true reflection of whether they can pay their debt or not. The men and
women who in the past have and do today risk their lives to protect us
deserve protection from us in return. We should be offering them
relief, not greater hardships.
Since 9/11, 350,000 reservists and guardsmen have been called to
active duty and almost 40,000 are serving in Iraq. According to the
National Guard, four out of 10 members of the Reserves and National
Guard lose money when they leave their civilian jobs for active duty.
Additionally, many left for the war thinking they would be deployed for
6 months and have ended up staying for a year or even longer. There is
almost no way that they could have financially anticipated and prepared
for that extension of their service.
We want to help people like Mrs. Vicky Wessel. When she appeared on
``60 Minutes'' last year, she expressed the concerns that many families
of reservists whose husbands or wives have been called to active duty
experience. What she talked about was the financial difficulty. She
said, ``It is because a staff sergeant's pay is a 60 percent cut in pay
from my husband's regular job.''
There are thousands of families like the Wessels. Make no mistake
about it, these families will not be protected under the bill as it
stands. These are people who, through no fault of their own, may end up
in bankruptcy. They are risking their lives for us. And the veterans
who have done so in the past, we should protect them. This is what my
motion to recommit does.
Mr. Speaker, I yield 1\1/2\ minutes to the gentlewoman from
California (Ms. Loretta Sanchez).
Ms. LORETTA SANCHEZ of California. Mr. Speaker, I rise today in
support of this motion to recommit this bill with instructions to
ensure that members of our military, veterans and their families are
afforded bankruptcy protection under Chapter 7.
Every American knows that our Nation's greatest debt is to the men
and the women who have worn the uniform of our country so that we can
live in freedom and prosperity. Unfortunately, this has come at a very
high price to many of the service members and to their families.
The war on terror is taking an entirely new toll, and a considerable
portion of the burden is falling on our reservists. Never before have
we asked so much of our troops. Nearly 250,000, including 120,000
reservists, have been fighting or are scheduled to begin service.
Nearly 40 percent of the reservists suffer a major loss in income
during this time. For many, the difference can amount to tens of
thousands of dollars. As a result, service members are falling behind
in their mortgages, depleting their life savings, losing personal
businesses and racking up significant credit card debt. My colleagues
might be surprised to know that some that are suffering the worst are
medical doctors, self-employed doctors who were in private practices,
but now have to leave them, have to keep the fixed overhead and pay
that and come back. Their patients are gone, their nurses are gone, and
they have thousands of dollars in unpaid bills.
Mr. Speaker, this country has a history of undertaking efforts to
secure legal protections so that service members can devote their
energy to the defense needs of our Nation. This motion would continue
those efforts.
I urge all of my colleagues to vote ``yes.''
Ms. SCHAKOWSKY. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman
from Ohio (Mr. Strickland).
Mr. STRICKLAND. Mr. Speaker, it is because of the unique financial
situations that veterans and military personnel often find themselves
in as a result of their military service to our country that I support
this motion to recommit, which would exempt them from the means test
under Chapter 7.
The means test used to determine whether a debtor can file under
Chapter 7 is an arbitrary bureaucratic formula. Its mathematical
variables really do not reflect the unique circumstances of deployed
military personnel that experience sudden loss of income. The test does
not look at the debtor's actual expenses or personal situation. Rather,
it uses a hypothetical expense of what a debtor's cost of living is
mathematically determined to be. The means test uses this figure to
calculate excess money, and when someone has too much excess money,
they are prohibited from filing under Chapter 7.
{time} 1600
The only recourse left to the individual denied this is a court
motion for permission to use actual income and expenses, and such a
motion takes time and money, something our soldiers and our veterans do
not have.
So I would just simply ask my colleagues to consider what we have
asked of our veterans and what we are currently asking of our military
personnel. They have endured much for us, and I ask that we simply
honor their service by voting for this exemption.
Mr. SENSENBRENNER. Mr. Speaker, I rise in opposition to the motion to
recommit.
The SPEAKER pro tempore (Mr. Simpson). The gentleman from Wisconsin
(Mr. Sensenbrenner) is recognized for 5 minutes.
Mr. SENSENBRENNER. Mr. Speaker, let us be clear. The means-based test
only applies to people with incomes above the State median income
average. Anybody who is below the State median income does not qualify
under the means-based test, and their bankruptcy petition cannot be
thrown out.
Secondly, what the motion of the gentlewoman from Illinois proposes
to do is to provide an exemption for active-duty servicemembers from
the means-based test. That has been taken care of in most part since
1940 under the Soldiers and Sailors Relief Act, which allows for the
staying of legal proceedings against anybody who is on active duty.
And I submit to the gentlewoman from Illinois and others that next
year join us in voting for a defense authorization bill that gives our
servicepeople a pay raise because that is the way to prevent
bankruptcies to begin with.
But I would also like to point out that this motion to recommit
applies to anybody who is a veteran. There are a lot of veterans that
would fall under this exemption that have a lot of income. Take, for
example, the junior Senator from Massachusetts, Mr. Kerry. He gets the
same salary that we do, and it is reported that his wife has
significant assets on her own. Under the gentlewoman's motion to
recommit, should Mr. Kerry end up in hard times and have to file for
bankruptcy, he would not allow his creditors to be able to ask for a
means-based bankruptcy to apply at least some of the Senate salary that
he received to apply to his debts. That is wrong. Vote ``no'' on the
motion to recommit and vote to pass the bill.
announcement by the speaker pro tempore
The SPEAKER pro tempore. The Chair would remind Members to refrain
from improper references to Senators.
Mr. SENSENBRENNER. Mr. Speaker, I yield back the balance of my time.
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
Ms. SCHAKOWSKY. 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 passage.
[[Page H218]]
The vote was taken by electronic device, and there were--ayes 170,
noes 198, answered ``present'' 1, not voting 63, as follows:
[Roll No. 9]
AYES--170
Allen
Andrews
Baca
Baird
Baldwin
Ballance
Becerra
Berkley
Berman
Berry
Bishop (GA)
Bishop (NY)
Blumenauer
Boswell
Boyd
Brady (PA)
Brown (OH)
Capps
Capuano
Cardin
Cardoza
Carson (IN)
Case
Clay
Clyburn
Conyers
Cooper
Costello
Cramer
Crowley
Cummings
Davis (AL)
Davis (CA)
Davis (FL)
Davis (IL)
Davis (TN)
DeFazio
DeLauro
Deutsch
Dicks
Dingell
Dooley (CA)
Doyle
Edwards
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Filner
Ford
Frank (MA)
Frost
Gonzalez
Gordon
Green (TX)
Grijalva
Harman
Hill
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Hooley (OR)
Hoyer
Inslee
Jackson (IL)
Jefferson
John
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind
Kleczka
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lofgren
Lowey
Lucas (KY)
Lynch
Majette
Maloney
Markey
Marshall
Matheson
Matsui
McCarthy (MO)
McCarthy (NY)
McCollum
McDermott
McGovern
McNulty
Meehan
Meek (FL)
Menendez
Michaud
Millender-McDonald
Miller (NC)
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Pomeroy
Price (NC)
Rahall
Rangel
Ross
Rothman
Rush
Ryan (OH)
Sabo
S[#x00E1]nchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Serrano
Sherman
Simmons
Skelton
Smith (WA)
Snyder
Solis
Spratt
Stark
Stenholm
Strickland
Stupak
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Tierney
Towns
Udall (CO)
Udall (NM)
Van Hollen
Vel[#x00E1]zquez
Visclosky
Watt
Waxman
Weiner
Wexler
Woolsey
Wynn
NOES--198
Aderholt
Akin
Bachus
Baker
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (UT)
Blackburn
Blunt
Boehlert
Boehner
Bonilla
Bonner
Boozman
Boucher
Bradley (NH)
Brady (TX)
Brown (SC)
Burgess
Burns
Burr
Burton (IN)
Calvert
Cannon
Cantor
Capito
Carter
Castle
Chabot
Chocola
Coble
Cole
Collins
Cox
Crenshaw
Cubin
Culberson
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
DeMint
Diaz-Balart, L.
Diaz-Balart, M.
Doolittle
Dreier
Duncan
Dunn
Ehlers
Emerson
English
Feeney
Ferguson
Flake
Foley
Fossella
Franks (AZ)
Frelinghuysen
Garrett (NJ)
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Hall
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Houghton
Hulshof
Isakson
Issa
Istook
Johnson (CT)
Johnson (IL)
Johnson, Sam
Keller
Kelly
Kennedy (MN)
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Latham
LaTourette
Lewis (KY)
Linder
LoBiondo
Lucas (OK)
Manzullo
McCotter
McCrery
McHugh
McKeon
Mica
Miller (FL)
Miller, Gary
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Paul
Pearce
Pence
Peterson (PA)
Petri
Pickering
Pitts
Platts
Porter
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ryan (WI)
Saxton
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shuster
Simpson
Smith (MI)
Smith (NJ)
Smith (TX)
Stearns
Sullivan
Sweeney
Tancredo
Tauzin
Taylor (NC)
Terry
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (FL)
ANSWERED ``PRESENT''--1
Ruppersberger
NOT VOTING--63
Abercrombie
Ackerman
Alexander
Ballenger
Bell
Bono
Brown, Corrine
Brown-Waite, Ginny
Buyer
Camp
Carson (OK)
Crane
Cunningham
DeGette
Delahunt
Doggett
Everett
Fattah
Forbes
Gallegly
Gephardt
Gerlach
Gutierrez
Hastings (FL)
Hefley
Honda
Hunter
Hyde
Israel
Jackson-Lee (TX)
Jenkins
Johnson, E. B.
Jones (NC)
Kucinich
Leach
Lewis (CA)
Lipinski
McInnis
McIntyre
Meeks (NY)
Miller (MI)
Miller, George
Mollohan
Ortiz
Pombo
Reyes
Rodriguez
Rogers (KY)
Roybal-Allard
Royce
Ryun (KS)
Sandlin
Shimkus
Slaughter
Souder
Tanner
Thomas
Turner (TX)
Waters
Watson
Weldon (PA)
Wu
Young (AK)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Simpson) (during the vote). Members are
advised that 2 minutes remain in this vote.
{time} 1624
(Mr. CONYERS changed his vote from ``no'' to ``aye.''
So the motion to recommit was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore. The question is on the passage of the Senate
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 will be a 5-minute vote.
The vote was taken by electronic device, and there were--yeas 265,
nays 99, answered ``present'' 1, not voting 67, as follows:
[Roll No. 10]
YEAS--265
Aderholt
Akin
Andrews
Baca
Bachus
Baird
Barrett (SC)
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Berkley
Berry
Biggert
Bilirakis
Bishop (GA)
Bishop (NY)
Bishop (UT)
Blackburn
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bonner
Boozman
Boswell
Boucher
Boyd
Bradley (NH)
Brady (TX)
Brown (SC)
Burgess
Burns
Burr
Burton (IN)
Calvert
Cannon
Cantor
Capito
Cardoza
Carter
Case
Castle
Chabot
Chocola
Clyburn
Coble
Cole
Collins
Cox
Cramer
Crenshaw
Crowley
Cubin
Culberson
Davis (AL)
Davis (FL)
Davis (TN)
Davis, Jo Ann
Davis, Tom
Deal (GA)
DeLay
DeMint
Deutsch
Diaz-Balart, L.
Diaz-Balart, M.
Dicks
Dingell
Dooley (CA)
Doolittle
Doyle
Dreier
Duncan
Dunn
Edwards
Ehlers
Emerson
English
Etheridge
Feeney
Ferguson
Flake
Foley
Ford
Fossella
Franks (AZ)
Frelinghuysen
Frost
Garrett (NJ)
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Hall
Harman
Harris
Hart
Hastings (WA)
Hayes
Hayworth
Hensarling
Herger
Hill
Hinojosa
Hobson
Hoekstra
Hooley (OR)
Hostettler
Houghton
Hoyer
Hulshof
Inslee
Isakson
Issa
Istook
Jefferson
John
Johnson (CT)
Johnson (IL)
Johnson, Sam
Keller
Kelly
Kennedy (MN)
Kind
King (IA)
King (NY)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Lampson
Larsen (WA)
Larson (CT)
Latham
LaTourette
Lewis (KY)
Linder
LoBiondo
Lucas (KY)
Lucas (OK)
Manzullo
Matheson
McCarthy (NY)
McCotter
McCrery
McHugh
McKeon
Meek (FL)
Menendez
Mica
Michaud
Miller (FL)
Miller, Gary
Moore
Moran (KS)
Moran (VA)
Murphy
Murtha
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Pallone
Pascrell
Pastor
Paul
Pearce
Pence
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Platts
Pomeroy
Porter
Portman
Price (NC)
Pryce (OH)
Putnam
Quinn
Radanovich
Rahall
Ramstad
Regula
Rehberg
Renzi
Rogers (AL)
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Ross
Rothman
Ryan (WI)
Saxton
Schrock
Scott (GA)
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shuster
Simmons
Simpson
Skelton
Smith (NJ)
Smith (TX)
Smith (WA)
Spratt
Stearns
Stenholm
Strickland
Sullivan
Sweeney
Tancredo
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weldon (FL)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Wynn
Young (FL)
NAYS--99
Allen
Baldwin
Ballance
Becerra
Berman
Brady (PA)
Brown (OH)
Capps
Capuano
Cardin
Carson (IN)
Clay
Conyers
Cooper
Costello
[[Page H219]]
Cummings
Davis (CA)
Davis (IL)
DeFazio
DeLauro
Emanuel
Engel
Eshoo
Evans
Farr
Filner
Frank (MA)
Gonzalez
Green (TX)
Grijalva
Hinchey
Hoeffel
Holden
Holt
Jackson (IL)
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kleczka
Langevin
Lantos
Lee
Levin
Lewis (GA)
Lofgren
Lowey
Lynch
Majette
Maloney
Markey
Marshall
Matsui
McCarthy (MO)
McCollum
McDermott
McGovern
McNulty
Meehan
Millender-McDonald
Miller (NC)
Nadler
Napolitano
Neal (MA)
Oberstar
Obey
Olver
Owens
Payne
Pelosi
Rangel
Rush
Ryan (OH)
Sabo
S[#x00E1]nchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Scott (VA)
Serrano
Sherman
Snyder
Solis
Stark
Stupak
Tierney
Towns
Udall (CO)
Udall (NM)
Van Hollen
Velazquez
Visclosky
Watt
Waxman
Weiner
Woolsey
ANSWERED ``PRESENT'' --1
Ruppersberger
NOT VOTING--67
Abercrombie
Ackerman
Alexander
Baker
Ballenger
Bell
Bono
Brown, Corrine
Brown-Waite, Ginny
Buyer
Camp
Carson (OK)
Crane
Cunningham
DeGette
Delahunt
Doggett
Everett
Fattah
Forbes
Gallegly
Gephardt
Gerlach
Gutierrez
Hastings (FL)
Hefley
Honda
Hunter
Hyde
Israel
Jackson-Lee (TX)
Jenkins
Johnson, E. B.
Jones (NC)
Kucinich
Leach
Lewis (CA)
Lipinski
McInnis
McIntyre
Meeks (NY)
Miller (MI)
Miller, George
Mollohan
Ortiz
Pombo
Reyes
Reynolds
Rodriguez
Rogers (KY)
Roybal-Allard
Royce
Ryun (KS)
Sandlin
Shimkus
Slaughter
Smith (MI)
Souder
Tanner
Thomas
Turner (TX)
Waters
Watson
Weldon (PA)
Wexler
Wu
Young (AK)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (during the vote). Members are advised 2
minutes remain in this vote.
{time} 1632
So the Senate bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
{time} 1630
Motion to Go to Conference
Mr. SENSENBRENNER. Mr. Speaker, pursuant to House Resolution 503, I
offer a motion.
The Clerk read as follows:
Mr. Sensenbrenner moves that the House insist on its
amendment to S. 1920 and request a conference with the Senate
thereon.
The motion was agreed to.
Motion to Instruct Conferees
Mr. NADLER. Mr. Speaker, I offer a motion to instruct.
The Clerk read as follows:
Mr. Nadler moves that the managers on the part of the House
at the conference on the disagreeing votes of the two Houses
on the House amendment to the Senate bill (S. 1920) be
instructed to disagree to section 414 of the House amendment.
The SPEAKER pro tempore (Mr. Simpson). Pursuant to clause 7 of rule
XXII, the gentleman from New York (Mr. Nadler) and the gentleman from
Wisconsin (Mr. Sensenbrenner) each will control 30 minutes.
The Chair recognizes the gentleman from New York (Mr. Nadler).
Mr. NADLER. Mr. Speaker, I yield myself such time as I may consume. I
anticipate that this debate on this motion to instruct will take only a
small fraction of the time allotted to it.
Mr. Speaker, this motion would instruct the conferees to strike
section 414 of the bill. Section 414 would repeal important protections
in the Bankruptcy Code against conflicts of interest on the part of
investment bankers involved in the reorganization of a bankrupt
company.
Section 414 would relieve investment bankers of the duty of being
disinterested persons before they can be retained as professionals by
the bankruptcy trustee. This disinterestedness standard has been in the
code since 1938. It protects the estate from conflicts of interest by
professionals in the case.
Mr. Speaker, many, many people who support this bill, which I do not,
are opposed to this provision and support this motion to instruct.
Judge Edith Jones of the U.S. Court of Appeals for the Fifth Circuit, a
very conservative judge who is a member of the Bankruptcy Reform
Commission and supports the bill, has written: ``Such a standard can
alone protect integrity in the bankruptcy process. If professionals who
have previously been associated with a debtor continue to work for the
debtor during a bankruptcy case, they will often be subject to
conflicting loyalties that undermine their foremost fiduciary duty to
the creditors. Strict disinterestedness required by current law
eliminates such conflicts or potential conflicts. Section 414, in
removing the rigorous standard of disinterestedness, is out of
character with the rest of this important legislation, however, and it
should be eliminated.''
Mr. Speaker, that letter is as follows:
United States Court of Appeals,
Fifth Circuit,
Houston, TX, March 11, 2003.
Hon. F. James Sensenbrenner, Jr.,
Chairman, House Committee on the Judiciary, Rayburn House
Office Building, Washington, DC.
Dear Mr. Chairman: I understand that the House Committee on
the Judiciary will consider H.R. 975, bankruptcy reform
legislation, on the morning of March 11, 2003. I also
understand that the Committee may consider whether or not to
retain Section 414 of the bill, which would amend the
``disinterested person'' standard codified at 11 U.S.C.
Sec. 101(14). As a former member of the National Bankruptcy
Review Commission and, in that capacity, a consistent
advocate of maintaining strict disinterestedness standards
for bankruptcy professionals, I urge the Committee not to
change existing law. I support Congressman Bachus's effort to
remove Section 414.
The National Bankruptcy Review Commission was asked to
recommend a modification of the disinterestedness standard in
order to accommodate, as I recall, the geographic growth and
increasing sophistication of professional firms of all kinds
involved in Chapter 11 bankruptcvy practice. Despite fervent
lobbying by prominent bankruptcy professionals and scholars,
the Commission resisted making such a recommendation. We
voted (by a lopsided majority, I believe) to retain the
standard as it has existed since the 1930's.
The Commission report cites two reasons for retaining a
strict prophylactic standard for all bankruptcy
professionals. These are worth brief restatement. First, such
a standard can alone protect integrity in the bankruptcy
process. If professionals who have previously been associated
with the debtor continue to work for the debtor during a
bankruptcy case, they will often be subject to conflicting
loyalties that undermine their foremost fiduciary duty to
the creditors. Strict disinterestedness, required by
current law, eliminates such conflicts or potential
conflicts.
Second, enforcing a strict standard of disinterestedness is
necessary to maintain public confidence in the integrity of
the bankruptcy system. A bankruptcy case should not be
subject to the criticism that professional fees are generated
to no purpose or for a bad purpose such as delay. The courts'
efforts to ensure that fees remain reasonable are enhanced
when, because of the complete disinterestedness of
participating professionals, no hidden motives may be imputed
to the actors in the case.
One need not focus solely on today's high-profile
bankruptcy cases to realize that the challenge of maintaining
disinterested professional services has permeated modern
corporate reorganization law. The Commission, for instance,
voted to retain the original standard in the wake of the
criminal conviction of a prominent bankruptcy lawyer and
several well-known instances in which law firms were required
to disgorge part of their fees--all for violating
disinterestedness standards. Given the ongoing nature of the
problem, I do not see how any professional group can
advocate, consistent with the public interest, eliminating
the statutory requirement of disinterestedness. Moreover, as
it appears likely that many future complex bankruptcy cases
will arise in which the role of investment bankers will have
to be explored, it seems particularly unwise to grant that
group--alone among bankruptcy professionals--a status
insulated from the strict disinterestedness requirement.
Since the close of the Commission's work in October 1997, I
have been a proponent of the bankruptcy reform legislation
that has been repeatedly passed by Congress. I still believe
the bankruptcy reform legislation is essential to restoring
integrity to personal and business bankruptcies, redressing
the imbalances and opportunities for manipulation that plague
current law, and encouraging individual responsibility in
financial affairs. Section 414, in removing investment
bankers from a rigorous standard of disinterestedness, is out
of character with the rest of this important legislation,
however, and it should be eliminated.
Very truly yours,
Edith H. Jones.
Mr. Speaker, why are we voting on this technical issue? Because, Mr.
Speaker, it has significant real-world consequences for employees,
retirees, shareholders, and creditors of a bankrupt company. Current
law prevents an investment banker who had been part of the financial
affairs, and perhaps of the problems, of a bankrupt company from being
responsible during the bankruptcy for advising, organizing, and
overseeing the reorganization.
[[Page H220]]
Anyone who has read a newspaper in the last few years cannot fail to
understand the importance of this motion. This deals with conflicts of
interest. Conflicts of interest among investment bankers, accountants,
management, and other insiders have been at the heart of the most
outrageous corporate scandals that have ended up in bankruptcy court,
which have been in the headlines in our front pages in the last few
years.
Perhaps when this provision was first proposed several years ago,
some Members may have thought it was a minor technical change. No one
any longer can believe for a moment after everything that has happened
that this is just a small benign change.
The chairman of the Securities and Exchange Commission, William
Donaldson, has written to Senators Leahy and Sarbanes in opposition to
this provision. The former chairman of the Securities and Exchange
Commission, Arthur Levin, has written to us in opposition to this
provision.
Mr. Speaker, that letter is as follows:
U.S. Securities and
Exchange Commission,
Washington, DC, May 22, 2003.
Hon. Patrick J. Leahy,
U.S. Senate, Russell Senate Office Building, Washington, DC.
Hon. Paul S. Sarbanes,
U.S. Senate, Hart Senate Office Building, Washington, DC.
Dear Senators Leahy and Sarbanes: Thank you for requesting
the Commission's views on Section 414 of H.R. 975, which
would amend the ``disinterested person'' definition in the
conflict of interest standards of the Bankruptcy Code to
remove the specific provisions covering investment bankers.
On May 7, in response to a question from Senator Sarbanes at
a hearing of the Senate Committee on Banking Housing and
Urban Affairs on the Impact of the Global Settlement, I
expressed my personal views about this amendment. Now I am
pleased to convey the view of the Commission, which is that,
while it may be possible to draft language that would address
some of the concerns of the proponents of the amendment,
Congress should proceed very cautiously before loosening any
conflicts of interest restriction. While we recognize that
this one-size-fits-all statutory exclusion is controversial,
we believe that it would be a mistake to eliminate the
exclusion in a similar one-size-fits-all manner at a time
when investor confidence is fragile.
The current ``disinterested person'' requirement was
adopted at least in part in response to a 1938 study by the
Securities and Exchange Commission that provided extensive
documentation and analysis of abuses in corporate
reorganization. The study concluded that a firm that served
as underwriter for a company's securities should not advise
the company about distributions to those security holders in
a reorganization plan. It further found that such a firm
should not advise the company about potential claims against
those involved with the company prior to the bankruptcy since
this often would involve an assessment of transaction in
which the firm participated. However, we should note that in
the 65 years since the 1938 study was issued, bankruptcy
practices and procedures have improved significantly with the
addition of a dedicated bankruptcy judicial system, the
establishment of the U.S. Trustee's office, and the
strengthening of active creditors' committees.
We are aware of the arguments of proponents of the
amendment that the current statutory exclusion is too broad
because it covers firms that participated in any underwriting
of the debtor, even if it was years ago and the firm has had
no further involvement with the debtor. However, if the
exclusion is eliminated entirely, we are concerned that the
general protection in the statute--which relies on the judge,
at the outset of the proceedings, to forbid those with
materially adverse interests to the estate, its creditors, or
its equity security holders from advising a company in
bankruptcy--may well be insufficient.
We appreciate the opportunity to comment on this proposed
amendment. If you or your staff need any further information,
please contact my office.
Sincerely,
William H. Donaldson,
Chairman.
____
[From Reuters, May 7, 2003]
SEC Chief Pans Bankruptcy Adviser Change
Washington (Reuters).--A measure before Congress that would
let an investment bank advise a former corporate client
during bankruptcy drew criticism from Securities and Exchange
Commission Chairman William Donaldson on Wednesday.
``Personally, at a time like this, where investor
confidence is as fragile as it is, I would want to proceed
very cautiously before lifting any of the conflict of
interest restrictions that we have,'' Donaldson told the
Senate Banking Committee.
The provision redefining a ``disinterested person'' is
contained in an overhaul of bankruptcy law that cleared the
U.S. House of Representatives in March.
Sen. Paul Sarbanes, Maryland Democrat, asked Donaldson
about the bankruptcy measure at a hearing on the $1.4 billion
settlement reached last week with 10 Wall Street firms over
biased research.
Donaldson said he was not speaking for the five-member SEC
and could not rule out that some better definition might
emerge in time to let former investment bankers bring their
expertise into the bankruptcy process.
``But right now, I think it personally would be a mistake
to change,'' said Donaldson.
Sarbanes, who said the prohibition on former investment
bankers acting as bankruptcy trustees dated back to 1938,
thanked Donaldson and said: ``I appreciate the attitude that
is reflected in that response.''
No date has been set in the Senate for taking up the bill,
which would also make it harder for individuals to walk away
from their debts through bankruptcy.
New York State Attorney General Eliot Spitzer, who has been in the
forefront of the investigation and prosecution of the Wall Street
scandals, has urged us not to make this change.
The people responsible in both parties, Republicans and Democrats,
the people responsible for protecting corporate integrity and
protecting the shareholders and the stakeholders are opposed to this
change.
We should be passing legislation to tighten the rules against
conflicts of interest. We should not be loosening the rules. Whatever
anyone may think of the rest of this mammoth bill, I hope everyone will
agree that this one provision cannot be justified and that when people
on this side of the aisle joined with William Donaldson as chairman of
the SEC and Judge Edith Jones, with whom I disagree in every other
provision in this bill, and Arthur Levin and Eliot Spitzer, stop, look,
and listen.
This provision has been in the code since 1938. It is a protective
provision. It protects shareholders, it protects workers, it protects
the 401(k) accounts. Why do we need to make this change now?
I hope people will vote to instruct the conferees, whatever they do
in the rest of this bill, not this change.
Mr. Speaker, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, section 414 does allow an investment banker that
previously represented a business to continue to represent the business
after it files for bankruptcy. Under current law, that investment
banker would be prohibited from representing the debtor on a per se
basis.
Let me say that this issue was debated in the Committee on the
Judiciary. There was an amendment that was offered, and it was rejected
by a vote of 12 to 17 when H.R. 975 was marked up in the committee.
This issue was not brought up during the conference committee on H.R.
333 in the previous Congress. And to my knowledge, there was no motion
to instruct on this issue that was ever made by anyone.
Let me say I am as sensitive to conflicts of interest as anybody
else. But if you have this absolute bar, an investment banker that
knows something about the business would be disqualified and then the
business if it was trying to reorganize under chapter 11 would have to
hire a new investment banker, and the new investment banker would end
up having to be paid for all the time to get himself or that
institution's self up to speed on the issues of the business.
So section 414 was designed to provide the professional advice that
investment bankers give in a way that would be able to reduce the cost
to the estate of the bankrupt business. And that is why I think that at
least section 414 should not be stricken in its entirety and would urge
a ``no'' vote on the motion to instruct.
Mr. Speaker, I yield 3 minutes to the gentleman from New York (Mr.
Weiner).
Mr. WEINER. Mr. Speaker, I will be brief, perhaps even less than the
3 minutes.
Of the forest of things that is wrong with the bankruptcy bill, and I
voted against it, this is actually a provision that represents a tree
that actually makes some sense.
So my colleagues understand this provision, it says that when an
entity enters into bankruptcy no investment house that has been
involved in underwriting on any level at any time in the history of
that company could be involved in the reorganization. So the following
not-so-hypothetical could happen: Ford Motor Company goes into
[[Page H221]]
a bankruptcy proceeding and Goldman Sachs, who happened to be involved
in their IPO 50 years ago and has had no investment and no underwriting
since, is precluded from doing it. So who winds up benefiting from this
provision? One company that is not an American company that happens not
to do any underwriting.
We have been all year on this side of the aisle, more than all year,
for the last several years, fighting against efforts by the Republicans
to take away discretion from judges. This is a provision that says we
are going to let the bankruptcy judge decide whether a party is
disinterested, conflicted or not. If we are truly concerned about
having conflicts of interest, theoretically we should not let
accountants do business with the debtor company or a lawyer that has
done business with the debtor company or anyone that has given advice
to the debtor company. Yet we are singling out investment banks. Why?
It does not make any sense to do that.
What we should do is take the language in this bill and make it the
model for other debates on tort reform and everything else in this
House. We have judges; we trust them to judge. We trust them to go
through the parties, decide who is interested, who is disinterested,
who has conflicts and who does not and then to draw conclusions about
who is interested in doing what.
By striking 414 and putting this blanket provision that says anyone
who has ever done any underwriting work cannot be involved in the
proceedings, I would argue does not benefit the debtor or the
stockholders or anyone else. We should want judges that say we want the
very best, most talented people who are going to look out for the
people who are the parties in the case. That should be how we do it. If
we think the judges are doing a bad job, well, that is another
question. If we think they cannot be trusted, well, that is another
question. But we had a problem in this House recently. We say that
juries cannot be trusted when it comes to tort reform. We say that
judges cannot be trusted when it comes to this type of thing. When did
we become such experts?
Apparently, the only thing American people can be trusted to do is
vote for us, and then we take away all the discretion for everyone
else. I think it is a very bad idea. There are 1,001 reasons why this
bankruptcy bill should go into the dust bin. This is one provision that
should not be changed. I urge a ``no'' vote.
Mr. SENSENBRENNER. Mr. Speaker, I yield back the balance of my time.
Mr. NADLER. Mr. Speaker, I yield myself such time as I may consume.
I have two basic comments. First, in response to the comments of my
distinguished colleague from New York, it is not the case that anyone
who worked as an investment banker for the banker company 50 years ago
is affected by this provision.
If you actually read the provision in the statute book, a
disinterested person is defined as a number of things, but it says the
following: ``Was not an investment banker for any outstanding security
of the debtor.'' If it is still outstanding, then he has still got a
relationship and he still has an interest in that. ``Has not been,
within 3 years before the date of the finding of the petition, an
investment banker,'' et cetera. So in other words, it is a 3-year bar
for outstanding securities. So the situation we were told about a
moment ago does not apply.
Let me say that this is not a question of discretion; it is a
question of protection. And, again, all the professionals in the field,
everyone to whom we ought to be looking for guidance in this comes to
the same conclusion. I do not claim to be an expert in investment
banking or bankruptcy law, but everyone who is basically says the same
thing.
I am going to read three quotes and that will be that. This is from
the senior professor at Harvard Law School, an expert on bankruptcy,
Elizabeth Warren: ``There is a reason why the professionals who have
worked for a business that collapses into bankruptcy are not permitted
to stay on.
{time} 1645
``The company must go back after bankruptcy and examine its old
transactions. Having the same professionals review their own work is
not likely to yield the most searching inquiry.''
Arthur Levitt, former Chairman of the Securities and Exchange
Commission: ``I haven't read a single argument made by the investment
banks that would persuade me that that prohibition should be changed.
What we are talking about is a significant potential conflict of
interest, and I think it is outrageous that investment banks would even
try to go down that road.''
William Donaldson, the current Chairman of the Securities and
Exchange Commission: ``We are aware of the arguments of proponents of
the amendment that the current statutory exclusion is too broad because
it covers firms that participated in any underwriting by the debtor,
even if it was years ago, and the firm has had no further involvement
with the debtor. However, if the exclusion is eliminated entirely,''
which is what this provision does, ``we are concerned that the general
protection in the statute, which relies on the judge at the outset of
the proceedings to forbid those with materially adverse interest to the
estate, its creditors or its equity and security holders from advising
a company in bankruptcy may well be insufficient.''
So there is a unanimity of judgment among the people involved in
protecting shareholders and stakeholders and 401(k)s and employees and
everybody else with a stake in this matter. We should not do this. And
just one further observation. This has been the law since 1938. We have
had no problems with it. We have no great hordes of people coming to
our offices saying, Get rid of this. It has caused all kind of
problems. Leave it alone.
Vote for the motion to recommit.
Mr. Chairman, I yield back the balance of my time.
Mr. SPEAKER pro tempore (Mr. Simpson). Without objection, the
previous question is ordered on the motion to instruct.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to instruct
offered by the gentleman from New York (Mr. Nadler).
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. NADLER. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The vote was taken by electronic device, and there were--yeas 146,
nays 203, answered ``present'' 1, not voting 82, as follows:
[Roll No. 11]
YEAS--146
Allen
Andrews
Baca
Bachus
Baird
Baldwin
Ballance
Becerra
Berkley
Bishop (GA)
Bishop (NY)
Boyd
Brady (PA)
Brown (OH)
Capps
Capuano
Cardin
Carson (IN)
Case
Clyburn
Conyers
Cooper
Costello
Cummings
Davis (CA)
Davis (FL)
Davis (IL)
Davis, Jo Ann
DeFazio
DeLauro
Deutsch
Dicks
Dingell
Doyle
Edwards
Emanuel
Engel
Eshoo
Etheridge
Evans
Farr
Filner
Ford
Frank (MA)
Frost
Gonzalez
Green (TX)
Grijalva
Harman
Hayworth
Hill
Hinojosa
Hoeffel
Holden
Holt
Hooley (OR)
Hoyer
Inslee
Jackson (IL)
Jefferson
Johnson (CT)
Jones (OH)
Kanjorski
Kaptur
Kennedy (RI)
Kildee
Kilpatrick
Kind
Kleczka
Lampson
Langevin
Lantos
Larsen (WA)
Larson (CT)
Lee
Levin
Lewis (GA)
Lofgren
Lynch
Majette
Maloney
Markey
Matsui
McCarthy (MO)
McCollum
McDermott
McGovern
Meehan
Menendez
Michaud
Millender-McDonald
Miller (NC)
Moore
Moran (VA)
Murtha
Nadler
Neal (MA)
Oberstar
Obey
Olver
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Peterson (MN)
Pomeroy
Price (NC)
Rahall
Rangel
Rohrabacher
Ross
Rothman
Rush
Ryan (OH)
Sabo
S[#x00E1]nchez, Linda T.
Sanchez, Loretta
Sanders
Schakowsky
Schiff
Scott (GA)
Scott (VA)
Serrano
Sherman
Skelton
Smith (NJ)
Smith (WA)
Snyder
Solis
Strickland
Stupak
Thompson (CA)
Thompson (MS)
Tierney
Towns
Udall (CO)
Udall (NM)
Van Hollen
Vel[#x00E1]zquez
Visclosky
Watt
Waxman
Wexler
Woolsey
NAYS--203
Aderholt
Akin
Bartlett (MD)
Barton (TX)
Bass
Beauprez
Bereuter
Biggert
Bilirakis
Bishop (UT)
Blumenauer
Blunt
Boehlert
Bonilla
Bonner
Boozman
Boswell
Boucher
Bradley (NH)
Brady (TX)
Brown (SC)
Burgess
Burns
Burr
Burton (IN)
Calvert
Cannon
Cantor
Capito
Cardoza
[[Page H222]]
Carter
Castle
Chabot
Chocola
Coble
Cole
Cox
Cramer
Crenshaw
Crowley
Cubin
Culberson
Davis (AL)
Davis (TN)
Davis, Tom
DeLay
DeMint
Diaz-Balart, L.
Dooley (CA)
Doolittle
Dreier
Duncan
Dunn
Ehlers
Emerson
English
Feeney
Ferguson
Flake
Foley
Fossella
Franks (AZ)
Frelinghuysen
Garrett (NJ)
Gibbons
Gilchrest
Gillmor
Gingrey
Goode
Goodlatte
Gordon
Goss
Granger
Graves
Green (WI)
Greenwood
Gutknecht
Hall
Harris
Hart
Hastings (WA)
Hayes
Hensarling
Herger
Hobson
Hoekstra
Hostettler
Houghton
Hulshof
Isakson
Issa
Istook
John
Johnson (IL)
Johnson, Sam
Keller
Kelly
Kennedy (MN)
King (IA)
Kingston
Kirk
Kline
Knollenberg
Kolbe
LaHood
Latham
LaTourette
Lewis (KY)
Linder
LoBiondo
Lucas (KY)
Lucas (OK)
Manzullo
Marshall
Matheson
McCarthy (NY)
McCotter
McCrery
McHugh
McKeon
Meek (FL)
Mica
Miller (FL)
Moran (KS)
Murphy
Musgrave
Myrick
Nethercutt
Neugebauer
Ney
Northup
Norwood
Nunes
Nussle
Osborne
Ose
Otter
Oxley
Pearce
Pence
Peterson (PA)
Petri
Pickering
Pitts
Platts
Porter
Portman
Pryce (OH)
Putnam
Quinn
Radanovich
Ramstad
Regula
Rehberg
Renzi
Reynolds
Rogers (AL)
Rogers (MI)
Ros-Lehtinen
Ryan (WI)
Saxton
Schrock
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shuster
Simmons
Simpson
Smith (MI)
Smith (TX)
Spratt
Stearns
Stenholm
Sullivan
Sweeney
Tancredo
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thornberry
Tiahrt
Tiberi
Toomey
Turner (OH)
Upton
Vitter
Walden (OR)
Walsh
Wamp
Weiner
Weldon (FL)
Weller
Whitfield
Wicker
Wilson (NM)
Wilson (SC)
Wolf
Young (FL)
ANSWERED ``PRESENT''--1
Ruppersberger
NOT VOTING--82
Abercrombie
Ackerman
Alexander
Baker
Ballenger
Barrett (SC)
Bell
Berman
Berry
Blackburn
Boehner
Bono
Brown, Corrine
Brown-Waite, Ginny
Buyer
Camp
Carson (OK)
Clay
Collins
Crane
Cunningham
Deal (GA)
DeGette
Delahunt
Diaz-Balart, M.
Doggett
Everett
Fattah
Forbes
Gallegly
Gephardt
Gerlach
Gutierrez
Hastings (FL)
Hefley
Hinchey
Honda
Hunter
Hyde
Israel
Jackson-Lee (TX)
Jenkins
Johnson, E. B.
Jones (NC)
King (NY)
Kucinich
Leach
Lewis (CA)
Lipinski
Lowey
McInnis
McIntyre
McNulty
Meeks (NY)
Miller (MI)
Miller, Gary
Miller, George
Mollohan
Napolitano
Ortiz
Paul
Pombo
Reyes
Rodriguez
Rogers (KY)
Roybal-Allard
Royce
Ryun (KS)
Sandlin
Shimkus
Slaughter
Souder
Stark
Tanner
Thomas
Turner (TX)
Waters
Watson
Weldon (PA)
Wu
Wynn
Young (AK)
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Simpson) (during the vote). Members are
advised that 2 minutes remain in this vote.
{time} 1710
Mrs. CUBIN, Messrs. HOUGHTON, GREENWOOD and LINCOLN DIAZ-BALART of
Florida changed their vote from ``yea'' to ``nay.''
So the motion to instruct was rejected.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
Stated against:
Mr. BARRETT of South Carolina. Mr. Speaker, due to a telephone call
concerning an issue critical to my district with the Deputy Secretary
of the Department of Energy, I unfortunately missed one recorded vote
on the House floor earlier today.
I ask that the Record reflect that had I not been unavoidably
detained, I would have voted ``no'' on Rollcall vote No. 11 (Democratic
Motion to Instruct Conferees on S. 1920).
personal explanation
Ms. EDDIE BERNICE JOHNSON of Texas. Mr. Speaker, on January 28, 2004,
due to an illness, I unfortunately missed four recorded votes on S.
1920. I would like the Record to reflect that had I been present, I
would have voted in the following manner:
Mr. Speaker, on Rollcall No. 8, I would have voted ``aye.''
Mr. Speaker, on Rollcall No. 9, I would have voted ``aye.''
Mr. Speaker, on Rollcall No. 10, I would have voted ``aye.''
Mr. Speaker, on Rollcall No. 11, I would have voted ``aye.''
Personal Explanation
Mr. ABERCROMBIE. Mr. Speaker, on January 27 and January 28, 2004, I
was unavoidably unable to vote. Had I been present, I would have voted
as follows:
Rollcall 6, H.R. 1385, Postage Stamp to benefit breast cancer
research, ``yes.''
Rollcall 7, H.R. 3493, Medical Devices Technical Corrections Act,
``yes.''
Rollcall 8, Baldwin Substitute to S. 1920, federal bankruptcy law,
``yes.''
Rollcall 9, Motion to Recommit S. 1920, federal bankruptcy law,
``yes.''
Rollcall 10, Final Passage S. 1920, federal bankruptcy law, ``no.''
Rollcall 11, Motion to Instruct Conferees, ``yes.''
personal explanation
Mr. RUPPERSBERGER. Mr. Speaker, I have interest in a company that
does business with a financial institution that one way or another
might be impacted by this legislation, so I have decided to vote
present on S. 1920, the Bankruptcy Extension Act and the accompanying
amendments and motions on January 28, 2004. This includes all rollcall
votes starting at No. 8 until the end of the consideration of this
measure. It also includes any motion to recommit and final passage.
Appointment of Conferees
The SPEAKER pro tempore. Without objection, the Chair appoints the
following conferees:
From the Committee on the Judiciary, for consideration of the Senate
bill and the House amendment, and modifications committed to
conference:
Messrs. Sensenbrenner, Hyde, Smith of Texas, Chabot, Cannon, Ms.
Hart, and Messrs. Conyers, Boucher, Nadler and Watt.
From the Committee on Financial Services, for consideration of
sections 901-906, 908-909, 911, and 1301-1309 of the House amendment,
and modifications committed to conference:
Messrs. Oxley, Bachus and Sanders.
There was no objection.
____________________