[Congressional Record Volume 151, Number 44 (Thursday, April 14, 2005)]
[House]
[Pages H1993-H2063]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005
Mr. SENSENBRENNER. Mr. Speaker, pursuant to House Resolution 211, I
call up the Senate bill (S. 256) to amend title 11 of the United States
Code, and for other purposes, and ask for its immediate consideration
in the House.
The Clerk read the title of the Senate bill.
The text of S. 256 is as follows:
S. 256
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 2005''.
(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.
Sec. 234. Protection of personal information.
TITLE III--DISCOURAGING BANKRUPTCY ABUSE
Sec. 301. Technical amendments.
[[Page H1994]]
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.
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.
Sec. 331. Limitation on retention bonuses, severance pay, and certain
other payments.
Sec. 332. Fraudulent involuntary bankruptcy.
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.
[[Page H1995]]
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.
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--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. Debts nondischargeable if incurred in violation of
securities fraud laws.
Sec. 1405. Appointment of trustee in cases of suspected fraud.
Sec. 1406. Effective date; application of amendments.
TITLE XV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
Sec. 1501. Effective date; application of amendments.
Sec. 1502. Technical corrections.
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. Such expenses
shall include reasonably necessary health insurance,
disability insurance, and health savings account expenses for
the debtor, the spouse of the debtor, or the dependents of
the debtor. 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, such as a serious
medical condition or a call or order to active duty in the
Armed Forces, to the extent such 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.
``(D) Subparagraphs (A) through (C) shall not apply, and
the court may not dismiss or
[[Page H1996]]
convert a case based on any form of means testing, if the
debtor is a disabled veteran (as defined in section 3741(1)
of title 38), and the indebtedness occurred primarily during
a period during which he or she was--
``(i) on active duty (as defined in section 101(d)(1) of
title 10); or
``(ii) performing a homeland defense activity (as defined
in section 901(1) of title 32).
``(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 a case 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).
``(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, including a veteran (as that term is
defined in section 101 of title 38), 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.''.
[[Page H1997]]
(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 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
[[Page H1998]]
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 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.
``(4) The requirements of paragraph (1) shall not apply
with respect to a debtor whom the court determines, after
notice and hearing, is unable to complete those requirements
because of incapacity, disability, or active military duty in
a military combat zone. For the purposes of this paragraph,
incapacity means that the debtor is impaired by reason of
mental illness or mental deficiency so that he is incapable
of realizing and making rational decisions with respect to
his financial responsibilities; and ``disability'' means that
the debtor is so physically impaired as to be unable, after
reasonable effort, to participate in an in person, telephone,
or Internet briefing required under paragraph (1).''.
(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
is a person described in section 109(h)(4) or 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 is a person described in section 109(h)(4) or 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;
[[Page H1999]]
``(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;
``(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
``(E) if a fee is charged for the instructional course,
charge a reasonable fee, and provide services without regard
to ability to pay the fee.
``(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'
[[Page H2000]]
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); or
``(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--
``(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
[[Page H2001]]
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 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, 2004), 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
[[Page H2002]]
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, on, 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, on,
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:
``(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) in paragraph (10), by striking ``and'' at the end;
(B) by redesignating paragraph (11) as paragraph (12); and
(C) 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;
and'';
(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
[[Page H2003]]
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 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
[[Page H2004]]
``(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;
``(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).'';
[[Page H2005]]
(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
``(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
[[Page H2006]]
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
``(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 case or 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;
[[Page H2007]]
``(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:
``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
[[Page H2008]]
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 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''.
SEC. 234. PROTECTION OF PERSONAL INFORMATION.
(a) Restriction of Public Access to Certain Information
Contained in Bankruptcy Case Files.--Section 107 of title 11,
United States Code, is amended by adding at the end the
following:
``(c)(1) The bankruptcy court, for cause, may protect an
individual, with respect to the following types of
information to the extent the court finds that disclosure of
such information would create undue risk of identity theft or
other unlawful injury to the individual or the individual's
property:
``(A) Any means of identification (as defined in section
1028(d) of title 18) contained in a paper filed, or to be
filed, in a case under this title.
``(B) Other information contained in a paper described in
subparagraph (A).
``(2) Upon ex parte application demonstrating cause, the
court shall provide access to information protected pursuant
to paragraph (1) to an entity acting pursuant to the police
or regulatory power of a domestic governmental unit.
``(3) The United States trustee, bankruptcy administrator,
trustee, and any auditor serving under section 586(f) of
title 28--
``(A) shall have full access to all information contained
in any paper filed or submitted in a case under this title;
and
``(B) shall not disclose information specifically protected
by the court under this title.''.
(b) Security of Social Security Account Number of Debtor in
Notice to Creditor.--Section 342(c) of title 11, United
States Code, is amended--
(1) by inserting ``last 4 digits of the'' before ``taxpayer
identification number''; and
(2) by adding at the end the following: ``If the notice
concerns an amendment that adds a creditor to the schedules
of assets and liabilities, the debtor shall include the full
taxpayer identification number in the notice sent to that
creditor, but the debtor shall include only the last 4 digits
of the taxpayer identification number in the copy of the
notice filed with the court.''.
(c) Conforming Amendment.--Section 107(a) of title 11,
United States Code, is
[[Page H2009]]
amended by striking ``subsection (b),'' and inserting
``subsections (b) and (c),''.
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
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
[[Page H2010]]
(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
subsection (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:
``(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
[[Page H2011]]
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 (l), under subsection (a)(3),
of the continuation of any 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 (m), 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.
[[Page H2012]]
``(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 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.''.
[[Page H2013]]
(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--
``(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 2005.
``(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
[[Page H2014]]
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 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.
[[Page H2015]]
``(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.
SEC. 325. UNITED STATES TRUSTEE PROGRAM FILING FEE INCREASE.
(a) Actions Under Chapter 7, 11, or 13 of Title 11, United
States Code.--Section 1930(a) of title 28, United States
Code, is amended--
(1) by striking paragraph (1) and inserting the following:
``(1) For a case commenced under--
``(A) chapter 7 of title 11, $200; and
``(B) chapter 13 of title 11, $150.''; and
(2) in paragraph (3), by striking ``$800'' and inserting
``$1000''.
(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; and
``(B) 70.00 percent of the fees collected under section
1930(a)(1)(B);'';
(2) in paragraph (2), by striking ``one-half'' and
inserting ``75 percent''; 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, 31.25 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''.
(d) Sunset Date.--The amendments made by subsections (b)
and (c) shall be effective during the 2-year period beginning
on the date of enactment of this Act.
(e) Use of Increased Receipts.--
(1) Judges' salaries and benefits.--The amount of fees
collected under paragraphs (1) and (3) of section 1930(a) of
title 28, United States Code, during the 5-year period
beginning on the date of enactment of this Act, that is
greater than the amount that would have been collected if the
amendments made by subsection (a) had not taken effect shall
be used, to the extent necessary, to pay the salaries and
benefits of the judges appointed pursuant to section 1223 of
this Act.
(2) Remainder.--Any amount described in paragraph (1),
which is not used for the purpose described in paragraph (1),
shall be deposited into the Treasury of the United States to
the extent necessary to offset the decrease in governmental
receipts resulting from the amendments made by subsections
(b) and (c).
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
[[Page H2016]]
(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).''.
SEC. 331. LIMITATION ON RETENTION BONUSES, SEVERANCE PAY, AND
CERTAIN OTHER PAYMENTS.
Section 503 of title 11, United States Code, is amended by
adding at the end the following:
``(c) Notwithstanding subsection (b), there shall neither
be allowed, nor paid--
``(1) a transfer made to, or an obligation incurred for the
benefit of, an insider of the debtor for the purpose of
inducing such person to remain with the debtor's business,
absent a finding by the court based on evidence in the record
that--
``(A) the transfer or obligation is essential to retention
of the person because the individual has a bona fide job
offer from another business at the same or greater rate of
compensation;
``(B) the services provided by the person are essential to
the survival of the business; and
``(C) either--
``(i) the amount of the transfer made to, or obligation
incurred for the benefit of, the person is not greater than
an amount equal to 10 times the amount of the mean transfer
or obligation of a similar kind given to nonmanagement
employees for any purpose during the calendar year in which
the transfer is made or the obligation is incurred; or
``(ii) if no such similar transfers were made to, or
obligations were incurred for the benefit of, such
nonmanagement employees during such calendar year, the amount
of the transfer or obligation is not greater than an amount
equal to 25 percent of the amount of any similar transfer or
obligation made to or incurred for the benefit of such
insider for any purpose during the calendar year before the
year in which such transfer is made or obligation is
incurred;
``(2) a severance payment to an insider of the debtor,
unless--
``(A) the payment is part of a program that is generally
applicable to all full-time employees; and
``(B) the amount of the payment is not greater than 10
times the amount of the mean severance pay given to
nonmanagement employees during the calendar year in which the
payment is made; or
``(3) other transfers or obligations that are outside the
ordinary course of business and not justified by the facts
and circumstances of the case, including transfers made to,
or obligations incurred for the benefit of, officers,
managers, or consultants hired after the date of the filing
of the petition.''.
SEC. 332. FRAUDULENT INVOLUNTARY BANKRUPTCY.
(a) Short Title.--This section may be cited as the
``Involuntary Bankruptcy Improvement Act of 2005''.
(b) Involuntary Cases.--Section 303 of title 11, United
States Code, is amended by adding at the end the following:
``(l)(1) If--
``(A) the petition under this section is false or contains
any materially false, fictitious, or fraudulent statement;
``(B) the debtor is an individual; and
``(C) the court dismisses such petition,
the court, upon the motion of the debtor, shall seal all the
records of the court relating to such petition, and all
references to such petition.
``(2) If the debtor is an individual and the court
dismisses a petition under this section, the court may enter
an order prohibiting all consumer reporting agencies (as
defined in section 603(f) of the Fair Credit Reporting Act
(15 U.S.C. 1681a(f))) from making any consumer report (as
defined in section 603(d) of that Act) that contains any
information relating to such petition or to the case
commenced by the filing of such petition.
``(3) Upon the expiration of the statute of limitations
described in section 3282 of title 18, for a violation of
section 152 or 157 of such title, the court, upon the motion
of the debtor and for good cause, may expunge any records
relating to a petition filed under this section.''.
(c) Bankruptcy Fraud.--Section 157 of title 18, United
States Code, is amended by inserting ``, including a
fraudulent involuntary bankruptcy petition under section 303
of such title'' after ``title 11''.
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 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
[[Page H2017]]
``(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
2005, 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''. Section 1409(b) of title 28, United States Code,
is further amended by striking ``$5,000'' and inserting
``$15,000''.
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
otherwise applicable nonbankruptcy law, or any 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--
(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''.
[[Page H2018]]
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 fee 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--
``(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--
[[Page H2019]]
``(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, and 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 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
[[Page H2020]]
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.''.
(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, on, or after the date of 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:
``(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.''.
[[Page H2021]]
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.--apter 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, 2008, 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 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
[[Page H2022]]
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 2005;''; 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
2005.
``(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 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
[[Page H2023]]
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
or elected 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 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.
[[Page H2024]]
``(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.
``(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
[[Page H2025]]
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 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.
[[Page H2026]]
``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 1517,
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;
``(2) the foreign representative applying for recognition
is a person or body; and
``(3) the petition meets the requirements of section 1515.
[[Page H2027]]
``(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 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,
[[Page H2028]]
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.--
(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
[[Page H2029]]
(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 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
[[Page H2030]]
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 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:
[[Page H2031]]
``(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 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.--
[[Page H2032]]
(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 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.
[[Page H2033]]
``(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 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
[[Page H2034]]
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 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
[[Page H2035]]
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 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;
[[Page H2036]]
``(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'';
(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:
[[Page H2037]]
``(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 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:
[[Page H2038]]
``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 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
[[Page H2039]]
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), and as in
effect on June 30, 2005, is hereby reenacted.
(2) Effective date of reenactment.--Paragraph (1) shall
take effect on July 1, 2005.
(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).
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 (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
[[Page H2040]]
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.
``(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.''.
[[Page H2041]]
(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 amended by
this Act, is further amended--
(1) by striking ``In this title--'' and inserting ``In this
title the following definitions shall apply:'';
(2) in each paragraph (other than paragraph (54A)), 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) 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
(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(b) of title 11, United States Code, as amended
by this Act, is further amended--
(1) by inserting ``101(19A),'' after ``101(18),'' each
place it appears;
(2) by inserting ``522(f)(3) and 522(f)(4),'' after
``522(d),'' each place it appears;
(3) by inserting ``541(b), 547(c)(9),'' after
``523(a)(2)(C),'' each place it appears;
(4) in paragraph (1), by striking ``and 1325(b)(3)'' and
inserting ``1322(d), 1325(b), and 1326(b)(3) of this title
and section 1409(b) of title 28''; and
(5) in paragraph (2), by striking ``and 1325(b)(3) of this
title'' and inserting ``1322(d), 1325(b), and 1326(b)(3) of
this title and section 1409(b) of title 28''.
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
[[Page H2042]]
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 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 2005''.
(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;''.
[[Page H2043]]
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),
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.
[[Page H2044]]
``(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 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 2005, 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
[[Page H2045]]
if a consumer pays only the required minimum monthly payments
and if no other advances are made, which table shall clearly
present standardized information to be used to disclose the
information required to be disclosed under subparagraph (A),
(B), or (C), as applicable;
``(ii) establish the table required under clause (i) by
assuming--
``(I) a significant number of different annual percentage
rates;
``(II) a significant number of different account balances;
``(III) a significant number of different minimum payment
amounts; and
``(IV) that only minimum monthly payments are made and no
additional extensions of credit are obtained; and
``(iii) promulgate regulations that provide instructional
guidance regarding the manner in which the information
contained in the table established under clause (i) should be
used in responding to the request of an obligor for any
information required to be disclosed under subparagraph (A),
(B), or (C).
``(I) The disclosure requirements of this paragraph do not
apply to any charge card account, the primary purpose of
which is to require payment of charges in full each month.
``(J) A creditor that maintains a toll-free telephone
number for the purpose of providing customers with the actual
number of months that it will take to repay the customer's
outstanding balance is not subject to the requirements of
subparagraph (A) or (B).
``(K) A creditor that maintains a toll-free telephone
number for the purpose of providing customers with the actual
number of months that it will take to repay an outstanding
balance shall include the following statement on each billing
statement: `Making only the minimum payment will increase the
interest you pay and the time it takes to repay your balance.
For more information, call this toll-free number: ____.' (the
blank space to be filled in by the creditor).''.
(b) Regulatory Implementation.--
(1) In general.--The Board of Governors of the Federal
Reserve System (hereafter in this title referred to as the
``Board'') shall promulgate regulations implementing the
requirements of section 127(b)(11) of the Truth in Lending
Act, as added by subsection (a) of this section.
(2) Effective date.--Section 127(b)(11) of the Truth in
Lending Act, as added by subsection (a) of this section, and
the regulations issued under paragraph (1) of this subsection
shall not take effect until the later of--
(A) 18 months after the date of enactment of this Act; or
(B) 12 months after the publication of such final
regulations by the Board.
(c) Study of Financial Disclosures.--
(1) In general.--The Board may conduct a study to determine
the types of information available to potential borrowers
from consumer credit lending institutions regarding factors
qualifying potential borrowers for credit, repayment
requirements, and the consequences of default.
(2) Factors for consideration.--In conducting a study under
paragraph (1), the Board should, in consultation with the
other Federal banking agencies (as defined in section 3 of
the Federal Deposit Insurance Act), the National Credit Union
Administration, and the Federal Trade Commission, consider
the extent to which--
(A) consumers, in establishing new credit arrangements, are
aware of their existing payment obligations, the need to
consider those obligations in deciding to take on new credit,
and how taking on excessive credit can result in financial
difficulty;
(B) minimum periodic payment features offered in connection
with open end credit plans impact consumer default rates;
(C) consumers make only the required minimum payment under
open end credit plans;
(D) consumers are aware that making only required minimum
payments will increase the cost and repayment period of an
open end credit obligation; and
(E) the availability of low minimum payment options is a
cause of consumers experiencing financial difficulty.
(3) Report to congress.--Findings of the Board in
connection with any study conducted under this subsection
shall be submitted to Congress. Such report shall also
include recommendations for legislative initiatives, if any,
of the Board, based on its findings.
SEC. 1302. ENHANCED DISCLOSURE FOR CREDIT EXTENSIONS SECURED
BY A DWELLING.
(a) Open End Credit Extensions.--
(1) Credit applications.--Section 127A(a)(13) of the Truth
in Lending Act (15 U.S.C. 1637a(a)(13)) is amended--
(A) by striking ``consultation of tax adviser.--A statement
that the'' and inserting the following: ``tax
deductibility.--A statement that--
``(A) the''; and
(B) by striking the period at the end and inserting the
following: ``; and
``(B) in any case in which the extension of credit exceeds
the fair market value (as defined under the Internal Revenue
Code of 1986) of the dwelling, the interest on the portion of
the credit extension that is greater than the fair market
value of the dwelling is not tax deductible for Federal
income tax purposes.''.
(2) Credit advertisements.--Section 147(b) of the Truth in
Lending Act (15 U.S.C. 1665b(b)) is amended--
(A) by striking ``If any'' and inserting the following:
``(1) In general.--If any''; and
(B) by adding at the end the following:
``(2) Credit in excess of fair market value.--Each
advertisement described in subsection (a) that relates to an
extension of credit that may exceed the fair market value of
the dwelling, and which advertisement is disseminated in
paper form to the public or through the Internet, as opposed
to by radio or television, shall include a clear and
conspicuous statement that--
``(A) the interest on the portion of the credit extension
that is greater than the fair market value of the dwelling is
not tax deductible for Federal income tax purposes; and
``(B) the consumer should consult a tax adviser for further
information regarding the deductibility of interest and
charges.''.
(b) Non-Open End Credit Extensions.--
(1) Credit applications.--Section 128 of the Truth in
Lending Act (15 U.S.C. 1638) is amended--
(A) in subsection (a), by adding at the end the following:
``(15) In the case of a consumer credit transaction that is
secured by the principal dwelling of the consumer, in which
the extension of credit may exceed the fair market value of
the dwelling, a clear and conspicuous statement that--
``(A) the interest on the portion of the credit extension
that is greater than the fair market value of the dwelling is
not tax deductible for Federal income tax purposes; and
``(B) the consumer should consult a tax adviser for further
information regarding the deductibility of interest and
charges.''; and
(B) in subsection (b), by adding at the end the following:
``(3) In the case of a credit transaction described in
paragraph (15) of subsection (a), disclosures required by
that paragraph shall be made to the consumer at the time of
application for such extension of credit.''.
(2) Credit advertisements.--Section 144 of the Truth in
Lending Act (15 U.S.C. 1664) is amended by adding at the end
the following:
``(e) Each advertisement to which this section applies that
relates to a consumer credit transaction that is secured by
the principal dwelling of a consumer in which the extension
of credit may exceed the fair market value of the dwelling,
and which advertisement is disseminated in paper form to the
public or through the Internet, as opposed to by radio or
television, shall clearly and conspicuously state that--
``(1) the interest on the portion of the credit extension
that is greater than the fair market value of the dwelling is
not tax deductible for Federal income tax purposes; and
``(2) the consumer should consult a tax adviser for further
information regarding the deductibility of interest and
charges.''.
(c) Regulatory Implementation.--
(1) In general.--The Board shall promulgate regulations
implementing the amendments made by this section.
(2) Effective date.--Regulations issued under paragraph (1)
shall not take effect until the later of--
(A) 12 months after the date of enactment of this Act; or
(B) 12 months after the date of publication of such final
regulations by the Board.
SEC. 1303. DISCLOSURES RELATED TO ``INTRODUCTORY RATES''.
(a) Introductory Rate Disclosures.--Section 127(c) of the
Truth in Lending Act (15 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
[[Page H2046]]
to any listing of a temporary annual percentage rate on an
envelope or other enclosure in which an application or
solicitation to open a credit card account is mailed.
``(C) Conditions for introductory rates.--An application or
solicitation to open a credit card account for which a
disclosure is required under paragraph (1), and that offers a
temporary annual percentage rate of interest shall, if that
rate of interest is revocable under any circumstance or upon
any event, clearly and conspicuously disclose, in a prominent
manner on or with such application or solicitation--
``(i) a general description of the circumstances that may
result in the revocation of the temporary annual percentage
rate; and
``(ii) if the annual percentage rate that will apply upon
the revocation of the temporary annual percentage rate--
``(I) will be a fixed rate, the annual percentage rate that
will apply upon the revocation of the temporary annual
percentage rate; or
``(II) will vary in accordance with an index, the rate that
will apply after the temporary rate, based on an annual
percentage rate that was in effect within 60 days before the
date of mailing the application or solicitation.
``(D) Definitions.--In this paragraph--
``(i) the terms `temporary annual percentage rate of
interest' and `temporary annual percentage rate' mean any
rate of interest applicable to a credit card account for an
introductory period of less than 1 year, if that rate is less
than an annual percentage rate that was in effect within 60
days before the date of mailing the application or
solicitation; and
``(ii) the term `introductory period' means the maximum
time period for which the temporary annual percentage rate
may be applicable.
``(E) Relation to other disclosure requirements.--Nothing
in this paragraph may be construed to supersede subsection
(a) of section 122, or any disclosure required by paragraph
(1) or any other provision of this subsection.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate regulations
implementing the requirements of section 127(c)(6) of the
Truth in Lending Act, as added by this section.
(2) Effective date.--Section 127(c)(6) of the Truth in
Lending Act, as added by this section, and regulations issued
under paragraph (1) of this subsection shall not take effect
until the later of--
(A) 12 months after the date of enactment of this Act; or
(B) 12 months after the date of publication of such final
regulations by the Board.
SEC. 1304. INTERNET-BASED CREDIT CARD SOLICITATIONS.
(a) Internet-Based 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
[[Page H2047]]
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.
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.''.
(4) by adding at the end the following:
``(e)(1) In addition to any transfer that the trustee may
otherwise avoid, the trustee may avoid any transfer of an
interest of the debtor in property that was made on or within
10 years before the date of the filing of the petition, if--
``(A) such transfer was made to a self-settled trust or
similar device;
``(B) such transfer was by the debtor;
``(C) the debtor is a beneficiary of such trust or similar
device; and
``(D) the debtor made such transfer with actual intent to
hinder, delay, or defraud any entity to which the debtor was
or became, on or after the date that such transfer was made,
indebted.
``(2) For the purposes of this subsection, a transfer
includes a transfer made in anticipation of any money
judgment, settlement, civil penalty, equitable order, or
criminal fine incurred by, or which the debtor believed would
be incurred by--
``(A) any violation of the securities laws (as defined in
section 3(a)(47) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)(47))), any State securities laws, or any
regulation or order issued under Federal securities laws or
State securities laws; or
``(B) 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 (15 U.S.C. 78l and 78o(d)) or
under section 6 of the Securities Act of 1933 (15 U.S.C.
77f).''.
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. DEBTS NONDISCHARGEABLE IF INCURRED IN VIOLATION OF
SECURITIES FRAUD LAWS.
(a) Prepetition and Postpetition Effect.--Section
523(a)(19)(B) of title 11, United States Code, is amended by
inserting ``, before, on, or after the date on which the
petition was filed,'' after ``results''.
(b) Effective Date Upon Enactment of Sarbanes-Oxley Act.--
The amendment made by subsection (a) is effective beginning
July 30, 2002.
SEC. 1405. APPOINTMENT OF TRUSTEE IN CASES OF SUSPECTED
FRAUD.
Section 1104 of title 11, United States Code, is amended by
adding at the end the following:
``(e) The United States trustee shall move for the
appointment of a trustee under subsection (a) if there are
reasonable grounds to suspect that current members of the
governing body of the debtor, the debtor's chief executive or
chief financial officer, or members of the governing body who
selected the debtor's chief executive or chief financial
officer, participated in actual fraud, dishonesty, or
criminal conduct in the management of the debtor or the
debtor's public financial reporting.''.
SEC. 1406. 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.--cept 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 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)''.
The SPEAKER pro tempore (Mr. Simpson). Pursuant to House Resolution
211, the gentleman from Wisconsin (Mr. Sensenbrenner) and the gentleman
from Michigan (Mr. Conyers) each will control 30 minutes.
The Chair recognizes the gentleman from Michigan (Mr. Sensenbrenner).
General Leave
Mr. SENSENBRENNER. Mr. Speaker, I ask unanimous consent that all
Members may have 5 legislative days within which to revise and extend
their remarks and include extraneous material on S. 256.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Wisconsin?
There was no objection.
Mr. SENSENBRENNER. Mr. Speaker, I yield by myself such time as I may
consume.
Mr. Speaker, I rise in support of S. 256, the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005. This legislation
consists of a comprehensive package of reform measures pertaining to
consumer and business bankruptcy cases. The current system has created
a set of incentives that encourage opportunistic personal filings and
the abuse of a bankruptcy system originally intended to strike a
delicate balance between debtor and creditor rights. These abuses
ultimately hurt debtors as well as creditors, consumers as well as
businesses, suppliers as well as purchasers. The only winners in the
current bankruptcy system are those who game the system for personal
gain.
S. 256 restores personal responsibility and integrity to the
bankruptcy system and ensures that the system is fair
[[Page H2048]]
to both debtors and creditors. This legislation represents the most
comprehensive reform of the bankruptcy system in more than 25 years.
As many of us know, bankruptcy reform has been subject to exhaustive
congressional review for more than a decade, beginning with the
establishment of a National Bankruptcy Review Commission in 1994. It is
important to note that over the course of the last four Congresses, the
House has passed bankruptcy reform on eight separate occasions by
overwhelming and bipartisan margins.
This bill will help stop fraudulent, abusive, and opportunistic
bankruptcy claims by closing various loopholes and incentives that have
produced steadily cascading claims.
Central to these reforms is a merit-based test that reflects the
commonsense proposition that those who are capable of repaying their
debts after seeking bankruptcy relief must actually repay their debts.
S. 256 will also give the courts greater powers to dismiss abusive
bankruptcy cases and to punish attorneys who encourage their clients to
file such claims. In addition, the bill prevents violent criminals or
drug traffickers from using bankruptcy relief to evade their creditors.
The bill closes the ``millionaire's mansion'' loophole in the current
bankruptcy code that permits corporate criminals to shield their multi-
million dollar homesteads from deserving creditors. Of critical
importance, the legislation prevents deadbeat parents from abusing the
bankruptcy system to shirk their child support obligations. With
respect to these reforms, the National Child Support Enforcement
Association stated that S. 256 is ``crucial to the collection of child
support during bankruptcy.''
Some might ask why Congress has been so concerned about abuse in the
bankruptcy system. The answer to this question should be obvious. It is
estimated that every American household bears an annual $400 hidden tax
for profligate and abusive bankruptcy filings. That is a $400 tax on
every household that no politician has to vote for, but gets paid
anyhow.
As a result, every abusive bankruptcy filing impacts hard-working
Americans in the form of higher interest rates and increased costs of
goods and service. Our economy and the hard-working Americans who
sustain it should not suffer any longer from the billions of dollars in
losses associated with abusive bankruptcy filings.
Mr. Speaker, this legislation not only deals with abuse in the
bankruptcy system; it includes many vital consumer protections as well.
S. 256 will provide the tools to crack down on bankruptcy petition
mills, which often misrepresent the benefits and risks of bankruptcy
relief. It will impose heightened standards of professional
responsibility for attorneys who represent debtors. It will require
certain credit card solicitations, monthly billing statements, and
related materials to include important disclosures and explanatory
statements on a broad range of credit terms and conditions, including
introductory interest rates and minimum payments.
The bill also helps America's family farmers and fishermen
confronting economic hard times by providing more tools to assist in
their bankruptcy reorganization. The bill includes protections for
medical patients in bankruptcy health care facilities and pro-privacy
provisions that protect against the unwanted disclosure of personal
information.
There are several other critical reforms contained in this
comprehensive legislation, but the limits of time prevent an exhaustive
recitation.
Mr. Speaker, the time for bankruptcy reform is long overdue.
Bankruptcy reform legislation has been subject to more process, more
consideration, more deliberation, more debate, and more voting than
virtually any other legislative item in the past decade. We have before
us legislation that represents the culmination of a decade of
legislative toil and persistence. It is the product of extensive
bicameral and bipartisan compromise and was approved by the other body
by a vote of 74 to 25.
We also have before us a historic opportunity to return a measure of
fairness and accountability to the bankruptcy system in a manner that
will curb bankruptcy abuse while rewarding the vast majority of hard-
working Americans who play by the rules and pay their bills as agreed
upon.
Mr. Speaker, I urge my colleagues to seize this opportunity to join
me in supporting this legislation.
Mr. Speaker, before closing, I include for the Record a supplemental
statement acknowledging the hard work of many Members and staff who
have helped make this legislation possible, as well as a summary of the
principal provisions of this bill.
Mr. Speaker, over the many years this legislation has been pending in
the Congress, many Members, Senators, and staff members have devoted
themselves to making S. 256 a reality. I would like to take this
opportunity to recognize these individuals.
Beginning with my colleagues in the House, I would like to mention
the many contributions of the Chairman of the Subcommittee on
Commercial and Administrative Law (Mr. Cannon) for his hard work on
behalf of this legislation. The Chairman of the Financial Services
Committee (Mr. Oxley) has also been a great resource. I also appreciate
the contributions of my colleagues on the other side of the aisle, the
Ranking Member of the Judiciary Committee (Mr. Conyers) and the
gentleman from Virginia (Mr. Boucher). Former Members should also be
recognized for their contributions. Bill McCollum is to be commended
for being the first to introduce comprehensive bankruptcy reform and
George Gekas deserves our gratitude for his tireless efforts.
In addition, I would like to mention the following staff on the
Judiciary Committee for their contributions: Phil Kiko, Majority
Committee General Counsel and Chief of Staff; Rob Tracci, Chief
Legislative Counsel and Parliamentarian; Raymond Smietanka, Chief
Counsel, Subcommittee on Commercial and Administrative Law; Perry
Apelbaum; David Lachmann; Matt Iandoli, Legislative Director for
Representative Cannon; Todd Thorpe, Chief of Staff for Representative
Cannon; Laura Vaught, Deputy Chief of Staff for Representative Boucher;
Jean Harmann, House Legislative Counsel and Dina Ellis, Counsel for the
House Financial Services Committee.
Former staffers who should also be recognized, include Will
Moschella, Joe Rubin, Alan Cagnoli, and Liz Trainer.
The vital and indispensable efforts of one staff member have uniquely
contributed to the bankruptcy reform legislation we consider today.
From her service as general counsel on the congressionally-created
National Bankruptcy Review Commission to her often behind the scenes
work on bankruptcy reform legislation extending to the 105th Congress,
Susan Jensen, counsel to the Judiciary Subcommittee on Commercial and
Administrative Law, deserves special recognition. Her technical
expertise in a complex area of law has resulted in dramatic
improvements in successive drafts of bankruptcy reform legislation and
helped establish a record of legislative history that elucidates the
legislation we consider today. Her professionalism, attention to
detail, and commitment to serving the House of Representatives deserves
the recognition and commendation of this House.
I would also like to acknowledge the countless contributions of our
colleagues in the other body. These include Senators Grassley, Hatch,
Sessions, Specter, Biden and Leahy.
This legislation has also benefitted from the hard work and devoted
assistance of numerous Senate staff members. These include, Rita Lari,
counsel for Senator Grassley, who has been a wonderful resource for our
staff. In addition, the following individuals must also be
acknowledged: Harold Kim and Tim Strachan, counsels for Senator
Specter; Perry Barber, Rene Augustine, and former staffer Makan
Delrahim, counsels for Senator Hatch; and Ed Pagano, Chief of Staff for
Senator Leahy.
Summary of Principal Provisions of S. 256, ``The Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005''
CONSUMER BANKRUPTCY REFORMS
Abuse prevention: S. 256 instills a greater level of
personal responsibility by closing various loopholes and
eliminating incentives in the current bankruptcy system that
encourage opportunistic consumer bankruptcy filings and
abuse. The bill's needs-based provisions target, for example,
those debtors who have a demonstrated ability to repay their
debts and channels them into a form of bankruptcy relief that
requires debt repayment. Courts, under S. 256, are given
greater powers to dismiss abusive bankruptcy cases and to
punish attorneys who encourage their clients to file such
cases. Debtors who have committed crimes of violence or
engaged in drug trafficking will no longer be able to use
bankruptcy to hide from their creditors. Likewise, deadbeat
parents will be prevented from using bankruptcy to shirk
their child support obligations. In addition, this
legislation prevents debtors from avoiding their
responsibility to pay for luxury goods and services purchased
on the eve of filing for bankruptcy.
Needs-based reforms: S. 256 implements an income and
expense analysis to determine
[[Page H2049]]
whether a debtor has a demonstrated ability to repay a
significant portion of his or her debts. If a debtor has the
ability to repay debts, he or she must either be channeled
into a form of bankruptcy relief that requires repayment or
risk having the bankruptcy case dismissed as an abusive
filing. This needs-based test specifies certain expense
amounts--derived from IRS expense standards and other
specified expenses--that are deducted from the debtor's
income. These include expenses for food, clothing, housing,
and transportation as well as certain educational expenses
for the debtor's children. The debtor may rebut the
presumption of abuse by demonstrating special circumstances
warranting additional expenses or income adjustment.
Spousal and child support protections: S. 256 prioritizes
the collection and payment of spousal and child support in
bankruptcy cases by giving these claims the highest payment
priority (current law gives these claimants an only 7th level
payment priority). The bill requires bankruptcy trustees to
give child support claimants important information about the
availability of state child support enforcement assistance
and to notify the proper state child support enforcement
authorities of the deadbeat parent's bankruptcy filing. S.
256 allows various enforcement actions to be brought against
a bankrupt deadbeat parent, including the withholding of his
or her driver's license, or the suspension of the debtor's
professional or occupational license. It also allows state
child support enforcement agencies to intercept a debtor's
tax refund for nonpayment of spousal or child support. In
addition, it ensures that a deadbeat parent do not escape
responsibility to pay a child's medical bills. The National
Child Support Enforcement Association says S. 256's reforms
are ``crucial to the collection of child support during
bankruptcy.''
Closes the ``mansion loophole'' for greedy corporate
culprits: Under current bankruptcy law, debtors living in
certain states can shield from their creditors virtually all
of the equity in their homes. In light of this, some debtors
actually move to these states just to take advantage of their
``mansion loophole'' laws. S. 256 closes this loophole for
abuse by requiring a debtor to reside in the state for at
least 2 years before he or she can claim that state's
homestead exemption--the current residency requirement is
only 91 days! The bill further reduces the opportunity for
abuse by requiring a debtor to own the homestead for at least
40 months before he or she can use state exemption law--
current law imposes no such requirement. In addition, S. 256
requires a debtor's homestead exemption to be reduced for to
the extent attributable to the debtor's fraudulent conversion
of nonexempt assets (e.g., cash) into a homestead exemption.
Most importantly, the bill stops securities law violators and
other culprits from hiding their homestead assets from those
whom they have defrauded or injured If a debtor was convicted
of a felony, violated a securities law, or committed a
criminal act, intentional tort, or engaged in reckless
misconduct that caused serious physical injury or death, S.
256 overrides state homestead exemption law and caps the
debtor's homestead exemption at $125,000.
Debtor protections: S. 256 requires debtors to receive
credit counseling before they can be eligible for bankruptcy
relief so that they will make an informed choice about
bankruptcy--its alternatives and consequences. The bill also
requires debtors, after they have filed for bankruptcy, to
participate in financial management instructional courses so
they can hopefully avoid future financial distress. S. 256
penalizes creditors who unreasonably refuse to negotiate a
pre-bankruptcy debt repayment plan with a debtor. The bill
strengthens the disclosure requirements for reaffirmation
agreements so that debtors will be better informed about
their rights and responsibilities. In addition, S. 256
requires certain monthly credit card billing statements to
include specified disclosures regarding the increased
interest and repayment time associated with making minimum
payments. The bill also requires certain home equity loan and
credit card solicitations to include enhanced consumer
disclosures. S. 256 prohibits a creditor from terminating an
open end consumer credit plan simply because the consumer has
not incurred finance charges on the account. Further, the
bill cracks down on bankruptcy petition mills and imposes
heightened standards of professional responsibility for
attorneys who represent debtors.
BUSINESS BANKRUPTCY AND OTHER REFORMS
Protections for small business owners: Under current
bankruptcy law, a business can be sued by a bankruptcy
trustee and forced to pay back monies previously paid to it
by a firm that later files for bankruptcy protection. S. 256
contains provisions making it easier--particularly for small
businesses--to successfully defend against these suits.
Promotes greater certainty in the financial market place:
S. 256 reduces systemic risk in the banking system and
financial marketplace by minimizing the risk of disruption
when parties to certain financial transactions become
bankrupt or insolvent. Federal Reserve Board Chairman Alan
Greenspan says these reforms are ``extremely important.''
Family farmers: S. 256 helps small family farmers facing
financial distress. While current bankruptcy law has a
specialized form of bankruptcy relief--Chapter 12--that is
specifically designed for family farmers, its benefits for
farmers are limited because of its restrictive eligibility
requirements. The bill responds to this problem in several
key respects: it more than doubles the debt eligibility limit
and requires it to be periodically adjusted for inflation; it
lowers the requisite percentage of a farmer's income that
must be derived from farming operations; and it gives farmers
more flexibility with respect to how certain creditors can be
repaid. As a result, many more deserving family farmers
facing financial hard times will be able to avail themselves
of Chapter 12. In addition, S. 256 makes Chapter 12 a
permanent component of the bankruptcy laws and extends the
benefits of this form of bankruptcy relief to family
fishermen.
Small business debtors: S. 256 addresses the special
problems presented by small business debtors by instituting
firm deadlines and enforcement mechanisms to weed out those
debtors who are not likely to reorganize. It also requires
the court and other designated entities to monitor these
cases more actively.
Transnational insolvencies: In response to the increasing
globalization of business dealings and operations, S. 256
establishes a separate chapter under the Bankruptcy Code
devoted to transnational insolvencies. These provisions are
intended to provide greater legal certainty for trade and
investment as well promote the fair and efficient
administration of these cases.
Privacy protections: Under current law, nearly every item
of information supplied by a debtor in connection with his or
her bankruptcy case is made available to the public. S. 256
prohibits the disclosure of the names of the debtor's minor
children and requires such information to be kept in a
nonpublic record, which can be made available for inspection
only by the court and certain other designated entities. In
addition, if a business debtor had a policy prohibiting it
from selling ``personally identifiable information'' about
its customers and the policy was in effect at the time of the
bankruptcy filing, then S. 256 prohibits the sale of such
information unless certain conditions are satisfied.
Protections for employees: S. 256 requires certain back pay
awards granted as a result of the debtor's violation of
Federal or State law to receive one of the highest payment
priorities in a bankruptcy case. In addition, S. 256
streamlines the appointment of an ERISA administrator for an
employee benefit plan, under certain circumstances, to
minimize the disruption that results when an employer files
for bankruptcy relief. In light of the disaterous impact that
bankruptcy cases like WorldCom and Enron have had on their
employees, reforms that more than double current the monetary
cap on wage and employee benefit claims entitled to priority
under the Bankruptcy Code. Other provisions would protect
retirees in cases where Chapter 11 debtors unilaterally
modify their benefits, such as health insurance. These
reforms would also make it easier to recover excessive pre-
petition compensation, such as bonuses, paid to insiders of a
debtor that can then be used to pay unpaid employee wage
claims.
Mr. Speaker, I reserve the balance of my time.
Mr. CONYERS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, this is the most special interest-vested bill that I
have ever dealt with in my career in Congress. It massively tilts the
playing field in favor of banks and credit card companies and against
working people and their families. I have never, ever faced such a
piece of legislation. That explains to me why it took 8 years to get
this thing up here, because they kept fixing it up, making it wrong.
Mr. Speaker, all I want to say as we open this debate is that to
those who assert that this bill cracks down on creditor abuse, I would
ask them to realize that this bill does absolutely nothing to
discourage abusive, underage lending; nothing to discourage reckless
lending to the developmentally disabled; nothing to regulate the
practice of sub-prime lending to persons with no means or little
ability to repay their debts; nothing to crack down on the sharks, the
lenders, that charge members of the Armed Forces up to 500 percent
interest per year or more. They hang around the bases and lure them in.
What this is is something that we should all be truly embarrassed
about. This bill is opposed by every consumer group, by all the
bankruptcy judges, the trustees, law professors, by all of organized
labor, by the military groups, by the civil rights organizations, and
by every major group concerned about seniors, women, and children.
Please, if we do not do anything else in the 109th Congress, let us
not let this bill get out of the House of Representatives.
Mr. Speaker, I reserve the balance of my time.
Mr. SENSENBRENNER. Mr. Speaker, I yield 2 minutes to the gentleman
[[Page H2050]]
from Virginia (Mr. Boucher) to show that this is truly a bipartisan
effort.
(Mr. BOUCHER asked and was given permission to revise and extend his
remarks.)
Mr. BOUCHER. Mr. Speaker, I thank the gentleman for yielding me time.
Mr. Speaker, the reform of the nation's bankruptcy laws which our
actions today will accomplish is well justified. This reform is
strongly in the interests of consumers. It will significantly reduce
the annual hidden tax of approximately $400 that the typical consumer
pays because others are misusing the bankruptcy laws. That amount
represents the increased cost of credit and the increased price of
goods and services caused by bankruptcy law misuse. This reform will
lower that hidden tax.
The reform also helps consumers by requiring clearer disclosures of
the cost of credit on credit card statements, and the reform will be a
major benefit to single parents who receive alimony or child support.
That person today is fifth in priority for the receipt of payment under
the bankruptcy laws. The reform before us today elevates the spouse
support recipient to number one in priority.
This reform proceeds from the basic premise that people who can
afford to repay a substantial portion of what they owe should do so.
The bill requires that repayment while allowing a discharge in
bankruptcy of the debts that cannot be repaid. In so doing, it responds
to the broad misuse of chapter 7's complete liquidation provisions that
we have observed in recent years.
The reform measure sets a threshold for the use of chapter 7. Debtors
who can make little or no repayment can use its provisions and
discharge all of their debts. Debtors whose annual income is below the
national mean of about $50,000 per year are untouched by this reform.
They can make full use of chapter 7 and discharge all of their debts,
whether or not they can afford to make repayments.
This reform imposes a modest measure of personal responsibility that
is well justified, and I urge its approval by the House.
Mr. CONYERS. Mr. Speaker, I am pleased to yield 2\1/2\ minutes to the
gentleman from Massachusetts (Mr. Delahunt), a distinguished member of
the committee.
Mr. DELAHUNT. Mr. Speaker, let me just suggest the following, with
all due respect to my friend from Wisconsin and my friend from
Virginia.
{time} 1345
The figure of $400 is a mythical figure. It is inaccurate.
In addition to that, be rest assured, if you are a consumer, you will
not benefit one penny from this bill. Do my colleagues know who is
going to benefit? The credit card industry. Anyone familiar with the
history of this bill knows that it was written by and for the credit
card industry, and they spent north of $40 million to make sure that
they got what they wanted.
The American people are the losers here, unless you happen to be a
senior executive of a credit card company or an investor in credit card
companies, because they are going to make a good score here today, but
the American taxpayer is going to pay for it.
According to the CBO, the bill will cost taxpayers $392 million over
a 5-year period and simultaneously reduce tax revenue by $456 million,
increasing the budget deficit, by the way, that we are all so concerned
about. The bill is nothing more than a public subsidy for one of the
most profitable businesses in our economy.
What is sad is that we could have produced legislation which would
have been fair and balanced. We continue to hear that fair and balanced
theme, but the credit card industry would not allow it. They would not
tolerate any effort to make them accountable, no matter how minimal.
To cite just one example, myself and the gentleman from North
Carolina (Mr. Watt) proposed an amendment to limit the interest charged
on a credit card to 75 percent. I said 75 percent. The credit card
industry said, no; and, of course, their supporters defeated our
amendment; and this amendment is not before us today. I would suggest
75 percent is not bad, even by Mafia standards. Loan sharking used to
be a crime in this country. Maybe this bill should be renamed as the
Loan Sharking Decriminalization Act of 2000.
We hear the term personal responsibility, but when it comes to the
concept of corporate responsibility, silence.
Mr. SENSENBRENNER. Mr. Speaker, I yield 3 minutes to the gentleman
from Utah (Mr. Cannon), the chairman of the Subcommittee on Commercial
and Administrative Law.
Mr. CANNON. Mr. Speaker, I rise in support of Senate bill 256 and
urge its adoption by the House.
Whether or not we have a cost of $400 per household or some other
cost, I think it is clear to all Americans that we pay a cost if we
have excessive bankruptcies in America. What we are looking for here is
workable markets where consumers have the opportunity to borrow money
at the lowest cost. Hopefully, they are not above 18 percent; certainly
not at 75 percent. The market does a remarkable job for that purpose.
For more than 7 years now, almost as long as I have been in Congress,
we have struggled with the rising tide of bankruptcy abuse which
threatens the delicate balance in this country between creditors and
debtors. As this reform measure has developed, slowly, inexorably, we
have dealt with each issue: framing, debating, considering, and
ultimately resolving each controversy. Progressive Congresses have
moved toward ultimate resolution, until finally today the House has
been presented with a bill that it can send directly to the President
for signature.
As chairman of the Subcommittee on Commercial and Administrative Law,
I take considerable satisfaction that, through collective effort, we
would be able to achieve what many said would never happen. We have
crafted fair and balanced legislation dealing in a straightforward
manner with a problem that has vexed the Nation for the past decade and
threatens economic growth and stability. By the way, the Bankruptcy Act
has not been amended for 25 years in a serious way.
The American people will truly be well served by this effort. This
bill is a rare achievement of reducing disparity in the bankruptcy
system. It establishes more uniform and predictable standards. It
strengthens the integrity of the bankruptcy process. It deals with the
continuing wave of bankruptcy filings and abuse of State homestead
exemptions. It will reinforce the public perception that the system is
fair for all participants. It improves the administration of the
bankruptcy process. And, finally, it restores a measure of personal
responsibility to the bankruptcy system that is spiraling out of
control.
Mr. Speaker, my constituents need this legislation, and America needs
this legislation, and I urge support today for S. 256.
I would also note that the need for additional bankruptcy judgeships
may need to be considered to reflect the numbers submitted by the
Judicial Conference's most recent report. Additional judgeships are
sorely needed in a number of districts across the country, including my
State of Utah. I was heartened by the assurance of the chairman of the
Committee on the Judiciary during the markup of Senate 256 that this
matter will be considered later this year. In that regard, I would like
to thank the gentleman from Georgia (Mr. Kingston) who has worked
tirelessly on the issue of expanding the number of bankruptcy judges we
have to meet this need.
Mr. Speaker, at this point I will place additional information on the
bill in the Record.
During the course of the Senate Judiciary Committee's consideration
of S. 256, a provision was added to deal with excessive retention
bonuses, severance payments and other forms of inducements paid by a
debtor to retain key personnel or otherwise induce a debtor's
management to remain with the debtor.
This provision addresses serious conserns and I support the intent of
its drafters. Nevertheless, this provision should not be construed to
invalidate all key employee retention programs for companies that may
someday wind up in Chapter 11. It is very important that a Chapter 11
debtor be able to retain management that is dedicated to maintaining
the company's value for the benefit of its creditors, investors,
employees, and other stakeholders. All too often, companies that fail
to reorganize successfully are converted to Chapter 7 for liquidation,
where creditors receive pennies on the dollar and employees face job
dislocation.
[[Page H2051]]
Where appropriate, key employee retention programs may be necessary
to bring a company in financial distress successfully through the
Chapter 11 process. Accordingly, section 331 of S. 256 should not be
applied to invalidate such programs where there is no evidence of
insider negligence, mismanagement, or fraudulent conduct contributed to
a company's insolvency--in whole or in part.
Given the possibility that the intent of the Congress with respect to
this provision and the interpretation of Section 331's text may not be
consistent, legislation clarifying language may be necessary. If so, I
will work with my colleagues in the House and Senate to address any
such inconsistencies.
I ask that a letter from the Association of Insolvency and
Restructuring Advisors be printed at this point in the Record.
Association of Insolvency,
and Restructuring Advisors,
Medford, OR, March 1, 2005.
Senator Arlen Specter,
Chairman, Committee on the Judiciary, U.S. Senate,
Washington, DC.
Dear Mr. Chairman: The undersigned are financial and legal
professionals who serve as the Board of Directors of the
Association of Insolvency and Restructuring Advisors (AIRA).
As board members we work to further the AIRA's goal of
increasing industry awareness of the organization as an
important educational and technical resource for
professionals in business turnaround, restructuring, and
bankruptcy practice, and of the Certified Insolvency and
Restructuring Advisor (CIRA) designation as an assurance of
expertise in this area.
We write to make you aware of serious concerns we have
regarding a provision contained in S. 256, the ``Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005.'' The
provision in question effectively prohibits the use of key
employee retention plans in Chapter 11 reorganizations. It
was added during the Judiciary Committee mark-up of the bill
and elicited little attention at the time. However, we
believe this provision will cause considerable harm to a
number of companies that will become subject to bankruptcy
proceedings, and, most importantly, to their employees,
customers, and creditors.
When a company is operating in Chapter 11, a primary
responsibility of management is to maintain and grow the
company's value for the benefit of all of its stakeholders. A
company that is well-managed through its restructuring
benefits its creditors, employees, retirees, unions and the
local communities of which the company is a part. Companies
that fail to successfully reorganize in Chapter 11 are
liquidated. Creditors receive pennies on the dollar and
employees see their jobs and retirement savings destroyed.
When companies enter Chapter 11, it is critical that they
attract and retain top management talent. But Chapter 11 is
also the most difficult time to attract and retain such
talent. Managers of Chapter 11 companies are faced with
intense scrutiny, stress, insecurity, and an enormously
complex process. Compensation and incentive tools used by
non-bankrupt companies such as equity compensation programs
are not available to assist with attracting and retaining the
type of management talent necessary to bring the company
successfully through the Chapter 11 process--this is because
the pre-petition equity is almost always without value. Key
employee retention plans (``KERPs'') have become common
practice since the early 1990's and have been viewed by
courts, debtors, and creditors alike as an important and
useful way to help reorganization by retaining key employees.
Bankruptcy courts have agreed with this reasoning, and many
judges have used their judicial discretion to approve KERPs.
For a court to approve a KERP under existing law, however, a
debtor must use proper business judgment in formulating the
program, and the court must find the program to be reasonable
and fair. Creditors have the right to object to proposed
KERPs, and judges are presented with a full evidentiary
record upon which to make a determination. If a KERP is
not appropriate or if it is not in the best interest of
the company's creditors, the judge can refuse to approve
it.
In the last few years, there has been a trend, with which
we agree, towards stricter judicial scrutiny of proposed
KERPs by bankruptcy judges. Such a trend seems appropriate in
the wake of numerous high profile bankruptcy filings where
management's misconduct or mismanagement has led to the
Chapter 11 filing. Judges have discretion to deny KERPs in
these circumstances, and they do so when the facts and
circumstances warrant.
Unfortunately, S. 256 as reported by the Senate Judiciary
Committee includes an amendment authored by Senator Edward M.
Kennedy (the Kennedy amendment) that places significant
limits on retention bonuses and severance payments to
employees of companies in Chapter 11. It would prohibit a
bankruptcy judge from approving retention bonuses in every
Chapter 11 case unless he or she finds that the company in
question has proven that the employee has a bona fide job
offer at the same or greater rate of compensation; was
prepared to accept the job offer; and the services of that
employee are ``essential to the survival of the business.''
The amendment also places significant caps on the amount of
such bonus and payments.
The Kennedy amendment appears to be motivated by a desire
to combat KERPs in Chapter 11 cases where employee-related
fraud substantially contributed to the bankruptcy of the
company. Yet, by painting with such a broad brush, the
Kennedy amendment will, if enacted, effectively eliminate all
companies' ability to ever receive court approval for a KERP.
Federal bankruptcy judges would have little or no discretion
to approve KERPs. In turn, bankrupt companies would have less
flexibility in trying to retain or attract necessary
employees. This result will cause considerable harm to
companies in bankruptcy, their employees, and their
creditors.
It is apparent that the Kennedy amendment is designed to
prevent abuses of the system, where creditors', employees'
and retirees' monies are unnecessarily expended for the
enrichment of management. Whether there currently is or is
not sufficient judicial scrutiny of KERPs is a valid
question, insofar as the overall bankruptcy system allows
debtors a fair amount of flexibility in exercising reasonable
judgment--but there must be an approach better than
handcuffing the judiciary and stakeholders in bankruptcy
cases by essentially precluding all use KERPs. The proper use
of KERPs requires an analysis of all facts and circumstances
of the case, and not what is essentially a blanket
proscription of these tools.
Senator Kennedy has advanced an important public policy
discussion with his amendment. Managers who have had
responsibility for driving a company into bankruptcy should
not be paid a bonus to remain. Similarly, if the retention of
an employee would not enhance a company's value for its
stakeholders, they should not be paid a bonus to stay.
Current law provides bankruptcy judges with the discretion
necessary to deny a KERP in such circumstances and bankruptcy
judges do deny KERP payments in these circumstances. Still,
if the Congress wishes to improve the operation of current
law while still safeguarding the ability of the courts to
approve legitimate KERPs, we would welcome a discussion on
how best to achieve that end. Unfortunately, S. 256, as
reported by the Committee, goes too far and should be amended
so as not to unnecessarily limit the bankruptcy court's
ability to determine what is in the best interest of each
individual bankruptcy estate.
Mr. Chairman, we thank you for considering our views on
this important matter. We would be pleased to address any
questions you or other members of the Committee on the
Judiciary may have.
Sincerely,
The members of the board and management of the Association
of Insolvency and Restructuring Advisors.
Soneet R. Kapila, CIRA, Kapila & Company; President, AIRA.
James M. Lukenda, CIRA, Huron Consulting Group; Chairman,
AIRA.
Grant Newton, CIRA, Executive Director, AIRA.
Daniel Armel, CIRA, Baymark Strategies LLC.
Dennis Bean, CIRA, Dennis Bean & Company.
Francis G. Conrad, CIRA, ARG Capital Partners LLP.
Stephen Darr, CIRA, Mesirow Financial Consulting LLC.
Louis DeArias, CIRA, PricewaterhouseCoopers LLP.
James Decker, CIRA, Houlihan Lokey Howard & Zukin.
Mitchell Drucker, CIT Business Credit.
Howard Fielstein, CIRA, Margolin Winer & Evens LLP.
Philip Gund, CIR, Marotta Gund Budd & Dzera LL.
Gina Gutzeit, FTI Palladium Partners.
Alan Holtz, CIRA, Giuliani Capital Advisors LLC.
Margaret Hunter, CIRA, Protiviti Inc.
Alan Jacobs, CIRA, AMJ Advisors LLC.
David Judd, Neilson Elggren LLP.
Bernard Katz, CIRA, JH Cohn LLP.
Farley Lee, CIRA, Deloitte.
Kenneth Lefoldt, CIRA, Lefoldt & Company.
William Lenhart, CIRA, BDO Seidman LLP.
Kenneth Malek, CIRA, Navigant Consulting Inc.
J. Robert Medlin, CIRA, FTI Consulting Inc.
Thomas Morrow, CIRA, AlixPartners LLC.
Michael Murphy, Mesirow Financial Consulting LLC.
Steven Panagos CIRA, Kroll Zolfo Cooper LLC.
David Payne, CIRA, D R Payne & Associates Inc.
David Ringer, CIRA, Eisner LLP.
Anthony Sasso, CIRA, Deloitte.
Matthew Schwartz, CIRA, Bederson & Company LLP.
Keith Shapiro, Esq., Greenberg Traurig LLP.
Grant Stein, Esq., Alston & Bird LLP.
Peter Stenger, CIRA, Stout Risius Ross Inc.
Michael Straneva, CIRA, Ernst & Young LLP.
Mr. Speaker, I urge again the adoption of S. 256.
Mr. CONYERS. Mr. Speaker, I am pleased to yield 3 minutes to the
gentleman from North Carolina (Mr. Watt), the ranking member of the
Subcommittee on Commercial and Administrative Law.
Mr. WATT. Mr. Speaker, I thank the gentleman for yielding me this
time.
[[Page H2052]]
Mr. Speaker, those of us who started this process 6 years or so ago
in the good faith belief that there were problems with the bankruptcy
system, in the sense that people were gaming the system, and felt that
there needed to be genuine reform cannot help but be disappointed today
because, in the process, we have lost sight of the objective of
reforming to do away with the sinister influences and the advantageous
corruption that is going on in the system.
I have never seen a bill that has violated more principles throughout
this process. The first one was that the consumers and the lenders got
together and decided that, because the lenders were not sure that they
could do bankruptcy reform without reaching a compromise and the
consumer groups realized that they might not be able to stop bankruptcy
reform, they set up this system called the means test, which
effectively exempted from the whole bankruptcy reform system those who
fall below the means test threshold. The result is that individuals who
fall below the means test threshold can continue with impunity to game
the system without any kind of responsibility, and those who fall above
the threshold get subjected to a set of arbitrary rules that, even if
they are not gaming the system, they are taken advantage of. So we have
lost sight of that.
The second thing is we have built in a set of perverse incentives for
easy credit now. For people who fall below the means test, there is
really no disincentive for them to go out and get as much credit as
they can. And for people above the means test there is no incentive for
lenders to be responsible in their lending practices, because they know
now they have this system that is going to protect them from people
that they have made irresponsible loans to.
The third problem is that, as we have gone through this process, the
more we have bought into this means test philosophy and debated this,
we now get to a point at the end of the process where it has corrupted
even our democratic process. Because we are here on the floor with 30
minutes of debate on our side to tell the public the problems with this
bill.
This is irresponsible legislating at its worst, and I encourage my
colleagues to reject this bill and vote no.
Mr. SENSENBRENNER. Mr. Speaker, I reserve the balance of my time.
Mr. CONYERS. Mr. Speaker, I yield 3 minutes to the gentleman from New
York (Mr. Nadler), the former ranking member of the Subcommittee on
Commercial and Administrative Law. This is an 8-year-old bill, and the
gentleman has been foremost in this process for all of those years.
Mr. NADLER. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, this bill is the worst giveaway to special interests,
the worst rip-off of the public, of the middle class than I have ever
seen in my public life. The people who understand how bankruptcy law
functions in the real world, the scholars, judges, trustees and
lawyers, whether they represent debtors, creditors, businesses or
individuals, have all told us this bill will not work, that it will be
costly, and that it will produce unfair and irrational results. But we
are ignoring them, trusting instead lobbyists, credit card companies,
banks, and anyone else who wants a special favor; and, boy, are there
special favors galore.
The credit card companies are the big winners, but so are shopping
centers, car lenders, crooked debt collectors, investment bankers,
credit unions, and assorted sub-prime lenders.
Those credit counseling operations that we have investigated for
dishonest activity, they now get a monopoly on granting access to
bankruptcy. Credit card companies that want their debts to survive the
bankruptcy and compete with child support claims, they get their wish.
Landlords who want to boot tenants out of their apartments, it is
easier.
Did you buy a trailer home or a car on credit? Now you will have to
pay the lender more than the home or car is worth to keep it.
Are you a tax collector? There is an entire title in the bill just to
squeeze more money out of debtors.
Are you a pawnbroker? Section 1230 is for you. You get to keep the
pawned property, and it cannot be sold to pay other debts like child
support or medical expenses. That is right. Congress is more worried
about the rights of pawnbrokers than about the rights of children.
So what is going on here? Why are bankers and bureaucrats telling us
this bill is great for single parents with children while children and
family advocates are telling us that it is not? Why does Congress
believe studies paid for by the credit card industry that label
millions of Americans crooks, while ignoring our own Congressional
Budget Office, the independent and nonpartisan American Bankruptcy
Institute, and the Government Accountability Office, all say these
studies are bunk?
The supporters say if we help the banks collect more money from
bankrupt families, we will not have to pay that $400 bankruptcy tax.
Our interest rates will go down because the banks will be able to
collect more money. But the Republican leadership would not allow us to
consider an amendment that would sunset the bill in several years if no
savings are passed on to consumers, and they will not be. Interest
rates have come down over the last 10 years on mortgages, on cars, on
everything, but not on credit cards.
Does anyone here trust VISA and MasterCard? Because we are writing
them a blank check paid for with taxpayer money and trusting them to
share the benefits with American consumers. Trust the banks. Trust the
lobbyists. Do not trust the people who do these cases for a living. Do
not trust the advocates for women and kids. Do not trust the civil
rights community. Do not trust the laboring community. Do not trust
disabled veterans and military family advocates. Do not trust crime
victims organizations.
Trust the banks. Trust the credit card companies. Trust VISA card.
Trust MasterCard. They are the beneficiaries. The public will be the
victims, and we will rue the day in a few years when the 60 or 70
different ways in which this bill enables the credit card companies to
stick their hands in the pockets of low- and middle-income people and
extremists going bankrupt because of a medical emergency, and take more
money out of that. Then the voters will know who really owns this
place.
Mr. Speaker, this bill is the worst giveaway to special interests,
the worst rip-off of the public, of the middle class, I have ever seen
in my public life.
Mr. Speaker, it is fitting that this House take up this 512-page
goodie bag for every special interest in town. Just yesterday, the
Republican majority rammed through a bill that would eliminate the
estate tax for the very wealthiest Americans. At least the Republican
majority is consistent: more for the very wealthy, no responsibility
for big banks, and squeeze the middle class.
This bill, which can only be described as the poster-child for
campaign finance reform, will soon shoot through this House and to a
President who has vowed that he would sign it.
Mr. Speaker, bankruptcy is notoriously complicated, but the members
of this House have certainly never let the complexity of a problem get
in the way of a good deal. The people who understand how bankruptcy law
functions in the real world: the scholars, judges, trustees, and
lawyers--whether they represent debtors, creditors, businesses or
individuals--have all told us this bill won't work, that it will be
costly, that it will produce unfair and irrational results. But we are
ignoring them, trusting instead lobbyists, credit card companies,
banks, and anyone else who wants some special favor.
And boy, are there favors galore. The credit card companies are the
big winners, but so are shopping centers, car lenders, crooked debt
collectors, investment bankers, credit unions, and assorted sub-prime
lenders.
Those credit counseling operations that we've investigated for
dishonest activity? They now get a monopoly on granting access to
bankruptcy. Credit card companies that want their debts to survive the
bankruptcy and compete with child support claims? They get their wish?
Landlords who want to boot tenants out of their apartments? This bill
makes it easier.
Did you buy a trailer home or a car on credit? Now you will have to
pay the lender more than the home or car is worth to keep it.
Are you a tax collector? There is an entire title in this bill just
for you to squeeze more money out of debtors.
Are you a pawn broker? Section 1230 is for you! You get to keep the
pawned property and it can't be sold to pay other debts, like child
support, or medical expenses. That's right, Congress is more worried
about the rights of pawn brokers than about the rights of children.
[[Page H2053]]
So what's going on here? Why are bankers and bureaucrats telling us
that this bill is great for single parents with children while children
and family advocates are telling us that it is not? More to the point--
why are so many members of Congress so willing to believe bankers over
the people who we work with day in and day out to protect the rights of
children?
Why does Congress believe studies paid for by the credit card
industry that label millions of Americans crooks, while ignoring our
own Congressional Budget Office, the independent and non-partisan
American Bankruptcy Institute, and the Government Accountability
Office, all of whom tell us these studies are bunk?
Why are we willing to spend so much public money to collect private
debts for banks? According to the Congressional Budget Office, this
bill will cost the government $392 million over the first 5 years,
increasing the deficit by $280 million. It will impose new costs on the
private sector of more than $123 million per year, in violation of the
Unfunded Mandate Reform Act. That number does not include increased
costs to debtors.
What are we spending this money on?
Means testing alone will cost the government $150 million over the
first 5 years.
The government will be a private collection agency for credit card
companies. Government funded audits will cost $66 million. The
government will collect and store debtors' tax returns for another $10
million.
Just to administer this whole mess, we will spend another $26 million
on extra judges--and no one here thinks that will be enough.
So why should taxpayers spend all these millions to collect private
debts for MasterCard and Visa? I asked George Wallace, the
representative of the creditor coalition, that question. I asked
whether he was aware that current law gives creditors the right to
challenge the discharge of debts, examine debtors under oath, demand
any documents from the debtors, seek dismissal of a case, and many
other legal remedies.
He said ``I have done these things and they do take a fair amount of
time and I bill my clients for them. They are expensive.'' So I asked
him why the government should pay to collect these debts if the banks
think it's too expensive to collect their debts themselves.
His response explains this whole bill. ``Because it's a governmental
program, sir. Because it is not the job of the creditor.''
A governmental program? We need to spend millions of taxpayer dollars
to help the nation's biggest banks collect money from bankrupt
families? Is this the new welfare?
I want to thank Mr. Wallace for his honesty. He may be the only
honest lobbyist left in Washington.
Some will say that if we help the banks collect more money from
bankrupt families, then we won't have to pay that $400 ``bankruptcy
tax.'' Our interest rates will go down because the banks will be able
to collect more money.
The distinguished chairman of the Judiciary Committee has made this
the cornerstone of the legislation. He recently told the Financial
Times of London, ``The responsible thing for the credit card issuers to
do would be to reduce interest rates because there is less risk. If
they don't they will play into the hands of the opponents of the bill--
it would reduce their credibility.''
I agree, but the Republican leadership wouldn't allow us to consider
an amendment that would sunset the bill in 2 years if no savings are
passed on to consumers. So I guess we're being asked to trust the
biggest banks in America not to pocket the extra money. And they won't
be. Interest rates have come down. Mortgage rates, car loans, but not
credit card rates.
Ask yourself: Where's my $400? Does any one here trust Visa and
MasterCard? Because you are writing them a blank check, paid for with
taxpayer money, and trusting them to share the benefits with American
consumers.
Anyone who really trust them to do this, raise your hand. Anyone?
Go ahead and vote for this. Why not? It's a done deal. Trust the
banks. Trust the lobbyists. Don't trust the people who do these cases
for a living. Don't trust the advocates for women and kids. Don't trust
the civil rights community. Don't trust labor. Don't trust disabled
veterans' and military family advocates. Don't trust crime victims
organizations. Trust the banks. Trust Visa. Trust MasterCard.
At least the voters will know who really runs this place.
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Putnam). The Chair reminds Members that
they should heed the gavel.
Mr. SENSENBRENNER. Mr. Speaker, I yield 2 minutes to the gentleman
from Virginia (Mr. Goodlatte).
(Mr. GOODLATTE asked and was given permission to revise and extend
his remarks.)
Mr. GOODLATTE. Mr. Speaker, bankruptcy filings are at an all-time
high. When bankruptcy filings increase, every American must pay more
for credit, goods, and services through higher rates and charges. It is
time that we relieve consumers from the burden of paying for the debts
of others.
Since the 105th Congress, the House has passed bankruptcy reform
legislation eighty times. S. 256, the Bankruptcy Abuse Prevention and
Consumer Protection Act, is the culmination of years of work and
bicameral as well as bipartisan negotiations.
A key aspect of S. 256 is retention of the income-based means test.
The means test applies clear and well-defined standards to determine
whether a debtor has the financial capability to pay his or her debts.
The application of such objective standards will help ensure that the
fresh start provisions of Chapter VII will be granted to those who need
them, while debtors that can afford to repay some of their debts are
steered toward filing chapter 13 bankruptcies.
S. 256 is good for America's family farmers. As Chairman of the House
Committee on Agriculture, I am pleased that we are finally making the
chapter 12 provisions of the Bankruptcy Code permanent. Bankruptcy
relief for family farmers will be made easier for those to obtain a
discharge of their indebtedness. In addition, the bill allows more
family farmers to qualify for chapter 12 relief by doubling the debt
limit and lowering the percentage of income that must be derived from
farming operations.
{time} 1400
In addition, S. 256 prevents fraud. Under the current system,
irresponsible people filing for bankruptcy could run up their credit
card debt immediately prior to filing knowing that their debts will
soon be wind away. What these people may not realize or care about is
that these debts do not just disappear. They are passed along in higher
charges and rates to hard working people.
Mr. Speaker, I rise in strong support of the ``Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005.''
Bankruptcy filings are at an all time high. When Bankruptcy filings
increase every American must pay more for credit, goods, and services
through higher rates and charges. It is time that we relieve consumers
from the burden of paying for the debts of others.
Since the 105th Congress, the House has passed bankruptcy reform
legislation eight times. S. 256, the ``Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005'' is the culmination of years of work
and bi-camerla, as well as bi-partisan negotiations.
A key aspect of S. 256 is the retention of the income-based means
test. The means test applies clear and well-defined standards to
determine whether a debtor has the financial capability to pay his or
her debts. The application of such objective standards will help ensure
that the fresh start provisions of Chapter 7 will be granted to those
who need them, while debtors that can afford to repay some of their
debts are steered toward filing Chapter 13 bankruptcies.
S. 256 is good for America's family farmers, who are the backbone of
our agriculture industry. The bill permanently extends Chapter 12
bankruptcy relief for family farmers and makes it easier for family
farmers to obtain discharges of their indebtedness. In addition, the
bill allows more family farmers to qualify for Chapter 12 relief by
doubling the debt limit and lowering the percentage of income that must
be derived from farming operations.
In addition, S. 256 prevents fraud. Under the current system,
irresponsible people filing for bankruptcy could run up their credit
card debt immediately prior to filing, knowing that their debts will
soon be wiped away. What these people may not realize or care about is
that these debts do not just disappear--they are passed along in higher
chargers and rates to hard-working folks who pay their bills on time.
S. 256 ends this fraudulent practice by requiring bankruptcy filers to
pay back nondischargable debts made in the period immediately preceding
their filing.
S. 256 also helps consumers. For example, this legislation helps
children by strengthening the protections in the law that prioritize
child support and alimony payments. In addition, it protects consumers
from ``bankruptcy mills'' that encourage people to file for bankruptcy
without fully informing them of their rights and the potential harms
that bankruptcy can cause.
S. 256 also ensures the fair treatment of those that administer our
bankruptcy laws. Specifically, this legislation restores fairness and
equity to the relationship between the U.S. trustee and private
standing bankruptcy
[[Page H2054]]
trustees by providing that in certain circumstances, after an
administrative hearing on the record, private trustees may seek
judicial review of U.S. trustee actions related to trustee removal.
This compromise, worked out between the U.S. trustee's office and
representatives of the private bankruptcy trustees, will ensure
fairness for those who dedicate themselves to their duties as private
trustees while ensuring that the U.S. trustee is subject to the same
checks and balances as other government agencies.
Bankruptcy should remain available to people who truly need it, but
those who can afford to repay their debts should repay their debts. S.
256 provides bankruptcy relief for those who truly cannot pay their
debts, but also clearly demonstrates to those who would abuse our
system that the free ride is over. I believe that S. 256 strikes the
appropriate balance between these two important goals. I want to
commend Chairmen Sensenbrenner and Cannon for their tremendous work on
this legislation, and I urge each of my colleagues to support this fair
and reasonable overhaul of the U.S. bankruptcy system.
Mr. CONYERS. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Houston, Texas (Ms. Jackson-Lee), a member of the committee.
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Speaker, I think it is important as we
debate this question that the opponents of this bill not be defined or
classified as opposing responsibility and opposing the responsibility
of being a good citizen and adhering to the debt that you accrue. I
think that is a wrong-headed definition of the opponents.
We have been described as non-patriot in other debates; in war and
peace, scoundrels and socialists. But I think it is important for the
American people to understand that we are engaging in a democratic
process to be able to allow a voice of opposition to be heard for a
tainted, stale and stagnant piece of legislation that has been bought
and paid for by special interests.
Our desire is to possibly encourage our colleagues in the House to
take a serious and deliberative review of S. 256.
Now, we have heard already that we were refused and denied amendments
and one would ask the question why. If we are a deliberative body, why
not make a bill that is as dated almost as the Gulf War, not the Iraq
war, to make it better.
Now, I hear my colleagues talking about $400 that will go to each
household. What a misnomer. Someone said that there was a tax refund a
couple of years ago, $350, $400. I can tell you that the constituents
in the 18th Congressional District never saw that money. I would like
to suggest to you that really what is happening is what Professor
Elizabeth Warren has said, that this is an overreaching problem, the
overreaching problem with this bill this time is that the American
economy has passed it by.
We are in the depth almost of a deficit that is about to stagnate and
stifle us. This bill will close the door to working and middle class
persons. Since this bill was written, Mr. Speaker, Enron, WorldCom,
Adelphia, United Airlines, LTV Steel, M-Mart, Polaroid, Global Crossing
have filed bankruptcy and they did not have to use a means test.
So let me suggest to you as I look at the medical conditions, I would
ask my colleagues on the other side of the aisle does their stale old
bill, this stack of old papers respond to the medical causes of
bankruptcy that shows that because there is death in the family,
illness or injury, people who go try to repay their bills and they fall
into bankruptcy and this old stale 1998 bill does not respond to that.
My next question, Mr. Speaker, is whether or not this old stale bill
deals with the military, the military who is in Iraq right now, does
this old stale bill deal with it? Does the old stale bill deal with the
loan sharks. That is a travesty and should be defeated.
Testimony of Elizabeth Warren Before the Senate Committee on the
Judiciary
My name is Elizabeth Warren. I teach bankruptcy law. As
some of you know, I have followed this issue with interest
for some time.
The overarching problem with this bill is that time and the
American economy have passed it by. It was drafted--never
mind by whom--eight years ago. Even if it had been a flawless
piece of legislation then, and it surely was not, the events
of the past eight years have dramatically changed the
economic and social environment in which you must consider
this bill.
In the eight years since this bill was introduced, new
cases have burst on the scene. The names are burned in our
collective memories: Enron, Worldcom, Adelphia, United
Airlines, USAirways and TWA, LTV Steel, K-Mart, Polaroid,
Global Crossing.
While the actual number of consumer bankruptcy cases has
declined slightly in the past year, many of the largest
corporate bankruptcy cases in American history have occurred
since the Senate last reevaluated the bankruptcy laws, and
some of those cases are already legend for the corporate
scandals that accompanied them. Because it was written eight
years ago, this bill has nothing to deal with these abuses,
with these dangers, with the needs that these cases have made
so painfully clear.
Problems not even on the horizon when this bill was written
are now front and center.
Companies in Chapter 11 that cancel pension plans and
health benefits, leaving thousands of families economically
devastated.
Companies that continue to pay executives and insiders tens
of millions of dollars, while they demand concessions from
their creditors.
Military families targeted for payday loans at 400%
interest, insurance scams, and other forms of financial
chicanery.
Scandals have rocked the so-called non-profit credit
counseling industry, exposing how tens of thousands of
consumers struggling desperately to pay their bills and not
file for bankruptcy were cheated.
Sub-prime mortgage companies, financed by some of the best
names in American banking, have unlawfully taken millions of
dollars from homeowners, then fled to the bankruptcy courts
to protect their insiders and bank lenders.
In the eight years since this bill was introduced, there
has been a revolution in the data available to us. Unlike
eight years ago, we need not have a theoretical debate about
who turns to the bankruptcy system. We now know:
One million men and women each year are turning to
bankruptcy in the aftermath of a serious medical problem--and
three-quarters of them have health Insurance.
A family with children is nearly three times more likely to
file for bankruptcy than an individual or couple with no
children.
More children now live through their parents' bankruptcy
than through their parents' divorce.
Unlike eight years ago, we need not have a theoretical
debate about the homestead exemption because we have had
example after example of abuse tied directly to the failure
of American companies. Millions of jobs have been lost but
not the Florida and Texas fortunes of their corporate
executives. Others are welcome to use the unlimited homestead
exemption as well.
After he lost a $33 million lawsuit in California, O.J.
Simpson moved to Florida, explaining to a reporter that the
unlimited exemption would permit him to protect a
multimillion-dollar house.
Abe Grossman ran up $233 million in debts in Massachusetts
and Rhode Island, then fled to Florida to purchase a 64,000
square foot home valued at $55 million.
Some physicians are reportedly dropping their malpractice
insurance and putting all their assets in their homes--where
they can't be touched by bankruptcy.
Under S. 256, they would still be welcome to file for
bankruptcy and to keep their fortunes and properties intact
while leaving their creditors with nothing.
Unlike eight years ago, we need not have a theoretical
debate about the effects of the proposed legislation on small
business.
It takes time to negotiate a reorganization, even for a
small company. The time-lines in S. 256 would have denied
reorganization to more than a third of the small businesses
that eventually saved themselves--destroying value for the
companies, their creditors, their employees and their
communities.
This bill would be the first in American history to
discriminate affirmatively against small businesses. For the
first time ever, Congress would pass a law that says
companies like Enron and Worldcom don't have to file extra
forms, Enron and Worldcom don't have to schedule meetings
with the Office of the United States Trustee, and Enron
and Worldcom don't have to meet fixed deadlines that a
judge cannot waive for any reason--but every troubled
small business in the Chapter 11 system would have to file
those papers, undergo that supervision and meet those
deadlines or be liquidated. No exceptions allowed for
small companies.
Unlike eight years ago, we need not have a theoretical
debate about the economic impact of bankruptcies on credit
card company profits.
In the eight years since this bill was introduced, credit
has not been curtailed. Minors--under 18 years of age--with
no incomes and no credit history are now described as an
``emerging market'' for the credit industry. Credit card
solicitations have doubled to 5 billion a year. Bankruptcy
filings have increased 17 percent, while credit card profits
have increased 163 percent, from $11.5 billion to $30.2
billion.
Some courts have demanded that credit card companies
disclose how much of their claims are the amounts actually
borrowed and how much are fees, penalties and interest.
Companies have admitted that for every
[[Page H2055]]
dollar they claim the customer borrowed, they are demanding
two more dollars in fees and interest.
With increased fees and universal default clauses that
drive up interest rates even for customers paying on time, a
growing number of people have no option but to declare
bankruptcy. Cases continue to surface like In re McCarthy, in
which a woman borrowed $2200, paid back $2010 in the two
years before bankruptcy, and was told by her credit card
company that she still owed $2600 more. Ms. McCarthy had two
choices: She could either declare bankruptcy or she could pay
$2000 every year for life--and die owing as much as she owes
today.
The means test in this bill, Section 102, has been one of
its most controversial provisions. Proponents like to say
that the means test will put pressure only on the families
that can afford to repay. And yet, the bill has 217 sections
that run for 239 pages. The means test aside, virtually every
consumer provision aims in the same direction. The bill
increases the cost of bankruptcy protection for every family,
regardless of income or the cause of financial crisis, and it
decreases the protection of bankruptcy for every family,
regardless of income or the cause of financial crisis.
There are provisions that will make Chapter 13 impossible
for many of the debtors who would file today, provisions that
make it easier than ever to abuse the unlimited homestead
provisions in some states and yet at the same time hurt
people with more modest homesteads in those same states.
Other provisions will compromise the privacy of millions of
families by putting their entire tax returns in the court
files and potentially on the Internet, making them easy prey
for identity thieves. Women trying to collect alimony or
child support will more often be forced to compete with
credit card companies that can have more of their debts
declared non-dischargeable. All these provisions apply
whether a person earns $20,000 a year or $200,000 a year.
But the means test as written has another, more basic
problem: It treats all families alike. It assumes that
everyone is in bankruptcy for the same reason--too much
unnecessary spending. A family driven to bankruptcy by the
increased costs of caring for an elderly parent with
Alzheimer's disease is treated the same as someone who maxed
out his credit cards at a casino. A person who had a heart
attack is treated the same as someone who had a spending
spree at the shopping mall. A mother who works two jobs and
who cannot manage the prescription drugs needed for a child
with diabetes is treated the same as someone who charged a
bunch of credit cards with only a vague intent to repay. A
person cheated by a sub-prime mortgage lender and lied to by
a credit counseling agency is treated the same as a person
who gamed the system in every possible way.
If Congress is determined to sort the good debtors from the
bad, then it is both morally and economically imperative that
they distinguish those who have worked hard and played by the
rules from those who have shirked their responsibilities. If
Congress is determined to sort the good from the bad, then
begin by sorting those who have been laid low by medical
debts, those who lost their jobs, those whose breadwinners
have been called to active duty and sent to Iraq, those who
are caring for elderly parents and sick children from those
few who overspend on frivolous purchases.
This Congress wants to set a new moral tone. Do it with the
bankruptcy bill. Don't press ``one-size-fits-all-and-they-
are-all-bad'' judgments on the very good and the very bad.
Spend the time to make the hard decisions. Leave discretion
with the bankruptcy judges to evaluate these families. Based
on the Harvard medical study and other research, I think you
will find that most debtors are filing for bankruptcy not
because they had too many Rolex watches and Gameboys, but
because they had no choice.
You have a choice. It's a choice that you're making for the
American people. Adopt new bankruptcy legislation. Establish
a means test that targets abuse. But do not enact a proposal
written to address myth and mirage more than reality. Do not
enact a proposal written for 1997 when the problems of the
American corporate economy in 1997 deserve far more attention
and the problems of the American middle class can no longer
be ignored.
Overwhelmingly, American families file for bankruptcy
because they have been driven there--largely by medical and
economic catastrophe--not because they want to go there. Your
legislation should respect that harsh reality and the
families who face it.
Announcement by the Speaker Pro Tempore
The SPEAKER pro tempore (Mr. Putnam). The gentlewoman is out of order
in defying the gavel.
The gentlewoman's time has expired.
Mr. SENSENBRENNER. Mr. Speaker, I yield 2 minutes to the gentlewoman
from Illinois (Mrs. Biggert).
Mrs. BIGGERT. Mr. Speaker, I thank the gentleman for yielding me
time.
Mr. Speaker, it is about great pleasure that I rise today to express
my strong support for the Bankruptcy Abuse Prevention and Consumer
Protection Act.
A Chinese proverb says, Give a man a fish and you feed him for a day.
Teach a man to fish and you feed him for a lifetime. And that is
exactly what this bill before us does today.
There are many reasons to support this bankruptcy reform bill, but I
want to focus on one that is important to many of my colleagues, to me,
and to the American people.
We should support the bill because it contains important financial
literacy provisions. Financial literacy goes hand in hand with helping
our citizens of all ages and walks of life to negotiate the complex
world of personal finance. Financial literacy can help Americans avoid
or survive bankruptcy.
We pass many laws that require the disclosure of the terms and
conditions of the rich mix of financial products and services that are
available to consumers. Unfortunately for too many Americans, knowing
the terms and conditions of financial products and services is
challenging enough. However, understanding those terms and conditions
is often an even greater challenge.
Recognizing this fact, Congress included provisions in the Fair and
Accurate Credit Transactions Act to address the issue of financial
literacy. The Bankruptcy Abuse Prevention and Consumer Protection Act
also contains important provisions addressing economic education and
financial literacy. These provisions are designed to ensure that those
who enter the bankruptcy system will learn the skills to more
effectively manage their money in an increasingly complicated
marketplace.
Last week we passed House Resolution 148, a bill that supports the
goals and ideals of Financial Literacy Month, which is this month,
April 2005. H. Res. 148 was co-sponsored by 82 Members of this body,
and 409 Members of this body voted for it.
Mr. Speaker, the number of bankruptcies remain at a historic high,
over 1.6 million bankruptcy cases were filed in Federal courts in 2004.
With this in mind, I urge my colleagues to support this bill.
Mr. CONYERS. Mr. Speaker, I yield 3 minutes to the gentlewoman from
California (Ms. Zoe Lofgren), a distinguished member of the committee.
Ms. ZOE LOFGREN of California. Mr. Speaker, this bill hurts
Americans. One group who will be especially hurt are family forced into
bankruptcy because of a medical crisis.
A recent study conducted by professors at Harvard Medical and Law
School showed that about half of all personal bankruptcies can be
attributed to medical costs.
Among those who cited illnesses as a cause of bankruptcy, the average
unreimbursed medical costs totaled nearly $12,000 even though more than
three-quarters had health insurance.
How does the bill hurt the families? Under the bill for the first
time there will be a presumption that many of these families abuse the
bankruptcy system. Under current law, people facing a medical
bankruptcy can seek several forms of relief. Chapter 7 is by far the
most common. Under 7 debtors are required to forfeit all of their
property other than the exempt assets in exchange for having their
debts extinguished.
Current law already gives bankruptcy courts discretion to deny
chapter 7 relieve where the filing is found to be a substantial abuse.
But unlike this bill, current law provides a presumption in favor of
granting relief to the debtor.
The other option is chapter 13 where a debtor is required to continue
paying creditors. This makes it more difficult for debtors to get back
on their feet.
This bill will hurt families facing medical bankruptcy because it
will force many of them into chapter 13. That is because it presumes
that these families are abusing the bankruptcy system if they fail the
means test. The means tests starts with a family's income and then
subtracts monthly expenses permitted by IRS guidelines. But instead of
using a debtor's actual projected income, the means tests uses the
debtor's average income over the prior 6 months. Thus, if a family's
bankruptcy was triggered by a loss of income resulting from a serious
illness, the means test would still attribute the lost income for the
purpose of determining whether the family is abusing the bankruptcy
system.
Further, the means test uses the median income for a State. My
constituents in Santa Clara County live in a
[[Page H2056]]
high-cost area. Almost nobody will be able to discharge their debts in
bankruptcy from Santa Clara County because of that high cost, no matter
how meritorious for their claim for relief.
Similarly, instead of using the debtor's actual expenses, the
inflexible guidelines developed by the IRS is used. As a result, more
families facing medical bankruptcy will be presumed to be abusing the
system, will be forced into chapter 13 and will never be able to stand
on their feet again. That is not right.
The Harvard study found that these struggling families did everything
they could to pay their medical bills to avoid bankruptcy. One in five
skipped meals. One-third had their electricity cut off. Almost half
lost their phone service. One in five was forced to move.
Incredibly, they also cut back on needed medications to try to avoid
bankruptcy. In fact, half went without needed prescriptions. And a full
60 percent went without a needed doctor appointment.
Please join me in opposing this unfair bill.
[From Market Watch]
Illness and Injury as Contributors to Bankruptcy
(By David U. Himmelstein, Elizabeth Warren, Deborah Thorne, and Steffie
Woolhandler)
ABSTRACT: In 2001, 1.458 million American families filed
for bankruptcy. To investigate medical contributors to
bankruptcy, we surveyed 1,771 personal bankruptcy filers in
five federal courts and subsequently completed in-depth
interviews with 931 of them. About half cited medical causes,
which indicates that 1.9-2.2 million Americans (filers plus
dependents) experienced medical bankruptcy. Among those whose
illnesses led to bankruptcy, out-of-pocket costs averaged
$11,854 since the start of illness; 75.7 percent had
insurance at the onset of illness. Medical debtors were 42
percent more likely than other debtors to experience lapses
in coverage. Even middle-class insured families often fall
prey to financial catastrophe when sick.
``If the debtor be insolvent to serve creditors, let his
body be cut in pieces on the third market day. It may be cut
into more or fewer pieces with impunity. Or, if his creditors
consent to it, let him be sold to foreigners beyond the
Tiber.''
--Twelve Tables, Table III, 6 (ca. 450 B.C.)
Our bankruptcy system works differently from that of
ancient Rome; creditors carve up the debtor's assets, not the
debtor. Even so, bankruptcy leaves painful problems in its
wake. It remains on credit reports for a decade, making
everything from car insurance to house payments more
expensive. Debtors' names are often published in the
newspaper, and the fact of their bankruptcy may show up
whenever someone tries to find them via the Internet.
Potential employers who run routine credit checks (a common
screening practice) will discover the bankruptcy, which can
lead to embarrassment or, worse, the lost chance for a much-
needed job.
Personal bankruptcy is common. Nearly 1.5 million couples
or individuals filed bankruptcy petitions in 2001, a 360
percent increase since 1980. Fragmentary data from the legal
literature suggest that illness and medical bills contribute
to bankruptcy. Most previous studies of medical bankruptcy,
however, have relied on court records--where medical debts
may be subsumed under credit card or mortgage debt--or on
responses to a single survey question. None has collected
detailed information on medical expenses, diagnoses, access
to care, work loss, or insurance coverage. Research has been
impeded both by the absence of a national repository for
bankruptcy filings and by debtors' reticence to discuss their
bankruptcy, in population-based surveys, only half of those
who have undergone bankruptcy admit to it.
The health policy literature is virtually silent on
bankruptcy, although a few studies have looked at
impoverishment attributable to illness. In his 1972 book,
Sen. Edward Kennedy (D-MA) gave an impressionistic account of
``sickness and bankruptcy.'' The likelihood of incurring high
out-of-pocket costs was incorporated into older estimates of
the number of underinsured Americans: twenty-nine million in
1987. About 16 percent of families now spend more than one-
twentieth of their income on health care. Among terminally
ill patients (most of them insured), 39 percent reported that
health care costs caused moderate or severe financial
problems. Medical debt is common among the poor, even those
with insurance, and interferes with access to care. At least
8 percent, and perhaps as many as 21 percent of American
families are contacted by collection agencies about medical
bills annually.
Our study provides the first extensive data on the medical
concomitants of bankruptcy, based on a survey of debtors in
bankruptcy courts. We address the following questions: (1)
Who files for bankruptcy? (2) How frequently do illness and
medical bills contribute to bankruptcy? (3) When medical
bills contribute, how large are they and for what services?
(4) Does inadequate health insurance play a role in
bankruptcy? (5) Does bankruptcy compromise access to care?
a brief primer on bankruptcy
``Bankrupt'' is not synonymous with ``broke.'' ``Bankrupt''
means filing a petition in a federal court asking for
protection from creditors via the bankruptcy laws. A single
petition may cover an individual or married couple. The
instant a debtor files for bankruptcy, the court assumes
legal control of the debtor's assets and halts all collection
efforts.
Shortly after the filing, a court-appointed trustee
convenes a meeting to inventory the debtor's assets and debts
and to determine which assets are exempt from seizure. States
may regulate these exemptions, which often include work
tools, clothes, Bibles, and some equity in a home.
About 70 percent of all consumer debtors file under Chapter
7 of the Bankruptcy Code; most others file under Chapter 13.
In Chapter 7 the trustee liquidates all nonexempt assets--
although 96 percent of debtors have so little unencumbered
property that there is nothing left to liquidate. At the
conclusion of the bankruptcy, the debtor is freed from many
debts. In Chapter 13 the debtor proposes a repayment plan,
which extends for up to five years. Chapter 13 debtors may
retain their property so long as they stay current with their
repayments.
Under both chapters, taxes, student loans, alimony, and
child support remain payable in full, and debtors must make
payments on all secured loans (such as home mortgages and car
loans) or forfeit the collateral.
study data and methods
This study is based on a cohort of 1,771 bankruptcy filings
in 2001. For each filing, a debtor completed a written
questionnaire at the mandatory meeting with the trustee, and
we abstracted financial data from public court records. In
addition, we conducted follow-up telephone interviews with
about half (931) of these debtors.
Sampling strategy. We used cluster sampling to assemble a
cohort to households filing for personal bankruptcy in five
(of the seventy-seven total) federal judicial districts. We
collected 250 questionnaires in each district, representative
of the proportion of Chapters 7 and 13 filings in that
district. These 1,250 cases constitute our ``core sample.''
For planned studies on housing, we collected identical data
from an additional 521 homeowners filing for bankruptcy. We
based our analyses on all 1,771 bankruptcies with responses
weighted to maintain the representativeness of the sample.
Data collection. With the cooperation of the judges in each
district, we contacted the trustees who officiate at meetings
with debtors. The trustees agreed to distribute, or to allow
a research assistant to distribute, a self-administered
questionnaire to debtors appearing at the bankruptcy meeting.
Questionnaires (which were available in English and Spanish)
included a cover letter explaining the research project and
human subjects protections and encouraging debtors to consult
their attorneys (who were almost always present) before
participating.
The questionnaire asked about demographics, employment,
housing, and specific reasons for filing for bankruptcy, it
also asked whether the debtor had medical debts exceeding
$1,000, had lost two or more weeks of work-related income
because of illness, or had health insurance coverage for
themselves and all dependents at the time of filing, and
whether there had been a gap of one month or more in that
coverage during the past two years. In joint filings, we
collected demographic information for each spouse.
During the spring and summer of 2001 we collected
questionnaires from consecutive debtors in each district
until the target number was reached.
Follow-up telephone interviews. The written questionnaire
distributed at the time of bankruptcy filing invited debtors
to participate in future telephone interviews, for which they
would receive $50; 70 percent agreed to such interviews. We
ultimately completed follow-up telephone interviews with 931
of the 1,771 debtor families, a response rate of 53 percent.
The telephone interviews, conducted between June 2001 and
February 2002 using a structured, computer-assisted protocol,
explored financial, housing, and medical issues. Many debtors
also provided a narrative description of their bankruptcy
experience.
Detailed medical questions. Each of the 931 interviewees
was asked if any of the following had been a significant
cause of their bankruptcy: an illness or injury; the death of
a family member; or the addition of a family member through
birth, adoption, custody, or fostering. Those who answered
yes to this screening question were queried about diagnoses,
health insurance during the illness, and medical care use and
spending. Interviewers collected information about each
household member with medical problems. In total, we
collected in-depth medical information on 391 people with
health problems in 332 debtor households.
Data analysis. We used data from the self-administered
questionnaires (and court records) obtained from all 1,771
filters to analyze demographics, health coverage at the time
of filing, and gaps in coverage in the two years before
filing.
We also used the questionnaire to estimate how frequently
illness and medical bills contributed to bankruptcy. We
developed two summary measures of medical bankruptcy. Under
the rubric ``Major Medical Bankruptcy'' we included debtors
who either (1) cited illness or injury as a specific reason
for bankruptcy, or (2) reported uncovered medical bills
exceeding $1,000 in the past years,
[[Page H2057]]
or (3) lost at least two weeks of work-related income because
of illness/injury, or (4) mortgaged a home to pay medical
bills. Our more inclusive category, ``Any Medical
Bankruptcy,'' included debtors who cited any of the above, or
addiction, or uncontrolled gambling, or birth, or the death
of a family member.
Data from the 931 follow-up telephone interviews were used
to analyze hardships experienced by debtors in the period
surrounding their bankruptcy, including problems gaining
access to medical care. The in-depth medical interviews
regarding 391 people with medical problems are the basis for
our analyses of which household members were ill, diagnoses,
health insurance at onset of illness, and out-of-pocket
spending. Two physicians (Himmelstein and Woolhandler) coded
the diagnoses given by debtors into categories for analysis.
SAS and SUDAAN were used for statistical analyses,
adjusting for complex sample design. To extrapolate our
findings nationally, we assumed that our sample was
representative of the 1,457,572 households filing for
bankruptcy during 2001. Human subject committees at Harvard
Law School and the Cambridge Hospital approved the project.
study findings
Who files for bankruptcy? Exhibit 1 displays the
demographic characteristics of our weighted sample of 1,771
bankruptcy filers. The average debtor was a forty-one-year-
old woman with children and at least some college education.
Most debtors owned homes; their occupational prestige scores
place them predominantly in the middle or working classes.
On average, each bankruptcy involved 1.32 debtors
(reflecting some joint filings by married couples) and 1.33
dependents. Extrapolating from our data, the 1.5 million
personal bankruptcy filings nationally in 2001 involved 3.9
million people: 1.9 million debtors, 1.3 million children
under age eighteen, and 0.7 million other dependents.
Medical causes of bankruptcy. Exhibit 2 shows the
proportion of debtors (N = 1,771) citing various medical
contributors to their bankruptcy and the estimated number of
debtors and dependents nationally affected by each cause.
More than one-quarter cited illness or injury as a specific
reason for bankruptcy; a similar number reported uncovered
medical bills exceeding $1,000. Some debtors cited more than
one medical contributor. Nearly half (46.2 percent) (95
percent confidence interval = 43.5, 48.9) of debtors met at
least one of our criteria for ``major medical bankruptcy.''
Slightly more than half (54.5 percent) (95 percent CI = 51.8,
57.2) met criteria for ``any medical bankruptcy.''
A lapse in health insurance coverage during the two years
before filing was a strong predictor of a medical cause of
bankruptcy (Exhibit 3). Nearly four-tenths (38.4 percent) of
debtors who had a ``major medical bankruptcy'' had
experienced a lapse, compared with 27.1 percent of debtors
with no medical cause (p < .0001). Surprisingly, medical
debtors were no less likely than other debtors to have
coverage at the time of filing. (More detailed coverage and
cost data for the subsample we interviewed appears below.)
Medical debtors resembled other debtors in most other
respects (Exhibit 1). However, the ``major medical
bankruptcy'' group was 16 percent (p < 03) less likely
than other debtors to cite trouble managing money as a
cause of their bankruptcy (data not shown).
Privations in the period surrounding bankruptcy. In our
follow-up telephone interviews with 931 debtors, they
reported substantial problems. During the two years before
filing, 40.3 percent had lost telephone service; 19.4 percent
had gone without food; 53.6 percent had gone without needed
doctor or dentist visits because of the cost, and 43.0
percent had failed to fill a prescription, also because of
the cost. Medical debtors experienced more problems in access
to care than other debtors did; three-fifths went without a
needed doctor or dentist visit, and nearly half failed to
fill a prescription.
Medical debt was also associated with mortgage problems.
Among the total sample of 1,771 debtors, those with more than
$1,000 in medical bills were more likely than others to have
taken out a mortgage to pay medical bills (5.0 percent versus
0.8 percent). Fifteen percent of all homeowners who had taken
out a second or third mortgage cited medical expenses as a
reason. Follow-up phone interviews revealed that among
homeowners with high-risk mortgages (interest rates greater
than 12 percent, or points plus fees of at least 8 percent),
13.8 percent cited a medical reason for taking out the loan.
Following their bankruptcy filings, about one-third of
debtors continued to have problems paying their bills.
Medical debtors reported particular problems making mortgage/
rent payments and paying for utilities. Although our
interviews occurred soon after the bankruptcy filings (seven
months, on average), many debtors had already been turned
down for jobs (3.1 percent), mortgages (5.8 percent),
apartment rentals (4.9 percent), or car loans (9.3 percent)
because of the bankruptcy on their credit reports.
Medical diagnoses, spending, and type of coverage. Our
interviews yielded detailed data on diagnoses, health
insurance coverage, and medical bills for 391 debtors or
family members whose medical problems contributed to
bankruptcy. In three-quarters of cases, the person
experiencing the illness/injury was the debt or spouse of the
debtor; in 13.3 percent, a child; and in 8.2 percent, an
elderly relative.
Illness begot financial problems both directly (because of
medical costs) and through lost income. Three-fifths (59.9
percent) of families bankrupted by medical problems indicated
that medical bills (from medical care providers) contributed
to bankruptcy; 47.6 percent cited drug costs; 35.3 percent
had curtailed employment because of illness, often (52.8
percent) to care for someone else. Many families had problems
with both medical bills and income loss.
Families bankrupted by medical problems cited varied, and
sometimes multiple, diagnoses. Cardiovascular disorders were
reported by 26.6 percent; trauma/orthopedic/back problems by
nearly one-third; and cancer, diabetes, pulmonary, or mental
disorders and childbirth-related and congenital disorders by
about 10 percent each. Half (51.7 percent) of the medical
problems involved ongoing chronic illnesses.
Our in-depth interviews with medical debtors confirmed that
gaps in coverage were a common problem. Three-fourths (75.7
percent) of these debtors were insured at the on-set of the
bankrupting illness. Three-fifths (60.1 percent) initially
had private coverage, but one-third of them lost coverage
during the course of their illness. Of debtors, 5.7 percent
had Medicare, 8.4 percent Medicaid, and 1.6 percent veterans/
military coverage. Those covered under government programs
were less likely than others to have experienced coverage
interruptions.
Few medical debtors had elected to go without coverage.
Only 2.9 percent of those who were uninsured or suffered a
gap in coverage said that they had not thought they needed
insurance; 55.9 percent said that premiums were unaffordable,
7.1 percent were unable to obtain coverage because of
preexisting medical conditions, and most others cited
employment issues, such as job loss or ineligibility for
employer-sponsored coverage.
Debtors' out-of-pocket medical costs were often below
levels that are commonly labeled catastrophic. In the year
prior to bankruptcy, out-of-pocket costs (excluding insurance
premiums) averaged $3,686 (95 percent CI = $2,693, $4,679)
(Exhibit 5). Presumably, such costs were often ruinous
because of concomitant income loss or because the need for
costly care persisted over several years. Out-of-pocket costs
since the onset of illness/injury averaged $11,854 (95
percent CI = $8,532, $15,175). Those with continuous
insurance coverage paid $734 annually in premiums on average
over and above the expenditures detailed above. Debtors with
private insurance at the onset of their illnesses had even
higher out-of-pocket costs than those with no insurance. This
paradox is explained by the very high costs--$18,005--
incurred by patients who initially had private insurance but
lost it. Among families with medical expenses, hospital bills
were the biggest medical expense for 42.5 percent
prescription medications for 21.0 percent, and doctors' bills
for 20.0 percent. Virtually all of those with Medicare
coverage, and most patients with psychiatric disorders, said
that prescription drugs were their biggest expense.
The human face of bankruptcy. Debtors' narratives painted a
picture of families arriving at the bankruptcy courthouse
emotionally and financially exhausted, hoping to stop the
collection calls, save their homes, and stabilize their
economic circumstances. Many of the debtors detailed ongoing
problems with access to care. Some expressed fear that their
medical care providers would refuse to continue their care,
and a few recounted actual experiences of this kind. Several
had used credit cards to charge medical bills they had no
hope of paying.
The co-occurrence of medical and job problems was a common
theme. For instance, one debtor underwent lung surgery and
suffered a heart attack. Both hospitalizations were covered
by his employer-based insurance, but he was unable to return
to his physically demanding job. He found new employment but
was denied coverage because of his preexisting conditions,
which required costly ongoing care. Similarly, a teacher who
suffered a heart attack was unable to return to work for many
months, and hence her coverage lapsed. A hospital wrote off
her $20,000 debt, but she was nevertheless bankrupted by
doctor's bills and the cost of medications.
A second common theme was sounded by parents of premature
infants or chronically ill children; many took time off from
work or incurred large bills for home care while they were at
their jobs.
Finally, many of the insured debtors blamed high copayments
and deductibles for their financial ruin. For example, a man
insured through his employer (a large national firm) suffered
a broken leg and torn knee ligaments, He incurred $13,000 in
out-of-pocket costs for copayments, deductibles, and
uncovered services--much of it for physical therapy.
Discussion
Bankruptcy is common in the United States, involving nearly
four million debtors and dependents in 2001; medical problems
contribute to about half of all bankruptcies. Medical
debtors, like other bankruptcy filer, were primarily middle
class (by education and occupation). The chronically poor are
less likely to build up debt, have fewer assets (such as a
home) to protect, and have less access to the legal resources
needed to navigate a complex financial rehabilitation. The
medical debtors we surveyed were demographically typical
Americans who got sick. They differed from others filing for
bankruptcy in one important respect: They were more likely to
have experienced a lapse in
[[Page H2058]]
health coverage. Many had coverage at the onset of their
illness but lost it. In other cases, even continuous coverage
left families with ruinous medical bills.
Study strengths and limitations. Our study's strengths are
the use of multiple overlapping data sources; a large sample
size; geographic diversity; and in-depth data collection.
Although our sample may not be fully representative of all
personal bankruptcies, the Chapter 7 filers we studied
resemble Chapter 7 filers nationally (the only group for
whom demographic data has been complied nationally from
court records). Several indicators suggest that response
bias did not greatly distort our findings.
As in all surveys, we relied on respondents' truthfulness.
Might some debtors blame their predicament on socially
acceptable medical problems rather than admitting to
irresponsible spending? Several factors suggest that our
respondents were candid. First, just prior to answering our
questionnaire, debtors had filed extensive information with
the court under penalty of perjury--information that was
available to use in the court records and that virtually
never contradicted the questionnaire data. They were about to
be sworn in by a trustee (who often administered our
questionnaire) and examined under oath. At few other points
in life are full disclosure and honesty so aggressively
emphasized.
Second, the details called for in our telephone interview--
questions about out-of-pocket medical expenses, who was ill,
diagnoses, and so forth--would make a generic claim that ``we
had medical problems'' difficult to sustain. Third, one of us
(Thorne) interviewed (for other studies) many debtors in
their homes. Almost all specifically denied spend-thrift
habits, and observation of their homes supported these
claims. Most reflected the lifestyle of people under economic
constraint, with modest furnishings and few luxuries.
Finally, our findings receive indirect corroboration from
recent surveys of the general public that have found high
levels of medical debt, which often result in calls from
collection agencies.
Even when data are reliable, making casual inferences from
a cross-sectional study such as ours is perilous. Many
debtors described a complex web of problems involving
illness, work, and family. Dissecting medical from other
causes of bankruptcy is difficult. We cannot presume that
eliminating the medical antecedents of bankruptcy would have
preventing all of the filings we classified as ``medical
bankruptcies.'' Conversely, many people financially ruined by
illness are undoubtedly too ill, too destitute, or too
demoralized to pursue formal bankruptcy. In sum, bankruptcy
is an imperfect proxy for financial ruin.
Trends in medical bankruptcy. Although methodological
inconsistencies between studies preclude precise
quantification of time trends, medical bankruptcies are
clearly increasing. In 1981 the best evidence available
suggests that about 25,000 families filed for bankruptcy in
the aftermath of a serious medical problem (8 percent of the
312,000 bankruptcy filings that year). Our findings suggest
that the number of medical bankruptcies had increased twenty-
threefold by 2001. Since the number of bankruptcy filings
rose 11 percent in the eighteen months after the completion
of our data collection, the absolute number of medical
bankruptcies almost surely continues to increase.
Policy implications. Our data highlight four deficiencies
in the financial safety net for American families confronting
illness. First, even brief lapses in insurance coverage may
be ruinous and should not be viewed as benign. While forty-
five million Americans are uninsured at any point in time,
many more experience spells without coverage. We found little
evidence that such gaps were voluntary. Only a handful of
medical debtors with a gap in coverage had chosen to forgo
insurance because they had not perceived a need for it; the
overwhelming majority had found coverage unaffordable or
effectively unavailable. The privations suffered by many
debtors--going without food, telephone service, electricity,
and health care--lend credence to claims that coverage was
unaffordable and belie the common perception that bankruptcy
is an ``easy way out.''
Second, many health insurance policies prove to be too
skimpy in the face of serious illness. We doubt that such
underinsurance reflects families' preference for risk; few
Americans have more than one or two health insurance options.
Many insured families are bankrupted by medical expenses well
below the ``catastrophic'' thresholds of high-deductible
plans that are increasingly popular with employers. Indeed,
even the most comprehensive plan available to us through
Harvard University leaves faculty at risk for out-of-pocket
expenses as large as those reported by our medical debtors.
Third, even good employment-based coverage sometimes fails
to protect families, because illness may lead to job loss and
the consequent loss of coverage. Lost jobs, of course, also
leave families without health coverage when they are at their
financially most vulnerable.
Finally, illness often leads to financial catastrophe
through loss of income, as well as high medical bills. Hence,
disability insurance and paid sick leave are also critical to
financial survival of a serious illness.
Only broad reforms can address these problems. Even
universal coverage could leave many Americans vulnerable to
bankruptcy unless such coverage was much more comprehensive
than many current policies. As in Canada and most of western
Europe, health insurance should be divorced from employment
to avoid coverage disruptions at the time of illness.
Insurance policies should incorporate comprehensive stop-loss
provisions, closing coverage loopholes that expose insured
families to unaffordable out-of-pocket costs. Additionally,
improved programs are needed to replace breadwinners' incomes
when they are disabled or must care for a loved one. The low
rate of medical bankruptcy in Canada suggests that better
medical and social insurance could greatly ameliorate this
problem in the United States.
In 1591 Pope Gregory XIV fell gravely ill. His doctors
prescribed pulverized gold and gems. According to legend, the
resulting depletion of the papal treasury is reflected in his
unadorned plaster sarcophagus in St. Peter's Basilica. Four
centuries later, solidly middle-class Americans still face
impoverishment following a serious illness.
Mr. SENSENBRENNER. Mr. Speaker, I yield myself 1 minute.
Mr. Speaker, unfortunately what the gentlewoman from California (Ms.
Zoe Lofgren) said is not correct. There is a means test that is
contained in this bill, but 11 United States Code, section 1307 which
permits the conversion of a chapter 13 case to a chapter 7 case is not
amended at all in any respect.
I would just like to read 11 U.S.C. 1307(a): ``A debtor may convert a
case under this chapter to a case under chapter 7 of this title at any
time. Any waiver of the right to convert under this subsection is
unenforceable.''
So if chapter 13 is such a straight jacket, the way out is through
the conversion as provided for in section 1307.
Mr. Speaker, I yield 4 minutes to the gentleman from Ohio (Mr.
Chabot).
Mr. CHABOT. Mr. Speaker, I thank the gentleman for yielding me time.
Mr. Speaker, I rise in strong support for this long overdue
legislation. I want to thank the chairman of the Committee on the
Judiciary, the gentleman from Wisconsin (Mr. Sensenbrenner), for his
leadership and his efforts in making this bill a reality. It represent
years of work, compromise and what I believe to be necessary reforms.
Our bankruptcy laws have shifted away from what was their original
purpose. In 1915 the Supreme Court wrote that our bankruptcy laws were
intended to give honest debtors a chance to ``start afresh, free from
obligations and responsibilities consequent upon business
misfortunes.''
This view was later reaffirmed in the 1934 case, Local Loan Company
v. Hunt, in which the court wrote that ``the purpose of the act has
been again and again emphasized by the courts in that it gives to the
honest but unfortunate debtor a new opportunity in life and a clear
field for future effort, unhampered by the pressure and discouragement
of preexisting debt.''
Over the last several decades, bankruptcy protections have expanded
to cover basically anyone and everyone, not just those who truly need
it. Statistics reveal that in 2004 approximately 1.5 million
individuals sought bankruptcy protection. Increasingly, this protection
is being sought for the consumer debt that has skyrocketed out of
control as a result of the misuse of credit cards and other credit
options. This expansive coverage comes at a price.
Personal bankruptcy filing cost businesses and our economy tens of
billions of dollars every year. It is basically a $500 per family
annual tax on each and every American family. H.R. 685 the Bankruptcy
Abuse and Consumer Protection Act of 2005, the bill that is here before
us today, strikes a balance. It requires those who have the means to
repay debts to do so while protecting those who truly need the
assistance provided by chapter 7, such as those with serious medical
conditions, the men and women of our armed services who are on active
duty, as well as those disabled veterans who served in years past.
Decisions to seek the protection of bankruptcy should be taken
seriously. The consequences of filing are not just personal but impact
our economy and society as a whole. As I mentioned, it is $600 per
family that we are essentially taxed this year for everybody who is
paying their debts from those who are not.
{time} 1415
Personal filings cannot continue at the current rate. This bill
represents a long overdue, much necessary first step; and I urge my
colleagues to support this legislation.
[[Page H2059]]
Mr. CONYERS. Mr. Speaker, I yield 20 seconds to my friend, the
gentleman from Virginia (Mr. Scott).
Mr. SCOTT of Virginia. Mr. Speaker, what the gentleman suggested was,
if someone has overwhelming medical bills, hundreds of thousands in
medical bills, that they can file under Chapter 7. That is not true. If
they have a job and they have $100 a month left over after essential
expenses, they are going to have to go under a wage earner plan for the
next 5 years. Every dime they have got after food and rent will go to
all of their bills. They cannot file under Chapter 7.
Mr. CONYERS. Mr. Speaker, I yield to the gentleman from Ohio (Mr.
Kucinich) for a unanimous consent request.
(Mr. KUCINICH asked and was given permission to revise and extend his
remarks.)
Mr. KUCINICH. Mr. Speaker, almost half of the bankruptcies in the
United States are connected to an illness in the family, whether people
had health insurance or not. Middle-class Americans, who had the
misfortune of either experiencing a medical emergency themselves or
watching a family member suffer, were then forced to face the daunting
task of pulling themselves out of debt. Bankruptcy law has allowed them
to start over. It has given hope. Now this new law will put people on
their own. Illness or emergency creates medical bills. We are telling
the people that they themselves are to blame. At the same time, we are
removing protections that would stay an eviction, that would keep a
roof over the head of a working family. We allow the credit industry to
trick consumers into using subprime cards, with exorbitant interest
rate hikes and fees. Then we hand those same consumers over to an
unforgiving prison of debt, to be put on a rack of insolvency and
squeezed dry by the credit card industry. We are protecting the profits
of the credit card industry instead of protecting the economic future
of the American people. Americans are left on their own. That's what
this Administration's ``Ownership Society'' is all about--you're on
your own--and your ship is sinking.
Mr. CONYERS. Mr. Speaker, I am now pleased to break the line of
members of the committee. I yield 1 minute and 15 seconds to a
distinguished friend of mine, the gentleman from New Jersey (Mr.
Pascrell).
Mr. PASCRELL. Mr. Speaker, you would not even exempt our brothers and
sisters coming back from war, and you want me to believe that this is
reasonable legislation?
Rising debt levels in turn reflect a shift in our economy away from a
time when families could afford to save and into a time when their
wages are stagnant. The costs of their health premiums increased 163
percent since 1988. Their tuitions have increased 170 percent. Their
mortgages, their child care. This is not a stable economy.
They are not crooks. They are not evil people. The American
Bankruptcy Institute says that 96.3 percent of the people filing
Chapter 7 just do not have the money. Now we are not saying forget
about all of this, but we are saying let us be reasonable.
Who should we help? Who should be first on the list of congressional
priorities? The families who are in financial straits or the credit
card companies who made a record $30 billion in profits last year and
whose profits have soared almost triple in the last decade?
This legislation does nothing to put caps on interest rates or late
fees or the overtime limits and other penalties, even those among
reasonable people.
Mr. SENSENBRENNER. Mr. Speaker, I yield 1\1/2\ minutes to the
gentleman from Delaware (Mr. Castle).
Mr. CASTLE. Mr. Speaker, I rise today in strong support of S. 256,
the Bankruptcy Abuse and Consumer Prevention Act.
Mr. Speaker, we have seen a sharp increase in bankruptcies in the
past 25 years. In 2003, consumer filings peaked at over 1.6 million
filings, a 465 percent increase from 1980. Those who believe credit
card companies, mortgage lenders and other financial institutions are
bearing the cost of consumers filing for bankruptcy do not understand
how business works. These costs will be shifted to American families
who are paying the price for this debt, some studies reflect $400 per
year in every household, by higher interest rates on their credit
cards, auto loans, school loans and mortgages. When the legislation
passes today it will be the American families who are the real winners.
This legislation balances the consumer's challenge of debt repayment
with the needs of businesses that collect money rightfully owed to
them. In an effort to better educate consumers and improve financial
literacy, the legislation requires many filers of bankruptcy to attend
financial counseling. This change coupled with congressional
encouragement for schools to incorporate personal finance curricula in
elementary and secondary education programs are both useful methods of
curbing future debt. As chairman of the Subcommittee on Education
Reform, which has jurisdiction over K through 12, I feel strongly that
educating future spenders can prevent debts incurred as adults.
Again, Mr. Speaker, I want to thank Chairman Sensenbrenner for his
years of strong and tenacious support for this legislation and thank
him for not giving up on these important, common-sense changes to our
bankruptcy system. I urge my colleagues to support this bipartisan
legislation.
Mr. CONYERS. Mr. Speaker, before I recognize the gentleman from
Massachusetts, I want to go back and yield 10 seconds to the gentleman
from New Jersey (Mr. Pascrell).
Mr. PASCRELL. Mr. Speaker, I want to make sure that everybody quite
understands that I will no longer support this legislation. I am
changing my vote this year to a no vote. This is terrible legislation,
and we have only made it worse.
Mr. CONYERS. Mr. Speaker, I am pleased to yield 2 minutes to my
friend, the gentleman from Massachusetts (Mr. Meehan), an excellent
member of the committee.
Mr. MEEHAN. Mr. Speaker, this bankruptcy bill is but the latest
attempt by the Republican Congress to undermine the economic security
of the middle class. Health care costs, not spending sprees, are the
single largest causes of bankruptcies in America. Health care costs.
Medical bankruptcies have gone up by more than 2,000 percent in the
last 25 years. Why are we here trying to increase the profits of credit
card companies while doing nothing to lower the cost of health care for
middle-class American families?
It is disgraceful that this bill is being considered under a closed
rule, with just an hour of debate, with no opportunity for amendment.
Supporters of this bill claim to have exempted service members who
become disabled on active duty, but to be exempted you have to go into
debt while on active duty.
A veteran who returns home from Iraq or Afghanistan and then goes
into debt because of the injuries sustained on active duty is still
subject to the punitive means test. What a way to treat the men and
women in uniform fighting on behalf of the United States. It is an
unfair loophole that we should have had the opportunity to close here
on the House floor.
Another blatant unfairness is that this bill allows millionaires to
shield their assets in estates in Florida and Texas, but no such
homestead exemption exists for middle-class families who suffer serious
medical expenses. We tried to offer an amendment allowing a limited
homestead exemption for families with crushing medical debts.
Unfortunately, no amendments were allowed.
It is an outrage that we cannot debate these issues here on the House
floor. This bill is simply an attempt to reward credit card companies
by removing a last resort available to middle-class families who fall
on hard times.
I urge Members to oppose this terrible bill.
Mr. SENSENBRENNER. Mr. Speaker, I yield myself a minute and a half.
Mr. Speaker, once again the opponents of this legislation are not
correct. My friend, the gentleman from Massachusetts, says that someone
who
[[Page H2060]]
is injured in Iraq and comes home is not going to be protected from
medical expenses. The United States Government has stood behind
everybody who has a service-connected injury or disability and pays for
the medical treatment out of taxpayers' money because that is the right
thing to do.
Secondly, he says that this bill continues the millionaires'
exemption in the eight States that have unlimited exemption. Wrong. It
plugs that exemption.
And if this bill goes down, a corporate crook can build a
multimillion dollar mansion on the Intercostal waterway in Florida and
be able to shield that asset from bankruptcy. What this bill does is it
does plug that unlimited exemption and it plugs it in a way that was
negotiated out in a bipartisan manner in the conference committee two
Congresses ago with a motion that was made in that conference committee
by my senior Senator, Herb Kohl, who is a Democrat.
Mr. Speaker, I reserve the balance of my time.
Mr. CONYERS. Mr. Speaker, I yield 10 seconds to the gentleman from
Massachusetts (Mr. Meehan).
Mr. MEEHAN. Mr. Speaker, I did not say the bill did not pay for
service members' medical expenses who are injured in Iraq or
Afghanistan. I said if they incur debt after they come back from
serving this country and are forced to bankruptcy, they get the
punitive means test. That is wrong. We should not do it to people
serving in Iraq and Afghanistan.
Mr. CONYERS. Mr. Speaker, how much time remains on either side?
The SPEAKER pro tempore (Mr. Putnam). The gentleman from Michigan
(Mr. Conyers) has 9 minutes and 20 seconds. The gentleman from
Wisconsin (Mr. Sensenbrenner) has 8 minutes remaining.
Mr. CONYERS. Mr. Speaker, I am now pleased to yield 2 minutes to the
gentlewoman from California (Ms. Linda T. Sanchez), who is an able
member of the committee.
Ms. LINDA T. SANCHEZ of California. Mr. Speaker, I rise in strong
opposition to the so-called Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005.
Contrary to its name, this bill does not protect consumers and it
certainly does not help honest, hard-working families with financial
problems. The only thing that this bill does is distort our bankruptcy
laws so that working families are treated more like criminals than
people in need of relief.
Our bankruptcy laws must strike a fair and practical balance between
debtors and creditors. This means that honest people with financial
troubles can make a fresh start by getting creditors off their backs.
But this bill does the exact opposite of that. Instead of helping
struggling families in debt, this bill erects harsh legal and monetary
roadblocks for people who are trying to file bankruptcy.
The vast majority of people who file for bankruptcy, 9 out of 10, do
so because they have either lost their job, suffered a medical
emergency, or there has been a divorce or separation in their family.
These are not people who are abusing the bankruptcy system.
We are talking about recently divorced, single working mothers trying
to support their children who may not be getting their child support.
We are talking about young men and women in our Armed Forces returning
home after serving their country in Iraq. We are talking about some of
the 1.6 million families who have lost their private-sector jobs since
2001 when a Republican administration took over the White House. These
are honest, hard-working families who have resorted to bankruptcy to
find some relief for their debts and a chance to start their lives
anew.
This is a terrible bill. It is harmful to struggling families and
goes against the basic policy of our bankruptcy laws, helping families
in financial trouble get a fresh start.
I urge every Member of the House to stand by America's working
families by voting no for passage of S. 256.
Mr. SENSENBRENNER. Mr. Speaker, I reserve the balance of my time.
Mr. CONYERS. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Los Angeles, California (Ms. Waters), a member of the committee.
Ms. WATERS. Mr. Speaker, the passing of this bill would be a complete
detriment to the American people. For many Americans find themselves,
usually through no fault of their own, facing bankruptcy. This scenario
could happen to almost anyone.
Mr. Speaker, the main reasons Americans file for bankruptcy is not to
abuse the system and avoid paying their bills. Americans file for
bankruptcy usually due to catastrophic medical expenses, divorce, or
the loss of their jobs.
Many important, common-sense amendments on subjects such as alimony,
child support, exemptions for medical emergencies, and job loss,
underage credit card lending, predatory lending and protection for
disabled veterans, just to name a few, were all rejected by the
Judiciary Committee.
Mr. Speaker, amendments should have been made to this bill to carve
out exemptions for certain basic needs so Americans can still have some
equity or resources should they be forced into bankruptcy.
More specifically, one loophole in the bankruptcy bill leaves the
victims of domestic violence and their children left with no resources
should they file for bankruptcy. This is so unfair. The bill should
have been allowed to be modified to secure better protection for
domestic abuse victims by granting them relief from summary eviction
from their houses.
Please note, this relief would have only been available if a domestic
violence debtor is certified, under penalty of perjury, that the debtor
was in fact a victim of domestic abuse and that their physical well-
being or the physical well-being of the debtor's child would be
threatened if this debtor were evicted.
Mr. Speaker, this amendment would have provided a safe harbor for
those victims who faced the great threat of more violence and extreme
danger if their homes are taken as a result of bankruptcy.
We also tried to do something about this underage credit card
lending. It is a travesty. These credit card companies set up on the
college campuses. They have vendors from the day these kids walk into
college. They send them all of this unsolicited mail, and they
telephone them unrelentlessly to get them involved in taking these
credit cards.
They do it. They run up the debt. Some of them are now 30, 35 years
old, out of college for years, still paying on these credit cards
because they allowed their minimum payments that do not even take into
account all of the interest on the debt.
{time} 1430
It is outright unreasonable that we did not have an amendment allowed
by my friends on the opposite side of the aisle to try and protect
families and future young families from this kind of exploitation.
Also, I want to point out that the means test includes disaster
assistance and veterans benefits. This is a rip-off.
Mr. SENSENBRENNER. Mr. Speaker, I reserve the balance of my time.
Mr. CONYERS. Mr. Speaker, I yield myself 5 seconds to let the
gentlewoman from California know that the credit card companies solicit
five billion mailings every year to college kids and others.
Mr. Speaker, may I ask the chairman how many speakers he may have
remaining.
Mr. SENSENBRENNER. Mr. Speaker, if the gentleman will yield, just me
at the present time.
Mr. CONYERS. Mr. Speaker, I yield 1 minute to the dynamic gentlewoman
from California (Ms. Woolsey).
(Ms. WOOLSEY asked and was given permission to revise and extend her
remarks.)
Ms. WOOLSEY. Mr. Speaker, over the last 18 months the House
leadership has passed bills that are windfalls for the pharmaceutical
industry, big oil, and they have given massive tax breaks to
corporations while the deficit in this country continues to grow by
records.
[[Page H2061]]
Now lining up for their share and licking their lips is the credit
card industry who stands to make billions of dollars at the expense of
American consumers.
With the hope of helping to protect veterans from these regulations,
I offered an amendment to this bill to simply waive any fee charged for
credit counseling for any servicemember returning from a combat area
for a period of 2 years. Do my colleagues think that was allowed to
come down here on the House floor for a vote? Absolutely not.
Many of these men and women have been away from their families, from
their homes, their jobs for long periods of time because of unethical
procedures that keep them overseas. Many of these individuals have lost
their businesses, they have lost their homes and they have bills and
are going to suffer. Our veterans, they will suffer because of this
bankruptcy bill.
Mr. Speaker, over the last eighteen months, the House leadership has
passed bills that are windfalls to the pharmaceutical industry and big
oil and, have given massive tax breaks to corporations, while the
deficit continues to break records.
Now lining up for their share and licking their lips is the credit
card industry, that stand to make billions of dollars at the expense of
the American consumer.
With the hope of helping to protect Veterans from these new
regulations, I offered an Amendment to this bill to simply waive any
fee charged for credit counseling for any service member returning from
a combat area, for a period of two years. Unfortunately, the majority
didn't allow any.
Many of these men and women have been away from their families, homes
and jobs for long periods of time because of unethical procedures that
keep them overseas. This is resulting in severe economic hardships,
business closures, homes foreclosures and bills unpaid.
We must not penalize our troops for serving our country. It is
appalling that any Veteran would face bankruptcy because of their
sacrifice.
Mr. Speaker, I urge my colleagues to vote against this bill to
protect American families and maintain a core American value to allow
people a fresh start.
Mr. CONYERS. Mr. Speaker, I yield myself 1 minute.
We should all be embarrassed that instead of repealing the biggest
loophole in the bankruptcy code, we have had 8 years to study it, the
homestead exemption, the bill places only weak obstacles in its path.
Instead of protecting women and health care providers from those who
would terrorize abortion clinics, we lay out a blueprint for them to
avoid their debts. Instead of helping individuals who have lost their
job or faced a health care emergency, we deny them the chance for a
fresh start.
By passing this measure in this form, the majority is telling the
American people, Republicans are telling the American people, it is
more important to help credit card companies than innocent spouses and
children; that it is more important to protect corporate scam artists
than workers losing their pension; that it is more important to protect
unscrupulous lenders than disabled veterans.
Mr. Speaker, I yield the remainder of my time to the gentlewoman from
California (Ms. Pelosi), the distinguished minority leader.
(Ms. PELOSI asked and was given permission to revise and extend her
remarks, and include extraneous material.)
Ms. PELOSI. Mr. Speaker, I thank the gentleman for yielding me time
and thank him for his distinguished leadership as the ranking member on
the Committee on the Judiciary and his important statements on this
bankruptcy bill today.
Mr. Speaker, we all agree that every person in our country must be
financially responsible, that we take responsibility for our action,
for our debts and we do so in a way that is honorable.
In the course of our country's history, our economy, our government
has always provided for people to get a fresh start under the
bankruptcy law to enable them to go forward to make a contribution to
our economy and our society. Recognizing that tradition and recognizing
the appreciation that we have for personal responsibility, I
regretfully rise in opposition to this bill because this bankruptcy
bill seeks to squeeze even more money for credit card companies from
the most hard-pressed Americans.
It would bind hardworking and honest Americans to credit card
companies and other lenders as modern day indentured servants. I think
it is our duty to speak up for those who would be hurt by this bill.
This duty is paramount because we have been shut out of the process
here, the legislative process to bring any amendments to the floor.
That would have been an amendment on identity theft, which this week's
news accounts demonstrate there are real problems of identity theft,
and an amendment was rejected.
We tried to take a legislative course of action in our previous
question, which is a technicality, is a procedure here on the floor;
but we were not able to get any Republican support to address the issue
of identity theft and how individuals can be protected from identity
theft under the bankruptcy bill.
According to the sponsors of this bill, 1.6 million Americans who
filed for bankruptcy last year are deadbeats who are avoiding their
debts. That is really the essence of what they are saying with this
bill. Proponents claim that there is a bankruptcy tax in which honest
Americans are footing the bill for abusive users of credit cards.
We should be vigilant for any abuse of any legal process. There is no
evidence, however, of widespread bankruptcy abuse. In fact, a recent
study indicated that 45 percent of those filing for bankruptcy had
skipped a needed doctor's visit, 25 percent had utilities shut off, 20
percent went without food. They are not using this money that they
should be paying in for luxuries. They just simply do not have money to
survive.
As a distinguished group of law professors wrote: ``Some people do
abuse the bankruptcy system, but the overwhelming majority of people in
bankruptcy are in financial distress as a result of job loss, medical
expense, divorce, or a combination of those causes. This bill attempts
to kill a mosquito with a shotgun.''
I have a problem with the bill on several counts as to what is
contained in the bill. The bankruptcy bill fails miserably, I believe,
on its merits. It employs, for the first time, a stringent and
unworkable means test that limits access to chapter 7 and forces
individuals into payment plans that will fail.
It frustrates a key goal of the bankruptcy code, to give individuals
who suffer economic misfortunes through no fault of their own a fresh
start. That is an American tradition.
The bill neglects the real causes of bankruptcies, as I just
mentioned, medical concerns, divorce, in some cases death, while
rewarding irresponsible corporate behavior.
It lets those who truly abuse and game the bankruptcy system, the
wealthy debtors who shield their assets in asset trusts and homestead
exemptions, keep their loopholes and get off, in some cases, scot-free.
It is wholly unnecessary. Current law already allows a bankruptcy
judge to deny a discharge in chapter 7 to prevent abuses. That is why
bankruptcy judges are uniformly opposed to the bill.
I just would like to quote Keith Lundin, a Federal bankruptcy judge
in Tennessee and an authority on bankruptcy repayment plans. Judge
Lundin says, ``The folks who brought you `those who can pay, should
pay' are pulling the stuffing out of the very part of the bankruptcy
law where debtors do pay.'' He says, ``The advocates aren't trying to
fix the bankruptcy law; they're trying to mess it up so much that
nobody can use it.''
They interviewed dozens of bankruptcy judges, whose names have been
suggested by proponents and opponents of this legislation, for their
standing on this issue, to speak out; and the reasons why these judges
are opposed are several reasons.
One is the judges now have broad discretion to determine how much a
debtor must pay to creditors and on what schedule, and the schedule is
very important, after declaring bankruptcy under what is known as
chapter 13; but under the legislation, that discretion would be
substantially curtailed.
The new legislation would bar courts from reducing the amount that
many debtors would have to repay on their cars and other big-ticket
items. It
[[Page H2062]]
would also extend the length of time people would have to make
repayments and impose repayment schedules that critics describe as so
onerous that debtors would fall behind. It just prescribes that they
would.
The bankruptcy judges say the result would be the collapse of more
repayment plans, forcing debtors out of bankruptcy court protection.
Creditors could then force debtors to pay the full amount owed, not the
reduced amount, and by moving to repossess their belongings. Many
people would have to pay creditors far into the future and thus be
unable to restart their economic lives, a long-held aim of bankruptcy.
I will submit this article from the Los Angeles Times for the Record
at this point.
[From the Los Angeles Times, Mar. 29, 2005]
Judges Say Overhaul Would Weaken Bankruptcy System.
(By Peter G. Gosselin)
For nearly a decade, proponents of overhauling the nation's
bankruptcy laws have described their aim as ensuring that
Americans who enter bankruptcy court do not escape bills that
they can truly afford to pay.
But only weeks before Congress is likely to approve the
long-sought overhaul, bankruptcy judges across the country
warn that the measure would undermine the very section of the
law under which debtors are now repaying more than $3 billion
annually to their creditors.
These judges say the effect of the overhaul would be to
discourage most forms of personal bankruptcy, which--for
nearly two centuries has served as a safety net for people in
economic trouble.
``The folks who brought you `those who can pay, should pay'
are pulling the stuffing out of the very part of the
bankruptcy law where debtors do pay,'' said Keith Lundin, a
federal bankruptcy judge in the eastern district of Tennessee
in Nashville and an authority on bankruptcy repayment plans.
``The advocates aren't trying to fix the bankruptcy law;
they're trying to mess it up so much that nobody can use
it,'' Lundin charged.
In interviews, a dozen current or former bankruptcy judges,
whose names were suggested by proponents as well as opponents
of the overhaul legislation, described what they saw as the
problems that could result from key provisions of the new
measure.
Judges now have broad discretion to determine how much a
debtor must pay to creditors and on what schedule after
declaring bankruptcy under what is known as Chapter 13. But
under the legislation, that discretion would be substantially
curtailed.
The new legislation would bar courts from reducing the
amount that many debtors would have to repay on their cars
and other big-ticket items. It would also extend the length
of time people would have to make repayments and impose
repayment schedules that critics describe as so onerous that
many debtors would fall behind.
The result, the judges said, would be the collapse of more
repayment plans, forcing debtors out of bankruptcy court
protection. Creditors then could try to force debtors to pay
the full amount owed--not the reduced amount a judge had
ordered--by moving to repossess their belongings or bringing
legal actions. Many people would have to pay creditors far
into the future, the critics said, and thus be unable to
restart their economic lives, a long-held aim of bankruptcy.
Repayment plans ``are pretty fragile documents to begin
with, but they're going to get a lot more fragile under these
conditions,'' said Ronald Barliant, a former bankruptcy judge
from the northern district of Illinois in Chicago.
``It's going to take away a lot of the incentives'' for
people to enter repayment plans, said David W. Houston III, a
bankruptcy judge from the northern district of Mississippi in
Aberdeen.
Overhaul proponents respond to such criticisms by
contending that the current bankruptcy system is rife with
fraud and abuse and is stacked against creditors. Many
proponents are deeply scornful of bankruptcy judges, who they
charge have let the system spin out of control.
``They're part of the . . . problem,'' declared Jeff
Tassey, a Washington lobbyist who heads the coalition of
credit card companies, banks and others that has spearheaded
the overhaul drive.
``They're not real judges, not Article 3 judges,'' Tassey
said. He was referring to Article 3 of the U.S. Constitution,
under which judges in the regular federal court system are
appointed for life. Bankruptcy judges are appointed under
Article 1 to 14-year renewable terms.
As matters now stand, financially distressed Americans
generally have two options in bankruptcy. They can file a
Chapter 7 case, in which they forfeit most of their assets in
return for cancellation of most debts and a debt-free ``fresh
start.'' Or, they can file a Chapter 13 case, in which they
get to keep most of their property but must agree to repay a
portion of their debts over a period of time.
Some advocates for changing the system have contended that
these provisions should be rewritten to address a kind of
moral laxness in bankruptcy practices.
``When you have seen a system that has gone from a few
hundred thousand cases to 1.5 million last year--most of that
increase during the fat years of the Clinton administration--
you must conclude something is not right,'' said Edith H.
Jones, a federal appellate court judge in Houston who served
on a blue-ribbon panel to review bankruptcy law in the 1990s
and is widely believed to be seen as on President Bush's
short list for a position on the Supreme Court.
``People have been encouraged to see bankruptcy as an easy
way out of uncomfortable situations,'' Jones said.
Overhaul proponents have also said that the new measure is
so narrowly cast that it would affect no more than 15 pecent
of bankruptcy filers.
The legislation would require courts to check whether
people make more than their state's median income and can
pass a ``means test,'' which gauges whether they have enough
to cover allowable living expenses, pay secured creditors
such as mortgage lenders and still have some left over for
unsecured creditors such as credit card companies. Those who
are above the median and have the means would no longer be
allowed to file under Chapter 7 and wipe out most of their
debts, but would have to file Chapter 13 cases and agree
to a repayment plan.
Nearly all congressional Republicans, together with many
Democrats, support the overhaul measure, which the president
has warmly endorsed and said he would sign. The Senate passed
the measure this month in a 74-25 vote. Approval from the
House is expected next month.
However, largely overlooked in the debate has been a series
of proposed changes in Chapter 13 that critics say would make
it harder for debtors to stick with repayment plans--the
opposite effect of what supporters say they want.
Critics, including bankruptcy judges in California, North
Carolina, Massachusetts, and Florida say there is nowhere
near the fraud in the system that advocates claim.
They cite a study by the nonpartisan American Bankruptcy
Institute, which concludes that only about 3 percent of those
who wipe out their debts in Chapter 7 could afford to repay a
portion in Chapter 13. Lobbyists for the credit card and
banking industries estimate that 10 percent or more would be
able to pay.
Those opposed to the changes contend that most people who
file for bankruptcy are truly distressed finanacially--and
say the success that courts have in collecting as much as
they do under Chapter 13 shows the system is working.
According to figures from the U.S. Trustee Program, a
Justice Department agency, Chapter 13 debtors repaid almost
$3.6 billion in 2003, the latest year for which figures are
available.
But critics say the courts' success with Chapter 13 is
threatened by several little-noticed elements of the proposed
legislation:
Under current law, those who file under Chapter 13 must
repay car loans only up to the amount the car is worth at the
time they enter court, or they risk losing the vehicle. A
debtor who bought a $24,000 sport utility vehicle and filed
for bankruptcy two years later, for example, might have to
pay far less because the vehicle had depreciated.
By reducing what debtors owe auto lenders in this fashion,
the law ensures more money for other creditors. And,
according to bankruptcy experts, it means that auto lenders
are treated on an equal footing with other ``secured''
creditors--they are promised repayment only to the value of
the item they could repossess.
Under the new measure, debtors would have to pay the full
amount on any vehicle purchased within 2 \1/2\ years of
bankruptcy, or risk losing the vehicle. The change may seem
minor to an outsider, but not to Chapter 13 debtors or
bankruptcy judges. ``That's going to be a big deal,''
predicted A. Thomas Small, a bankruptcy judge for the eastern
district of North Carolina in Raleigh. It would mean that
many repayment plans that work now would fail under the new
measure, he said.
Under current law, the debtor and his lawyer work out a
repayment plan that they think represents the most the debtor
can pay and still cover basic living expenses. A bankruptcy
judge must eventually approve the plan, which usually has
reduced or stretched-out payments to creditors. In the
meantime, the debtor immediately begins making payments to a
court-appointed trustee.
Under the legislation, many debtors would have to make full
payments on such big-ticket items as houses, furniture and
appliances. They would have to make those payments directly
to the lenders. And at the same time, they would have to
start paying the court-appointed trustee for debts to
doctors, credit card companies and other unsecured creditors.
Many bankruptcy judges say debtors who come before them
often do not have enough income to make both sets of
payments.
The result, they warned, would be that many debtors' plans
would quickly fail.
Under current bankruptcy law, two guiding principles are
that debtors should not be required to repay indefinitely, or
they effectively become indentured servants to their
creditors, and that they should eventually be given a debt-
free ``fresh start'' on their economic lives.
The legislation would require debtors to agree to repayment
plans with a five-year minimum repayment schedule, up from
the current three-year minimum. It would also
[[Page H2063]]
boost the chances that debtors would be required to continue
paying some debts even after a plan's successful completion.
Todd Zywicki, a law professor at George Mason University in
Virginia, said the shift away from the ``fresh start''
philosophy is justified because another bedrock American
value--that people who incur debts should pay them--is being
sullied under the current system.
But many bankruptcy judges and independent experts warn
that equally compelling values would be lost if the proposed
measure becomes law.
Practically, they warn, debtors who would no longer qualify
for Chapter 7 and fail to complete Chapter 13 repayment plans
would either have to keep paying creditors indefinitely or
drop out.
``If you're confronted with a mountain of debt and have no
hope of getting out from under it, you're either going to go
underground or turn to crime,'' said Kenneth N. Klee, a
former Republican congressional staffer who was one of the
chief authors of the last major bankruptcy law change in 1978
and now teaches law at UCLA.
More broadly, say judges and others, the ability to start
over after running into financial problems should not be
discounted.
``Loads of people have filed bankruptcy--Mark Twain, Buster
Keaton, Walt Disney,'' said Lundin, the Nashville-based
bankruptcy judge. ``Bankruptcy is a very American safety net.
``It's part and parcel of the American dream.''
Mr. Speaker, while this bill fails to improve the bankruptcy system,
the bill succeeds in being harsh, punitive and mean-spirited.
The bill is particularly harsh on women who are often the primary
care givers for their children or their parents and are the largest
single group in bankruptcy; on older Americans who are the fastest
growing group in bankruptcy due to medical costs; and on children.
Parents seeking child support will compete with credit card companies
and other lenders in State courts, but will have little protection and
fewer resources than the large credit card companies they are up
against.
Finally, the bill does a disservice to those who serve our Nation,
especially our National Guard troops and Reservists who are not
protected by an amendment passed by the other body.
National Guard and Reservists make up nearly 40 percent of those
serving in the Iraqi theater. They often leave behind small businesses
and jobs and incur debt, but they do not have the benefits and services
offered to active duty Armed Forces.
This bill would not stop abusive creditors who are stalking down
military families while their loved ones are serving our Nation bravely
and heroically.
I would hope that our Republican colleagues would join us in a
bipartisan way to support our motion to recommit that would give some
opportunities for the National Guard not to be treated this way under
the bankruptcy bill.
As for the bill, instead of addressing real causes of bankruptcy,
this bill rewards irresponsible corporate behavior and fattens the
already large profits of the credit card industry.
While bankruptcy filings have increased 17 percent in the last 8
years, credit card profits have increased more than 160 percent, from
$11 billion to more than $30 billion. There are now 5 billion credit
card solicitations a year stuffed into our mail boxes and many targeted
at teenagers with no jobs, no income, no visible means of support to
pay these credit card bills.
It is an industry with little oversight and loose underwriting that
charges enormous fees and unfair interest payments. The legislation
does nothing to address these failings. In fact, the other body
rejected an amendment to tell customers how much it would cost in
additional interest if they make only minimum payments on their credit
card bills.
For these and other reasons, Mr. Speaker, I sadly oppose this bill. I
say sadly because this is an area where there should not be any major
disagreement. If the point is to honor a tradition in our country where
people are entitled to a fresh start so they can begin contributing
back to our economy and to our society, then we should uphold that; and
if people are abusing the system, existing law already covers that.
Instead, we have a situation where it is mean and harsh to those who
can least afford to pay back and gives opportunity to the wealthiest,
the wealthiest, and corporate abusers of the system.
With that, Mr. Speaker, I am giving my reasons for why I oppose the
bill.
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