[Senate Report 105-253]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 394
105th Congress                                                   Report
                                 SENATE

 2d Session                                                     105-253
_______________________________________________________________________


 
                 CONSUMER BANKRUPTCY REFORM ACT OF 1998

                                _______
                                

                 July 21, 1998.--Ordered to be printed

_______________________________________________________________________


Mr. Hatch, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                     ADDITIONAL AND MINORITY VIEWS

                         [To accompany S. 1301]

    The Committee on the Judiciary, to which was referred the 
bill (S. 1301) to amend provisions of title 11 and title 18, 
United States Code, to provide for consumer bankruptcy 
protection, having considered the same, reports favorably 
thereon, with an amendment in the nature of a substitute, and 
recommends that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Background and need for the legislation.........................22
 II. Committee and Subcommittee consideration in the 105th Congress..30
III. Section-by-section analysis.....................................34
 IV. Cost estimate...................................................55
  V. Regulatory impact statement.....................................65
 VI. Additional views of Senator Patrick Leahy.......................66
VII. Additional views of Senator Herb Kohl...........................67
VIII.Additional views of Senators Richard J. Durbin, Russell D. 
     Feingold, Dianne Feinstein, Herb Kohl, and Robert G. Torricelli.69
 IX. Additional views of Senator Richard J. Durbin...................73
  X. Minority and dissenting views of Senator Edward M. Kennedy and 
     Senator Russell D. Feingold.....................................77
 XI. Changes in existing law made by the bill, as reported...........99

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Consumer Bankruptcy 
Reform Act of 1998''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

                    TITLE I--NEEDS-BASED BANKRUPTCY

Sec. 101. Conversion.
Sec. 102. Dismissal or conversion.

        TITLE II--ENHANCED PROCEDURAL PROTECTIONS FOR CONSUMERS

Sec. 201. Allowance of claims or interests.
Sec. 202. Exceptions to discharge.
Sec. 203. Effect of discharge.
Sec. 204. Automatic stay.
Sec. 205. Discharge.
Sec. 206. Discouraging predatory lending practices.

  TITLE III--IMPROVED PROCEDURES FOR EFFICIENT ADMINISTRATION OF THE 
                           BANKRUPTCY SYSTEM

Sec. 301. Notice of alternatives.
Sec. 302. Fair treatment of secured creditors under chapter 13.
Sec. 303. Discouragement of bad faith repeat filings.
Sec. 304. Timely filing and confirmation of plans under chapter 13.
Sec. 305. Application of the codebtor stay only when the stay protects 
the debtor.
Sec. 306. Improved bankruptcy statistics.
Sec. 307. Audit procedures.
Sec. 308. Creditor representation at first meeting of creditors.
Sec. 309. Fair notice for creditors in chapter 7 and 13 cases.
Sec. 310. Stopping abusive conversions from chapter 13.
Sec. 311. Prompt relief from stay in individual cases.
Sec. 312. Dismissal for failure to timely file schedules or provide 
required information.
Sec. 313. Adequate time for preparation for a hearing on confirmation 
of the plan.
Sec. 314. Discharge under chapter 13.
Sec. 315. Nondischargeable debts.
Sec. 316. Credit extensions on the eve of bankruptcy presumed 
nondischargeable.
Sec. 317. Definition of household goods and antiques.
Sec. 318. Relief from stay when the debtor does not complete intended 
surrender of consumer debt collateral.
Sec. 319. Adequate protection of lessors and purchase money secured 
creditors.
Sec. 320. Limitation.
Sec. 321. Miscellaneous improvements.
Sec. 322. Bankruptcy judgeships.
Sec. 323. Preferred payment of child support in chapter 7 proceedings.
Sec. 324. Preferred payment of child support in chapter 13 proceedings.
Sec. 325. Payment of child support required to obtain a discharge in 
chapter 13 proceedings.
Sec. 326. Child support and alimony collection.
Sec. 327. Nondischargeability of certain debts for alimony, 
maintenance, and support.
Sec. 328. Enforcement of child and spousal support.
Sec. 329. Dependent child defined.

                    TITLE IV--TECHNICAL CORRECTIONS

Sec. 401. Definitions.
Sec. 402. Adjustment of dollar amounts.
Sec. 403. Extension of time.
Sec. 404. Who may be a debtor.
Sec. 405. Penalty for persons who negligently or fraudulently prepare 
bankruptcy petitions.
Sec. 406. Limitation on compensation of professional persons.
Sec. 407. Special tax provisions.
Sec. 408. Effect of conversion.
Sec. 409. Automatic stay.
Sec. 410. Amendment to table of sections.
Sec. 411. Allowance of administrative expenses.
Sec. 412. Priorities.
Sec. 413. Exemptions.
Sec. 414. Exceptions to discharge.
Sec. 415. Effect of discharge.
Sec. 416. Protection against discriminatory treatment.
Sec. 417. Property of the estate.
Sec. 418. Limitations on avoiding powers.
Sec. 419. Preferences.
Sec. 420. Postpetition transactions.
Sec. 421. Technical amendment.
Sec. 422. Setoff.
Sec. 423. Disposition of property of the estate.
Sec. 424. General provisions.
Sec. 425. Appointment of elected trustee.
Sec. 426. Abandonment of railroad line.
Sec. 427. Contents of plan.
Sec. 428. Discharge under chapter 12.
Sec. 429. Extensions.
Sec. 430. Bankruptcy cases and proceedings.
Sec. 431. Knowing disregard of bankruptcy law or rule.
Sec. 432. Effective date; application of amendments.

                    TITLE I--NEEDS-BASED BANKRUPTCY

SEC. 101. CONVERSION.

  Section 706(c) of title 11, United States Code, is amended by 
inserting ``or consents to'' after ``requests''.

SEC. 102. DISMISSAL OR CONVERSION.

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

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

        and
          (2) in subsection (b)--
                  (A) by inserting ``(1)'' after ``(b)''; and
                  (B) in paragraph (1), as redesignated by subparagraph 
                (A) of this paragraph--
                          (i) in the first sentence--
                                  (I) by striking ``but not'' and 
                                inserting ``or'';
                                  (II) by inserting ``, or, with the 
                                debtor's consent, convert such a case 
                                to a case under chapter 13 of this 
                                title,'' after ``consumer debts''; and
                                  (III) by striking ``substantial 
                                abuse'' and inserting ``abuse''; and
                          (ii) by striking the last sentence and 
                        inserting the following:
  ``(2) In considering under paragraph (1) whether the granting of 
relief would be an abuse of the provisions of this chapter, the court 
shall consider whether--
          ``(A) under section 1325(b)(1), on the basis of the current 
        income of the debtor, the debtor could pay an amount greater 
        than or equal to 20 percent of unsecured claims that are not 
        considered to be priority claims (as determined under 
        subchapter I of chapter 5); or
          ``(B) the debtor filed a petition for the relief in bad 
        faith.
  ``(3)(A) If a panel trustee appointed under section 586(a)(1) of 
title 28 brings a motion for dismissal or conversion under this 
subsection and the court grants that motion and finds that the action 
of the counsel for the debtor in filing under this chapter was not 
substantially justified, the court shall order the counsel for the 
debtor to reimburse the trustee for all reasonable costs in prosecuting 
the motion, including reasonable attorneys' fees.
  ``(B) If the court finds that the attorney for the debtor violated 
Rule 9011, at a minimum, the court shall order--
          ``(i) the assessment of an appropriate civil penalty against 
        the counsel for the debtor; and
          ``(ii) the payment of the civil penalty to the panel trustee 
        or the United States trustee.
  ``(C) In the case of a petition referred to in subparagraph (B), the 
signature of an attorney shall constitute a certificate that the 
attorney has--
          ``(i) performed a reasonable investigation into the 
        circumstances that gave rise to the petition; and
          ``(ii) determined that the petition--
                  ``(I) is well grounded in fact; and
                  ``(II) is warranted by existing law or a good faith 
                argument for the extension, modification, or reversal 
                of existing law and does not constitute an abuse under 
                paragraph (1) of this subsection.
  ``(4)(A) Except as provided in subparagraph (B), the court may award 
a debtor all reasonable costs in contesting a motion brought by a party 
in interest (other than a panel trustee) under this subsection 
(including reasonable attorneys' fees) if--
          ``(i) the court does not grant the motion; and
          ``(ii) the court finds that--
                  ``(I) the position of the party that brought the 
                motion was not substantially justified; or
                  ``(II) the party brought the motion solely for the 
                purpose of coercing a debtor into waiving a right 
                guaranteed to the debtor under this title.
  ``(B) A party in interest that has a claim of an aggregate amount 
less than $1,000 shall not be subject to subparagraph (A).
  ``(5) However, a party in interest may not bring a motion under this 
section if the debtor and the debtor's spouse combined, as of the date 
of the order for relief, have current monthly total income equal to or 
less than the national median household monthly income calculated on a 
monthly basis for a household of equal size. However, for a household 
of more than 4 individuals, the median income shall be that of a 
household of 4 individuals plus $583 for each additional member of that 
household.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
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 13.''.

        TITLE II--ENHANCED PROCEDURAL PROTECTIONS FOR CONSUMERS

SEC. 201. ALLOWANCE OF CLAIMS OR INTERESTS.

  Section 502 of title 11, United States Code, is amended by adding at 
the end the following:
  ``(k)(1) The court may award the debtor reasonable attorneys' fees 
and costs if, after an objection is filed by a debtor, the court--
          ``(A)(i) disallows the claim; or
          ``(ii) reduces the claim by an amount greater than 20 percent 
        of the amount of the initial claim filed by a party in 
        interest; and
          ``(B) finds the position of the party filing the claim is not 
        substantially justified.
  ``(2) If the court finds that the position of a claimant under this 
section is not substantially justified, the court may, in addition to 
awarding a debtor reasonable attorneys' fees and costs under paragraph 
(1), award such damages as may be required by the equities of the 
case.''.

SEC. 202. EXCEPTIONS TO DISCHARGE.

  Section 523 of title 11, United States Code, is amended--
          (1) in subsection (a)(2)(A), by striking ``a false 
        representation'' and inserting ``a material false 
        representation upon which the defrauded person justifiably 
        relied''; and
          (2) by striking subsection (d) and inserting the following:
  ``(d)(1) Subject to paragraph (3), if a creditor requests a 
determination of dischargeability of a consumer debt under this section 
and that debt is discharged, the court shall award the debtor 
reasonable attorneys' fees and costs.
  ``(2) In addition to making an award to a debtor under paragraph (1), 
if the court finds that the position of a creditor in a proceeding 
covered under this section is not substantially justified, the court 
may award reasonable attorneys' fees and costs under paragraph (1) and 
such damages as may be required by the equities of the case.
  ``(3)(A) A creditor may not request a determination of 
dischargeability of a consumer debt under subsection (a)(2) if--
          ``(i) before the filing of the petition, the debtor made a 
        good faith effort to negotiate a reasonable alternative 
        repayment schedule (including making an offer of a reasonable 
        alternative repayment schedule); and
          ``(ii) that creditor refused to negotiate an alternative 
        payment schedule, and that refusal was not reasonable.
  ``(B) For purposes of this paragraph, the debtor shall have the 
burden of proof of establishing that--
          ``(i) an offer made by that debtor under subparagraph (A)(i) 
        was reasonable; and
          ``(ii) the refusal to negotiate by the creditor involved to 
        was not reasonable.''.

SEC. 203. EFFECT OF DISCHARGE.

  Section 524 of title 11, United States Code, is amended by adding at 
the end the following:
  ``(i) The willful failure of a creditor to credit payments received 
under a plan confirmed under this title (including a plan of 
reorganization confirmed under chapter 11 of this title) in the manner 
required by the plan (including crediting the amounts required under 
the plan) shall constitute a violation of an injunction under 
subsection (a)(2).
  ``(j) An individual who is injured by the failure of a creditor to 
comply with the requirements for a reaffirmation agreement under 
subsections (c) and (d), or by any willful violation of the injunction 
under subsection (a)(2), shall be entitled to recover--
          ``(1) the greater of--
                  ``(A)(i) the amount of actual damages; multiplied by
                  ``(ii) 3; or
                  ``(B) $5,000; and
          ``(2) costs and attorneys' fees.''.

SEC. 204. AUTOMATIC STAY.

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

SEC. 205. DISCHARGE.

  Section 727 of title 11, United States Code, is amended--
          (1) in subsection (c), by adding at the end the following:
  ``(3)(A) A creditor may not request a determination of 
dischargeability of a consumer debt under subsection (a) if--
          ``(i) before the filing of the petition, the debtor made a 
        good faith effort to negotiate a reasonable alternative 
        repayment schedule (including making an offer of a reasonable 
        alternative repayment schedule); and
          ``(ii) that creditor refused to negotiate an alternative 
        payment schedule, and that refusal was not reasonable.
  ``(B) For purposes of this paragraph, the debtor shall have the 
burden of proof of establishing that--
          ``(i) an offer made by that debtor under subparagraph (A)(i) 
        was reasonable; and
          ``(ii) the refusal to negotiate by the creditor involved to 
        was not reasonable.''; and
          (2) by adding at the end the following:
  ``(f)(1) The court may award the debtor reasonable attorneys' fees 
and costs in any case in which a creditor filesa motion to deny relief 
to a debtor under this section and that motion--
          ``(A) is denied; or
          ``(B) is withdrawn after the debtor has replied.
  ``(2) If the court finds that the position of a party filing a motion 
under this section is not substantially justified, the court may assess 
against the creditor such damages as may be required by the equities of 
the case.''.

SEC. 206. DISCOURAGING PREDATORY LENDING PRACTICES.

  Section 502(b) of title 11, United States Code, is amended--
          (1) in paragraph (8), by striking ``or'' at the end;
          (2) in paragraph (9), by striking the period at the end and 
        inserting ``; or''; and
          (3) by adding at the end the following:
          ``(10) the claim is based on a secured debt if the creditor 
        has failed to comply with the requirements of subsection (a), 
        (b), (c), (d), (e), (f), (g), (h), or (i) of section 129 of the 
        Truth in Lending Act (15 U.S.C. 1639).''.

  TITLE III--IMPROVED PROCEDURES FOR EFFICIENT ADMINISTRATION OF THE 
                           BANKRUPTCY SYSTEM

SEC. 301. NOTICE OF ALTERNATIVES.

  (a) In General.--Section 342 of title 11, United States Code, is 
amended by striking subsection (b) and inserting the following:
  ``(b) Before the commencement of a case under this title by an 
individual whose debts are primarily consumer debts, that individual 
shall be given or obtain (as required in section 521(a)(1), as part of 
the certification process under subchapter 1 of chapter 5) a written 
notice prescribed by the United States trustee for the district in 
which the petition is filed pursuant to section 586 of title 28. The 
notice shall contain the following:
          ``(1) A brief description of chapters 7, 11, 12, and 13 and 
        the general purpose, benefits, and costs of proceeding under 
        each of those chapters.
          ``(2) A brief description of services that may be available 
        to that individual from an independent nonprofit debt 
        counseling service.
          ``(3)(A) The name, address, and telephone number of each 
        nonprofit debt counseling service with an office located in the 
        district in which the petition is filed, if any.
          ``(B) Any nonprofit debt counseling service described in 
        subparagraph (A) that has registered with the clerk of the 
        bankruptcy court on or before December 10 of the preceding year 
        shall be included in the list referred to in that clause, 
        unless the chief bankruptcy judge of the district involved, 
        after giving notice to the debt counseling service and the 
        United States trustee and opportunity for a hearing, orders, 
        for good cause, that a particular debt counseling service shall 
        not be so listed.''.
  (b) Debtor's Duties.--Section 521 of title 11, United States Code, is 
amended--
          (1) by inserting ``(a)'' before ``The debtor shall--'';
          (2) by striking paragraph (1) and inserting the following:
          ``(1) file--
                  ``(A) a list of creditors; and
                  ``(B) unless the court orders otherwise--
                          ``(i) a schedule of assets and liabilities;
                          ``(ii) a schedule of current income and 
                        current expenditures;
                          ``(iii) a statement of the debtor's financial 
                        affairs and, if applicable, a certificate--
                                  ``(I) of an attorney whose name is on 
                                the petition as the attorney for the 
                                debtor or any bankruptcy petition 
                                preparer signing the petition pursuant 
                                to section 110(b)(1) indicating that 
                                such attorney or bankruptcy petition 
                                preparer delivered to the debtor any 
                                notice required by section 342(b); or
                                  ``(II) if no attorney for the debtor 
                                is indicated and no bankruptcy petition 
                                preparer signed the petition, of the 
                                debtor that such notice was obtained 
                                and read by the debtor;
                          ``(iv) copies of any Federal tax returns, 
                        including any schedules or attachments, filed 
                        by the debtor for the 3-year period preceding 
                        the order for relief;
                          ``(v) copies of all payment advices or other 
                        evidence of payment, if any, received by the 
                        debtor from any employer of the debtor in the 
                        period 60 days prior to the filing of the 
                        petition;
                          ``(vi) a statement of the amount of projected 
                        monthly net income, itemized to show how 
                        calculated; and
                          ``(vii) a statement disclosing any reasonably 
                        anticipated increase in income or expenditures 
                        over the 12-month period following the date of 
                        filing;''; and
          (3) by adding at the end the following:
  ``(b)(1) At any time, a creditor, in the case of an individual under 
chapter 7 or 13, may file with the court notice that the creditor 
requests the petition, schedules, and a statement of affairs filed by 
the debtor in the case and the court shall make those documents 
available to the creditor who requests those documents.
  ``(2) At any time, a creditor, in a case under chapter 13, may file 
with the court notice that the creditor requests the plan filed by the 
debtor in the case and the court shall make that plan available to the 
creditor who requests that plan.
  ``(c) An individual debtor in a case under chapter 7 or 13 shall file 
with the court--
          ``(1) at the time filed with the taxing authority, all tax 
        returns, including any schedules or attachments, with respect 
        to the period from the commencement of the case until such time 
        as the case is closed;
          ``(2) at the time filed with the taxing authority, all tax 
        returns, including any schedules or attachments, that were not 
        filed with the taxing authority when the schedules under 
        subsection (a)(1) were filed with respect to the period that is 
        3 years before the order for relief;
          ``(3) any amendments to any of the tax returns, including 
        schedules or attachments, described in paragraph (1) or (2); 
        and
          ``(4) in a case under chapter 13, a statement subject to the 
        penalties of perjury by the debtor of the debtor's income and 
        expenditures in the preceding tax year and monthly income, that 
        shows how the amounts are calculated--
                  ``(A) beginning on the date that is the later of 90 
                days after the close of the debtor's tax year or 1 year 
                after the order for relief, unless a plan has been 
                confirmed; and
                  ``(B) thereafter, on or before the date that is 45 
                days before each anniversary of the confirmation of the 
                plan until the case is closed.
  ``(d)(1) A statement referred to in subsection (c)(4) shall 
disclose--
          ``(A) the amount and sources of income of the debtor;
          ``(B) the identity of any persons responsible with the debtor 
        for the support of any dependents of the debtor; and
          ``(C) the identity of any persons who contributed, and the 
        amount contributed, to the household in which the debtor 
        resides.
  ``(2) The tax returns, amendments, and statement of income and 
expenditures described in paragraph (1) shall be available to the 
United States trustee, any bankruptcy administrator, any trustee, and 
any party in interest for inspection and copying, subject to the 
requirements of subsection (e).
  ``(e)(1) Not later than 30 days after the date of enactment of the 
Consumer Bankruptcy Reform Act of 1998, the Director of the 
Administrative Office of the United States Courts shall establish 
procedures for safeguarding the confidentiality of any tax information 
required to be provided under this section.
  ``(2) The procedures under paragraph (1) shall include restrictions 
on creditor access to tax information that is required to be provided 
under this section.
  ``(3) Not later than 1 year after the date of enactment of the 
Consumer Bankruptcy Reform Act of 1998, the Director of the 
Administrative Office of the United States Courts shall prepare, and 
submit to Congress a report that--
          ``(A) assesses the effectiveness of the procedures under 
        paragraph (1); and
          ``(B) if appropriate, includes proposed legislation--
                  ``(i) to further protect the confidentiality of tax 
                information; and
                  ``(ii) to provide penalties for the improper use by 
                any person of the tax information required to be 
                provided under this section.''.
  (c) Title 28.--Section 586(a) of title 28, 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 ``; and''; and
          (3) by adding at the end the following:
          ``(7) on or before January 1 of each calendar year, and also 
        not later than 30 days after any change in the nonprofit debt 
        counseling services registered with the bankruptcy court, 
        prescribe and make available on request the notice described in 
        section 342(b)(3) of title 11 for each district included in the 
        region.''.

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

  (a) Restoring the Foundation for Secured Credit.--Section 1325(a) of 
title 11, United States Code, is amended--
          (1) in paragraph (5), by striking the matter preceding 
        subparagraph (A) and inserting the following:
          ``(5) with respect to an allowed claim provided for by the 
        plan that is secured under applicable nonbankruptcy law by 
        reason of a lien on property in which the estate has an 
        interest or is subject to a setoff under section 553--''; and
          (2) by adding at the end of the subsection the following 
        flush sentence:
``For purposes of paragraph (5), section 506 shall not apply to a claim 
described in that paragraph.''.
  (b) Payment of Holders of Claims Secured by Liens.--Section 
1325(a)(5)(B)(i) of title 11, United States Code, is amended to read as 
follows:
                  ``(B)(i) the plan provides that the holder of such 
                claim retain the lien securing such claim until the 
                debt that is the subject of the claim is fully paid 
                for, as provided under the plan; and''.
  (c) Determination of Secured Status.--Section 506 of title 11, United 
States Code, is amended by adding at the end the following:
  ``(e) Subsection (a) shall not apply to an allowed claim to the 
extent attributable in whole or in part to the purchase price of 
personal property acquired by the debtor during the 90-day period 
preceding the date of filing of the petition.''.

SEC. 303. DISCOURAGEMENT OF BAD FAITH REPEAT FILINGS.

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

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

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

``Sec. 1321. Filing of plan

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

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

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

SEC. 306. IMPROVED BANKRUPTCY STATISTICS.

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

``Sec. 159. Bankruptcy statistics

  ``(a) The clerk of each district shall compile statistics regarding 
individual debtors with primarily consumer debts seeking relief under 
chapters 7, 11, and 13 of title 11. Those statistics shall be in a form 
prescribed by the Director of the Administrative Office of the United 
States Courts (referred to in this section as the `Office').
  ``(b) The Director shall--
          ``(1) compile the statistics referred to in subsection (a);
          ``(2) make the statistics available to the public; and
          ``(3) not later than October 31, 1998, and annually 
        thereafter, prepare, and submit to Congress a report concerning 
        the information collected under subsection (a) that contains an 
        analysis of the information.
  ``(c) The compilation required under subsection (b) shall--
          ``(1) be itemized, by chapter, with respect to title 11;
          ``(2) be presented in the aggregate and for each district; 
        and
          ``(3) include information concerning--
                  ``(A) the total assets and total liabilities of the 
                debtors described in subsection (a), and in each 
                category of assets and liabilities, as reported in the 
                schedules prescribed pursuant to section 2075 of this 
                title and filed by those debtors;
                  ``(B) the current total monthly income, projected 
                monthly net income, and average income and average 
                expenses of those debtors as reported on the schedules 
                and statements that each such debtor files under 
                sections 111, 521, and 1322 of title 11;
                  ``(C) the aggregate amount of debt discharged in the 
                reporting period, determined as the difference between 
                the total amount of debt and obligations of a debtor 
                reported on the schedules and the amount of such debt 
                reported in categories which are predominantly 
                nondischargeable;
                  ``(D) the average period of time between the filing 
                of the petition and the closing of the case;
                  ``(E) for the reporting period--
                          ``(i) the number of cases in which a 
                        reaffirmation was filed; and
                          ``(ii)(I) the total number of reaffirmations 
                        filed;
                          ``(II) of those cases in which a 
                        reaffirmation was filed, the number in which 
                        the debtor was not represented by an attorney; 
                        and
                          ``(III) of those cases, the number of cases 
                        in which the reaffirmation was approved by the 
                        court;
                  ``(F) with respect to cases filed under chapter 13 of 
                title 11, for the reporting period--
                          ``(i)(I) the number of cases in which a final 
                        order was entered determining the value of 
                        property securing a claim in an amount less 
                        than the amount of the claim; and
                          ``(II) the number of final orders determining 
                        the value of property securing a claim issued;
                          ``(ii) the number of cases dismissed for 
                        failure to make payments under the plan; and
                          ``(iii) the number of cases in which the 
                        debtor filed another case within the 6 years 
                        previous to the filing; and
                  ``(G) the extent of creditor misconduct and any 
                amount of punitive damages awarded by the court for 
                creditor misconduct.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 6 of title 28, United States Code, is amended by adding at the 
end the following:

``159. Bankruptcy statistics.''.

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

SEC. 307. AUDIT PROCEDURES.

  (a) Amendments.--Section 586 of title 28, United States Code, is 
amended--
          (1) in subsection (a), as amended by section 301 of this Act, 
        by striking paragraph (6) and inserting the following:
          ``(6) make such reports as the Attorney General directs, 
        including the results of audits performed under subsection (f); 
        and''; and
          (2) by adding at the end the following:
  ``(f)(1)(A) The Attorney General shall establish procedures for the 
auditing of the accuracy and completeness of petitions, schedules, and 
other information which the debtor is required to provide under 
sections 521 and 1322 of title 11, and, if applicable, section 111 of 
title 11, in individual cases filed under chapter 7 or 13 of such 
title.
  ``(B) The audits described in subparagraph (A) shall be made in 
accordance with generally accepted auditing standards and performed by 
independent certified public accountants or independent licensed public 
accountants. Those procedures shall--
          ``(i) establish a method of selecting appropriate qualified 
        persons to contract with the United States trustee to perform 
        those audits;
          ``(ii) establish a method of randomly selecting cases to be 
        audited according to generally accepted auditing standards, 
        except that not less than 1 out of every 500 cases in each 
        Federal judicial district shall be selected for audit;
          ``(iii) require audits for schedules of income and expenses 
        which reflect greater than average variances from the 
        statistical norm of the district in which the schedules were 
        filed; and
          ``(iv) establish procedures for--
                  ``(I) reporting the results of those audits and any 
                material misstatement of income, expenditures, or 
                assets of a debtor to the Attorney General, the United 
                States Attorney and the court, as appropriate;
                  ``(II) providing, not less frequently than annually, 
                public information concerning the aggregate results of 
                such audits including the percentage of cases, by 
                district, in which a material misstatement of income or 
                expenditures is reported; and
                  ``(III) fully funding those audits, including 
                procedures requiring each debtor with sufficient 
                available income or assets to contribute to the payment 
                for those audits, as an administrative expense or 
                otherwise.
  ``(2) The United States trustee for each district is authorized to 
contract with auditors to perform audits in cases designated by the 
United States trustee according to the procedures established under 
paragraph (1).
  ``(3) According to procedures established under paragraph (1), upon 
request of a duly appointed auditor, the debtor shall cause the 
accounts, papers, documents, financial records, files and all other 
papers, things, or property belonging to the debtor as the auditor 
requests and that are reasonably necessary to facilitate the audit to 
be made available for inspection and copying.
  ``(4)(A) The report of each audit conducted under this subsection 
shall be filed with the court, the Attorney General, and the United 
States Attorney, as required under procedures established by the 
Attorney General under paragraph (1).
  ``(B) If a material misstatement of income or expenditures or of 
assets is reported under subparagraph (A), a statement specifying that 
misstatement shall be filed with the court and the United States 
trustee shall--
          ``(i) give notice thereof to the creditors in the case; and
          ``(ii) in an appropriate case, in the opinion of the United 
        States trustee, that requires investigation with respect to 
        possible criminal violations, the United States Attorney for 
        the district.''.
  (b) Effective Date.--The amendments made by this section shall take 
effect 18 months after the date of enactment of this Act.

SEC. 308. CREDITOR REPRESENTATION AT FIRST MEETING OF CREDITORS.

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

SEC. 309. FAIR NOTICE FOR CREDITORS IN CHAPTER 7 AND 13 CASES.

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

SEC. 310. STOPPING ABUSIVE CONVERSIONS FROM CHAPTER 13.

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

SEC. 311. PROMPT RELIEF FROM STAY IN INDIVIDUAL CASES.

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

SEC. 312. DISMISSAL FOR FAILURE TO TIMELY FILE SCHEDULES OR PROVIDE 
                    REQUIRED INFORMATION.

  Section 707 of title 11, United States Code, as amended by section 
102 of this Act, is amended by adding at the end the following:
  ``(c)(1) Notwithstanding subsection (a), and subject to paragraph 
(2), if an individual debtor in a voluntary case under chapter 7 or 13 
fails to file all of the information required under section 521(a)(1) 
within 45 days after the filing of the petition commencing the case, 
the case shall be automatically dismissed effective on the 46th day 
after the filing of the petition.
  ``(2) With respect to a case described in paragraph (1), any party in 
interest may request the court to enter an order dismissing the case. 
The court shall, if so requested, enter an order of dismissal not later 
than 5 days after that request.
  ``(3) Upon request of the debtor made within 45 days after the filing 
of the petition commencing a case described in paragraph (1), the court 
may allow the debtor an additional period of not to exceed 20 days to 
file the information required under section 521(a)(1) if the court 
finds justification for extending the period for the filing.''.

SEC. 313. ADEQUATE TIME FOR PREPARATION FOR A HEARING ON CONFIRMATION 
                    OF THE PLAN.

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

SEC. 314. 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), (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. NONDISCHARGEABLE DEBTS.

  Section 523(a) of title 11, United States Code, is amended by 
inserting after paragraph (14) the following:
          ``(14A) incurred to pay a debt that is nondischargeable by 
        reason of section 727, 1141, 1228 (a) or (b), or 1328(b), or 
        any other provision of this subsection, except for any debt 
        incurred to pay such a nondischargeable debt in any case in 
        which--
                  ``(A)(i) the debtor who paid the nondischargeable 
                debt is a single parent who has 1 or more dependent 
                children at the time of the order for relief; or
                  ``(ii) there is an allowed claim for alimony to, 
                maintenance for, or support of a spouse, former spouse, 
                or child of the debtor payable under a judicial or 
                administrative order to that spouse or child (but not 
                to any other person) that was unpaid by the debtor as 
                of the date of the petition; and
                  ``(B) the creditor is unable to demonstrate that the 
                debtor intentionally incurred the debt to pay the 
                nondischargeable debt;''.

SEC. 316. CREDIT EXTENSIONS ON THE EVE OF BANKRUPTCY PRESUMED 
                    NONDISCHARGEABLE.

  Section 523(a)(2) of title 11, United States Code, as amended by 
section 202 of this Act, is amended--
          (1) in subparagraph (A), by striking the semicolon at the end 
        and inserting the following: ``(and,for purposes of this 
subparagraph, consumer debts owed in an aggregate amount greater than 
or equal to $400 incurred for goods or services not reasonably 
necessary for the maintenance or support of the debtor or a dependent 
child of the debtor to a single creditor that are incurred during the 
90-day period preceding the date of the order for relief shall be 
presumed to be nondischargeable under this subparagraph); or'';
          (2) in subparagraph (B), by striking ``or'' at the end; and
          (3) by striking subparagraph (C).

SEC. 317. DEFINITION OF HOUSEHOLD GOODS AND ANTIQUES.

  Section 101 of title 11, United States Code, is amended by inserting 
after paragraph (27) the following:
          ``(27A) `household goods' has the meaning given that term in 
        section 444.1(i) of title 16, of the Code of Federal 
        Regulations (as in effect on the effective date of this 
        paragraph), which is part of the regulations issued by the 
        Federal Trade Commission that are commonly known as the `Trade 
        Regulation Rule on Credit Practices', except that the term 
        shall also include any tangible personal property reasonably 
        necessary for the maintenance or support of a dependent 
        child;''.

SEC. 318. RELIEF FROM STAY WHEN THE DEBTOR DOES NOT COMPLETE INTENDED 
                    SURRENDER OF CONSUMER DEBT COLLATERAL.

  (a) Automatic Stay.--Section 362 of title 11, United States Code, as 
amended by section 303, is amended--
          (1) in subsection (c)(1), in the matter preceding 
        subparagraph (A), by striking ``(e) and (f)'' and inserting 
        ``(e), (f), and (h)'';
          (2) by redesignating subsection (h) as subsection (i); and
          (3) by inserting after subsection (g) the following:
  ``(h) In an individual case under chapter 7, 11, or 13 the stay 
provided by subsection (a) is terminated with respect to property of 
the estate securing in whole or in part a claim that is in an amount 
greater than $3,000, or subject to an unexpired lease with a remaining 
term of at least 1 year (in any case in which the debtor owes at least 
$3,000 for a 1-year period), if within 30 days after the expiration of 
the applicable period under section 521(a)(2)--
          ``(1)(A) the debtor fails to timely file a statement of 
        intention to surrender or retain the property; or
          ``(B) if the debtor indicates in the filing that the debtor 
        will retain the property, the debtor fails to meet an 
        applicable requirement to--
                  ``(i) either--
                          ``(I) redeem the property pursuant to section 
                        722; or
                          ``(II) reaffirm the debt the property secures 
                        pursuant to section 524(c); or
                  ``(ii) assume the unexpired lease pursuant to section 
                365(d) if the trustee does not do so; or
          ``(2) the debtor fails to timely take the action specified in 
        a statement of intention referred to in paragraph (1)(A) (as 
        amended, if that statement is amended before expiration of the 
        period for taking action), unless--
                  ``(A) the statement of intention specifies 
                reaffirmation; and
                  ``(B) the creditor refuses to reaffirm the debt on 
                the original contract terms for the debt.''.
  (b) Debtor's Duties.--Section 521(a)(2) of title 11, United States 
Code, as redesignated by section 301(b) of this Act, is amended--
          (1) in the matter preceding subparagraph (A), by striking 
        ``consumer'';
          (2) in subparagraph (B)--
                  (A) by striking ``forty-five days after the filing of 
                a notice of intent under this section'' and inserting 
                ``30 days after the first meeting of creditors under 
                section 341(a)''; and
                  (B) by striking ``forty-five-day period'' and 
                inserting ``30-day period''; and
          (3) in subparagraph (C), by inserting ``, except as provided 
        in section 362(h)'' before the semicolon.

SEC. 319. ADEQUATE PROTECTION OF LESSORS AND PURCHASE MONEY SECURED 
                    CREDITORS.

  (a) In General.--Chapter 13 of title 11, United States Code, is 
amended by adding after section 1307 the following:

``Sec. 1307A. Adequate protection in chapter 13 cases

  ``(a)(1)(A) On or before the date that is 30 days after the filing of 
a case under this chapter, the debtor shall make cash payments in an 
amount determined under paragraph (2)(A), to--
          ``(i) any lessor of personal property; and
          ``(ii) any creditor holding a claim secured by personal 
        property to the extent that the claim is attributable to the 
        purchase of that property by the debtor.
  ``(B) The debtor or the plan shall continue making the adequate 
protection payments until the earlier of the date on which--
          ``(i) the creditor begins to receive actual payments under 
        the plan; or
          ``(ii) the debtor relinquishes possession of the property 
        referred to in subparagraph (A) to--
                  ``(I) the lessor or creditor; or
                  ``(II) any third party acting under claim of right, 
                as applicable.
  ``(2) The payments referred to in paragraph (1)(A) shall be 
determined by the court.
  ``(b)(1) Subject to the limitations under paragraph (2), the court 
may, after notice and hearing, change the amount and timing of the 
dates of payment of payments made under subsection (a).
  ``(2)(A) The payments referred to in paragraph (1) shall be payable 
not less frequently than monthly.
  ``(B) The amount of a payment referred to in paragraph (1) shall not 
be less than the reasonable depreciation of the personal property 
described in subsection (a)(1), determined on a month-to-month basis.
  ``(c) Notwithstanding section 1326(b), the payments referred to in 
subsection (a)(1)(A) shall be continued in addition to plan payments 
under a confirmed plan until actual payments to the creditor begin 
under that plan, if the confirmed plan provides--
          ``(1) for payments to a creditor or lessor described in 
        subsection (a)(1); and
          ``(2) for the deferral of payments to such creditor or lessor 
        under the plan until the payment of amounts described in 
        section 1326(b).
  ``(d) Notwithstanding sections 362, 542, and 543, a lessor or 
creditor described in subsection (a) may retain possession of property 
described in that subsection that was obtained in accordance with 
applicable law before the date of filing of the petition until the 
first payment under subsection (a)(1)(A) is received by the lessor or 
creditor.''.
  (b) Clerical Amendment.--The table of sections at the beginning of 
chapter 13 of title 11, United States Code, is amended by inserting 
after the item relating to section 1307 the following:

``1307A. Adequate protection in chapter 13 cases.''.

SEC. 320. LIMITATION.

  Section 522 of title 11, United States Code, is amended--
          (1) in subsection (b)(2)(A), by inserting ``subject to 
        subsection (n),'' before ``any property''; and
          (2) by adding at the end the following new subsection:
  ``(n)(1) Except as provided in paragraph (2), as a result of electing 
under subsection (b)(2)(A) to exempt property under State or local law, 
a debtor may not exempt any amount of interest that exceeds in the 
aggregate $100,000 in value in--
          ``(A) real or personal property that the debtor or a 
        dependent of the debtor uses as a residence;
          ``(B) a cooperative that owns property that the debtor or a 
        dependent of the debtor uses as a residence; or
          ``(C) a burial plot for the debtor or a dependent of the 
        debtor.
  ``(2) The limitation under paragraph (1) shall not apply to an 
exemption claimed under subsection (b)(2)(A) by a family farmer for the 
principal residence of that farmer.''.

SEC. 321. MISCELLANEOUS IMPROVEMENTS.

  (a) Who May Be a Debtor.--Section 109 of title 11, United States 
Code, is amended by adding at the end the following:
  ``(h) Notwithstanding any other provision of this section, an 
individual may not be a debtor under this title unless that individual 
has, during the 90-day period preceding the date of filing of the 
petition of that individual, made a good-faith attempt to create a debt 
repayment plan outside the judicial system for bankruptcy law (commonly 
referred to as the `bankruptcy system'), through a credit counseling 
program (offered through credit counseling services described in 
section 111(a)) that has been approved by--
          ``(1) the United States trustee; or
          ``(2) the bankruptcy administrator for the district in which 
        the petition is filed.''.
  (b) Chapter 7 Discharge.--Section 727(a) of title 11, United States 
Code, is amended--
          (1) in paragraph (9), by striking ``or'' at the end;
          (2) in paragraph (10), by striking the period and inserting 
        ``; or''; and
          (3) by adding at the end the following:
          ``(11) after the filing of the petition, the debtor failed to 
        complete an instructional course concerning personal financial 
        management described in section 111 that was administered or 
        approved by--
                  ``(A) the United States trustee; or
                  ``(B) the bankruptcy administrator for the district 
                in which the petition is filed.''.
  (c) Chapter 13 Discharge.--Section 1328 of title 11, United States 
Code, is amended by adding at the end the following:
  ``(f) 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 that was administered or approved by--
          ``(1) the United States trustee; or
          ``(2) the bankruptcy administrator for the district in which 
        the petition is filed.''.
  (d) Debtor's Duties.--Section 521 of title 11, United States Code, as 
amended by sections 301(b) and 318(b) of this Act, is amended by adding 
at the end the following:
  ``(e) In addition to the requirements under subsection (a), an 
individual debtor shall file with the court--
          ``(1) a certificate from the credit counseling service that 
        provided the debtor services under section 109(h) or other 
        substantial evidence of a good-faith attempt to create a debt 
        repayment plan outside the bankruptcy system in the manner 
        prescribed in section 109(h); and
          ``(2) a copy of the debt repayment plan developed under 
        section 109(h) through the credit counseling service referred 
        to in paragraph (1).''.
  (e) Exceptions to Discharge.--Section 523(d) of title 11, United 
States Code, as amended by section 202 of this Act, is amended by 
striking paragraph (3)(A)(i) and inserting the following:
          ``(i) before the filing of the petition, the debtor made a 
        good faith attempt pursuant to section 109(h) to negotiate a 
        reasonable alternative repayment schedule (including making an 
        offer of a reasonable alternative repayment schedule); and''.
  (f) General Provisions.--
          (1) In general.--Chapter 1 of title 11, United States Code, 
        is amended by adding at the end the following:

``Sec. 111. Credit counseling services; financial management 
                    instructional courses

  ``(a) The clerk of each district shall maintain a list of credit 
counseling services that provide 1 or more programs described in 
section 109(h) and that have been approved by--
          ``(1) the United States trustee; or
          ``(2) the bankruptcy administrator for the district.
  ``(b) The United States trustee or each bankruptcy administrator 
referred to in subsection (a)(1) shall--
          ``(1) make available to debtors who are individuals an 
        instructional course concerning personal financial management, 
        under the direction of the bankruptcy court; and
          ``(2) maintain a list of instructional courses concerning 
        personal financial management that are operated by a private 
        entity and that have been approvedby the United States trustee 
or that bankruptcy administrator.''.
          (2) Clerical amendment.--The table of sections at the 
        beginning of chapter 1 of title 11, United States Code, is 
        amended by adding at the end the following:

``111. Credit counseling services; financial management instructional 
courses.''.

  (g) Definitions.--Section 101 of title 11, United States Code, as 
amended by section 317 of this Act, is amended--
          (1) by inserting after paragraph (13) the following:
          ``(13A) `debtor's principal residence'--
                  ``(A) means a residential structure, including 
                incidental property, without regard to whether that 
                structure is attached to real property; and
                  ``(B) includes an individual condominium or co-
                operative unit;''; and
          (2) by inserting after paragraph (27A), as added by section 
        318 of this Act, the following:
          ``(27B) `incidental property' means, with respect to a 
        debtor's principal residence--
                  ``(A) property commonly conveyed with a principal 
                residence in the area where the real estate is located;
                  ``(B) all easements, rights, appurtenances, fixtures, 
                rents, royalties, mineral rights, oil or gas rights or 
                profits, water rights, escrow funds, or insurance 
                proceeds; and
                  ``(C) all replacements or additions;''.

SEC. 322. BANKRUPTCY JUDGESHIPS.

  (a) Short Title.--This section may be cited as the ``Bankruptcy 
Judgeship Act of 1998''.
  (b) Temporary Judgeships.--
          (1) Appointments.--The following judgeship positions shall be 
        filled in the manner prescribed in section 152(a)(1) of title 
        28, United States Code, for the appointment of bankruptcy 
        judges provided for in section 152(a)(2) of such title:
                  (A) One additional bankruptcy judgeship for the 
                eastern district of California.
                  (B) Four additional bankruptcy judgeships for the 
                central district of California.
                  (C) One additional bankruptcy judgeship for the 
                southern district of Florida.
                  (D) Two additional bankruptcy judgeships for the 
                district of Maryland.
                  (E) One additional bankruptcy judgeship for the 
                eastern district of Michigan.
                  (F) One additional bankruptcy judgeship for the 
                southern district of Mississippi.
                  (G) One additional bankruptcy judgeship for the 
                district of New Jersey.
                  (H) One additional bankruptcy judgeship for the 
                eastern district of New York.
                  (I) One additional bankruptcy judgeship for the 
                northern district of New York.
                  (J) One additional bankruptcy judgeship for the 
                southern district of New York.
                  (K) One additional bankruptcy judgeship for the 
                eastern district of Pennsylvania.
                  (L) One additional bankruptcy judgeship for the 
                middle district of Pennsylvania.
                  (M) One additional bankruptcy judgeship for the 
                western district of Tennessee.
                  (N) One additional bankruptcy judgeship for the 
                eastern district of Virginia.
          (2) Vacancies.--The first vacancy occurring in the office of 
        a bankruptcy judge in each of the judicial districts set forth 
        in paragraph (1) that--
                  (A) results from the death, retirement, resignation, 
                or removal of a bankruptcy judge; and
                  (B) occurs 5 years or more after the appointment date 
                of a bankruptcy judge appointed under paragraph (1);
        shall not be filled.
  (c) Extensions.--
          (1) In general.--The temporary bankruptcy judgeship positions 
        authorized for the northern district of Alabama, the district 
        of Delaware, the district of Puerto Rico, the district of South 
        Carolina, and the eastern district of Tennessee under section 
        3(a) (1), (3), (7), (8), and (9) of the Bankruptcy Judgeship 
        Act of 1992 (28 U.S.C. 152 note) are extended until the first 
        vacancy occurring in the office of a bankruptcy judge in the 
        applicable district resulting from the death, retirement, 
        resignation, or removal of a bankruptcy judge and occurring--
                  (A) 8 years or more after November 8, 1993, with 
                respect to the northern district of Alabama;
                  (B) 10 years or more after October 28, 1993, with 
                respect to the district of Delaware;
                  (C) 8 years or more after August 29, 1994, with 
                respect to the district of Puerto Rico;
                  (D) 8 years or more after June 27, 1994, with respect 
                to the district of South Carolina; and
                  (E) 8 years or more after November 23, 1993, with 
                respect to the eastern district of Tennessee.
          (2) Applicability of other provisions.--All other provisions 
        of section 3 of the Bankruptcy Judgeship Act of 1992 remain 
        applicable to such temporary judgeship position.
  (d) Technical Amendment.--The first sentence of section 152(a)(1) of 
title 28, United States Code, is amended to read as follows: ``Each 
bankruptcy judge to be appointed for a judicial district as provided in 
paragraph (2) shall be appointed by the United States court of appeals 
for the circuit in which such district is located.''.
  (e) Travel Expenses of Bankruptcy Judges.--Section 156 of title 28, 
United States Code, is amended by adding at the end the following new 
subsection:
  ``(g)(1) In this subsection, the term `travel expenses'--
          ``(A) means the expenses incurred by a bankruptcy judge for 
        travel that is not directly related to any case assigned to 
        such bankruptcy judge; and
          ``(B) shall not include the travel expenses of a bankruptcy 
        judge if--
                  ``(i) the payment for the travel expenses is paid by 
                such bankruptcy judge from the personal funds of such 
                bankruptcy judge; and
                  ``(ii) such bankruptcy judge does not receive funds 
                (including reimbursement) from the United States or any 
                other person or entity for the payment of such travel 
                expenses.
  ``(2) Each bankruptcy judge shall annually submit the information 
required under paragraph (3) to the chief bankruptcy judge for the 
district in which the bankruptcy judge is assigned.
  ``(3)(A) Each chief bankruptcy judge shall submit an annual report to 
the Director of the Administrative Office of the United States Courts 
on the travel expenses of each bankruptcy judge assigned to the 
applicable district (including the travel expenses of the chief 
bankruptcy judge of such district).
  ``(B) The annual report under this paragraph shall include--
          ``(i) the travel expenses of each bankruptcy judge, with the 
        name of the bankruptcy judge to whom the travel expenses apply;
          ``(ii) a description of the subject matter and purpose of the 
        travel relating to each travel expense identified under clause 
        (i), with the name of the bankruptcy judge to whom the travel 
        applies; and
          ``(iii) the number of days of each travel described under 
        clause (ii), with the name of the bankruptcy judge to whom the 
        travel applies.
  ``(4)(A) The Director of the Administrative Office of the United 
States Courts shall--
          ``(i) consolidate the reports submitted under paragraph (3) 
        into a single report; and
          ``(ii) annually submit such consolidated report to Congress.
  ``(B) The consolidated report submitted under this paragraph shall 
include the specific information required under paragraph (3)(B), 
including the name of each bankruptcy judge with respect to clauses 
(i), (ii), and (iii) of paragraph (3)(B).''.

SEC. 323. PREFERRED PAYMENT OF CHILD SUPPORT IN CHAPTER 7 PROCEEDINGS.

  Section 507(a) of title 11, United States Code, is amended in the 
matter preceding paragraph (1), by inserting ``, except that, 
notwithstanding any other provision of this title, any expense or claim 
entitled to priority under paragraph (7) shall have first priority over 
any other expense or claim that has priority under any other provision 
of this subsection'' before the colon.

SEC. 324. PREFERRED PAYMENT OF CHILD SUPPORT IN CHAPTER 13 PROCEEDINGS.

  Section 1322(b)(1) of title 11, United States Code, is amended by 
striking the semicolon at the end and inserting the following: ``and 
provide for the payment of any claim entitled to priority under section 
507(a)(7) before the payment of any other claim entitled to priority 
under section 507(a), notwithstanding the priorities established under 
section 507(a).''.

SEC. 325. PAYMENT OF CHILD SUPPORT REQUIRED TO OBTAIN A DISCHARGE IN 
                    CHAPTER 13 PROCEEDINGS.

  Title 11, United States Code, is amended--
          (1) in section 1325(a)--
                  (A) in paragraph (5), by striking ``and'' at the end;
                  (B) in paragraph (6), by striking the period at the 
                end and inserting ``; and''; and
                  (C) by adding at the end the following:
          ``(7) if the debtor is required by a judicial or 
        administrative order to pay alimony to, maintenance for, or 
        support of a spouse, former spouse, or child of the debtor, the 
        debtor has paid all amounts payable under that order for 
        alimony, maintenance, or support that are due after the date on 
        which the petition is filed.''; and
          (2) in section 1328(a), as amended by section 314 of this 
        Act, in the matter preceding paragraph (1), by inserting ``, 
        and with respect to a debtor who is required by a judicial or 
        administrative order to pay alimony to, maintenance for, or 
        support of a spouse, former spouse, or child of the debtor, 
        only after the debtor certifies as of the later of the date of 
        that completion or the date of certification that all amounts 
        payable under that order for alimony, maintenance, or support 
        that are due before the date of that certification have been 
        paid in accordance with the plan if applicable, or if the 
        underlying debt is not treated by the plan, paid in full'' 
        after ``completion by the debtor of all payments under the 
        plan''.

SEC. 326. CHILD SUPPORT AND ALIMONY COLLECTION.

  Section 362(b) of title 11, United States Code, is amended--
          (1) in paragraph (17), by striking ``or'' at the end;
          (2) in paragraph (18), by striking the period at the end and 
        inserting a semicolon; and
          (3) by adding at the end the following:
          ``(19) under subsection (a) with respect to the withholding 
        of income pursuant to an order as specified in section 466(b) 
        of the Social Security Act (42 U.S.C. 666(b)); or
          ``(20) under subsection (a) with respect to the withholding, 
        suspension, or restriction of drivers' licenses, professional 
        and occupational licenses, and recreational licenses pursuant 
        to State law, as specified in section 466(a)(15) of the Social 
        Security Act (42 U.S.C. 666(a)(15)) or with respect to the 
        reporting of overdue support owed by an absent parent to any 
        consumer reporting agency as specified in section 466(a)(7) of 
        the Social Security Act (42 U.S.C. 666(a)(7)).''.

SEC. 327. NONDISCHARGEABILITY OF CERTAIN DEBTS FOR ALIMONY, 
                    MAINTENANCE, AND SUPPORT.

  Section 523 of title 11, United States Code, as amended by section 
202 of this Act, is amended--
          (1) in subsection (a), by striking paragraph (5) and 
        inserting the following:
          ``(5) to a spouse, former spouse, or child of the debtor--
                  ``(A) for actual alimony to, maintenance for, or 
                support of that spouse or child;
                  ``(B) that was incurred by the debtor in the course 
                of a divorce or separation or in connection with a 
                separation agreement, property settlement agreement, 
                divorce decree, other order of a court of record, or 
                determination made in accordance with State or 
                territorial law by a governmental unit; or
                  ``(C) that is described in subparagraph (A) or (B) 
                and that is assigned pursuant to section 408(a)(3) of 
                the Social Security Act (42 U.S.C. 608(a)(3)), or to 
                the Federal Government, a State, or any political 
                subdivision of a State,
        but not to the extent that the debt (other than a debt 
        described in subparagraph (C)) is assigned to another entity, 
        voluntarily, by operation of law, or otherwise;''; and
          (2) in subsection (c), by striking ``(6), or (15)'' and 
        inserting ``or (6)''.

SEC. 328. ENFORCEMENT OF CHILD AND SPOUSAL SUPPORT.

  Section 522(c)(1) of title 11, United States Code, is amended by 
inserting ``, except that, notwithstanding any other Federal law or 
State law relating to exempted property, such exempt property shall be 
liable for debts of a kind specified in paragraph (1) or (5) of section 
523(a)'' before the semicolon at the end of the paragraph.

SEC. 329. DEPENDENT CHILD DEFINED.

  Section 101 of title 11, United States Code, is amended by inserting 
after paragraph (14) the following:
          ``(14A) `dependent child' means, with respect to an 
        individual, a child who has not attained the age of 18 and who 
        is a dependent of that individual, within the meaning of 
        section 152 of the Internal Revenue Code;''.

                    TITLE IV--TECHNICAL CORRECTIONS

SEC. 401. DEFINITIONS.

  Section 101 of title 11, United States Code, as amended by section 
317, is amended--
          (1) by striking ``In this title--'' and inserting ``In this 
        title:'';
          (2) in each paragraph, by inserting ``The term'' after the 
        paragraph designation;
          (3) in paragraph (35)(B), by striking ``paragraphs (21B) and 
        (33)(A)'' and inserting ``paragraphs (23) and (35)'';
          (4) in each of paragraphs (35A) and (38), by striking ``; 
        and'' at the end and inserting a period;
          (5) in paragraph (51B)--
                  (A) by inserting ``who is not a family farmer'' after 
                ``debtor'' the first place it appears; and
                  (B) by striking ``thereto having aggregate'' and all 
                that follows through the end of the paragraph;
          (6) by amending paragraph (54) to read as follows:
          ``(54) The term `transfer' means--
                  ``(A) the creation of a lien;
                  ``(B) the retention of title as a security interest;
                  ``(C) the foreclosure of a debtor's equity of 
                redemption; or
                  ``(D) each mode, direct or indirect, absolute or 
                conditional, voluntary or involuntary, of disposing of 
                or parting with--
                          ``(i) property; or
                          ``(ii) an interest in property;'';
          (7) in each of paragraphs (1) through (35), in each of 
        paragraphs (36) and (37), and in each of paragraphs (40) 
        through (56A) (including paragraph (54), as amended by 
        paragraph (6) of this section), by striking the semicolon at 
        the end and inserting a period; and
          (8) by redesignating paragraphs (4) through (56A) in entirely 
        numerical sequence, so as to result in numerical paragraph 
        designations of (4) through (72), respectively.

SEC. 402. ADJUSTMENT OF DOLLAR AMOUNTS.

  Section 104 of title 11, United States Code, is amended by inserting 
``522(f)(3), 707(b)(5),'' after ``522(d),'' each place it appears.

SEC. 403. EXTENSION OF TIME.

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

SEC. 404. WHO MAY BE A DEBTOR.

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

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

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

SEC. 406. LIMITATION ON COMPENSATION OF PROFESSIONAL PERSONS.

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

SEC. 407. SPECIAL TAX PROVISIONS.

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

SEC. 408. EFFECT OF CONVERSION.

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

SEC. 409. AUTOMATIC STAY.

  Section 362(b) of title 11, United States Code, as amended by section 
326 of this Act, is amended--
          (1) in paragraph (19), by striking ``or'' at the end;
          (2) in paragraph (20), by striking the period at the end and 
        inserting a semicolon; and
          (3) by adding at the end the following:
          ``(21) under subsection (a) of this section of any transfer 
        that is not avoidable under section 544 and that is not 
        avoidable under section 549;
          ``(22) under subsection (a)(3) of this section, of the 
        continuation of any eviction, unlawful detainer action, or 
        similar proceeding by a lessor against a debtor involving 
        residential real property in which the debtor resides as a 
        tenant under a rental agreement; or
          ``(23) under subsection (a)(3) of this section, of the 
        commencement of any eviction, unlawful detainer action, or 
        similar proceeding by a lessor against a debtor involving 
        residential real property in which the debtor resides as a 
        tenant under a rental agreement that has terminated.''.

SEC. 410. AMENDMENT TO TABLE OF SECTIONS.

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

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

SEC. 411. 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. 412. PRIORITIES.

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

SEC. 413. EXEMPTIONS.

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

SEC. 414. EXCEPTIONS TO DISCHARGE.

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

SEC. 415. EFFECT OF DISCHARGE.

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

SEC. 416. 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. 417. PROPERTY OF THE ESTATE.

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

SEC. 418. LIMITATIONS ON AVOIDING POWERS.

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

SEC. 419. PREFERENCES.

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

SEC. 420. POSTPETITION TRANSACTIONS.

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

SEC. 421. TECHNICAL AMENDMENT.

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

SEC. 422. SETOFF.

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

SEC. 423. DISPOSITION OF PROPERTY OF THE ESTATE.

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

SEC. 424. GENERAL PROVISIONS.

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

SEC. 425. 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. Upon the filing of a 
report under the preceding sentence--
          ``(i) the trustee elected under paragraph (1) shall be 
        considered to have been selected and appointed for purposes of 
        this section; and
          ``(ii) the service of any trustee appointed under subsection 
        (d) shall terminate.
  ``(B) In the case of any dispute arising out of an election under 
subparagraph (A), the court shall resolve the dispute.''.

SEC. 426. 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. 427. 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. 428. DISCHARGE UNDER CHAPTER 12.

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

SEC. 429. EXTENSIONS.

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

SEC. 430. 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. 431. 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. 432. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

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

              I. BACKGROUND AND NEED FOR THE LEGISLATION.

    In recent years, bankruptcy filings have increased to 
record levels. According to the House, there were 1,423,128 
bankruptcy filings in the 12 month period ending March 31, 
1998, of which 1,370,490 (96.3%) were consumer bankruptcies. 
This represents a 19.1 percent rise over the same period ending 
in 1997, and the eight consecutive 12-month period that filings 
hit a record high. Currently, the rate of personal bankruptcies 
is about one in seventy. Richard E. Coulson et al., Case 
Developments In Consumer Bankruptcy Highlight Need For 
Statutory Reform, 51 Consumer Fin. L. Q. Rep. 261 (Summer 
1997). Unemployment Holds Steady And Is The Lowest In 28 Years, 
Seattle Intelligencer, June 6, 1998, at B3; Statement of Jim 
Paxton, Chairman of the Joint Economic Committee, July 
Employment Statistics, (Aug. 8, 1997). This extraordinary 
increase in bankruptcy filings has a significant negative 
impact on the American economy. In response to this rising 
number of bankruptcies and the heightened degree of abusiveness 
by creditors and debtors, the Committee recommends S. 1301, 
which will promote fair and balanced reforms of the consumer 
bankruptcy laws while providing an unprecedented level of 
protection for all consumers, especially ex-spouses, single 
parents, and children affected by bankruptcy proceedings.

           General Overview of the Current Bankruptcy System

    Title I of S. 1301 reforms the bankruptcy code to limit the 
availability of bankruptcy relief to those who truly need it. 
The concept--``needs-based bankruptcy''--is the culmination of 
many Congressional efforts, by Republicans and Democrats, over 
five decades, to reform the bankruptcy system so that 
bankruptcy is available to those unfortunate Americans who need 
debt forgiveness, but is not abused by those who are not truly 
in financial need or who have the ability to contribute to 
repayment of their debts.
    The Constitution gives Congress the authority to enact 
``uniform laws on the subject of bankruptcies throughout the 
United States.'' Art. I, Sec. 8, cl. 4 (1787). Since 1898, 
bankruptcy protections have been a permanent part of federal 
law.\1\ Under current law, individuals considering bankruptcy 
often proceed under Chapter 7, where the bankrupt will 
surrender all assets which do not qualify for an exemption to a 
bankruptcy trustee. The bankruptcy trustee then sells the 
bankrupt's property and distributes the proceeds to the 
creditors. Any deficiency which remains after the sale of these 
assets is simply erased (or ``discharged''), and the bankrupt 
cannot be required to repay debts which have been erased during 
bankruptcy. Chapter 7, often referred to as ``straight 
bankruptcy,'' is the oldest and most commonly used type of 
bankruptcy proceeding.
---------------------------------------------------------------------------
    \1\ The first attempt at establishing a national bankruptcy policy 
was the Bankruptcy Act of 1800. 2 Stat. 19 (1800). This act, like the 
two that followed, was of short duration and enacted in response to a 
financial panic. Between 1803 and 1898 the United States attempted 8 
times to enact or amend a uniform system of bankruptcy. U.S. Laws, 
Statutes, Etc., Bankruptcy Act Revision, Hearings before the 
Subcommittee on Civil and Constitutional Rights, Ninety-Fourth 
Congress. Each time the act either failed to pass or was repealed.
---------------------------------------------------------------------------
    Individuals may also declare bankruptcy under Chapter 13 of 
the bankruptcy code. Chapter 13 provides for the development of 
a repayment plan that allows a debtor to repay some portion of 
pre-bankruptcy debts. At the end of the repayment period, the 
unpaid portion of debt is erased, and a debtor cannot be 
required to repay the unpaid portion of the discharged debt. 
Unlike Chapter 7, the purpose of Chapter 13 is to rehabilitate 
financially-troubled consumers by using future earnings to 
repay debts in exchange for a discharge of the unpaid portions 
of those debts.
    Prior to 1984, an individual contemplating bankruptcy had 
the unfettered discretion to choose either Chapter 7 or Chapter 
13. Thus, an individual who could repay some pre-bankruptcy 
debt under Chapter 13 was not required to do so under Chapter 
7. In 1984, Congress amended section 707 of the Bankruptcy Code 
to provide that a Chapter 7 case could be dismissed on the 
judge's or the United States trustee's motion, if the 
bankrupt's case showed ``substantial abuse.'' Unfortunately, 
for a variety of reasons, these provisions have proven 
unworkable. It is this feature of bankruptcy law which has 
caused justifiable concern on the part of many who support the 
general concept of erasing or discharging debts for Americans 
in serious financial trouble, but who recognize the need to 
tailor bankruptcy relief to the extent needed. Many feel that 
the recent explosion in personal bankruptcy filings is partly 
attributable to the decreased moral stigma associated with a 
bankruptcy system which provides debt relief to certain 
Americans who use bankruptcy as a financial planning device. 
See testimony of Tahira Hira, Subcommittee on Administrative 
Oversight and the Courts Hearing, ``S. 1301, The Consumer 
Bankruptcy Reform Act: Seeking Fair and Practical Solutions to 
the Consumer Bankruptcy Crisis'' (March 11, 1997); Testimony of 
Kenneth R. Crone, Subcommittee on Administrative Oversight and 
the Courts Hearing, ``The Increase in Personal Bankruptcy and 
the Crisis in Consumer Credit,'' (April 11, 1997). This 
decreased moral stigma means that bankruptcy is not viewed as a 
last resort for financially troubled Americans who need, and 
deserve, debt forgiveness. Lee Flint, Bankruptcy Policy: Toward 
a Moral Justification for Financial Rehabilitation of Consumer 
Debt, 48 Wash. & Lee L. Rev. 515 (1991).
    S. 1301 responds to the growing concern about the record 
levels of bankruptcy filings by clarifying when a bankruptcy 
judge who should dismiss a Chapter 7 case, or convert a Chapter 
7 case to Chapter 13. If a bankrupt in Chapter 7 can repay 
twenty-percent or more of his general unsecured debts, the 
judge can require the bankrupt to transfer to Chapter 13 or 
leave the bankruptcy system. The Committee notes that the 
Department of Justice supports a judicially administered means-
test. See Letter to the Honorable Orrin G. Hatch, Committee on 
the Judiciary, May 7, 1998 (on file with the Committee).
    While some opponents of bankruptcy reform including the two 
dissenting Members of this Committee, blame the explosion of 
bankruptcies on too much credit, the Committee has strong 
reservations about the detrimental effect on power and minority 
communities of reducing the availability of credit. If credit 
lending practices are restricted as the dissenters suggest 
should be, the result will be less credit available to women, 
minorities, and others who need toborrow money to pay various 
necessities and emergencies.

                 The History of Needs-Based Bankruptcy

    The idea of requiring bankrupts to repay their debts when 
they have the ability to do so is not new. This topic has been 
the subject of many proposed amendments, from the early 1930s 
to the current Congress. S. 1301 is an extension of this 
longstanding effort to ensure that bankruptcy is reserved for 
those truly in need of debt forgiveness. See Oversight Hearing 
on Personal Bankruptcy, Committee on the Judiciary, 
Subcommittee on Monopolies and Commercial Law, 97th Cong. 2nd 
Sess., (1982) (Statement of Frank Kennedy).
    The general structure of the present federal bankruptcy 
code is the result of the Bankruptcy Reform Act of 1978, Pub. 
L. 95-598. The 1978 Act was the first major overhaul and 
attempt to update comprehensively the bankruptcy law since 
passage of the Chandler Act in 1938. 52 Stat. 840 (1938). Prior 
to the Chandler Act, individuals in serious financial trouble 
had no choice but to file for ``straight bankruptcy'' under 
Chapter VII.\2\ However, the Chandler Act contained a new, 
alternative procedure, the Chapter XIII Wage Earner's Plan, 
which allowed an individual to retain nonexempt assets by 
proposing a plan to pay his or her existing debts from future 
income, after which the wage earner would receive a discharge 
of any unpaid balances of his debts.
---------------------------------------------------------------------------
    \2\ One feature of the 1978 revision of bankruptcy laws re-
designated the bankruptcy chapters so that they are now identified by 
Arabic, rather than Roman, numerals.
---------------------------------------------------------------------------
    The debate over Chapter XIII occurred years earlier in 
joint hearings before the House and Senate Judiciary Committees 
in 1932, during the Seventy-Second Congress. By the time it was 
enacted in 1938, Chapter XIII codified informal practices which 
had developed without explicit statutory authorization. In the 
mid 1930's in Birmingham, Alabama a former special referee in 
bankruptcy, Valentine Nesbitt, first developed a ``repayment 
option'' which was the model for Chapter XIII. Weinstein, The 
Bankruptcy Law of 1938 (1938).
    The hearings in 1932 were held on S. 3866, Section 75 of 
which would have established a repayment plan for wage earners. 
Section 75 provided a method for an indebted wage earner to 
come into court without being labeled ``a bankrupt,'' and get 
the benefit of a court injunction to fend off creditors while 
the wage earner arranged to repay his pre-bankruptcy debts in 
installments.
    Proponents of the 1932 amendment believed that most 
Americans were making enormous efforts to avoid bankruptcy, and 
that most wage earners who were in deeply in debt genuinely 
desire to pay their debts, if given time, and if they were not 
harassed by their creditors.
    During the consideration of the 1932 proposal, Congress 
explicitly considered bankruptcy practices in England. In 1888, 
an English bankruptcy statute, gave the power to the bankruptcy 
judges to condition debt forgiveness on the repayment of some 
debts. Douglas Boshkoff, Limited, Conditional, and Suspended 
Discharges in Anglo-American Bankruptcy Proceedings, U. Pa. L. 
Rev. 69 (1982). With the conditional or suspended discharge, 
English courts are given broad discretion to condition debt-
forgiveness on the making of payments to creditors from future 
earnings or other post-bankruptcy acquisitions, or to suspend 
the discharge while such payments are being made. The British 
experience shows that bankruptcy courts can, if given the 
power, play an important role limiting bankruptcy relief to 
those who truly need it. S. 1301 gives bankruptcy judges that 
power.
    Since the 1938 amendments, there have been several 
proposals to limit bankruptcy relief to those who truly need 
it. In the 1960s, Congress considered several such proposals. 
See H.R. 12784, 88th Cong., 2d Sess. (1964); H.R. 292, 89th 
Cong., 1st Sess. (1965); S. 613, 89th Cong., 1st Sess. (1965); 
H.R. 1057 & H.R. 5771, 90th Cong., 1st Sess. (1967). Under 
these proposals, an individual debtor seeking relief under the 
liquidation provisions of the bankruptcy laws would be denied 
relief if the court concluded that he or she could pay 
substantial amounts of debts out of future earnings under a 
Chapter XIII plan.
    Following the 1978 amendments, in the early 1980s, Senator 
Dole introduced S. 2000 during in the 97th Congress. In the 
House of Representatives, Congressman Evans introduced H.R. 
4786, which eventually garnered 269 co-sponsors. Congress did 
not pass either proposal in the 97th Congress, so these measure 
were reintroduced in the 98th Congress as H.R. 1169 and S. 445. 
As a result of these efforts, Congress created Section 707(b) 
of the Bankruptcy Code in 1984 to allow judges to dismiss 
Chapter 7 cases if granting relief would constitute a 
``substantial abuse'' of the bankruptcy code. Pub. Law 105-165. 
The focus of the effort was to require bankrupts who had the 
ability to pay a significant percentage of their debts 
``without difficulty'' to proceed under Chapter 13 instead of 
Chapter 7. However, the term ``substantial abuse'' was not 
defined and creditors and trustees were expressly forbidden 
from presenting evidence to a judge that granting relief in a 
particular case would result in a ``substantial abuse.'' 
Further, Section 707(b) specifies that courts must presume that 
substantial abuse does not exist. Under a minority view, the 
debtor's ``ability to pay'' debts out of future income, 
standing alone, can qualify as substantial abuse. See In Re 
Koch, 109 F. 3d 1285 (8th Cir. 1997). The prevailing view, 
however, is ``ability to pay'' is but one factor a court may 
consider in assessing whether there is a substantial abuse. See 
In Re Green, 934 F.2d 568 (4th Cir. 1991). In other words, 
Section 707(b) was designed with serious defects which have 
rendered the section unusable as a practical matter.
    S. 1301 amends Section 707(b) to cure these defects. First, 
the phrase ``substantial abuse'' has been dropped and replaced 
with the lesser standard of ``abuse.'' Second, S. 1301 
explicitly requires judges to consider a bankrupt's ability to 
repay general creditors in determining whether to dismiss the 
bankrupt's case or transfer the bankrupt to Chapter 13. 
Importantly, under S. 1301, creditors and trustees are now 
explicitly given the power to present evidence of abuse to the 
bankruptcy judge. S. 1301 gives trustees important new 
financial incentives for ferreting out bankrupts who have 
repayment capacity and provides for appropriate penalties for 
bankruptcy attorneys who recklessly steer individuals with 
repayment capacity toChapter 7 bankruptcy.
    As this historical survey clearly shows, the concept of 
limiting bankruptcy relief to those who truly need it has been 
a recurring theme in the debate over bankruptcy since the 
beginning of permanent bankruptcy laws. On numerous occasions, 
Congress has considered various proposals to limit bankruptcy 
relief in this way. Given the unprecedented level of consumer 
bankruptcies filed in this country in recent years, and the 
financial losses to American businesses and consumers which 
necessarily result from so much debt forgiveness, the Committee 
feels that the time has come for the common-sense reforms 
embodied in S. 1301.

                     Enhanced Consumer Protections

    In addition to the ``means testing'' provisions discussed 
earlier, S. 1301 contains several important reforms which will 
protect individuals who face unnecessary and unfair harassment 
from creditors. There have been examples of creditors 
unjustifiably alleging that a debt should not be discharged 
because it was incurred through fraud with no basis for making 
such an allegation. In Re Lantanawhich, 207 BR 326 (Bankr. D. 
Mass. 1987); Mohl, Sears to Pay Staff, Residents $10.82 
Million,'' The Boston Globe A-1 (September 4, 1997): Susan 
Chandler, Sears, States Settle Debt Cases Firm to Pay About 2 
Million to Illinois Customers, Chicago Tribune, (Sept. 4, 
1997); Mary Kane, ``(A) Banks Finance The Bankrupt (B) Credit 
Card Firms Eager to Solicit Consumers Despite Credit 
Problems'', The Star Ledger Newark, N.J., (July 20, 1997); 
James Russell, ``U.S. Judge Vindicates Bankrupt Consumer 
Courts: The Jurist Sends A Strong Message to Credit Card 
Marketers in Case Involving AT & T'', Orange County Reg., (May 
30, 1997). Obviously, such activities threaten the integrity of 
the bankruptcy system, one feature of which is to protect 
honest debtors from the threats of unscrupulous debt 
collectors. The Committee therefore recommends several 
provisions in Title II of S. 1301 which contain tough new 
penalties to punish and deter unethical or illegal collection 
activities.
    The two dissenting Members of the Committee completely 
ignore the new consumer protection penalties when they allege 
that S. 1301 does not adequately address the problem of 
coercive re-affirmations. Section 203 of S. 1301 specifically 
targets coercive re-affirmations by providing that creditors 
will face treble damage awards as well as minimum fines and 
legal costs if they fail to comply with the pro-consumer 
limitations which currently exist in Section 524 of the 
bankruptcy code. Moreover, under Section 203 of S. 1301 
creditors are barred from using many collection techniques if 
they refused to accept an offer of compromise from a 
financially troubled customer who later declares bankruptcy. 
Thus, it is more than disingenuous for the two dissenting 
Members of the Committee to suggest that the Committee, or the 
sponsors of this legislation, will ``make a terrible problem 
worse.''
    Moreover, the dissenters appear to ignore the tough new 
restrictions imposed on creditors' actions in bankruptcy. These 
restrictions include penalties on creditors who bring motions 
to object to debtor's discharge without substantial 
justification for the motion. The penalties for this include 
attorney fees and costs of the debtor to be assessed against 
the creditor. Furthermore, if a creditor willfully does not 
apply Chapter 13 trustee payments per the plan, it will 
constitute a violation of the bankruptcy injunction and be 
punishable as such. To complement the need for accuracy in the 
debtor's schedules, creditors are called upon to be accurate in 
the proofs of claim filed. If the proof of claim is disallowed 
or reduced in amount by 20% or more, the court may award the 
debtor attorney fees, costs and damages as warranted by the 
equities of the case. Finally, a creditor is barred from 
bringing a non-dischargeability action if the debtor made 
prepetition good faith efforts at negotiating a reasonable 
alternative payment schedule that the creditor unreasonably 
refused.
    Contrary to the views of the two dissenting Members of this 
Committee, and as Senator Durbin correctly notes in his 
additional views, the Committee adopted by unanimous consent an 
amendment to protect the elderly from predatory loans. While 
this amendment may need technical refirements to avoid 
excessive litigation and abuse, the Committee is strongly 
committed to protecting consumers from unethical lending 
practices.

              Reducing Abusive Uses of the Bankruptcy Code

    As the National Bankruptcy Review Commission correctly 
noted, many of the worst abuses of the bankruptcy system 
involve individuals who repeatedly file for bankruptcy with the 
sole intention of using the automatic stay (i.e., a court 
injunction which arises whenever a bankruptcy case is filed). 
National Bankruptcy Rev. Comm. Rep., Bankruptcy the Next Twenty 
Years, October 20, 1997 vol. 1, at 262. Accordingly, Title III 
of S. 1301 contains restrictions on repeat filers. Under S. 
1301, if a bankrupt has filed for bankruptcy before, and that 
case was dismissed, the bankrupt will not get the benefit of 
the automatic stay. The Committee feels that this change will 
dramatically reduce the number of frivolous bankruptcy cases.
    Title III also contains new protections for secured lenders 
and requires random audits of bankruptcy petitions to verify 
the accuracy of information contained in bankruptcy petitions. 
The Committee is concerned that there is little incentive for 
individuals to list all of their assets or fully disclose their 
financial affairs, including their income and living expenses, 
when they file for bankruptcy. Of course, such laxity fosters 
an environment in which the overall financial condition of the 
bankrupt is likely to be inaccurate, with the result that 
creditors may receive less than they could when a bankrupt's 
financial affairs are accurately disclosed. Accordingly, the 
random audit procedures will restore some integrity to the 
system, since all material misstatements are required to be 
reported to the appropriate authorities.

                 Enhanced Protections for Child Support

    In response to concerns that certain provisions of S. 1301 
could have unintended consequences which would make the 
collection of child support debts more difficult, the Committee 
unanimously accepted an amendment offered by Senators Hatch, 
Grassley and Kyl to enhance the relative position of child 
support claimants in bankruptcy proceedings. Section 325 of S. 
1301, now requires the payment of all unpaid child support 
prior to other debts in a Chapter 7 liquidation proceeding and 
prior final in a Chapter 13 bankruptcy. Similarly, Section 
325requires child support to be paid first before other priority debts 
in a Chapter 13 repayment plan.

     Additional Bankruptcy Judgeships and Miscellaneous Provisions

    S. 1301 requires the Administrative Office of the United 
States Courts to provide special procedures and safeguards to 
ensure the confidentiality of tax information which bankrupts 
are required to file with their court papers. S. 1301 also 
expands the scope of non-dischargeable debts to include debts 
incurred as a result of a civil judgement from claims relating 
to sexual conduct or intentional violent conduct.
    Furthermore, the Committee adopted, by a unanimous vote, an 
amendment that authorizes eighteen new temporary bankruptcy 
judgeships around the country, and extends five other ones. In 
considering whether to create new bankruptcy judgeships, the 
Committee has emphasized that the judiciary bears the burden of 
demonstrating the need for new judgeships. Although not 
satisfied that this burden has been completely met, the 
Committee is willing to agree to most of the Judicial 
Conference's requests at this time with the understanding that 
future requests will be subject to more thorough scrutiny.
    The Subcommittee on Administrative Oversight and the Courts 
held a hearing on this matter last year on September 22, 1997. 
Following the hearing, the Judicial Conference took many months 
to supply information requested by the Subcommittee. In fact, 
to date, some of the requested material has never been 
provided. For instance, the Subcommittee requested documents 
related to special task forces the Judicial Conference 
dispatched to districts requesting new judgeships to evaluate 
these districts and make recommendations regarding the 
effective use of resources. The Subcommittee was initially 
informed that no written documents existed. The Subcommittee 
then requested that the observations and recommendations be put 
in writing and submitted to the Subcommittee for review. The 
Judicial Conference responded that if this information was 
given to Congress, judges would be less candid and open about 
their respective district's shortfalls and needs. See Letter 
from Senator Grassley to the Honorable David Thompson 
(requesting information on the actions taken to avoid adding 
new judgeships), October 23, 1997, (on file with the 
Subcommittee on Administrative Oversight and the Courts); 
Letter from The Honorable David Thompson to Senator Grassley, 
November 6, 1997, (on file with the Subcommittee on 
Administrative Oversight and the Courts). The Committee views 
access to such information necessary in order for Congress to 
determine judgeship needs.
    The Judicial Conference, and supporters of its judgeship 
request, have argued for their case by referring to the overall 
rise in bankruptcy filings. The Committee feels that focusing 
merely on increased filings misses the mark.
    Importantly, the Judicial Conference uses a weighting 
system to determine when new bankruptcy judgeships are needed. 
This means that because not all bankruptcy cases require the 
same amount of judge time and effort, some cases are weighted 
more than others, with the more complex cases being given a 
much greater weight than the simpler cases. The recent increase 
in bankruptcy filings has been due almost entirely to consumer 
bankruptcy cases--in particular consumer cases filed under 
chapter 7 of the bankruptcy code. Laura Castaneda, Issuers of 
Credit Cards Get Tougher, San Francisco Chronicle, Sept. 15 
1997. Unlike complex corporate reorganizations under Chapter 
11, these cases require little effort from a bankruptcy judge. 
As a result, they are not weighted heavily in the formula used 
to assess the need for new judges. In most of the districts 
which are requesting new judgeships, the weighted case-filings, 
relied upon in making judgeship requests, have either decreased 
or remained about the same since 1993. Ed Flynn, Chapter 7 Case 
Processing Speed, American Bankruptcy Institute Journal (1994). 
Thus, the Committee questions the pressing need for new 
judgeships because the weighted case filings appear either to 
have remained stable or decreased in most requesting districts.
    The amendment includes a modest reporting requirement for 
non-caseload related travel, to help ensure more 
accountability. In recent years, a question has arisen 
regarding the amount of non-case related travel engaged in by 
bankruptcy judges in those districts which are requesting new 
judgeships. The Committee believes that the American taxpayer 
is entitled to expect that bankruptcy judges exhaust all 
options before requesting additional judgeships.
    The Committee has been very reluctant to create new 
judgeships unless the need for such judgeships are fully 
justified. At the request of Subcommittee Chairman Grassley, 
the General Accounting Office examined the non-caseload related 
travel of bankruptcy judges in districts which are requesting 
new judgeships. GAO Rep., Federal Judiciary: Information on 
Noncase-Related Travel of Bankruptcy Judges in 14 Bankruptcy 
Districts, GGD-97-166R at 1, Aug. 8, 1997. The non-partisan GAO 
study has raised questions regarding non-case related travel.
    The Committee agrees that bankruptcy judges should engage 
in some non-case related travel. But, it is perhaps 
inappropriate to spend nearly a year's worth of work-time on 
non-case related travel--as one district did--where pressing 
official work is pending and then argue for more judges. In the 
fourteen requesting districts, there were 416 trips taken in 
1995 and 406 taken in 1996. GAO Report at 4. Many non-case 
related trips involved teaching seminars and courses. It is 
beyond dispute that there are numerous bankruptcy professionals 
and academics capable of teaching seminars and many of these 
activities are beneficial to the general public. However, the 
Committee is of the view that bankruptcy judges should give 
first priority to their caseload. That would be the appropriate 
way to do business, and one the Committee believes that the 
taxpayers have every right to demand.

  II. COMMITTEE AND SUBCOMMITTEE CONSIDERATION IN THE 105TH CONGRESS.

    As noted earlier, the work of the Committee in the 105th 
Congress built upon the foundations established by the work of 
prior Congresses. In addition, during the 105th Congress, the 
Subcommittee on Administrative Oversight and the Courts held 
the following hearings.

                         Subcommittee Hearings

    The Subcommittee on Administrative Oversight and the Courts 
of the Committee on the Judiciary held a hearing on April 11, 
1997 on the increase in personal bankruptcies and the crisisin 
consumer credit. Witnesses included Michael E. Staten, Director of the 
Credit Research Center, Purdue University; Ian Domowitz, Department of 
Economics, Professor at Northwestern University; Edward Bankole, Vice-
President, Moody's Investors Service; Kim Kowalewski, Chief, Financial 
and General Macroeconomic Analysis Division, Congressional Budget 
Office; and Michael McEneney, Morrison and Foerster, on behalf of the 
National Consumer Bankruptcy Coalition.
    On October 21, 1997, the Subcommittee held a hearing in 
Washington, D.C. to review the recommendations of the National 
Bankruptcy Review Commission. The witnesses testifying on 
behalf of the Commission included Brady C. Williamson, Chair; 
Hon. Robert E. Ginsberg, Vice-Chair, U.S. Bankruptcy Judge; M. 
Caldwell Butler; Jim Sheppard; Hon. Edith Hollan Jones; John 
Gose; Babette Ceccotti; and Jay Alix.
    On March 11, 1998, the Subcommittee held a hearing on S. 
1301, entitled ``The Consumer Bankruptcy Reform Act: Seeking 
Fair and Practical Solutions to the Consumer Bankruptcy 
Crisis''. The Subcommittee heard witnesses from three panels. 
The first panel of witnesses included Lawrence A. Friedman, 
Secretary, National Association of Bankruptcy Trustees; Hon. A. 
Thomas Small, Chief Bankruptcy Judge; Tahira K. Hira, Professor 
at Iowa State University; George J. Wallace, attorney at 
Eckert, Seamans, Cherin, and Melott, LLC; William E. Brewer, 
Jr., National Association of Consumer Bankruptcy Attorneys; 
Stan Bluestone, National Retail Federation. Witnesses on the 
second panel were Richard Stana, General Accounting Office; 
Michael Staten, Director of Credit Research Center; Stephen 
Brobeck, Executive Director, Consumer Federation of America; 
Brian McDonnell, National Association of Federal Credit Unions; 
and Robert Elliot, Household International. Witnesses on the 
third panel consisted of Douglas Boshkoff, Professor at Indiana 
University School of Law; Randy Picker, National Bankruptcy 
Conference; Deborah D. Williamson, American Bankruptcy 
Institute; and Matthew Mason, United Auto Workers.
    Thus, over a period of a year, the Subcommittee held three 
hearings focusing primarily on consumer bankruptcy issues and 
heard from twenty-five witnesses.
    Given the large number of witnesses who provided testimony 
regarding the current crisis in consumer bankruptcy, the 
committee is perplexed by the complaint of the two dissenting 
Members of this Committee that further hearings are needed. It 
is profoundly ironic that the Senator voicing this complaint 
never attended any of the three hearings conducted by the 
Subcommittee on the Administrative Oversight and the Courts or 
submitted written questions to any of the witnesses who 
appeared at these hearings. In light of such non-participation, 
it is difficult to see any value to future hearings. Thus, 
having chosen not to engage in various hearings held by the 
Subcommittee in any way, it is troubling that the two 
dissenting Members of the Committee now use their own non-
participation as a political argument to derail this 
legislation.

                          subcommittee markup

    The Subcommittee on Administrative Oversight and the Courts 
met on April 2, 1998 at 2 p.m. with a quorum present.
    (1) Senator Kohl offered an amendment to eliminate the 
misuse of the homestead exemption. This amendment would allow 
certain property to be exempted under state or local law, up to 
$100,000. The amendment was agreed to by unanimous consent.
    (2) Senator Sessions offered an amendment that would impose 
mandatory debtor education. The amendment was agreed to by 
unanimous consent.
    (3) Senator Durbin offered an amendment that would exempt 
debtors from creditor-initiated motions under Section 707(b) if 
the family has a monthly total income equal to or less than the 
national median family income. The amendment was agreed to by 
unanimous consent.
    (4) Senator Sessions offered an amendment that would 
prohibit the use of bankruptcy laws to avoid evictions and 
unlawful detainer actions. The amendment was agreed by a 4-3 
vote.
    (5) Senator Kyl offered an amendment to establish a 
presumption that debts incurred during the 90-day period 
preceding a bankruptcy are nondischargeable. The amendment was 
agreed to by a voice vote.
    (6) Senator Kyl offered an amendment that would make debts 
incurred through fraud nondischargeable in Chapter 13 cases. 
The amendment was agreed to by a voice vote.
    (7) Senator Sessions offered an amendment to define the 
term debtor's principal residence, incidental property, and 
other purposes. The amendment was deferred for Committee 
consideration.
    (8) Senator Sessions offered an amendment to bar 
``cramdowns'' of items purchased on secured credit within 90 
days of bankruptcy. The amendment was agreed to by unanimous 
consent.
    The Subcommittee then voted to favorably report S. 1301 
with an amendment in the nature of a substitute by a rollcall 
vote of 6 yeas and 1 nay.
        YEAS                          NAYS
Thurmond (by proxy)                 Feingold
Kyl
Sessions
Durbin
Kohl (by proxy)
Grassley

                            committee markup

    The Senate Committee on the Judiciary, with a quorum 
present, met on May 21, 1998 at 10 a.m. The following rollcall 
votes occurred on the bill and the amendments proposed thereto:
    (1) Senator Specter offered an amendment to permit a judge 
to waive bankruptcy filing fees when the judge determines the 
debtor will be unable to pay the fee even in a series of 
monthly installments. The amendment was defeated by a rollcall 
vote of 9 yeas to 9 nays.
        YEAS                          NAYS
Specter                             Thurmond
Leahy                               Grassley
Kennedy (by proxy)                  Thompson (by proxy)
Biden                               Kyl
Kohl (by proxy)                     DeWine
Feinstein                           Ashcroft
Feingold                            Abraham
Durbin                              Sessions
Torricelli                          Hatch
    (2) Senator Specter offered an amendment that would provide 
that the standard applied by a judge in ordering the debtors' 
attorney to pay costs and attorney's fees would be that the 
conduct of the lawyer be ``frivolous''. The amendment was 
defeated by 9 yeas to 9 nays.
        YEAS                          NAYS
Specter                             Thurmond
Thompson (by proxy)                 Grassley
Leahy                               Kyl
Kennedy (by proxy)                  DeWine
Biden                               Ashcroft
Kohl (by proxy)                     Abraham
Feinstein                           Sessions
Feingold                            Durbin
Torricelli                          Hatch
    (3) Senator Feingold offered an amendment that would 
provide that the standard applied by a judge in ordering the 
debtors's attorney to pay costs and attorney's fees would be 
that the conduct of the lawyer was not substantially justified. 
The amendment was accepted by unanimous consent.
    (4) Senator Grassley offered an amendment to provide 
additional bankruptcy judgeships. The amendment was agreed by 
unanimous consent.
    (5) Senator Grassley offered a technical amendment to 
insert language that would provide more-focused creditor 
sanctions. The amendment was agreed by unanimous consent.
    (6) Senator Hatch offered an amendment co-sponsored by 
Senators Grassley and Kyl to augment the ability of ex-spouses, 
single parents and children to collect payments from deadbeat 
parents by making child support and alimony payments the top 
priority under the bankruptcy laws. The amendment was accepted 
by unanimous consent.
    (7) Senator Durbin offered an amendment that would broaden 
the Federal Trade Commission's definition of household goods 
beyond families with children to all persons involved in the 
bankruptcy proceedings. The amendment was deferred for floor 
consideration.
    (8) Senator Abraham offered an amendment that would 
prohibit ``cramdowns'' in Chapter 13 cases. The amendment was 
passed by a 10 yeas to 7 nays rollcall vote.
        YEAS                          NAYS
Thurmond                            Leahy (by proxy)
Grassley                            Kennedy
Thompson (by proxy)                 Biden
Kyl                                 Kohl
DeWine                              Feinstein
Ashcroft (by proxy)                 Feingold
Abraham                             Durbin
Sessions
Torricelli
Hatch
    (9) Senator Torricelli offered an amendment that provided 
that any debt incurred for certain intentional tort would not 
be dischargeable. The amendment was agreed to by unanimous 
consent.
    (10) Senator Durbin offered an amendment that would modify 
the amendment accepted by the Subcommittee on Administrative 
Oversight and the Courts to prohibit the use of bankruptcy laws 
to avoid evictions and unlawful detainer actions, if the debtor 
continued to pay rent during the course of the bankruptcy. The 
amendment was deferred for floor consideration.
    (11) Senator Durbin offered an amendment to disallow 
bankruptcy claims of lenders who engage in predatory lending 
practices in violation of the Truth in Lending Act. The 
amendment was agreed to by unanimous consent.
    (12) Senator Leahy offered an amendment to require that the 
Administrative Office of the Director of the United States 
Courts establish a standard of measures to safeguard the 
confidentiality of tax information. The amendment was adopted 
by unanimous consent.
    (13) Senator Feingold offered an amendment that would 
exempt debtor's attorneys from being responsible for reasonable 
costs and attorney fees in cases where an attorney took on 
thebankruptcy case pro bono. The amendment was deferred.
    The Committee voted to favorably report S. 1301 by a 
rollcall vote of 15 yeas to 2 nays.
        YEAS                          NAYS
Thurmond                            Kennedy
Grassley                            Feingold
Specter (by proxy)
Thompson (by proxy)
Kyl
DeWine
Ashcroft
Abraham
Sessions
Leahy
Biden
Kohl (by proxy)
Durbin
Torricelli
Hatch

                    III. SECTION-BY-SECTION ANALYSIS

                    title I--needs based bankruptcy

    This title of S. 1301 changes section 707(b) of the 
bankruptcy code to allow for a Chapter 7 case to be dismissed 
or converted to Chapter 13.

Section 101. Conversion

    This section amends section 706(c) of Title 11 of the 
United States Code. It is amended by inserting ``or consents 
to'' after ``requests''.

Section 102. Dismissal or conversion

    This section deletes the current section heading and 
inserts the following: ``707. Dismissal of a case or conversion 
to a case under chapter 13.'' The section strikes the word 
``substantial'' and provides a non-exhaustive list of factors 
that a court must consider in deciding whether to dismiss or 
convert a Chapter 7 Bankruptcy case. The factors include the 
following: (A) if the debtor could pay an amount greater than 
or equal to 20% of unsecured claims which are not considered to 
be priority claims or (B) if the debtor filed the petition for 
relief in bad faith. The term ``bad faith'' is intended to 
encompass situations where dismissals have been warranted under 
the current version of 707(b). This section explicitly gives 
creditors and trustees the right to file motions under Section 
707(b). The Committee believes that this will level the playing 
field for creditors.
    In addition, the section directs the court to order the 
counsel for the debtor to reimburse the trustee for all 
reasonable costs associated with prosecuting a motion for 
dismissal or conversion if the motion was granted and if the 
court finds that the action of the counsel for the debtor in 
filing under this chapter was not substantially justified. The 
Committee intends the term ``not substantially justified,'' as 
used in this section, and as used throughout S.1301, to mean 
that there is no ``reasonable basis in fact and law,'' as 
interpreted by the following bankruptcy cases: In re Akdogan, 
204 B.R. 90, 98 (E.D.N.Y 1997); see also In re Carolam, 204 
B.R. 980, 987 (Bankr. 9th Cir. 1996) (1996): In re Burns, 894 
F.2d 361, 363 (10th Cir. 1990) (discussing history of Section 
523 (d) of the Bankruptcy Code).
    As four dissenting members of the National Bankruptcy 
Commission correctly observed, ``bankruptcy mills'' often 
process consumers into bankruptcies without ``serious 
investigation'' of their financial condition. Recommendations 
for Reform of Consumer Bankruptcy Law By Four Dissenting 
Commissioners, p. 23, printed in The Report of the National 
Bankruptcy Review Commission. The Committee notes that Chapter 
7 trustees are often in the best position to know which 
bankrupts have the ability to repay their debts. Therefore, 
trustees are now expected to investigate the debtor's petition 
and schedules and conduct the first meeting of creditors to 
determine in a fair way if the debtor does not belong in 
Chapter 7. The prospect of reimbursment for filing 707(b) 
motions will deputize this well-informed army of trustees to 
identify and eliminate bankruptcy abuses. The court may further 
order fines against the debtor's attorney for violations of 
Rule 9011, where appropriate.
    Furthermore, the section provides that the court may award 
a debtor all reasonable costs in contesting a creditor's motion 
to transfer or dismiss, including attorneys'' fees, if the 
court does not grant the motion and the party's position was 
not substantially justified or the motion was brought solely to 
coerce a debtor into waiving a guaranteed right. Thus, contrary 
to the assertion of the two dissenting Members of this 
Committee, there are real and meaningful disincentives for 
creditors to uses 707(b) motions solely to harass or coerce 
debtors.
    The section also addresses the problems associated with 
small creditors by providing that a party in interest filing an 
aggregate claim of less than $1,000 is not subject to the fines 
in subparagraph (A).
    Finally, the section prohibits Sec. 707(b) creditor and 
trustee motions if the debtor (or the debtor and spouse 
combined) have current monthly total income equal to or less 
than thenational median household monthly income for a 
household of equal size. The section further provides that for a 
household of more than 4, the median income of the household shall be 
that of a household of 4 plus $583 for each additional member of the 
household above 4.

        title ii--enhanced procedural protections for consumers

Section 201. Allowance of claims or interests

    This section amends section 502 of Title 11, United States 
Code, to prevent creditors in bankruptcy from deliberately 
overstating their claims. Under the amended section, a court 
may award the debtor reasonable attorneys' fees if the court 
disallows the creditor's claim or the court reduces the 
creditor's claim by more than 20% and the court finds that the 
position of the filing party was not substantially justified. 
Case law permits the court to award additional damages when 
appropriate and the position of the creditor was not 
substantially justified.

Section 202. Exceptions to discharge

    This section amends section 523 of Title 11 of the United 
States Code. The section adds to the list of non-dischargeable 
debts, debts acquired by a ``materially false representation 
upon which the defrauded person justifiably relied.'' The 
Committee is especially concerned that some unscrupulous 
creditors have alleged false representations with no basis for 
doing so. Under the amended section, a court shall award the 
debtor reasonable attorneys' fees and costs if the creditor 
requests a determination of dischargeability of a consumer debt 
and the debt is not discharged. This section also directs the 
court, if it finds the creditor's proceeding is not 
substantially justified, to award additional amounts as may be 
required by the equities of the case.
    Additionally, the section provides that a creditor may not 
contest the discharge of a consumer debt if (1) the debtor made 
a good faith effort to negotiate a reasonable repayment 
schedule and (2) the creditor unreasonably refused to negotiate 
a repayment schedule. The burden of proof for establishing 
these facts will be on the debtor.

Section 203. Effect of discharge

    This section amends section 524 of Title 11 of the United 
States Code. Under the amended section, the ``willful'' failure 
of a creditor to credit payments received under a plan 
confirmed under the bankruptcy code shall constitute a 
violation of this discharge injunction under subsection (a)(2). 
The Committee intends the term ``willful'' to encompass only 
deliberate refusals to credit payments under circumstances 
where it is clear that the creditor is aware of its legally 
binding responsibility to do so. The section also provides that 
a creditor may not charge a debtor or his account for 
attorneys' fees or costs except as specifically provided for in 
the plan. In addition, any individual who is injured because of 
a failure by a creditor to comply with reaffirmation agreement 
requirements or by any willful violation of the subsection 
(a)(2) injunction shall be entitled to recover (1) the greater 
of (A) the amount of actual damages multiplied by 3 or (B) 
$5,000; and (2) costs and attorneys' fees.

Section 204. Automatic stay

    This section amends section 362(h) of Title 11 of the 
United States Code. Under the amended section, any individual 
who is injured by a willful violation of a stay provided under 
this section shall be entitled to recover (1) actual damages 
and (2) reasonable costs and attorneys' fees. The section also 
provides that the above individual may recover punitive damages 
in appropriate circumstances.

Section 205. Discharge

    This section amends section 727 of Title 11 of the United 
States Code. The section provides that a creditor may not 
request a determination of dischargeability of a consumer debt 
if (1) the debtor made a good faith effort to negotiate a 
reasonable repayment schedule and (2) the creditor unreasonably 
refused to negotiate a repayment schedule. The burden of proof 
for establishing these facts will be on the debtor. Under the 
amended section, the court may award the debtor reasonable 
attorneys' fees and costs if a creditor files a motion to deny 
relief to a debtor and the motion is denied or withdrawn after 
the debtor has replied. The section also provides that the 
court may assess damages against the creditor, in an amount as 
may be required by the equities of the case, if it finds the 
position of a party filing a motion not substantially 
justified.

Section 206. Discouraging predatory lending practices

    This section amends section 502(b) of Title 11 of the 
United States Code. After technical amendments, this section 
amends section 502 to prohibit the bankruptcy claims of lenders 
that materially violate certain requirements of the Truth in 
Lending Act in new loans made by such lenders. However, the 
Committee does not intend to clog the bankruptcy courts with 
litigation over disputes involving the Truth in Lending Act.

  title iii--improved procedures for efficient administration of the 
                           bankruptcy system

Section 301. Notice of alternatives

    This section amends section 342 of Title 11 of the United 
States Code. Under the amended section, an individual whose 
debts are primarily consumer debts shall receive a written 
notice prescribed by the United States trustee for the district 
in which the petition is filed. The section provides that the 
notice shall contain the following:
          (1) brief descriptions of chapters 7, 11, 12 and 13 
        of title 11 outlining the general purpose, benefits and 
        costs of proceeding under each chapter;
          (2) brief descriptions of services available from an 
        independent, nonprofit debt counseling service; and
          (3) the name, address and telephone number of each 
        nonprofit debt counseling service with an office 
        located in the district in which the petition was 
        filed. The list of nonprofit debt counseling services 
        shall include any service that has registered with the 
        clerk of the bankruptcy court on or before December 10 
        of the preceding year, unless the chief bankruptcy 
        judge of the district, after notice and opportunity for 
        a hearing, orders, for good cause, that a particular 
        debt counseling service shall not be listed.
    Further, the section also amends section 521 of Title 11 of 
the United States Code to clarify a debtor's duties. Under the 
amended section, the debtor shall file with the court the 
following:
          (1) a list of creditors; and unless the court orders 
        otherwise;
          (2) a schedule of assets and liabilities;
          (3) a schedule of current income and expenditures;
          (4) a statement of the debtor's financial affairs;
          (5) if applicable, a certificate of the attorney for 
        the debtor or bankruptcy petition preparer indicating 
        the debtor received any notice required or if no 
        attorney or bankruptcy petition preparer are indicated, 
        that notice was actually obtained and read by the 
        debtor;
          (6) copies of Federal tax returns filed by the debtor 
        for the 3-year period preceding the order for relief;
          (7) copies of all payment advances or other evidence 
        of payment received by the debtor from any employer 
        within 60 days prior to the filing of the petition;
          (8) an itemized statement of projected monthly net 
        income; and
          (9) a statement disclosing any reasonably anticipated 
        increase in income or expenditures over the 12 months 
        following the date of filing.
    The section also adds that a creditor under chapter 7 or 13 
may at any time request the petition, schedule, and a statement 
of affairs filed by the debtor or a plan filed by the debtor 
from the bankruptcy court.
    The section also provides that a debtor under chapter 7 or 
13 shall file with the court the following:
          (1) at the time filed with the taxing authority, all 
        tax returns within the period from the commencement of 
        the case until its close;
          (2) at the time filed with the taxing authority, all 
        tax returns that were not filed with the taxing 
        authority when the schedules under subsection (a)(1) 
        were filed with respect to the period that is 3 years 
        before the order for relief;
          (3) any amendments to tax returns; and
          (4) in Chapter 13 cases, a statement subject to 
        penalties of perjury of debtor's income and 
        expenditures in the preceding tax year and monthly net 
        income. The preceding statement must show how the 
        amounts are calculated. This statement shall disclose 
        the amount and sources of income of the debtor, the 
        identity of any persons responsible with the debtor for 
        the support of any dependents of the debtor; and any 
        persons who contributed to the debtor's household as 
        well as the amounts contributed.
    In addition, the tax returns, amendments, and statement of 
income and expenditures previously described shall be available 
for inspection and copying by the United States trustee, any 
bankruptcy administrator, trustee or party in interest.
    The Director of the Administrative Office of the United 
States Courts shall establish procedures to maintain the 
confidentiality of any tax information no later that 30 days 
after the date of enactment of the Consumer Bankruptcy Act of 
1998. Moreover, the section directs the Director of the 
Administrative Office of the United States not later than 1 
year after the date of enactment of this bill to prepare and 
submit a report to Congress assessing the effectiveness of the 
restrictions and suggestions for penalties.

Section 302. Fair treatment of secured creditors under chapter 13

    This section amends section 1325(a)(5)(B)(I) of Title 11 of 
the United States Code. After technical amendments, this 
section strikes the previous subsection (a) and adds a new 
section, which provides that ``cramdowns'' will not be 
permitted in Chapter 13 cases. Under current law, a secured 
claim can be reduced or ``crammed down'' to the value of the 
collateral and since secured claims are paid in full, reducing 
the amount of secured claims means that secured lenders will 
receive less.
    The section also amends the title of section (b) to 
``Payment of Holders of Claims Secured by Liens.'' This 
subsection provides that a lienholder will retain the lien 
securing such claim until the debt that gave rise to the lien 
is fully paid for, as provided under the plan.
    The section also amends section 506 of Title 11 of the 
United States Code. Under the amended section, a claim is 
attributable to the purchase price of personal property 
acquired in the 90 days prior to filing cannot be reduced under 
section 506(a).

Section 303. Discouragement of bad faith repeat filings

    This section will greatly reduce abuses of the bankruptcy 
system by reducing the incentive to file for bankruptcy 
repeatedly without completing the bankruptcy process. After 
technical amendments, the amended section adds that with 
respect to any action taken on a debt or property securing a 
debt, or any lease, the automatic stay shall terminate with 
respect to the property or debtor on the 30th day after the 
filing of the later case if: (A) a single or joint case is 
filed by or against an individual debtor under chapter 7, 11, 
or 13; and (B) a single or joint case of that debtor was 
pending during the preceding year but was dismissed (other than 
a case refiled under a chapter other than chapter 7 after 
dismissal under section 707(b) of this title).
    This section provides that the court may extend the stay in 
a particular case with respect to 1 or more creditors, if a 
party in interest so requests, after providing notice and a 
hearing before the expiration of the 30-day period in paragraph 
(2). The stay will be extended only if the party in interest 
demonstrates that the filing of the later case is in good faith 
with respect to the creditors to be stayed.
    The section provides that a case shall be presumed to have 
not been filed in good faith if:
          (A) more than one previous case under chapter 7, 11, 
        or 13 of Title 11 of the United States Code title in 
        which the individual was a debtor was pending during 
        the 1-year period described in paragraph (1) or;
          (B) a previous case under chapters 7, 11, or 13 in 
        which the individual was a debtor was dismissed after 
        the debtor failed to file or amend the petition or 
        other documents as required (after having received from 
        the court a request to do so), or the debtor failed to 
        perform the terms of a plan that was confirmed by the 
        court (without substantial excuse) or;
          (C) if, (1) during the period commencing with the 
        dismissal of the next most previous case under chapter 
        7, 11, or 13 there has not been a substantial change in 
        the financial or personal affairs of the debtor, (2) 
        the case is a chapter 7 case and there is no other 
        reason to conclude that the later case will be 
        concluded with a discharge, or (3) the case is a 
        chapter 11 or 13 case and there is not a confirmed plan 
        that will be fully performed.
    The section also provides that if a request is made, and 
granted, for relief from the stay under subsection (a) with 
respect to real or personal property the court may, in addition 
to making any other order under this subsection, order that the 
relief so granted shall be in rem either: (1) for a definite 
period of not less than 1 year, or (2) indefinitely.
    Furthermore, the section provides that after an order is 
issued under subparagraph (A), the stay under subsection (a) 
shall not apply to any property subject to the in rem order in 
any other case filed by the debtor. Additionally, if an in rem 
order so provides, the stay shall, in addition to being 
inapplicable to the debtor involved, not apply with respect to 
an entity under this title if: (1) the entity had reason to 
know of the order at the time that the entity obtained an 
interest in the property affected, or (2) the entity was 
notified of the commencement of the proceeding for relief from 
the stay, and at such time no case in which the entity was a 
debtor was pending.
    For the purposes of this section, a case is pending during 
the period beginning with the issuance of the order for relief 
and ending at such time as the case involved is closed.

Section 304. Timely filing and confirmation of plans under chapter 13

    This section amends section 1321 of Title 11 of the United 
States Code. The amended section provides that the debtor shall 
file a plan no later than 90 days after the order for relief. 
The court may extend such period if the debtor should not 
justly be held accountable for the circumstances creating the 
need for the extension.
    The section also amends section 1324 of Title 11 of the 
United States Code. The amended section, concerning 
confirmation of hearings provides that the hearing shall be 
held no later than 45 days after the filing of the plan unless 
the court, after notice and hearing, orders otherwise.

Section 305. Application of the co-debtor stay only when the stay 
        protects the debtor

    This section amends section 1301(b) of Title 11 of the 
United States Code. After technical amendments, the section 
limits the co-debtor stay to 30 days when the debtor did not 
receive consideration for property that is subject to a claim 
when transferred to another party. However, a special rule is 
provided to protect a spouse or ex-spouse when the other spouse 
or ex-spouse files for bankruptcy and is obligated under a 
legally binding separation or property settlement agreement or 
divorce or dissolution decree to pay the creditor of the non-
filing spouse. Finally, the co-debtor stay shall terminate as 
of the date of confirmation of the plan if the plan provides 
that the debtor's interest in personal property subject to a 
lease with respect to which the debtor is the lessee will be 
surrendered or abandoned.

Section 306. Improved bankruptcy statistics

    This section amends Chapter 6 of Part I of Title 28 of the 
United States Code by adding a new section. This new section 
provides that the clerk of each district shall compile 
statistics regarding debtors with primarily consumer debts 
seeking relief under chapters 7, 11, and 13 of title 11. The 
Director of the Administrative Office of the United States 
shall prescribe the form for the statistics, compile the 
statistics, and make them available to the public. In addition, 
the director shall prepare annually and submit to Congress a 
report concerning the statistics compiled and an analysis of 
the information.
    The compilation required of the Director shall be itemized 
by chapter with respect to title 11, presented both in the 
aggregate and for each district, and include information 
concerning the following: (A) total assets and liabilities of 
the debtors and each category of assets and liabilities 
reported by those debtors in the schedules prescribed pursuant 
to section 2075; (B) current total monthly income, projected 
monthly net income, and average income and expenses as filed by 
the debtors under sections 111, 521, and 1322 of title 11; (C) 
the aggregate amount of debt discharged in the reporting period 
(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 predominantly nondischargeable 
categories); (D) average time period between filing of the 
petition and the closing of the case; (E) for the reporting 
period, the number of cases in which a reaffirmation was filed, 
total number of reaffirmations filed, number of reaffirmation 
cases where the debtor was not represented by an attorney, and 
of those cases the number approved by the court; (F) with 
respect to cases filed under chapter 13 of title 11, the number 
of cases wherethe final order determined the value of property 
securing a claim to be less than the amount of the claim, the number of 
final orders determining the value of property securing a claim issued, 
the number of cases dismissed for failure to make payments, and the 
number of cases where the debtor filed another case within the 6 years 
previous to the filing, and (G) the extent of creditor misconduct and 
any amount of punitive damages awarded by the court for creditor 
misconduct.
    The amendments made by this section shall take effect 18 
months after the date of enactment of this Act.

Section 307. Audit procedures

    This section amends section 586 of Title 28 of the United 
States Code. This section provides that the Attorney General 
shall establish procedures for the auditing of the accuracy and 
completeness of petitions, schedules, and other information 
which the debtor is required to provide under sections 521 and 
1322 of title 11 (and when applicable section 111 of title 11) 
in cases filed under chapter 7 or 13.
    Importantly, the audits required by this section shall be 
made in accordance with generally accepted auditing standards 
and performed by independent certified public accountants or 
licensed public accountants. The audit procedures shall:
          (1) establish a method of selecting appropriate 
        qualified persons to contract with the United States 
        trustee to perform those audits;
          (2) establish a method of randomly selecting cases to 
        be audited (not less than 1 out of every 500 cases in 
        each Federal judicial district shall be selected);
          (3) require audits for schedule of income and 
        expenses which reflect greater than average variances 
        from the statistical norm of the district; and
          (4) establish procedures for reporting the results of 
        the audits to the Attorney General, the United States 
        Attorney and the courts as appropriate, providing, at 
        least annually, public information concerning the 
        aggregate results of such audits including the 
        percentage of cases, by district, in which a material 
        misstatement of income or expenditures is reported, and 
        fully funding the audits, including procedures 
        requiring a debtor with sufficient available income or 
        assets to contribute to the payment and an 
        administrative expense.
    The section also provides that 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 above procedures.
    Upon request of a duly appointed auditor, the debtor shall 
cause the accounts, papers, documents, financial records, files 
and all other things that the auditor requests and that are 
reasonably necessary to facilitate the audit to be made 
available for inspection and copying.
    The report of each audit conducted under this subsection 
shall be filed with the court, the Attorney General, and the 
United States Attorney, under the procedures established in 
paragraph (1).
    If a material misstatement of income or expenditures or of 
assets is reported under subparagraph (A), a statement 
specifying that misstatement shall be filed with the court and 
the United States trustee and shall give notice thereof to the 
creditors and the United States Attorney for the district (in 
an appropriate case in the opinion of the United States 
trustee).
    The amendments made by this section shall take effect 18 
months after the date of enactment of this Act.

Section 308. Creditor representation at first meeting of creditors

    This section amends section 341(c) of Title 11 of the 
United States Code. The amended section provides that 
notwithstanding any local or State law requiring that 
representation be by an attorney in a meeting of creditors 
under subsection (a), a creditor holding a consumer debt or any 
representative of the 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. Nothing in the subsection should be construed to 
require any creditor to be represented by an attorney at any 
meeting of creditors.
    This section will reduce costs for small businesses in 
bankruptcy, which often cannot afford to pay an attorney to 
appear at the creditor's meeting.

Section 309. Fair notice for creditors in chapter 7 and 13 cases

    This section amends section 342 of Title 11 of the United 
States Code. After technical amendments, the amended section 
provides that if the credit agreement between a debtor and a 
creditor, or the last communication before the filing of the 
petition, lists a current account number of the debtor, the 
debtor shall include that account number in any notice to the 
creditor required to be given under this title.
    The section also provides that, if the creditor has 
specified to the debtor an address at which the creditor wishes 
to receive correspondence regarding the debtor's account, any 
notice to the creditor required to be given by the debtor under 
this title shall be given at such address.
    For the purposes of this section, the term ``notice'' 
includes: (A) any correspondence from the debtor to the 
creditor after commencement of the case, (B) any statement of 
the debtor's intention under section 521(a)(2), (C) notice of 
commencement of any proceeding in the case to which the 
creditor is a party, and (D) any notice of hearing under 
section 1324.
    A creditor, in a case of an individual under chapter 7 or 
13, may file at any time with the court a notice of the address 
to be used to notify the creditor. This notice shall be served 
on the debtor. If the court or the debtor is required to give 
the creditor notice, 5 days after receipt of thenotice under 
paragraph (1), the notice shall be given at that address.
    An entity may file a statement indicating its address for 
notice in cases under chapter 7 or 13. After 30 days following 
the statement, any notice in a case filed under chapter 7 or 13 
given by the court shall be to that address. Notice given to a 
creditor other than as provided in this section shall not be 
effective notice until that notice has been brought to the 
attention of the creditor, provided that the stay provided in 
section 362 of Title 11 of the United States Code shall apply 
to any creditor who has received actual notice of the filing of 
a bankruptcy petition.
    The section also provides that if the creditor has 
designated a person or department to be responsible for 
receiving notices and has established reasonable procedures to 
ensure bankruptcy notices will be delivered to that department 
or person, notice shall not be brought to the attention of the 
creditor until that notice is received by that department or 
person.
    These changes will prevent unscrupulous debtors from 
misidentifying account numbers or serving notice in remote 
locations in order to hinder or delay creditors.

Section 310. Stopping abusive conversions from chapter 13

    This section amends section 348(f)(1) of Title 11 of the 
United States Code. The first change deletes ``in the converted 
case, with allowed secured claims'' of subparagraph (B) and 
inserts in its place, ``only in a case converted to chapter 11 
or 12 but not in a case converted to chapter 7, with allowed 
secured claims in cases under chapters 11 and 12.''
    The amended section also provides that with respect to 
cases converted from chapter 13, the claim of a creditor 
holding security as of the date of the petition shall continue 
to be secured unless the full amount of the claim determined 
under applicable nonbankruptcy law has been paid in full as of 
the date of conversion. This is true notwithstanding any 
valuation or determination of the amount of an allowed secured 
claim made for the purposes of the chapter 13 proceeding. Thus, 
if a ``cram down'' occurs in Chapter 13, the debtor could not 
benefit from this ``cram down'' if the case is converted to 
Chapter 7.

Section 311. Prompt relief from stay in individual cases

    This section amends section 362(e) of Title 11 of the 
United States Code. The amended section provides that in the 
case of an individual filing under chapter 7, 11, or 13, the 
automatic stay under subsection (a) shall terminate 60 days 
after a request is made by a party in interest under subsection 
(d), unless a final decision is rendered by the court during 
the 60-day period (beginning on the date of the request), or 
the 60-day period is extended by agreement of all parties in 
interest or by the court for such time as the court finds is 
required by compelling circumstances.

Section 312. Dismissal for failure to file schedules timely or provide 
        required information

    This section provides that bankruptcy cases will be 
dismissed if an individual debtor in a case under chapter 7 or 
13 fails to file all of the information required under section 
521(a)(1) of this title within 45 days after the filing for 
bankruptcy. Under this section, any party in interest may 
request the court to enter an order dismissing the case. The 
court shall enter an order of dismissal not later than 5 days 
after that request, except, upon request of the debtor made 
within 45 days after the filing for bankruptcy, the court may 
allow the debtor an additional period not to exceed 20 days to 
file the information required under section 521(a)(1) of this 
title, if the court finds justification for extending the 
period.

Section 313. Adequate time for preparation for a hearing on 
        confirmation of the plan

    This section amends section 1324 of Title 11 of the United 
States Code. After technical amendments, the amended section 
provides if not later than 5 days after receiving notice of a 
hearing on confirmation of the plan, a creditor objects to the 
confirmation of the plan, the hearing on confirmation of the 
plan may be held no earlier than 20 days after the first 
meeting of creditors under section 341(a) of this title. This 
will give creditors the time necessary to determine whether the 
debtor's plan is fair and proposed in good faith.

Section 314. Discharge under chapter 13

    This section amends section 1328 of Title 11 of the United 
States Code. The section provides that any debt which is 
fraudulently incurred is not dischargeable. It further provides 
that restitution awarded as a result of a conviction of a crime 
for willful or malicious personal injury or death to another 
person is not dischargeable in Chapter 13.

Section 315. Non-dischargeable debts

    The section provides that debts incurred to pay 
nondischargeable debts are themselves nondischargeable. 
Importantly, this section does not apply when nondischargeable 
debts are paid by new borrowing by either a single parent who 
has 1 or more dependent children at the time of the order for 
relief, or there is an allowed claim for alimony or child 
support that was unpaid at the time of the petition and the 
creditor cannot demonstrate that the debtor intentionally 
incurred the debt to pay the nondischargeable debt. This will 
ensure that new debts incurred to pay non-dischargeable debts 
will not compete with nondischargeable child or family support 
in a post-bankruptcy environment.

Section 316. Credit extensions on the eve of bankruptcy presumed 
        nondischargeable

    This section amends section 523 of Title 11 of the United 
States Code. Under the amended section, consumer debts of $400 
or more incurred within 90 days of bankruptcy for goods or 
services which are not necessary for the maintenance or support 
of the debtor or a dependent child are presumed to be 
nondischargeable.

Section 317. Definition of household goods and antiques

    This section amends section 101 of Title 11 of the United 
States Code. The section provides that the term ``household 
goods'' has the same meaning as given by the Federal Trade 
Commission in 16 CFR section 444.1(I). This section also 
expands the Federal Trade Commission's definition of household 
goods to include tangible personal property that is needed for 
the maintenance and support of a dependent child.
    Under current law, household goods are exempt from the 
bankruptcy estate and cannot be reached by creditors. The 
Committee supports the concept of excepting reasonably 
necessary household goods from the reach of creditors, but is 
very concerned that the category not become so broad that it 
would encompass many items not reasonably necessary to the 
functioning of a household. The Committee intends this change 
to prohibit courts from defining the households goods exemption 
to encompass such items as automobiles, gun collections, 
recreational vehicles or boats.

Section 318. Relief from stay when the debtor does not complete 
        intended surrender of consumer debt collateral

    This section amends section 362 of Title 11 of the United 
States Code. The section provides that the automatic stay is 
terminated as to property securing a claim or subject to an 
unexpired lease, if within the proscribed time the debtor fails 
to timely file the required statements of intention or to 
indicate whether the property will be surrendered or retained. 
The stay may also be terminated if the debtor intends to retain 
the property and fails to meet the requirement to redeem the 
property or reaffirm the debt, or assume the unexpired lease. 
The stay may additionally be terminated if the debtor fails to 
timely take the action specified in a statement of intention, 
unless the statement specifies reaffirmation and the creditor 
refuses to reaffirm the debt on the original contract terms. 
The Committee recommends this change so that secured creditors 
are not unfairly disadvantaged by debtors who retain collateral 
without retaining and paying for the collateral, and only 
surrendering it at some future date, perhaps in a deteriorated 
condition.

Section 319. Adequate protection of lessors and purchase money secured 
        creditors

    This section adds a new section 1307A. This new section 
protects lessors of personal property and creditors holding 
purchase money security interests by directing the debtor to 
make cash payments to these creditors under chapter 13. The 
section directs the debtor to continue making payments until 
the earlier of the dates on which the creditor begins to 
receive payments under the Chapter 13 repayment plan or the 
debtor relinquishes possession of the property to the lessor, 
creditor or a third party under claim of right. The court, 
subject to limitations, may, after notice and hearing, change 
the amount and timing of the payments.

Section 320. Limitation

    This section amends section 522 of Title 11 of the United 
States Code, to limit to $100,000 the amount a debtor may 
exempt in real or personal property used as a residence or in a 
burial plot. This limitation does not apply to a family farmer.
    This section will eliminate one of the most flagrant abuses 
of the bankruptcy system. It closes a loophole that allows 
debtors in a few states to shield their assets in luxury homes, 
while their creditors are shortchanged. Currently, a Chapter 7 
debtor can exempt certain possessions from being sold off to 
satisfy his debts. A principal exemption is for a debtor's 
home, up to a certain value as established by state law. 
Although most states cap the exemption at $40,000 or less, five 
states exempt homes no matter how high their value.
    As a result, millionaire debtors who declare bankruptcy in 
these states continue to live in a style that is no longer 
appropriate, while their creditors get little or nothing. For 
example, the owner of a failed Ohio S&L paid off only a 
fraction of $300 million in bankruptcy claims, but still held 
on to the multimillion dollar ranch he bought in Florida; a New 
Jersey couple moved to Florida when their business was about to 
fail, and then used bankruptcy to protect their half million 
dollar home, while writing off much of the nearly $2 million 
they owed creditors; and a convicted Wall Street financier 
filed bankruptcy while owing at least $50 million in debts and 
fines, but still kept his $5 million Florida mansion with 11 
bedrooms and 21 bathrooms. Many debtors move to states like 
Florida and Texas expressly to take advantage of their 
unlimited exemptions.
    The $100,000 cap will prevent these high profile abuses and 
in so doing help restore the stigma to bankruptcy. This cap was 
endorsed by the Bankruptcy Review Commission.

Section 321. Miscellaneous improvements

    The section amends section 109 of Title 11 of the United 
States Code. This section adds a new subsection (h) which 
provides that in the 90 days prior to a filing, a potential 
debtor must attempt to make a repayment plan outside the 
bankruptcy system through an approved credit counseling 
program.
    The section also amends section 727(a) of Title 11 of the 
United States Code. The section adds a new subsection (11) 
which adds the failure to complete a personal financial 
management course to the list of actions for which a court 
shall not grant a discharge.
    The section also amends section 1328 of Title 11 of the 
United States Code. The section adds a new subsection (f) which 
adds the failure to complete a personal financial management 
course to the list of actions for which a court shall not grant 
a discharge.
    The section also amends section 521 of Title 11 of the 
United States Code. This section adds a new subsection (e) 
which requires a debtor to file a certificate from a credit 
counseling service or other evidence of a good faith attempt to 
create a debt repayment plan. In addition, the debtor must file 
a copy of the debt repayment plan.
    The section also amends section 523(d) of Title 11 of the 
United States Code. The section provides that a creditor may 
not request a determination of dischargeability of a consumer 
debt if the debtor made a good faith attempt to negotiate a 
repayment schedule pursuant to section 109(h).
    The section also amends Chapter 1 of Title 11 of the United 
States Code to add a new section 111. The new section provides 
that the clerk of each district shall maintain a list of credit 
counseling services. The list of programs is to be approved by 
the United States trustee or the bankruptcy administrator for 
the district. The section further directs the United States 
trustee or bankruptcy administrator to make available an 
instructional course concerning personal financial management 
or provide a list of approved personal financial management 
courses.
    The section also amends section 101 of Title 11 of the 
United States Code. This section defines the term ``debtor's 
principal residence'' to include incidental property commonly 
conveyed with a principal residence in the area where the 
property is located, all easements, rights appurtenances, 
fixtures, rents, royalties, mineral rights, oil or gas rights 
or profits, water rights, escrow funds, or insurance, and all 
replacements or additions to the property without regard to 
whether it is attached to real property. Under current law, 
mortgages on principal residences are not subject to being 
reduced to the value of the residence in bankruptcy. This 
prohibition on ``cramdowns'' protects homeowners by reducing 
incentives for mortgage lenders to foreclose when a homeowner 
falls behind in mortgage payments.

Section 322. Bankruptcy judgeships

    This section amends Title 28 of the United States Code. It 
authorizes the appointment of additional temporary bankruptcy 
judgeships in the districts that follow:
          (A) One additional bankruptcy judgeship for the 
        eastern district of California;
          (B) Four additional bankruptcy judgeships for the 
        central district of California;
          (C) One additional bankruptcy judgeship for the 
        southern district of Florida;
          (D) Two additional bankruptcy judgeships for the 
        district of Maryland;
          (E) One additional bankruptcy judgeship for the 
        eastern district of Michigan;
          (F) One additional bankruptcy judgeship for the 
        southern district of Mississippi;
          (G) One additional bankruptcy judgeship for the 
        district of New Jersey;
          (H) One additional bankruptcy judgeship for the 
        eastern district of New York;
          (I) One additional bankruptcy judgeship for the 
        northern district of New York;
          (J) One additional bankruptcy judgeship for the 
        southern district of New York;
          (K) One additional bankruptcy judgeship for the 
        eastern district of Pennsylvania;
          (L) One additional bankruptcy judgeship for the 
        middle district of Pennsylvania;
          (M) One additional bankruptcy judgeship for the 
        western district of Tennessee; and
          (N) One additional bankruptcy judgeship for the 
        eastern district of Virginia.
    The section provides that judgeship vacancies in the above 
districts resulting from death, retirement, resignation, or 
removal of a bankruptcy judge which occur 5 years or more after 
the appointment date shall not be filled.
    The section also adds that temporary bankruptcy judgeships 
authorized for the northern district of Alabama, the district 
of Delaware, the district of Puerto Rico, the district of South 
Carolina, and the eastern district of Tennessee under the 
Bankruptcy Judgeship Act of 1992 are extended until the first 
vacancy resulting from the death, retirement, resignation, or 
removal occurs:
          (A) 8 years or more after November 8, 1993, in the 
        northern district of Alabama;
          (B) 10 years or more after October 28, 1993, in the 
        district of Delaware;
          (C) 8 years or more after August 29, 1994, in the 
        district of Puerto Rico;
          (D) 8 years or more after June 27, 1994, in the 
        district of South Carolina; and
          (E) 8 years or more after November 23, 1993, in the 
        district of Tennessee.
    The section also amends section 152(a)(1) of Title 28 of 
the United States Code. It adds that each judge shall be 
appointed by the United States Court of Appeals for the circuit 
in which such a district is located.
    The section also amends section 156 of Title 28 of the 
United States Code to require post-travel reports for non-cases 
related travel by bankruptcy judges. The section defines the 
term travel expenses to include expenses incurred by a 
bankruptcy judge that are not directly related to any case, and 
excludes expenses incurred by the judge paid from personal 
funds and where no payment or reimbursement is made to the 
judge by the government or any other person or entity. Each 
bankruptcy judge will submit an annual report to the Chief 
Bankruptcy Judge. The Chief Bankruptcy Judge will submit an 
annual report to the Director of the Administrative Office of 
the United States Courts on the travel expenses of each 
bankruptcy judge. The annual report shall include: the travel 
expenses and the name of each judge, the description of the 
subject matter of the travel expenses, the number of days that 
the judge traveled.
    The section also requires that the Director of 
Administrative Office of the United States consolidate the 
reports received into one report and submit it to Congress.

Section 323. Preferred payment of child support in chapter 7 
        proceedings

    This section amends section 507(a) of Title 11 of the 
United States Code. It amends the section by placing expenses 
or claims that are entitled to priority under paragraph (7) in 
first priority over any other claims or expenses that have 
priority as child or marital supports under 507(a)(7).

Section 324. Preferred payment of child support in chapter 13 
        proceedings

    This section amends section 1322(b)(1) of Title 11 of the 
United States Code. It amends the section by requiring that 
child support payments be paid before any other priority claim 
is paid during a Chapter 13 repayment plan.

Section 325. Payment of child support required to obtain a discharge in 
        chapter 13 proceedings

    This section amends section 1325(a) of Title 11 of the 
United States Code. The amended section provides that the 
debtor is required to pay all alimony and child support 
obligations in full in order to obtain debt forgiveness in 
Chapter 13.

Section 326. Child support and alimony collection

    This section amends section 362(b) of Title 11 of the 
United States Code. After technical amendments, this section 
exempts collection activities for child support and alimony 
from the automatic stay. The section specifically permits the 
withholding of income pursuant to an order specified in section 
466(b) of the Social Security Act and also adds the 
withholding, suspension, or restriction of drivers' licenses, 
professional and occupational licenses, and recreational 
licenses pursuant to State law, under the Social Security Act 
one the reporting of overdue support owed by an absent parent 
to any consumer reporting agency. The Committee recommends this 
change which will greatly improve the ability of state 
governments, and ex-spouses to collect unpaid child support.

Section 327. Nondischargeability of certain debts for alimony, 
        maintenance, and support

    The section amends section 523 of Title 11 of the United 
States Code as amended by section 202 of this Act. After 
technical amendments, the section adds that certain debts 
incurred for actual alimony and child support are automatically 
non-dischargeable. This provision will make it unnecessary for 
an ex-spouse seeking to enforce these obligations to incur the 
legal expenses of litigation, as required by present law, non-
dischargeable of the marital dissolution obligation in 
bankruptcy.

Section 328. Enforcement of child and spousal support

    This section amends 522(c)(1) of Title 11 of the United 
States Code. The section adds that exempted property shall be 
liable for debts of a kind that are specified in paragraph (1) 
or (5) of section 523(a). As a result, child support, alimony 
and marital dissolution obligations can be collected post-
bankruptcy from exempt property.

Section 329. Dependent child defined

    This section amends section 101 of Title 11 of the United 
States Code. This section defines the term ``dependent child'' 
as a child who has not attained the age of 18 and who is a 
dependent of that individual as within the Internal Revenue 
Code.

                    TITLE IV--TECHNICAL CORRECTIONS

    In general, the changes in this title of S. 1301 mirror 
provisions of H.R. 764, which passed the House of 
Representatives earlier this Congress.

Section 401. Definitions

    This section amends the definitions contained in section 
101 of Title 11 of the United States Code. Paragraphs (1), (2), 
(4), (5)(B), (7), and (8) of section 401 make technical changes 
to section 101 to convert each definition into a sentence 
(thereby facilitating future amendments to the separate 
paragraphs) and to redesignate the definitions in correct and 
completely numerical sequence. Paragraph (8) of this section 
makes the necessary conforming amendment to cross references to 
the newly redesignated definitions and simplifies these 
references to avoid future reference errors. Paragraph (5)(A) 
of the section excludes family farms from the definition of 
single asset real estate.
    In general terms, single asset real estate is a single 
piece of real estate which generates substantially all of the 
gross income of the debtor, on which no other substantial 
business is being conducted, and which as presently defined is 
encumbered by no more than $4 million in outstanding debt. 
Section 362 of the Bankruptcy Code effectively provides a 
secured creditor with relief from the automatic stay's bar to 
foreclosure on such property unless, within 90 days of the 
order for relief, the debtor has filed a plan of reorganization 
which stands a reasonable possibility of being confirmed, or 
unless the debtor has commenced making monthly payments to each 
secured creditor in an amount equal to interest at the current 
fair market rate on the value of the creditor's interest in the 
real estate.
    The present $4 million cap prevents the use of the 
expedited relief procedure in many commercial property 
reorganizations, and effectively provides an opportunity for a 
number of debtors to abusively file for bankruptcy in order to 
obtain the protection of the automatic stay against their 
creditors. The section removes the ceiling.

Section 402. Adjustment of dollar amounts

    This section corrects an omission in section 104(b) of 
Title 11 of the United States Code, as added by Public Law 103-
894, by adding references to section 522(f)(3), and 707(b)(5) 
so that the triennial adjustment required by section 104(b) 
extends to the figure representing an aggregate value of 
certain implements, professional books, tools of the trade, 
farm animals, and crops which the debtor may exempt from the 
property of the estate and so protect from creditors' liens. 
Section 522(f)(3) now sets the total permissible value of such 
property at $5,000.

Section 403. Extension of time

    The section makes a technical amendment by striking ``922'' 
and all that follows and inserting ``922, 1201 or.'' To correct 
a reference error described in amendment notes contained in the 
United States Code.

Section 404. Who may be a debtor

    This section of the bill makes a technical amendment by 
striking subsection ``(c) or (d)of''. Additionally, it amends 
section 109(b)(2) of the United States Code.

Section 405. Penalty for persons who negligently or fraudulently 
        prepare bankruptcy petitions

    This section of the bill makes a technical correction to 
change from the singular possessive to the plural possessive 
the reference to the fees payable to attorneys. This section 
amends section 110(j)(3) of Title 11, of the United States 
Code.

Section 406. Limitation on compensation of professional persons

    This section amends 328(a) of Title 11 of the United States 
Code to provide that a trustee or a creditors' and equity 
security holders' committee may, with court approval, employ a 
professional person on any reasonable terms and conditions of 
employment, including on a retainer, on an hourly basis, or on 
a contingent fee basis. This section amends section 328(a) to 
include compensation ``on a fixed or percentage fee basis'' in 
addition to the other specified forms of reimbursement.

Section 407. Special tax provisions

    The section of the bill makes a technical correction in 
section 346(g)(1)(C) of Title 11 of the United States Code to 
remove language referring to a repealed section of the Internal 
Revenue Code of 1986. Additional information regarding the 
repealed section is indicated in the appropriate footnote, and 
contained in the notes under the heading ``References in 
Text,'' found in the United States Code.

Section 408. Effect of conversion

    The section makes a technical correction in section 
348(f)(2) of Title 11 of the United States Code to clarify that 
the first reference to property, like the subsequent reference 
to property, is a reference to property of the estate.

Section 409. Automatic stay

    The section clarifies that the automatic stay does not 
apply to a transfer that is not avoidable under sections 544 or 
549 or Title 11. Further, this section prohibits using the 
automatic stay to prevent the continuation of state law 
eviction proceedings.

Section 410. Amendment to table of section

    This section amends chapter 5 of Title 11 of the United 
States Code. This section makes technical amendments by 
striking the section 556 and replacing with, ``556. Contractual 
right to liquidate a commodities contract or forward 
contract.''

Section 411. Allowance of administrative expenses

    This section provides that 503(b)(4) of Title 11 of the 
United States Code, limits the types of compensable 
professional services rendered by an attorney or accountant 
that can qualify as administrative expenses in a bankruptcy 
case. Expenses for attorneys or accountants incurred by 
individual members of creditors' and equity security holders' 
committees would not be recoverable, but expenses incurred for 
such professional services by the committees themselves would 
be.

Section 412. Priorities

    This section makes technical amendments to section 507(a) 
of Title 11 of the United States Code. The amendment made by 
section 14(1) corrects an error in the punctuation at the end 
of section 507(a)(3). The amendment made by section 14(2) 
corrects an omission in paragraph (7) of section 507(a) and 
conforms paragraph (7) to the other paragraphs of section 
507(a) that provide priority only to unsecured claims.

Section 413. Exemptions

    This section would make grammatical and clarifying 
amendments to section 522(f)(1)(A)(ii)(II) and a conforming 
amendment to section 522(g)(2) of the Bankruptcy Code.

Section 414. Exceptions to discharge

    This section makes technical and conforming changes to 
accommodate drafting errors in changes made to Title 11 from 
the Bankruptcy Reform Act of 1994 and the Omnibus Consolidated 
Rescissions and Appropriation Act of 1996.

Section 415. Effect of discharge

    Section 17 of the bill makes technical amendments to 
correct errors in section 524(a)(3) of Title 11 of the United 
States Code.

Section 416. Protection against discriminatory treatment

    The section amends section 525(c) of Title 11 of the United 
States Code by making a technical amendment to conform a 
reference to its antecedent reference. The omission of 
``student'' before ``grant'' in the second place it appears in 
section 525(c) made possible the interpretation that a broader 
limitation on lender discretion was intended, so that no loan 
could be denied because of a prior bankruptcy if the lending 
institution was in the business of making student loans. The 
section is intended to make clear that lenders involved in 
making government guaranteed or insured student loans are not 
barred by this Bankruptcy Code provision from denying other 
types of loans based on an applicant's bankruptcy history; only 
student loans and grants, therefore, cannot be denied under 
section 525(c) because of a prior bankruptcy.

Section 417. Property of the estate

    The section makes technical changes to Section 541 of the 
Bankruptcy Code to clarify the original Congressional intent to 
generally exclude production payments from the debtor's estate.

Section 418. Limitations on avoiding powers

    The section amends section 546 of Title 11 of the United 
States Code to redesignate subsection (g) as subsection (h).

Section 419. Preferences

    Section 419 of the bill restates Congress's intent to 
overrule the so-called DePrizio doctrine and verify the intent 
behind section 547 of the Code. In 1994, the Congress first 
attempted to clarify this situation by amending section 550 of 
the Code. The section by section analysis placed in the 
Congressional Record at that stated: ``This section by section 
overrules the DePrizio line of cases and clarifies that non-
insider transferees should not be subject to the preference 
provisions of the Bankruptcy Code beyond the 90 day statutory 
period.'' (140 Cong. Rec. No. 142 at H10767 (October 6, 1994); 
See also, Statement of Sen. Grassley, 140 Cong. Rec. No. 144 at 
S14461 (October 6, 1994)). However, in a misapplication of the 
plain language doctrine, certain courts have ignored the 1994 
amendments and this legislative history. In the present bill, 
yet again, it is the Committee's intent to expressly overrule 
DePrizio by making a technical amendment to section 547 so as 
to re-affirm the position that innocent lenders should not be 
subject to the insider preference provisions of the Code. 
Further, it is our intent that section 419 be applied to all 
pending court actions where there has been no final judgement, 
consistent with the original intent of section 547 as clarified 
by the 1994 amendments.

Section 420. Postpetition transactions

    The section amends section 549(c) to clarify its 
application to an interest in real property.

Section 421. Technical amendment

    The section provides a technical amendment that replaces 
``product'' with its plural form ``products.''

Section 422. Setoff

    The section amends section 553(b)(1) of Title 11 of the 
United States Code to replace the current paragraph cross 
reference to ``362(b)(17).''

Section 423. Disposition of property of the estate

    The section amends section 726(b) of Title 11 of the United 
States Code, by striking ``1009''.

Section 424. General provisions

    The section amends section 901(a) of Title 11 of the United 
States Code to correct an omission in a list of sections 
applicable to cases under chapter 9 of Title 11.

Section 425. Appointment of elected trustee

    This section refines existing law by clarifying the 
procedure for giving effect to the election of a private 
trustee in a chapter 11 reorganization case. Section 702(b) of 
the Bankruptcy Code permits creditors at the meeting of 
creditors to elect one person to serve as trustee in the case, 
provided certain conditions are met. Section 1104(b) of the 
Bankruptcy Code relates to the convening of the meeting of 
creditors for this purpose and the conduct of the election. In 
addition the section would renumber Section 1104(b) as Section 
1104(b)(1) and would add a new subsection 1104(b)(2) requiring 
the United States trustee to file a report certifying the 
election when an eligible, disinterested trustee is elected 
under paragraph (1). The effect of such filing would be to 
consider such elected trustee as selected and appointed for 
purposes of Section 1104 and to terminate the service of any 
trustee appointed under subsection (d), which provides for the 
appointment of a trustee or examiner by the United States 
trustee, subject to court approval.

Section 426. Abandonment of railroad line

    The section redesignates section ``11347'' as section 
``11326(a).''

Section 427. Contents of plan

    The section redesignates section ``11347'' as section 
``11326(a).''

Section 428. Discharge under chapter 12.

    The section amends section 1228 of Title 11 of the United 
States Code, replacing each reference of ``1222(b)(10)'' with 
``1222(b)(9)''.

Section 429. Extensions

    The section amends section 302(d)(3) of the Bankruptcy, 
Judges, United States Trustees, and Family Farmer Bankruptcy 
Act of 1986 by removing ``or October 1, 2002 and or October 1, 
2003,'' and ``whichever occurs first.''

Section 430. Bankruptcy cases and proceedings

    This section makes a technical change to correct an 
incomplete cross-reference.

Section 431. Knowing disregard of bankruptcy law or rule

    This section amends section 156(a) of Title 18 of the 
United States Code, which defined ``bankruptcy petition 
preparer'' and ``document for filing,'' by making stylistic 
changes and correcting a reference to Title 11 of the United 
States Code.

Section 432. Effective date; application of amendments

    This section provides that amendments made by this Title of 
S. 1301 shall take effect on the date of enactment, but shall 
apply only to cases commenced under Title 11 on or after the 
date of enactment. The vast majority of Bankruptcy Code changes 
made by this act are technical and will not change the results 
in future cases.

                           IV. COST ESTIMATE

    In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 404 of the 
Congressional Budget Act of 1974, the committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 18, 1998.
Hon. Orrin G. Hatch,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed federal cost estimate (including the 
impact on state and local governments) and private-sector 
mandates statement for S. 1301, the Consumer Bankruptcy Reform 
Act of 1998.
    If you wish further details on these items, we will be 
pleased to provide them. The CBO staff contacts are Susanne S. 
Mehlman and Mark Grabowicz (for federal costs), Leo Lex (for 
the state and local impact), and Matthew Eyles (for the 
private-sector impact).
            Sincerely,
                                         June E. O'Neill, Director.
    Enclosures.

     congressional budget office private-sector mandates statements

S. 1301--Consumer Bankruptcy Reform Act of 1998

    Summary: S. 1301 would make many changes and additions to 
the federal bankruptcy laws. By amending the bankruptcy code, 
the bill would affect consumer debtors, creditors, private 
bankruptcy trustees, attorneys, bankruptcy petition preparers, 
debt relief counselors, and other entities in the private 
sector.
    Certain provisions in S. 1301 that effectuate means-testing 
in the bankruptcy system would impose new private-sector 
mandates, as defined in the Unfunded Mandates Reform Act 
(UMRA). New mandates would be imposed on consumer bankruptcy 
attorneys and bankruptcy petition preparers.
    CBO estimates that the direct costs of new private-sector 
mandates in S. 1301 would exceed the statutory threshold in 
UMRA ($100 million in 1996, adjusted annually for inflation). 
In 1999, mandate costs could be between $200 million and $525 
million. Nearly all mandate costs would stem from requirements 
for consumer bankruptcy attorneys to investigate and verify 
financial information provided by their clients. Mandate costs 
on bankruptcy petition preparers, which arise from new consumer 
protection regulations, would be modest. Mandate costs can be 
expected to grow in future years. By 2003, direct costs could 
be between $300 million and $950 million.
    Bankruptcy attorneys would initially bear those costs, 
although they would be able to recoup most costs by increased 
payments from bankruptcy estates. Administrative costs, which 
include attorneys' fees and costs, receive priority treatment 
in the bankruptcy system and are generally reimbursed before 
creditors' claims.
    S. 1301 would also provide financial benefits to creditors. 
By incorporating means-testing into the bankruptcy system, the 
number of debtors who would be required to file plans of 
reorganization would rise. As a result, the pool of funds 
available to creditors for repayment would likely increase. In 
addition, other provisions in the bill would generate further 
benefits to creditors. However, benefits to creditors would be 
partially offset by higher costs of administering the 
bankruptcy code. In isolated cases, where administrative costs 
rise by more than the pool of debtors' funds, S. 1301 could 
impose costs on some creditors.
    Overview of the bill and private-sector mandates: Under 
current law, most individual debtors who seek bankruptcy relief 
have two options: liquidation (chapter 7) or reorganization 
(chapter 13). S. 1301 would institute a ``needs-based system'' 
for relief under chapter 7 by requiring individuals (and 
households) who file for bankruptcy to seek debt relief under 
chapter 13 if they earn a regular income equal to or greater 
than the national median income (adjusted for household size) 
and could pay at least 20 percent of their unsecured debts. In 
chapter 7 cases, debtors' nonexempt assets are sold and 
distributed by a court-appointed trustee to creditors after 
deducting administrative expenses. Chapter 7 debtors who are 
discharged from the system receive a ``fresh start'' and are 
not liable for creditors' claims not repaid in full. By 
contrast, chapter 13 allows debtors to retain their assets in 
exchange for agreeing to repay creditors out of future income 
over a period of three to five years. In both chapters, certain 
debts, such as taxes or those debts incurred fraudulently, may 
not be discharged.
    S. 1301 would amend current law by establishing a system of 
means-testing provisions for determining the eligibility of 
consumers for relief under the bankruptcy code. Some provisions 
in the bill that carry out means-testing would impose new 
private-sector mandates. S. 1301 would also expand the types of 
debts that may not be discharged from bankruptcy. In addition, 
S. 1301 would amend other provisions in federal bankruptcy law, 
including those covering spousal or child support, family 
farmers, collection of bankruptcy data, and single-asset real 
estate debtors.
    The Unfunded Mandates Reform Act (Public Law 104-4) defines 
a private-sector mandate as any provision in legislation that 
would impose an enforcement duty upon the private-sector except 
a condition of federal assistance or a duty arising from 
participation in a voluntary federal program. While a very 
small portion of debtors is forced into bankruptcy, the 
bankruptcy process is largely voluntary for debtors, and 
debtor-initiated bankruptcies are equivalent to participation 
in a voluntary federal program. Consequently, new duties 
imposed by the bill on individuals who file as debtors do not 
meet the definition of private-sector mandates, and additional 
costs for debtors would not be counted as direct costs for 
purposes of UMRA.
    Provisions that would impose new enforceable duties on 
other private entities, such as bankruptcy attorneys and 
petition preparers (including debtors' attorneys), do meet the 
definition of a private-sector mandate. Creditors, who are 
subject to many requirements under the existing bankruptcy 
code, would face changed duties under S. 1301. Creditors have 
very specific obligations when they are a party in interest to 
a bankruptcy case, and most creditors' duties in current law 
would remain. While S. 1301 would alter the duties of some 
creditors, in general, the bill would provide creditors with 
additional rights in bankruptcy cases.
    Private-sector mandates contained in the bill: S. 1301 
would impose new private-sector mandates, as defined in UMRA, 
on bankruptcy attorneys and bankruptcy petition preparers. 
Bankruptcy attorneys would face new duties to investigate and 
verify financial information of their clients. Section 102 of 
the bill would apply Bankruptcy Rule 9011 from Title 11, United 
States Code, to make bankruptcy attorneys liable for 
misrepresentations of a debtor's financial condition. Rule 9011 
requires attorneys to reasonably verify information provided by 
debtors and attest, under threat of sanctions and other 
penalties, that such information is well-grounded in fact. As a 
result, attorneys in consumer bankruptcy cases would have a 
duty to investigate and verify documents that their clients 
must include in petitions for bankruptcy relief. Those 
documents include a list of creditors, a schedule of assets and 
liabilities, a schedule of current income and expenditures, 
statements of projected monthly net income and reasonably 
anticipated increases in income or expenditures, and other 
financial information.
    S. 1301 would also impose new consumer protection 
regulations on bankruptcy petition preparers, including 
attorneys. The bill would require bankruptcy petition preparers 
to provide potential clients a written notice, prescribed by 
the Executive Office for the United States Trustees (U.S. 
Trustees) for the district in which the petition is filed, that 
contains: a description of chapters 7, 11, 12, and 13, 
including the costs and benefits of each chapter; a description 
of services that may be available from nonprofit debt 
counseling services; and information that would enable the 
individual to contact nonprofit debt counseling services.
    Estimated direct cost to the private sector: CBO estimates 
that the direct costs of new private-sector mandates contained 
in S. 1301 would exceed the statutory threshold in each of the 
first five years that the mandates were effective. In 1999, new 
mandates could impose direct costs of between $200 million and 
$525 million. Costs would likely increase over the five-year 
period and, by 2003, direct private-sector mandate costs could 
total between $300 million and $950 million: Almost all costs 
would result from additional duties of attorneys to investigate 
and verify financial information provided by their clients. 
Because reliable national data on the costs of the bankruptcy 
system are lacking and the actual costs to attorneys are 
uncertain, these estimates encompass a broad range.
    CBO's estimate excludes: financial transfers between 
debtors and creditors that would result from enacting S. 1301; 
costs that could result from delaying distributions from 
bankruptcy estates to certain creditors due to increased 
litigation; and potential reductions in debtor repayments in 
cases where the costs of administration rise by more than 
payments by debtors.
    Costs to Consumer Bankruptcy Attorneys. S. 1301 would make 
consumer bankruptcy attorneys responsible for verifying the 
financial information provided by debtors who file for relief. 
CBO estimates that additional attorneys' costs could be between 
$200 million and $525 million in 1999. By 2003, direct costs 
could be between $300 million and $950 million. These estimates 
are based on information from the U.S. Trustees about the 
number of bankruptcy cases expected to be filed over the 1999-
2003 period, estimates of debtors who would choose not to file 
if S. 1301 is enacted, estimates of debtors who would have 
their cases filed as or converted to chapter 13 cases under the 
bill's requirements, and estimates of the increased costs to 
attorneys from performing inquiries into their client's 
financial condition.
    Information from the U.S. Trustees and trends in bankruptcy 
filings indicate that, in 1999, more than 1.4 million consumer 
bankruptcy petitions will likely be filed. Of those cases filed 
in 1999, about 960,000 petitions would be filed under chapter 7 
and about 390,000 petitions under chapter 13. CBO estimates 
that, under S. 1301, 5 percent of chapter 7 debtors (about 
48,000) would choose not to file, and 5 percent of all chapter 
7 cases would be filed as or converted to chapter 13 cases. 
Completing investigations of debtors' financial affairs and, 
for chapter 7 cases, computing debtor-eligibility, would be 
time consuming. The costs to attorneys could increase by 
several hundred dollars per case. If attorneys' costs rise by 
roughly $150 per case to $400 per case, applying that increase 
to a reduced level of chapter 7 cases and a higher number of 
chapter 13 cases, direct costs in 1999 would be within the $200 
million to $525 million range.
    Mandate costs would increase in subsequent years even if 
bankruptcy filings drop initially as a result of enacting S. 
1301. Bankruptcy filings, after a small decline in 2000, will 
likely increase between 2001-2003. The U.S. Trustees estimate 
that in 2003 more than 1.8 million nonbusiness petitions would 
be filed (about 1.3 million under chapter 7 and 540,000 under 
chapter 13). Applying the same assumptions about the number of 
chapter 7 cases not filed for any bankruptcy protection, those 
converted to chapter 13 cases, and increased attorneys' costs, 
direct costs in 2003 would be about $250 million to $700 
million. Furthermore, attorneys' responsibilities for cases 
filed under chapter 13 in years before 2003 would carry forward 
because chapter 13 cases have a duration of between three years 
and five years. Despite a failure rate of 2 out of 3 plans 
filed under chapter 13, duties for attorneys from cases filed 
in previous years could add an additional $50 million to $250 
million, depending on the amount of future litigation.
    The costs of new mandates in S. 1301 would initially be 
borne by bankruptcy attorneys. However, provisions in current 
law exist for reimbursement of attorneys by increased payments 
from bankruptcy estates. Attorneys' fees and costs are treated 
as administrative expenses in the bankruptcy code and are paid 
out of debtors' estates before distributions are made to 
creditors. Consequently, the cost of new mandates are 
ultimately paid out of the pool of funds available to 
creditors.
    Costs to Bankruptcy Petition Preparers. S. 1301 would apply 
new consumer protection regulations to bankruptcy petition 
preparers. The bill provides that petition preparers must 
dispense notices to potential clients about the bankruptcy 
system, alternatives to the system, and information about 
nonprofit debt counseling services in the area. CBO estimates 
that the direct cost of notice requirements would be modest. 
Notices would be prescribed by the U.S. Trustees for each 
district and, consequently, little effort would likely be 
required of bankruptcy petition preparers to comply with the 
new regulations.
    Effects on Creditors. S. 1301 also contains many provisions 
that would benefit creditors. Most significant for creditors 
are provisions that would shift debtors from chapter 7 to 
chapter 13 and provisions that would expand the types of debts 
that would be nondischargeable. By expanding the types of debts 
that are nondischargeable, such as many credit card debts over 
$400 when incurred within 90 days of filing, some creditors 
would continue to receive payments on debts that would be 
discharged under current law. Means-testing in the bankruptcy 
system would result in more individuals being required to seek 
relief under chapter 13 rather than chapter 7 and fewer filing 
for any bankruptcy protection. Because chapter 13 requires 
debtors to develop a plan to repay creditors over a specified 
period, the total pool of funds available for distribution for 
creditors would likely increase. As long as the likelihood of 
repayment by debtors and the pool of funds increases by an 
amount that is greater than the rise in administrative costs, 
creditors would be made better off under the bill.
    Estimate prepared by: Matt Eyles.
    Estimate approved by: Arlene Holen, Assistant Director for 
Special Studies.

               congressional budget office cost estimate

S. 1301--Consumer Bankruptcy Reform Act of 1998

    Summary: S. 1301 would make changes and additions to the 
laws relating to bankruptcy, including establishing a system of 
means-testing for determining eligibility for obtaining relief 
under chapter 7 of the U.S. bankruptcy code. CBO estimates that 
implementing S. 1301 would cost $293 million over the 1999-2003 
period--$277 million in discretionary spending, which would be 
subject to appropriation of the necessary funds, and $16 
million in mandatory spending. In addition, we estimate that 
the bill would increase receipts by $1 million a year. Because 
the bill would affect direct spending and receipts, pay-as-you-
go procedures would apply.
    S. 1301 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would have no 
significant impact on the budgets of state, local, or tribal 
governments.
    Description of the bill's major provisions: Title I of S. 
1301 would establish a system of means-testing for determining 
eligibility for relief under chapter 7 of the U.S. bankruptcy 
code. Title II would provide various procedural protections to 
debtors. title III would:
          require the Administrative Office of the United 
        States Courts (AOUSC) to receive and maintain income 
        tax returns for all chapter 7 and chapter 13 debtors;
          require the AOUSC to collect and publish certain 
        statistics on bankruptcy cases;
          require that at least one out of every 500 bankruptcy 
        cases under chapter 13 or chapter 7 be audited by an 
        independent certified public accountant;
          require the Executive Office for the United States 
        Trustees (U.S. Trustees) to establish a program to 
        educate debtors on financial management; and
          authorize 18 new temporary judgeships and extend five 
        existing judgeships in 19 federal districts.
    Title IV would make various technical changes to bankruptcy 
laws.
    Estimated cost to the Federal Government: The bill would 
affect direct spending because it would authorize additional 
bankruptcy judgeships, and the salaries and benefits of these 
judges are considered mandatory. Costs for other personnel and 
administrative expenses of the courts associated with 
additional judgeships would be subject to the availability of 
appropriated funds. Enacting the means-testing provisions in 
Title I would result in fewer debtors filing for chapter 7 
bankruptcy protection and more debtors filing for chapter 13 
protection. As a result, CBO estimates a net increase in 
revenues from bankruptcy filing fees each year.
    As shown in the following table, CBO estimates that 
implementing S. 1301 would cost the courts, the AOUSC, and the 
U.S. Trustees $43 million in 1999 and $277 million over the 
1999-2003 period, subject to appropriation of the necessary 
funds. In addition, we estimate that mandatory spending for the 
salaries and benefits of bankruptcy judges would increase by $1 
million in 1999 and $16 million over the 1999-2003 period. 
Additional revenues from filing fees would total $5 million 
over five years. The costs of this legislation fall within 
budget function 750 (administration of justice).
    Basis of estimate: For purposes of this estimate, CBO 
assumes that S. 1301 will be enacted by October 1, 1998, and 
that all estimated authorization amounts will be appropriated 
for each fiscal year.

                                     [By fiscal year, in million of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                                  1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION                                  
                                                                                                                
Means-Testing Litigation (Sections 101-102):                                                                    
    Estimated Authorization Level.............................         1         1         1     (\1\)     (\1\)
    Estimated Outlays.........................................         1         1         1     (\1\)     (\1\)
Maintain Income Tax Information (Section 301):                                                                  
    Estimated Authorization Level.............................         6         5         6         7         9
    Estimated Outlays.........................................         5         5         6         7         9
Data Compilation/Publication (Section 306):                                                                     
    Estimated Authorization Level.............................         2         6         8         8         9
    Estimated Outlays.........................................         2         5         8         8         9
Audit Procedures (Section 307):                                                                                 
    Estimated Authorization Level.............................         0         2         4         5         6
    Estimated Outlays.........................................         0         2         4         5         6
Debtor Financial Management Training (Section 321):                                                             
    Estimated Authorization Level.............................        40        33        32        26        27
    Estimated Outlays.........................................        32        34        32        27        27
Support Costs for Additional Judgeships (Section 322):                                                          
    Estimated Authorization Level.............................         3         9        10        10        11
    Estimated Outlays.........................................         3         8        10        10        10
Total Changes:                                                                                                  
    Estimated Authorization Level.............................        52        56        61        56        62
    Estimated Outlays.........................................        43        55        61        57        61
                                                                                                                
                                           CHANGES IN DIRECT SPENDING                                           
                                                                                                                
Additional Judgeships (Section 322):                                                                            
    Estimated Authorization Level.............................         1         3         4         4         4
    Estimated Outlays.........................................         1         3         4         4         4
                                                                                                                
                                               CHANGES IN REVENUES                                              
                                                                                                                
Decrease in Chapter 7 Filing Fees and Increase in Chapter 13                                                    
 Filing Fees:                                                                                                   
    Estimated Revenues, Title I...............................         1         1         1         1        1 
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000 a year.                                                                                  

    Spending subject to appropriation: The estimated increases 
in discretionary spending would be required to fund the 
additional workload that would be imposed on the courts, the 
AOUSC, and the U.S. Trustees. Currently, the U.S. Trustees are 
funded through the bankruptcy-related fees collected by the 
courts. Without additional statutory authority, these fees 
cannot be increased to cover any additional expenditures that 
would result from enacting the bill. Because the legislation 
does not provide for such increases in fees, any additional 
costs would be subject to the availability of appropriated 
funds.
    Means-testing (sections 101-102).--The means-testing 
provision in S. 1301 would require a bankruptcy judge to 
consider two factors when deciding if a debtor's petition for a 
chapter 7 bankruptcy would be abusive and therefore require 
dismissal or conversion to a chapter 13 case. First, the court 
would consider whether the debtor could repay 20 percent of his 
or her general unsecured claims. Second, the court would 
consider if the debtor filed the case in ``bad faith.'' Also, 
creditors would be allowed to bring motions claiming abuse of 
the bankruptcy system, unless the debtor and the debtor's 
spouse have combined current monthly income less than or equal 
to the national median income for a family of the same size. In 
addition, a creditor would have to pay the debtor's attorney's 
fees and litigation costs if the motion to dismiss the case was 
denied and not substantially justified.
    Under S. 1301, CBO estimates that the U.S. Trustees would 
be required to compile and review income data necessary for 
means-testing and to participate in any litigation that would 
result from issues concerning eligibility. CBO expects that any 
additional data collection requirements would not pose a 
significant burden on the U.S. Trustees and thus would require 
no additional appropriations. However, we expect that the U.S. 
Trustees would incur additional costs for the work that would 
result from increased litigation.
    Based on information from the U.S. Trustees, CBO expects 
that the bill's means-testing provisions could increase 
litigation over a debtor's eligibility for chapter 7 relief 
because of potential conflicts between the courts and debtors 
over whether granting relief would be an ``abuse'' of the 
bankruptcy code. Under the bill, additional motions for 
dismissal would result as more objective criteria would be 
applied to a debtor's income and expenses and because creditors 
would have the ability to challenge petitions for chapter 7 
relief. Some debtors whose petitions for chapter 7 relief would 
be denied under S. 1301 would undoubted appeal those decisions.
    Although CBO cannot predict the amount of additional 
litigation, we expect that there would be some during the first 
few years following enactment of S. 1301, as parties test the 
new law's standards. We expect that the U.S. Trustees, who 
would become gatekeepers to thebankruptcy system under the 
bill, would be heavily involved in any litigation that would result, at 
an estimated cost of about $1 million through 2001. In subsequent 
years, the amount of litigation could diminish as precedents are 
established, and we estimate that costs would decrease to about less 
than $500,000 annually.
    Maintenance of tax returns (section 301).--This section 
would require the AOUSC to receive and retain tax returns for 
the three most recent years preceding the commencement of the 
bankruptcy case for all chapter 7 and chapter 13 debtors (about 
7 million debtors over the 1999-2003 period). CBO estimates 
that appropriations of $33 million over the next five years 
would be required to store and provide access to over 20 
million tax returns.
    Compilation and publication of bankruptcy data and 
statistics (section 306).--S. 1301 would require the AOUSC to 
collect data on chapter 7, chapter 11, and chapter 13 cases and 
to make the information available to the public. CBO estimates 
that appropriations of about $33 million would be required over 
the 1999-2003 period to meet these requirements. Of the total 
estimated cost, about $22 million would be required over the 
next five years for additional legal clerks, analysts, and data 
base support. The remainder of the estimated cost ($11 million) 
would be incurred for compiling data and providing Internet 
access to records pertaining to bankruptcy cases.
    Audit procedures (section 307).--Beginning 18 months after 
enactment, S. 1301 would require that at least one out of every 
500 bankruptcy cases under chapter 7 and chapter 13, plus other 
selected cases under those chapters, be audited by an 
independent certified public accountant. The U.S. Trustees 
estimates that about 1.2 million cases would be subject to 
audit in fiscal year 2000, increasing to about 1.8 million in 
fiscal year 2003. Assuming that about 0.25 percent of all cases 
would be audited and that each audit would cost about $1,200 
(in 1998 dollars), implementing this provision would require 
appropriations of $2 million in fiscal year 2000 and $17 
million over the 1999-2003 period. Section 307 also would 
require the Attorney General to attempt to recover some of the 
costs of audits from debtors with sufficient income or assets. 
As a result, it is possible that net costs for this section 
could be less than the above estimate to the extent that 
debtors could contribute to the funding of the audits; however, 
CBO does not expect that such debtor contributions would be 
significant.
    Instructional courses in financial management (section 
321).--This section would require the U.S. Trustees to 
establish a training program to educate debtors on financial 
management. Debtors would be required to undergo this training, 
or comparable training approved by the U.S. Trustees, as a 
condition of receiving relief from certain debts. Based on 
information from the U.S. Trustees, CBO estimates that about 1 
million debtors would participate if such a program were 
administered by the U.S. Trustees in fiscal year 1999. In 
future years, CBO expects that private companies would offer 
comparable instruction that could be taken by debtors (at their 
own expense) in place of a class administered by the U.S. 
Trustees. As a result, we expect that the number of debtors 
participating in the U.S. Trustees' instructional program would 
drop to about 600,000 by fiscal year 2002. At a projected cost 
of about $40 per debtor, CBO estimates that the U.S. Trustees 
would require the appropriation of about $158 million over the 
next five years to administer the training program.
    Extension and authorization of bankruptcy judgeships--
Support costs (section 322).--This provision would extend five 
temporary bankruptcy judgeships and authorize 18 new temporary 
bankruptcy judgeships for 19 federal judicial districts. Based 
on information from the AOUSC, CBO assumes that one half of the 
18 new positions would be filled by the middle of fiscal year 
1999 and the other half would be filled by the start of fiscal 
year 2000. Also, we anticipate that all five temporary 
judgeships would be extended by fiscal year 2001. We expect 
that discretionary expenditures associated with each judgeship 
would average about $400,000 (in 1998 dollars), after initial 
costs of about $145,000. Therefore, CBO estimates that the 
administrative support of additional bankruptcy judges would 
require an appropriation of about $3 million in 1999 and about 
$43 million over the 1999-2003 period.

                      direct spending and revenues

    Means-testing (sections 101-103).--CBO estimates that 
enacting the means-testing provisions would impose some 
additional workload on the courts. Although the U.S. Trustees 
would be responsible for conducting the initial review of 
financial information under either bill, CBO expects that the 
courts would also be involved in some level of review of such 
data. In addition, many bankruptcy judges expect that 
additional hearings and other court proceedings would be held 
over eligibility and income data.
    Section 322 of this bill authorizes 18 new temporary 
bankruptcy judgeships and extends five existing temporary 
judgeships. Based on information from the AOUSC and other 
bankruptcy experts, CBO expects that such an increase in the 
number of bankruptcy judges would be sufficient to meet the 
increased workload. Assuming that the salary and benefits of a 
bankruptcy judge would average about $152,000 a year (in 1998 
dollars), CBO estimates that the mandatory costs associated 
with the salaries and benefits of these additional judgeships 
would be $1 million in 1999 and about $16 million over the 
1999-2003 period.
    The means-testing provisions would also affect the 
government's income from bankruptcy filing fees because they 
would cause changes in the number and type of bankruptcy 
filings. CBO projects that, as a result of this bill, about 5 
percent of all chapter 7 debtors (about 48,000 out of 960,000 
cases each year) would not file for any type of bankruptcy 
protectionand that about 5 percent of all chapter 7 cases would 
be filed as or converted to chapter 13 cases. With a reduction in 
chapter 7 filings, the government would lose income from chapter 7 
filing fees. CBO estimates that for each case that would not be filed 
under chapter 7 or any other chapter, there would be a $130 reduction 
in the filing fee paid to the government. Income from this fee appears 
in two different places in the budget. Of the $130, $70 is recorded as 
part of the offsetting collections to the U.S. Trustee System Fund and 
Judiciary, and $15 is recorded as governmental receipts (i.e., 
revenues). Under chapter 7, the remaining $45 is paid to the private 
trustee assigned to the case and does not affect the federal budget. 
Assuming that fees for about 48,000 cases would no longer be collected 
each year, CBO estimates that enacting S. 1301 would result in a loss 
of about $1 million a year in revenues and about $3 million in 
offsetting collections. The loss of offsetting collections would reduce 
the amount available for spending by the U.S. Trustees and the AOUSC; 
however, CBO estimates that no additional appropriations would be 
required to replace this projected loss of fees because it would be 
matched by a reduction in workload associated with these chapter 7 
cases.
    The shift of cases from chapter 7 to chapter 13 would, in 
contrast, lead to greater fee collections. In contrast to the 
distribution of fees under chapter 7, $60 of the $130 filing 
fee is collected as a governmental receipt under chapter 13. 
(Private trustees are not paid out of the filing fee under 
chapter 13.) Thus, the government collects an additional $45 
for each shift of a case from chapter 7 to chapter 13. Because 
CBO expects that about 48,000 chapter 7 cases would be filed as 
or converted to chapter 13 cases, we estimate that revenues 
would increase by about $2 million in each year. On balance, 
the net change in revenues would be an increase of about $1 
million each year.
    Pay-as-you-go considerations: Section 252 of the Balanced 
Budget and Emergency Deficit Control Act sets up pay-as-you-go 
procedures for legislation affecting direct spending or 
receipts. As shown in the table below, CBO estimates that 
enacting S. 1301 would increase direct spending by about $16 
million over the next five years for the salaries and benefits 
of additional bankruptcy judges. In addition, enacting Title I 
would result in fewer chapter 7 debtors filing for bankruptcy 
protection and more debtors filing for chapter 13, protection. 
As a result, CBO estimates a net increase in revenues of about 
$1 million each year. For purposes of enforcing pay-as-you-go 
procedures, only the effects in the current year, the budget 
year, and the succeeding four years are counted.

                                    [By fiscal year, in millions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                      1998   1999   2000   2001   2002   2003   2004   2005   2006   2007   2008
----------------------------------------------------------------------------------------------------------------
Changes in outlays.................      0      1      3      4      4      4      4      4      3      2      2
Changes in receipts................      0      1      1      1      1      1      1      1      1      1      1
----------------------------------------------------------------------------------------------------------------

    Estimated impact on State, local, and tribal governments: 
S. 1301 contains no intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA) and would have no 
significant impact on the budgets of state, local, or tribal 
governments. Federal bankruptcy statutes currently allow states 
to determine certain property exemptions for homes in 
bankruptcy cases. The bill would place some limits on the value 
of homes that individuals may protect under those statutes. 
While this provision may limit the application of some state 
laws, it may also fee up additional resources in cases where a 
state or local government may have an outstanding tax claim.
    Previous CBO estimates: On May 8, 1998, CBO transmitted a 
preliminary cost estimate comparing the means-testing 
provisions in S. 1301, as reported by the Senate Judiciary 
Committee's Subcommittee on Administrative Oversight and the 
Courts on April 2, 1998, with those in H.R. 3150, as introduced 
on February 3, 1998. The May 8 letter indicated that 
implementing the means-testing provisions in S. 1301 could 
require between 10 and 15 additional judges to meet the 
increased workload requirements that would be imposed on the 
federal court system under S. 1301. Costs for the salaries and 
benefits of judges, which are mandatory, would be about $2 
million annually. CBO further indicated that the means-testing 
provisions (in the subcommittee version of S. 1301) would not--
by themselves--affect direct spending because the earlier 
version of the bill did not authorize any increase in the 
number of bankruptcy judges.
    Subsequently, on June 5, 1998, CBO transmitted a cost 
estimate for H.R. 3150, as reported by the House Committee on 
the Judiciary on May 20, 1998. Unlike S. 1301, H.R. 3150 would 
not authorize additional bankruptcy judgeships. Thus, enacting 
H.R. 3150 would not affect direct spending. Differences in 
discretionary spending estimates between S. 1301 and H.R. 3150 
reflect differences in the provisions of the two bills.
    Estimate prepared by: Federal Costs: Susanne S. Mehlmand 
and Mark Grabowicz; Impact on State, Local, and Tribal 
Governments: Leo Lex.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.

                     V. REGULATORY IMPACT STATEMENT

    In compliance with paragraph 11(b)(1), rule XXVI of the 
Standing Rules of the Senate, the Committee, after due 
consideration, concludes that S. 1301 will not have significant 
regulatory impact.

             VI. ADDITIONAL VIEWS OF SENATOR PATRICK LEAHY

    Every American agrees with the basic principle that debts 
should be repaid. The vast majority of Americans are able to 
meet their obligations. But, for those who fall on financial 
hard times, bankruptcy should be available in a fair and 
balanced way.
    Unfortunately, more and more Americans are filing for 
bankruptcy. The numbers are disturbing. While the unemployment 
rate keeps going down and inflation remains low, the Nation's 
personal bankruptcies keep going up. Vermont's personal 
bankruptcy rate increased by about 40 percent for each of the 
last two years and Vermont was ranked next to last in personal 
bankruptcy filings last year. In most other states, personal 
bankruptcy rates increased even more dramatically.
    I do not know all the answers as to why more and more 
Americans are filing for bankruptcy. I think some may be 
abusing the system. I think most are not. My guess is that 
stagnant wages and more consumer credit card debt are the 
primary reasons. Where there are abuses in the bankruptcy law, 
we should move to correct them. I want to commend Senator 
Durbin and Senator Grassley for moving forward to correct 
abuses in a measured and balanced way.
    I have consulted with our bankruptcy judge in Vermont and 
will continue to do so. He cautions that we remember the 
purpose bankruptcy serves, which is as a safety net for many of 
our constituents. Those who use bankruptcy are the most 
vulnerable of the American middle class. They are older 
Americans who have lost their jobs or are unable to pay their 
medical debts. They are women attempting to raise their 
families or secure alimony and child support after a divorce. 
They are individuals struggling to recover from unemployment.
    As we move forward with reforms that are appropriate to 
eliminate abuses in the system, we need to remember the people 
who use the system, both the debtor and the creditor. We need 
to balance the interests of creditors with those of middle 
class Americans who need the opportunity to resolve 
overwhelming financial burdens.

                                                     Patrick Leahy.

               VII. ADDITIONAL VIEWS OF SENATOR HERB KOHL

    The dramatic rise in bankruptcies is very troubling, 
regardless of whether the blame lies with credit card 
companies, a culture that disparages personal responsibility, 
the bankruptcy code or, most probably, with all of the above. 
While none of us wants to return to the era of ``debtors'' 
prison,'' we need to do something to reverse this trend.
    But true ``reform'' will only occur if we target the abuses 
without overburdening the vast majority of debtors who truly 
need--and deserve--relief. That is why I support this bill. It 
is also why Senator Sessions and I added a much-needed cap on 
the homestead exemption. And, finally, it is the reason that we 
need to go further by also taking steps to protect debtors from 
abuses by the credit card industry. Let me explain.
    First, I support the approach this bill takes because it 
generally targets people who can afford to repay some of their 
debts, not honest debtors who have fallen on hard times. Its 
``means testing'' provisions send the message that abuse of the 
bankruptcy code will not be tolerated, while still providing 
flexibility to take into account debtors' individual 
circumstances. Unlike other proposals under consideration, it 
does not sweep too broadly, putting costly procedural burdens 
on honest as well as abusive debtors. Of course, as with any 
piece of legislation, this bill has room for improvement. I 
look forward to refining and strengthening it on the floor.
    Second, our cap on the homestead exemption will eliminate 
one of the worst abuses of the bankruptcy system. This 
proposal, adopted unanimously in subcommittee, closes a 
loophole that allows too many debtors to shield their assets in 
luxury homes, while their creditors get left out in the cold. 
Currently, a handful of States allow debtors to protect their 
homes no matter how high the value. And time after time, 
millionaire debtors move to States with unlimited exemptions, 
like Florida and Texas, declare bankruptcy--yet continue to 
live like kings while their creditors get little or nothing. If 
we want to restore the stigma attached to bankruptcy, these 
high profile abuses are the best place to start.
    Our proposal is simple and effective: It caps at $100,000 
the maximum homestead exemption that an individual filing 
bankruptcy can claim. With the cap in place, bankrupt debtors 
will retain their right to a roof over their heads, but not to 
luxury accommodations.
    Finally, real reform should require a balanced approach 
that not only targets abuses by debtors, but also curbs abuses 
by creditors. The credit card industry has played no small role 
in the explosion of consumer debt and consumer bankruptcies. 
Mass credit card solicitations do more than overload our mail 
boxes and pile up on our kitchen tables. They also tempt many 
individuals to try to borrow their way out of financial 
distress, often leaving them worse off and with little choice 
other than bankruptcy. Perhaps, as an incentive to creditors, 
the benefits of this measure should be denied to credit card 
companies who deliberately extend credit to those who are 
clearly too irresponsible to use it wisely. On the floor, I 
hope we can address these abuses, or, at the very least, ensure 
that consumers have the information they need to make 
intelligent choices.
    Overall, I commend Senators Grassley and Durbin for their 
hard work and close collaboration. I look forward to a final 
product that continues tackling the worst abuses, while still 
helping honest debtors.

                                                         Herb Kohl.

   VIII. ADDITIONAL VIEWS OF SENATORS RICHARD J. DURBIN, RUSSELL D. 
     FEINGOLD, DIANNE FEINSTEIN, HERB KOHL AND ROBERT G. TORRICELLI

    We write to express our concerns that S. 1301 will not 
adequately prevent bankruptcies, make insolvency less likely, 
or improve the perilous financial situation that millions of 
Americans find themselves in every year. S. 1301 does not 
contain enough provisions that aim at improving the financial 
lot of millions of Americans or that confront the question why 
more than 1 million Americans filed for personal bankruptcy 
last year.
    The main goal of S. 1301 is to prevent abuse of the 
bankruptcy code. Abuse is simply the manipulation of the law to 
avoid paying debts that legitimately could be paid with a 
reasonable amount of effort by the debtor. This is a goal that 
we entirely support. We support the goals of S. 1301 because of 
the overriding importance of preventing and catching abuse. But 
we also believe that it has defects that should be cured before 
final passage.
    We firmly believe that S. 1301 must be accompanied by other 
provisions--aimed at dealing with financial industry practices 
that prey on the unfortunate and that increase the likelihood 
of bankruptcy--in order for it to be fully effective and 
thoughtful.
    At the committee markup of S. 1301, Senator Torricelli 
commented on a growing trend in America: ``There is bankruptcy 
by entrapment in this country--unsolicited credit cards, credit 
cards to very low income people, credit cards at usurious rates 
of interest. The class of protections that we are offering to 
legitimate corporations that extend credit, in my judgment, 
should not be fully extended to those companies with these 
usurious rates who prey on low-income people, and do so on an 
unsolicited basis.''
    A few facts may help put the situation into perspective.
    In 1975, total household debt was 24 percent of aggregate 
household income. Today, household debt is more than 100 
percent of aggregate household income.\1\ In short, in the last 
23 years, the average debt burden of the average American 
family has quadrupled. Not surprisingly, this higher debt 
burden has made more and more American families vulnerable to 
financial catastrophe. A job loss, layoff, or income decline 
can result in debts spinning out of control very quickly. A 
divorce, a car crash, a health emergency, a sick parent, or a 
lawsuit can lead to a financial emergency.
---------------------------------------------------------------------------
    \1\ See Statistical Abstract of the United States.
---------------------------------------------------------------------------
    The evidence indicates that most personal bankruptcies 
filed are not for abusive purposes. Several facts illuminate 
this case:
    According to the National Bankruptcy Review Commission, in 
1977 there were 0.74 bankruptcies for every million dollars of 
consumer debt; in 1997, there were 0.73 bankruptcies for every 
million dollars of consumer debt.\2\
---------------------------------------------------------------------------
    \2\ Report of the National Bankruptcy Review Commission (1997) at 
85.
---------------------------------------------------------------------------
    The average income of a person in bankruptcy has steadily 
declined since 1981. In 1981, the median income of a debtor in 
bankruptcy was $23,254. In 1997, it was $17,652. Even as median 
income was dropping, the median amount of unsecured debt owed 
by the average debtor was growing from $20,230 in 1981 to 
$28,949 in 1997.\3\
---------------------------------------------------------------------------
    \3\ Elizabeth Warren, ``The Bankruptcy Crisis,'' 73 Indiana Law 
Journal 1049 (1998).
---------------------------------------------------------------------------
    Studies prepared by the Congressional Budget Office 
indicate that personal bankruptcy filings increase almost in 
lockstep with increases in household debt-to-income ratios. 
(Chart attached).\4\
---------------------------------------------------------------------------
    \4\ Statement of Kim Kowalewski, Chief, Financial and General 
Macroeconomic Analysis Unit, Congressional Budget Offic, before the 
Subcommittee on Administrative Oversight and the Courts, Committee on 
the Judiciary, United States Senate at 4 (April 1997). See also Diane 
Ellis, ``The Effect of Consumer Interest Rate Deregulation on Credit 
Card Volumes, Charge-offs, and the Personal Bankruptcy Rate,'' Bank 
Trends 98-05 (Division of Insurance, FDIC February 1998).
---------------------------------------------------------------------------
    These facts persuade us of two things. First, most people 
are going into bankruptcy because of debt, not because they are 
lazy, shiftless, and morally corrupt. Second, any effort to 
address the bankruptcy problem must not only deal with the 
personal responsibility of the debtor but must also deal with 
the corporate responsibility of the creditor.
    A combination of industry practices have contributed 
greatly to the bankruptcy crisis.
    From 1994 to 1996, credit card issuers mailed more than two 
and a half billion card solicitations each year. Each American 
household probably received more than 41 credit card mailings--
not counting telephone solicitations or home equity loan 
solicitations. In a little over four years, the credit card 
companies offered about $1 million of credit to every household 
in the United States.\5\
---------------------------------------------------------------------------
    \5\ George M. Salem and Aaron C. Clark, GKM Banking Industry 
Report, Bank Credit Cards: Loan Loss Risks are Growing, 5 (June 11, 
1996).
---------------------------------------------------------------------------
    And then in 1997, credit card solicitation jumped 20 
percent to three billion mailings. Direct solicitations of both 
college and high school students reached unprecedented heights. 
More than half of the eighth grade students in one Peoria, 
Illinois grade school class have received credit-card 
applications in their own name.\6\ In upstate New York, nearly 
every member of a group living house for people with learning 
disabilities received credit card applications. One of them, 
who could sign his name but could not add or subtract, had 13 
credit cards with more than $11,000 in debt outstanding. His 
only income is $7,000 a year from Social Security disability 
benefits.\7\
---------------------------------------------------------------------------
    \6\ Pam Adams, ``Differences From State to State Can Have a Major 
Impact on Debtors,'' Peoria Journal Star, June 29, 1998.
    \7\ Dan Herbeck, ``Where Credit Isn't Due Developmentally Disabled 
Become Victims,'' Buffalo News, April 7, 1998.
---------------------------------------------------------------------------
    In the last four years, outstanding credit card debt has 
doubled so that by the end of 1997 $422 billion in credit card 
loans were outstanding.\8\ Credit card usage has grown fastest 
in recent years among debtors with the lowest incomes. Since 
the early 1990s, Americans with incomes below the poverty line 
nearly doubled their credit card usage, and those in the 
$10,000 to $25,000 income bracket came in a close second in the 
rise in debt. The result is not surprising: 27 percent of the 
under $10,000 families have consumer debt that is more than 40 
percent of their income. Nearly one in ten has at least one 
debt that is more than 60 days past due.\9\
---------------------------------------------------------------------------
    \8\  OCC Advisory Letter 96-7, September 26, 1996, (96-7.txt at 
www.occ.treas.gov); FDIC Quarterly Banking Profile Graph Book, Fourth 
Quarter 1997.
    \9\ Federal Reserve Bulletin, Family Finances in the U.S.: Recent 
Evidence from the Survey of Consumer Finances, Table 14 Aggregate and 
median ratios of debt payments to family incomes, and shares of debtors 
with ratios above 40 percent and those with any payment sixty days or 
more past due, by selected family characteristics, 1989, 1992, and 
1995.
---------------------------------------------------------------------------
    Even as credit card lending has exploded, so too has home 
equity lending with high loan-to-value ratios. Between 1995 and 
1997, the amount of this high-risk home equity lending has 
increased from $1 billion to $10 billion. This year, it is 
expected to double from its 1997 level.\10\
---------------------------------------------------------------------------
    \10\ Fred Bleakley, ``A 125% Solution to Card Debt Stirs Worry--
Second Mortgage Trend May Signal Economic Trouble,'' Wall St. Journal, 
November 17, 1997; see also, `` Increased Home Equity Loans Raises 
Specter of Card Delinquencies,'' 8 Credit Risk Management, July 13, 
1998.
---------------------------------------------------------------------------
    The increased availability of credit among many segments of 
our society has been highly beneficial. But it also has its 
dark side.
    As the New York Times reported in 1996: ``A model developed 
by Fair Isaac & Company, a consulting firm, finds that the 
characteristics of many people who are about to file for 
bankruptcy are also those of the most profitable customers: 
They take a lot of cash advances, borrow up to their credit 
limits and only make the minimum payment each month.'' \11\
---------------------------------------------------------------------------
    \11\ Saul Hansell, ``The Debt Trap--A Special Report. Personal 
Bankruptcies Surging as Economy Hums,'' The New York Times, August 25, 
1996.
---------------------------------------------------------------------------
    Ironically, a string of industry practices punish people 
who engage in good personal financial management. For example, 
a number of credit card issuers have begun terminating the 
accounts of people who pay their debts off in full every month. 
Other banks charge people monthly fees--on top of interest 
paid--if they pay their debts off in full.
    More troubling, another set of practices effectively pushes 
overextended borrowers into deeper and deeper trouble. Late 
fees, over-limit fees, other hidden charges and dramatic jumps 
in interest rates mean that a person who suffers a minor 
financial roadbump can quickly find himself speeding toward 
financial catastrophe. Banks often almost double the interest 
rate they charge for a consumer who misses two payments. 
Getting behind on your credit cards today is not just a small 
problem that can be cured easily with a new job at the same 
salary or with a small loan from a friend willing to help. 
Moreover, evidence indicates that creditors are unwilling to 
help people who find themselves in financial trouble. A survey 
of people who declared bankruptcy prepared by Visa in 1996 
found that two-thirds of the people surveyed reported that 
creditors did not try to work with them to help them avoid 
filing for bankruptcy.\12\
---------------------------------------------------------------------------
    \12\ Visa, ``Consumer Bankruptcy: Bankruptcy Debtor Survey,'' 10 
(July 1996).
---------------------------------------------------------------------------
    In addition, credit card companies encourage debtors to 
only make minimum payments which do not pay down the loan. 
Industry analysts estimate that using a typical minimum monthly 
payment rate on a credit card it would take 34 years to pay off 
a $2,500 loan and total payments would exceed 300 percent of 
the original principal.\13\ But the average credit card holder 
would never know this. Credit card companies also offer low 
teaser rates that are designed to encourage consumers to run up 
balances when the rate is low but that are inevitably paid off 
at a much higher rate.
---------------------------------------------------------------------------
    \13\ Salem & Clark, supra note 5, at 25.
---------------------------------------------------------------------------
    These practices--a tidal wave of solicitations, aggressive 
marketing among higher risk customers, and fees and penalties 
that push people in trouble further down--are combined with 
solicitations and bills that are virtually incomprehensible to 
the average consumer. Trying to read or understand a credit 
card offer, bill or contract is a lesson in frustration and 
confusion. As a result, the vast majority of Americans are 
stymied in their efforts to fully understand the implications 
of their financial decisions. They pay only the monthly minimum 
not knowing that at that rate it will take them almost 35 years 
to pay off the full amount. They transfer balances to cards 
with low introductory rates only to be surprised by higher 
interest rates on other purchases. Not surprisingly, consumer 
confusion mixed with tantalizing offers and aggressive 
solicitation from credit card companies is a recipe for 
financial trouble.
    And the sad fact is that many Americans seem to believe 
that they can literally borrow their way out of debt. Credit 
card companies and home equity lenders encourage this 
impression by attempting to persuade consumers to consolidate 
all of their debt and then get an extra line of credit. As 
Senator Feinstein commented at the committee mark up: ``But one 
of the things that is happening more and more is the almost 
entrapment that takes place from credit card companies who 
provide credit cards with up to a $10,000 limit to people who 
really have no business having those credit cards. I have two 
people close to me that [were] * * * very close to bankruptcy, 
with seven or eight different credit cards and figuring they 
could get out of debt by sort of playing one against the other 
and really not having the kind of credit rating to have any of 
those cards. * * * It seems to me that any legislation really 
ought to put some obligation on those who sell credit so 
loosely, that at least they be required under the law of this 
land to look at the creditworthiness of the individual who is 
getting that credit.''
    So we write today to make clear that we must take aim at 
these practices. Real reform must assure not only that 
consumers have clear and comprehensible information about 
credit card debt, but that the institutions that engage in 
risky and predatory lending are neither encouraged nor 
protected by the bankruptcy law. We intend to insist on 
comprehensive bankruptcy reform.

                                   Dick Durbin.
                                   Russ Feingold.
                                   Dianne Feinstein.
                                   Herb Kohl.
                                   Robert G. Torricelli.

           IX. ADDITIONAL VIEWS OF SENATOR RICHARD J. DURBIN

    Much of our discussion concerning reform of the nation's 
bankruptcy laws has focused upon perceived abuses of the 
bankruptcy system by consumer debtors. Far less discussion has 
occurred with regard to abuses by creditors that help usher the 
nation's consumers into bankruptcy. I believe that abuses exist 
on both sides of the debtor-creditor relationship and that 
bankruptcy reform is incomplete if it fails to address 
documented abuses among creditors.
    Studies have identified a host of predatory financial 
practices directed at the nation's financially vulnerable. 
These studies suggest that many low-income Americans 
participate in a virtual ``fringe'' economy. They may lack 
access to mainstream financial institutions--often because of 
high minimum balance requirements or excessive fees--and may 
also lack the collateral or the credit rating needed to secure 
loans for a home, for home repairs, or for other essential 
needs.
    This segment of the economy is at the mercy of a variety of 
credit practices by a variety of offerors that can lead to 
financial ruin. High pressure consumer finance companies have 
bilked unsophisticated consumers out of substantial sums by 
aggressively marketing expensive loan insurance products, 
charging usurious interest rates, urging repeated refinancings, 
and loading their products with hidden fees and costs. High 
cost mortgage lenders have defrauded millions of older 
Americans with modest income but substantial home equity of 
their lifelong homeownership investments. Some auto lenders in 
the used-car industry have gouged customers with interest rates 
as high as 50%, and with assessments for credit insurance, 
repair warranties, and hidden fees, adding thousands of dollars 
to the cost of an otherwise inexpensive used car. Pawn shops in 
some states have charged annual rates of 240% or more to 
consumers who have nowhere else to turn for small, short-term 
loans.
    Abusive credit practices of every stripe harm millions of 
older and low-income Americans each year. During the committee 
debate on S. 1301, I offered an amendment designed to address 
and curtail just one bad practice among many--the predatory, 
high-cost mortgage loans targeted at the low-income elderly and 
the financially unsophisticated. This amendment was adopted 
unanimously, and I write to day to discuss it in further 
detail.
    In recent years, there has been an explosion in the market 
for these home mortgages, generally for secondary mortgages 
that are not used to fund the purchase or construction of a 
home. The market is known as the ``subprime mortgage'' 
industry. The subprime mortgage industry offers home mortgage 
loans to higher-risk borrowers--loans carrying far greater 
interest rates and fees than conventional loans, and also 
carrying extremely high profit margins for these lenders.
    In 1997 alone, subprime lenders originated over $125 
billion dollars in home equity loans. By the first half of 1997 
they accounted for 15.5% of the total home equity lending 
market. The companies engaging in subprime mortgage lending 
have grown from small companies into large corporations with 
nationwide operations. According to a recent study of predatory 
financial practices by the Public Policy Institute, a part of 
the Research Group for the American Association of Retired 
Persons, ``[t]he evidence indicates that, nationally, the 
losses to mortgage fraud and rate-gouging may reach into the 
billions of dollars over the past decade--representing hundreds 
of thousands and perhaps more than one million individual 
victims.'' Michael Hudson, ``Predatory Financial Practices: How 
Can Consumers Be Protected?'' (Winter 1997).
    The growth of the subprime lending industry is of concern 
to us for two reasons--first, because of the reprehensible 
tactics, called predatory lending practices, which some of 
these companies use to conduct their business, and second, 
because of the vulnerable people--senior citizens and the low-
income, the financially unwary--whom they often target with 
their loans.
    The story of Genie McNab, a 70-year-old woman living in 
Decatur, Georgia, demonstrates both aspects of the problem. Ms. 
McNab is retired and lives alone on Social Security and 
retirement benefits. In November of 1996, with the ``help'' of 
a mortgage broker, Ms. McNab obtained a 15-year mortgage loan 
for $54,300 from a large national finance company. Her annual 
percentage rate is 12.85%. Under the terms of the mortgage, she 
will pay $596.49 a month until the year 2011, when she will be 
required to make a final payment of $47,599.14. By the time she 
is done, her $54,200 loan will have cost her $154,967.
    Fifteen years from now, when she is 83 years old, Genie 
McNab will be saddled with a balloon payment she will never be 
able to make. She'll face foreclosure, and she'll be forced to 
consider bankruptcy. She'll face the loss of herhome and her 
financial security, not to mention her dignity and sense of well-being. 
Ironically, Ms. McNab paid a mortgage broker $700 to find her this 
unconscionable loan--a mortgage broker who also collected a $1,100 fee 
from the mortgage lender.
    Unfortunately, Ms. McNab is a typical target of the high-
cost mortgage lender--an elderly person, living alone on a 
fixed income. She is just the type of person who may suddenly 
have encountered an unexpected financial obstacle--the death of 
a spouse and the loss of that spouse's income, a large medical 
bill, an expensive home repair, or a mounting credit card debt 
incurred to deal with that income loss or with those medical 
bills. These are the real life circumstances which make her an 
irresistible target for some members of the subprime mortgage 
industry.
    According to a former career employee of the industry, who 
testified anonymously at a hearing before Senate Special 
Committee on Aging in March of this year, ``my perfect customer 
would be an uneducated woman who is living on a fixed income--
hopefully from her deceased husband's pension and social 
security--who has her house paid off, is living off of credit 
cards, but having a difficult time keeping up her payments, and 
who must make a car payment in addition to her credit card 
payments.'' This industry professional candidly acknowledged 
that unscrupulous lenders specifically market their loans to 
elderly widowed women, blue-collar workers, people who haven't 
gone to college, people on fixed incomes, non-English speaking 
people and people who have significant equity in their homes.
    They targeted another such person in the District of 
Columbia. Her name is Helen Ferguson. She is 76 years old and 
lives in Northwest D.C. As a result of predatory lending 
practices, her home is in jeopardy. In 1991, Ms. Ferguson had a 
total monthly income of about $504 from Social Security and 
Supplemental Security Income. With the help of her family, she 
made a $229 monthly mortgage payment on her house. However, on 
her fixed income, she was unable to make needed home repairs. 
She began hearing and seeing radio and television ads for low 
interest home improvement loans and contacted a lender. Ms. 
Ferguson thought she signed up for a $25,000 loan, but in 
reality, the lender collected over $5,000 in fees and 
settlement charges for a $15,000 loan. The interest rate the 
lender charged her was 17%. Her mortgage payments went up to 
$400 a month--almost twice her old payment.
    Over the next few years, the lender repeatedly tried to 
convince Ms. Ferguson to take out more loans, calling her and 
her sister at home and work, sending letters and Christmas 
cards. In March of 1993, she gave in to the lender, borrowing 
money to make home repairs. By March of 1994, she could not 
keep up with her mortgage payments. She signed for a loan with 
another lender, unaware that it had a variable interest rate 
and terms that would cause her payments to rise to $600 and 
eventually $723 a month. For this loan she paid over $5,000 in 
broker fees, and more than 14% in total fees and settlement 
charges. The first lender also continued to solicit her, and 
she eventually signed up for even more loans. Each time the 
lender persuaded her that a refinancing would enable her to 
meet her monthly payments.
    Ms. Ferguson was the target of a predatory loan practice 
known as ``loan flipping.'' In such cases, lenders purposely 
structure the loans with monthly payments they know the 
homeowner cannot afford so that at the point of default they 
will return to the lender to refinance. The refinancing 
provides the lender with additional points and fees. And in the 
case of some Ms. Ferguson's loans, not only did the lender 
prepare two sets of documents, and rush the signing, but the 
lender's representatives took with them all the papers from the 
mortgage closing, mailing them to her only after the 3-day 
rescission period was expired and the check for home repairs 
was spent.
    Ms. Ferguson eventually was obligated to make monthly 
payments of more than $800, although her income was only $504 a 
month, and the lenders knew it. In 5 years the debt on her home 
increased from $20,000 to over $85,000. She felt helpless and 
overwhelmed, and it was only after contacting the American 
Association of Retired Persons that she realized these lenders 
were violating federal law.
    Lump sum balloon payments on short-term loans, loan 
flipping, the extension of credit with a complete disregard for 
the borrower's ability to repay--these aren't the only abusive 
mortgage practices. Lenders on these secondary mortgages 
sometimes include harsh repayment penalties in the loan terms, 
or roll over fees and charges into the loan, or negatively 
amortize the loan payments so that principal actually increases 
over time--all of which is prohibited by law, although ordinary 
homeowners are unlikely to be aware of that. Some of these 
homeowners will not make it to a lawyer or other source of help 
before financial meltdown occurs. When they realize what has 
happened, these consumers are often on the brink of foreclosure 
and bankruptcy. Often, the people soliciting these loans have 
won their trust and confidence, and the homeowners are 
reluctant to believe that they have been so ruthlessly taken 
in.
    The problem of predatory financial practices in the high-
cost mortgage industry is relevant to bankruptcy because it is 
driving vulnerable people into bankruptcy. These people are not 
entering bankruptcy in order to abuse the system, they are 
filing bankruptcy because the reprehensible tactics of 
unscrupulous lenders have driven them into insolvency.
    My amendment prohibits a high-cost mortgage lender that 
extended credit in violation of the provisions of the Truth-In-
Lending Act from collecting its claim in bankruptcy. The result 
of my amendment will be that when an individual like Genie 
McNab or Helen Ferguson goes to the bankruptcy court--seeking 
last-resort help for the financial distress an unscrupulous 
lender has caused her--the claim of the predatory home lender 
will not be allowed. If the lender has failed to comply with 
the requirements of the Truth in Lending Act for high-cost 
second mortgages, the lender will have absolutely no claim 
against the bankruptcy estate.
    My amendment is not aimed at all subprime lenders or at all 
second mortgages. Indeed, it is aimed only at the worst, most 
predatory, of these by and large worthy lenders. My provision 
is aimed only at practices that are already illegal. It does 
not deal with technical or immaterial violations of the Truth 
in Lending Act. Disallowing the claims of predatory lenders in 
bankruptcy cases will not end these predatory practices 
altogether. Yet it is one step we can take to curb creditor 
abuse in a situation where the lender bears primary 
responsibility for the deterioration of a consumer's financial 
situation.

                                                       Dick Durbin.

   X. MINORITY AND DISSENTING VIEWS OF SENATOR EDWARD M. KENNEDY AND 
                      SENATOR RUSSELL D. FEINGOLD

                            I. Introduction

    There is no doubt that more and more Americans are turning 
to the consumer bankruptcy system and the financial protections 
it offers. In 1997, more than 1.3 million families filed for 
bankruptcy. This represents nearly a 400 percent increase since 
1980. Clearly, steps must be taken to reign in the number of 
individuals and families filing for bankruptcy. Where there is 
fraud and abuse we must take steps to reduce and eliminate it.
    The Consumer Bankruptcy Reform Act of 1997 is not a well-
balanced solution to this problem. Instead, it has the 
potential to harm women and children, the elderly, and the 
unemployed. It elevates unsecured credit card debt to the same 
levels as alimony and child support, student loans, and taxes. 
It penalizes an attorney for vigorously representing a debtor. 
In short, this bill takes a good idea--reducing the number of 
bankruptcy filings--and twists it into a bad deal for some of 
our most vulnerable Americans.
    S. 1301 assumes that debtors are by nature irresponsible or 
intent on committing fraud. In part, this is a result of using 
erroneous assumptions to craft public policy. Despite evidence 
that debtors now wait longer to file bankruptcy and are deeper 
in debt than those who filed for bankruptcy a decade ago, 
proponents of this bill argue that a declining social stigma is 
responsible for an increase in bankruptcy filings.
    Supporters of this legislation also use an October 1997, 
Credit Research Center report entitled, Personal Bankruptcy: A 
Report on Petitioners Ability to Pay as a foundation for the 
claim that most debtors could actually repay more of their 
debts than is currently required by law. But the General 
Accounting Office (GAO) found that the Center's report had 
several methodological flaws that make both its validity and 
its reliability suspect. The GAO concluded that ``[t]he methods 
used in the Center's analysis do not provide a sound basis for 
generalizing the Center report's findings to the annual 1996 
filings in each of the 13 locations nor to the national 
population of personal bankruptcy filings.''
    In reality, the causes of increased bankruptcy filings are 
far more complex than a declining social stigma. Increased 
bankruptcy filings can be attributed to job loss, divorce, 
increasing health care costs, and declining real wages. A more 
complete explanation for the increase in bankruptcy filings 
includes the conclusions of numerous scholars and researchers, 
who believe that increased marketing and high credit card 
interest rates are major contributors to increased bankruptcy 
filings. For example, Harvard Business School researchers David 
Moss and Gibbs Johnson note that ``the evidence suggests that 
shifts in the volume of and distribution of consumer credit--
rather than declining stigma--are the most likely sources of 
the recent surge in consumer filings.'' They add that another 
explanation for the surge of filings that began in the late 
1980s ``is that consumer creditors began reaching substantially 
further down into the income distribution beginning in the mid 
1980s.''
    A report issued by the Consumer Federation of America 
earlier this year indicates that credit card mail solicitations 
reached an all-time high in 1997--in the second quarter alone, 
credit card companies sent out 881 million mail solicitations. 
In total, credit card companies sent out 3.1 million mail 
solicitations last year. Credit card manufacturers also 
increased their advertising 14 percent between 1995 and 1996.
    But even in the face of mounting evidence that credit card 
marketing and skyrocketing interest rates have contributed to 
increased bankruptcy filings, this bill does nothing to prevent 
credit card companies from targeting low-income families. It 
does nothing to curb high credit card interest rates or to slow 
the flow of unsolicited, pre-approved credit card applications. 
It demands no new consumer protections or disclosures from the 
credit card industry.
    This is irresponsible legislating, since evidence suggests 
a strong link between credit card interest rates, credit card 
defaults, and bankruptcy. University of Maryland professor 
Lawrence Ausubel, in a 1997 article in the American Bankruptcy 
Law Journal, noted this link and added that bankruptcy filings 
``follow exceedingly closely changes in the rate of credit card 
delinquencies.''
    How can we turn a blind eye to credit card lending 
practices that allow--even encourage--people who can't afford 
credit cards to incur enormous debts? Students, low-income 
families, even people who have declared bankruptcy routinely 
receive unsolicited, pre-approved credit card applications.
    When job loss, divorce, or medical emergency strike, some 
of these individuals have no choice but to file for bankruptcy 
in order to stabilize themselves. Congress must balance the 
interests of creditors with those of Americans who need the 
opportunity to resolve overwhelming financial burdens. As we 
address abuses by debtors, we must also address creditor 
abuses. This bill does not do that.
    In light of these substantial concerns, we believe that the 
Judiciary Committee moved too rapidly in its consideration of 
S. 1301 and ignored the recommendations of numerous bankruptcy 
judges, scholars, and practitioners. After only two days of 
subcommittee hearings on the issue of consumer bankruptcy and 
one hearing on the proposed bill, the Committee passed 
legislation embodying the most ambitious changes in the 
bankruptcy law in the 100 years of the modern bankruptcy 
system. This is a dramatic departure from the attention 
Congress usually gives to major bankruptcy reform legislation.
    The majority's criticism of Senators' hearing attendance 
does not change the fact that there were very few hearings 
devoted to the topic of consumer bankruptcy or S. 1301. 
Moreover, one of the dissenters does not sit on the 
Subcommittee, and the only Full Committee hearing on S. 1301 
was canceled without explanation. The hearing was not 
rescheduled. As noted above, this contrasts significantly with 
Congress' intensive and thorough review of the 1978 bankruptcy 
bill.
    In 1978, the last time Congress reformed the bankruptcy 
laws, the Subcommittee on Improvements in Judicial Machinery 
held 21 days of hearings, and the Full Committee held three 
more hearings on the bill. Similarly, the House Subcommittee on 
Civil and Constitutional Rights held 35 days of hearings.
    The Committee also gave little consideration to the report 
of the bi-partisan National Bankruptcy Review Commission that 
sent its findings and recommendations to Congress in October 
1997. While the Commission did not reach unanimous agreement in 
the area of consumer bankruptcy, the legislation diverges 
sharply from the recommendations of both the majority and the 
four-person minority. When the Commission was authorized in 
1994, Congress specifically pronounced itself ``generally 
satisfied with the basic framework established in the current 
Bankruptcy Code,'' and counseled the Commission ``not [to] 
disturb the fundamental tenets of current law.''
    Keeping in mind its mandate, the Commission held 21 public 
meetings, which were attended by 2600 people. After hearing 
from 602 participants, the Commission adopted 172 proposals, 
which were forwarded to Congress. Although S. 1301 adopts a few 
of those recommendations, it primarily consists of proposals 
that were specifically rejected or not acted upon by the 
Commission.
    Congress has not reached consensus on the catalyst for 
increased bankruptcy filings, nor has it adequately explored 
all alternatives to reduce filings. We do know, however, that 
single parents and children, older Americans, minorities, and 
working families, among others, will be especially hard-hit by 
the provisions included in S. 1301. Before passing bankruptcy 
reform legislation, Congress should fully examine the 
complexities of the problem and carefully craft legislation 
that will eliminate creditor and debtor abuses without 
eliminating an important safety net for middle class Americans. 
Anything less is a disservice to our constituents.

        II. The Effect of S. 1301 on Single Parents and Children

    S. 1301 has been criticized for its effects on single 
parents and children, both as debtors and as creditors trying 
to collect past-due support. Many of the provisions producing 
these concerns do not explicitly mention ex-spouses, children 
or support obligations. Rather, the especially problematic 
provisions increase dividends and collection rights for 
nonpriority unsecured creditors (such as credit card lenders) 
through forced repayment plans,\1\ additional exceptions to 
discharge,\2\ or provisions enhancing creditors' leverage to 
obtain reaffirmations \3\ at the expense of priority creditors 
(such as child support recipients). Other provisions inflate 
the claims and entitlements of secured institutional 
lenders,\4\ leaving a smaller proportion of income available 
for payment of priority claims. In addition, numerous 
provisions in S. 1301 complicate bankruptcy procedure or 
encourage unilateral action by particular creditors such that 
scarce resources will be consumed through litigation or through 
addressing the consequences of ejection from the system.\5\
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    \1\ See S. 1301 Sec. 102.
    \2\ Id. Sec. Sec. 314, 315, 316.
    \3\ Id. Sec. Sec. 102, 308, 310, 315, 316, 317, 318.
    \4\ Id. Sec. Sec. 302, 305, 310, 311, 317, 318, 319, 321.
    \5\ Id. Sec. Sec. 102, 301, 303, 305, 309, 319, 321, 409.
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    Some proponents of S. 1301 put forth a set of amendments 
with the express purpose of protecting support obligations. 
While those amendments include some well-intentioned proposals 
that may enhance the legal status of support obligations, the 
amendments are largely cosmetic. Rather than clearing the way 
for women and children to collect past due and current support 
obligations, many of the new provisions would have little 
effect in practice, and, in some instances, actually could 
hamper the ability of women and children to collect support 
obligations because those provisions also would increase 
competition for scarce resources by expanding the priority and 
nondischargeability of additional government obligations and of 
nonsupport debts.
    The following discussion analyzes the components of the 
``child support amendments.''

                   A. Legal Priority of Child Support

                              1. chapter 7

    During the weeks preceding the Judiciary Committee markup 
of S. 1301, several Members of Congress raised concerns about 
the bill's effect on the payment of spousal and child support 
obligations. Specifically, on May 5, 1998, 31 Senators wrote 
Chairman Hatch and Ranking Member Leahy that,

          Under current law, outstanding spouse and child 
        support, in addition to past taxes and educational 
        loans, are debts that cannot be discharged in 
        bankruptcy like other debts. Thus, for example, when a 
        non-custodial parent files for bankruptcy and is able 
        to discharge certain debts, the custodial parent is 
        better able to retrieve child support without competing 
        with commercial creditors for the limited resources 
        available post-bankruptcy. This treatment is wholly 
        appropriate: a child is not something one borrows, 
        rather, he or she is someone to whom one has a moral 
        and legal obligation * * * [p]rovisions in S. 1301 and 
        H.R. 3150 would dramatically alter the priority placed 
        on this support. The legislation effectively places 
        spousal and child support obligations on equal footing 
        with some consumer debt. This means that custodial 
        parents and ex-spouses may have to compete in 
        bankruptcy and post-bankruptcy courts with the vast 
        resources of these commercial lenders with little 
        likelihood of success. (Emphasis added)

    In response to this concern, the Judiciary Committee 
amended 11 U.S.C. Sec. 507 to subordinate administrative 
expenses to prepetition priority support obligations. While 
this amendment is being highlighted as exemplary of a 
commitment to protect support obligations, the amendment may 
not be workable and is not likely to have an appreciable 
effect.
    The order of priority is relevant only with respect to 
distributions of nonexempt unencumbered property in Chapter 7. 
The vast majority of Chapter 7 cases are ``no asset'' cases, 
and creditors receive no distributions, making one's level of 
priority irrelevant. In the handful of ``asset'' consumer 
Chapter 7 cases, it is necessary to be able to pay 
administrative expenses to liquidate property for other 
priority creditors, and thus subordinating administrative 
expenses may not be in the best interests of support recipients 
if it precludes the liquidation of property altogether. In 
Chapter 13, all priority debts are entitled to the same 
treatment and must be paid in full unless the creditors agree 
to lesser treatment, again making priority irrelevant.
    Overall, this provision does not ameliorate the adverse 
consequences of this bill on support recipients, which are 
unrelated to the level of priority accorded to prepetition 
arrearages on support obligations. Rather, the effect of this 
bill is felt most severely after bankruptcy when spousal and 
child support will have to compete with newly-nondischargeable 
consumer debt.

                             2. chapter 13

    Section 324 would amend 11 U.S.C. Sec. 1322(b)(1) so that 
priority prepetition support debts can be paid in a Chapter 13 
plan prior to other priority claims, notwithstanding the order 
of priorities set forth in 11 U.S.C. Sec. 507(a). The amendment 
would not be binding because section 1322(b) delineates the 
debtor's options for crafting a Chapter 13 plan but does not 
prescribe mandatory treatment. In any event, while well-
intentioned, the amendment would not change current practice 
since support obligations normally are frontloaded in Chapter 
13 plans.

    B. Payment of Child Support as Prerequisite to Chapter 13 Plan 
                       Confirmation and Discharge

    Section 325 would amend 11 U.S.C. Sec. 1325(a) to condition 
confirmation of a Chapter 13 plan on the payment of support 
obligations. To the extent that this provision requires the 
payment of regular support obligations, it is not objectionable 
and is consistent with public policy. If, however, the language 
of this provision is construed to include arrears, this 
requirement might be infeasible and thus may not be in the best 
interest of the support recipient, the debtor, or other 
creditors. The language therefore should be modified slightly 
to clarify that the provision intends to refer to ongoing, not 
past-due, support. In addition, as currently drafted, the 
provision does not address the consequences of discovering 
after confirmation that preconfirmation payments were not 
complete. The remedy for such a discovery should be plan 
modification, dismissal or conversion, but not revocation of 
confirmation.
    Section 325 also would condition a Chapter 13 discharge on 
a certification that the debtor made postpetition support 
payments in accordance with the plan or otherwise paid those 
obligations in full. Again, while this provision probably would 
be fine in most cases, it is unclear whether the provision is 
intended to refer to past due obligations, ongoing obligations, 
or both. Moreover, a support recipient should be permitted to 
agree different treatment in the debtor's plan, like other 
creditors are entitled to do. See, e.g., 11 U.S.C. 
Sec. 1322(a)(2). Overall, one should bear in mind that the 
majority of Chapter 13 debtors never receives a discharge, and 
thus this amendment is not likely to be an issue in a large 
percentage of the cases.

                             C. Wage Orders

    Section 326 would amend 11 U.S.C. Sec. 362(b) so that the 
automatic stay that enjoins most collection actions in 
bankruptcy cases would not enjoin actions to impose or enforce 
a wage order for domestic support obligations or actions to 
withhold, suspend, or restrict licenses of the debtor for his 
delinquency in support obligations. This amendment would 
obviate the need for parties to seek relief from the stay, and 
thus in some instances could minimize costs, although section 
362(b)(2), which was added to the Bankruptcy Code in 1994, 
already permits the continuation of garnishment in most cases. 
In addition, since some wage assignments are for debts owed to 
a government unit rather than to the ex-spouse or child 
directly, this provision sometimes will divert funds away from 
individual support recipients when a government unit exercises 
its wage order rights for its own benefit. For this amendment 
to be truly pro-family, government units should be required to 
hold such withheld payments in trust for application to any 
outstanding obligations owed directly to support recipients.
    An automatic stay exception for wage orders may have 
limited efficacy, since bankruptcy cases with claims for 
domestic support obligations do not necessarily involve wage 
orders. The ability to obtain a wage order depends on the laws 
of a given state and whether the ex-spouse's employment 
situation makes this possible. Since individuals who file for 
bankruptcy are likely to have experienced a prebankruptcy 
period of unemployment or marginal employment for cash payment, 
it is less likely that a support recipient will have a wage 
order against a debtor spouse. Moreover, a wage order or 
license revocation may be useless if a financially troubled ex-
spouse cannot shed his high interest unsecured debts; S. 1301 
would impose restrictions on access to Chapter 7 and decrease 
all debtors' ability to discharge unsecured debts, and thus 
will increase a debtor's incentives to leave his job, move to 
another jurisdiction, and get paid on a cash basis. Thus, while 
permitting continued wage garnishment may be helpful in some 
instances, it falls short of addressing the detrimental impact 
of this legislation on single parents and children.

                       D. Exceptions to discharge

            1. debts incurred to pay nondischargeable debts

    Section 315 would add an exception to discharge for debts 
incurred to pay obligations that would not have been 
dischargeable if unpaid on the date of the bankruptcy filing. 
This provision is problematic due to the lack of policy 
justification for making general unsecured debts 
nondischargeable unless they were incurred fraudulently. The 
fact that the debt was incurred to pay a debt that may have 
been nondischargeable does not change this analysis, since the 
societal need for repayment of the underlying debt has been 
satisfied. In some cases, excepting a general unsecured debt 
from discharge actually will frustrate Congress' original 
policy determination to make a debt nondischargeable. For 
example, excepting from discharge an obligation to a financial 
institution used to pay a domestic support obligation would 
make it more difficult for ex-spouses and children to collect 
debts owed directly to them, as they would face additional 
competition from institutional lenders for limited resources. 
Moreover, one cannot always predict which debts will be deemed 
nondischargeable, since courts have reached variable 
interpretations of the exceptions to discharge. This amendment 
therefore could expand the number of complicated 
nondischargeability threats and allegations, providing 
increased leverage for certain lenders to pursue and obtain 
reaffirmations of unsecured debt.
    The attempt in the ``child support amendments'' to 
ameliorate this provision for support recipients is well-
meaning but unfortunately may not accomplish its intended goal. 
The amended provision actually goes farther than the original 
provision to expand the number of potentially nondischargeable 
debts by including debts incurred to pay obligations that would 
be nondischargeable under any subsection of section 523(a). In 
cases involving dependent children or support obligations, a 
debt would be nondischargeable if the debtor ``intentionally 
incurred the debt'' to pay a nondischargeable debt. This 
language is likely to be construed to mean that the general 
unsecured debt survives bankruptcy as long as the payment was 
made ``intentionally'' and not accidentally, which is not a 
meaningful requirement. To the extent that the amendment is 
seeking to target individuals who incur debts with the 
intention not to repay them at all, this behavior already is 
addressed in current Bankruptcy Code section 523(a)(2)(A).

     2. consumer debts incurred within 90 days prior to filing for 
                               bankruptcy

    Section 316 would create a presumption of 
nondischargeability for any consumer debt $400 or greater and 
not reasonably necessary for the maintenance or support of the 
debtor or a dependent child of the debtor incurred within 90 
days prior to bankruptcy. Clearly, debtors should not incur 
debts with the intention not to repay them, e.g., if they know 
that they are going to file for bankruptcy; section 
523(a)(2)(A) of current law already makes such debts 
nondischargeable. Yet, debts incurred within 90 days prior to 
filing may not have been incurred in contemplation of 
bankruptcy, and thus the isolation of these debts for special 
treatment is somewhat arbitrary. This type of bright line rule 
does not catch the abusers of the system, who can plan around 
this provision and delay their filings. Such rules instead 
catch the least sophisticated and least well-represented 
families who are legitimate candidates for debt relief. This 
amendment also might capture older debts that were refinanced 
within 90 days prior to bankruptcy, and thus could discourage 
debtors' attempts to privately resolve financial problems.
    In response to concerns that this expansion of credit card 
debt nondischargeability adversely affects the collection of 
support obligations, the ``child support amendments'' added 
additional language limiting the amendment's effects to debts 
greater than or equal to $400 and for goods and services not 
reasonably necessary for the maintenance or support of the 
debtor or a dependent child of the debtor. This positive step 
is commendable. However, due to the realities of bankruptcy 
practice, this amendment is not likely to ameliorate the 
adverse consequences of this provision. Lenders could allege in 
nearly every case that goods were not ``reasonably necessary,'' 
and fighting the claim would cost more than the amount of the 
claim itself. Rather than litigating, with the attendant drain 
on money, time and legal resources, it is more likely that the 
debtor will concede nondischargeability or reaffirm the debt. 
Either way, the litigation costs or the surviving debt and 
accompanying interest charges would adversely affect the 
ability of the debtor to meet his obligation to pay other 
important debts and expenses.

               E. Protection of Property Settlement Debts

    Section 327 would amend 11 U.S.C. Sec. 523(a)(5) to except 
from discharge all debts resulting from property settlements. 
This amendment does not expand nondischargeability for debts 
that are actually in the nature of support (e.g., many hold 
harmless agreements), which already are protected under the 
current section 523(a)(5). The amendment instead would expand 
protection for nonsupport debts between ex-spouses. Although 
this sounds reasonable on its face, it could have odd 
consequences in some cases.
    First, a support recipient who files for bankruptcy him or 
herself may not be able to discharge property settlement debts 
under this amendment. As another example, consider a debtor who 
has been married and divorced twice and owes support 
obligations to his second ex-wife and children, but does not 
support his first ex-wife because she is the successful owner 
of her own business. If the first divorce decree dealt with 
business debts, this change would elevate business debts to his 
wealthy first wife to the status of support obligations to his 
second ex-wife and her children, who thus would face increased 
competition for the debtors' resources (along with unsecured 
lenders whose debts would ride through bankruptcy through 
increased nondischargeable debts and reaffirmations).

              F. Collection From Otherwise Exempt Property

    Section 328 of S. 1301 would permit nondischargeable 
support obligations to be collected from exempt property 
notwithstanding federal or state law. Perhaps more 
significantly, it would grant this entitlement to taxing 
authorities, which are more likely to be able to take advantage 
of this provision. By overriding all state and federal laws 
exempting property, the amendment would nullify wage 
exemptions, federal wage garnishment laws, and exemptions in 
section 6334 of the Internal Revenue Code and comparable state 
laws, all of which limit the property that can be seized by 
taxing agencies to satisfy a tax debt. For example, the 
amendmentwould permit the Internal Revenue Service to seize 
items that otherwise would be exempt under the Internal Revenue Code, 
such as clothing and school books. The amendment would override state 
laws protecting tenancies by the entireties from the tax debts of one 
spouse and, for the first time, would jeopardize a separated spouse's 
interest in such property as to tax claims that are solely against the 
bankrupt spouse. Aside from the latitude that this provision grants to 
the Internal Revenue Service, the efficacy of this type of provision 
for a support recipient depends greatly upon the ability of an ex-
spouse to hire a lawyer, find property to attach, and pursue these 
legal rights.

 G. Application of the Co-Debtor Stay Only When the Stay Protects the 
                                 Debtor

    Under section 305, the Chapter 13 co-debtor stay would be 
terminated automatically 30 days after the bankruptcy filing if 
the debtor did not receive consideration for the creditor's 
claim or if property securing debt was not in the debtor's 
possession. The co-debtor stay could be retained if the debtor 
could show that receipt of property was not part of a scheme to 
defraud or hinder any creditor. The co-debtor stay would be 
lifted upon Chapter 13 plan confirmation as to a lease that has 
been surrendered or abandoned. The exception to the co-debtor 
stay would not apply if the debtor was maintaining property 
pursuant to a legally binding separation agreement or divorce 
decree. However, this carveout would not prevent a creditor 
from acting unilaterally against property that is the subject 
of an informal agreement or if the lender did not know the 
details of the support order or divorce decree. Thus, section 
305 still could be harmful to support recipients and is less 
preferable than current law. In any event, the Bankruptcy Code 
should provide a specific remedy for violations of the co-
debtor stay.

             H. Definition of Household Goods and Antiques

    Section 317 would define ``household goods'' using the 
definition employed by the Federal Trade Commission Trade 
Regulation Rule on Credit Practices, 16 C.F.R. Sec. 444.1, but 
also would include tangible personal property reasonably 
necessary for maintenance or support of a dependent child. 
Providing statutory definitions can have a beneficial 
clarifying effect in some instances, but the recommended FTC 
definition would diverge from the prevailing current 
interpretations of ``household goods'' in section 522(f) and 
probably increase litigation. See, e.g., In re McGreevy, 955 
F.2d 957 (4th Cir. 1992) (defining household goods as items of 
personal property typically found in or around home and used by 
debtor or his dependents to support and facilitate day-to-day 
living within home, including maintenance and upkeep of home); 
see also In re Reid, 121 B.R. 875 (Bankr. D.N.M. 1990) 
(rejecting narrow FTC definition for purposes of section 
522(f), In re Boyer, 63 B.R. 153 (Bankr. E.D. Mo. 1986) (same).

         III. S. 1301 Will Harm Older Americans and Minorities

    Proponents of S. 1301 assert that the bill will reduce 
bankruptcy system abuses. They claim that many debtors utilize 
the current system to avoid debts that they have the ability, 
at least in part, to repay. The bill advocates use of a ``needs 
based'' approach in order to significantly reduce Chapter 7 
filings and force some debtors to utilize Chapter 13. The bill 
compels some debtors who are ``able'' to pay 20% of their 
unsecured debt to file Chapter 13. In addition to forcing many 
debtors to file for Chapter 13 bankruptcy, the bill creates new 
categories of non-dischargeable debt. By expanding categories 
of non-dischargeable debt (e.g., certain credit card debt) and 
altering many of the requirements of Chapter 7 and Chapter 13, 
the proposed reforms will make it more difficult for debtors to 
achieve financial stability and rebuild their long-term 
financial futures. The proposed structural alterations in the 
bankruptcy laws will likely have deleterious effects on some of 
the most vulnerable sectors of the population, including older 
Americans, and African-American and Latino families.

     A. S. 1301 May Cause Financial Distress Among Older Americans

    Many of those who call for bankruptcy reform point to the 
recent increase in credit card debt and consumer bankruptcy 
filings and suggest that many debtors are guilty of fiscal 
irresponsibility; however, most older Americans who file for 
bankruptcy cite job loss and catastrophic medical problems as 
the cause of their financial distress. In recent years 
thousands of older Americans have been the victims of 
downsizing; some are able to find other employment but often at 
substantially lower wages and without the health and other 
benefits that become increasingly important with age. Moreover, 
for older victims of downsizing, loss of income may not be 
temporary. As Harvard University Law Professor Elizabeth Warren 
has noted, when a thirty-year worker loses a job at age 54, the 
person's economic survival is severely threatened.
    Older Americans, particularly those who are under 65 and do 
not yet have access to the social safety nets of Social 
Security and Medicare, often resort to short-term, high-
interest credit when faced with unemployment because they 
assume that their unemployment will be temporary. Due to their 
age, however, many of these individuals never earn a salary 
comparable to that which they lost; thus, they find themselves 
unable to deal with the debt they have incurred. Under existing 
bankruptcy laws, these people could file for Chapter 7 relief 
and discharge all of their short-term, high-interest debt 
(principally credit card and finance company debt, along with 
some medical debt). This increases the possibility that they 
will be able to continue making priority debt payments.
    S. 1301 would radically increase the burden on older 
Americans. Many will not be able to obtain bankruptcy relief 
unless they commit every available penny of disposable income 
to a multi-year repayment plan, although two-thirds of debtors 
who currently file Chapter 13 already fail to complete their 
repayment plans. Those who file for Chapter 7 relief will be 
saddled with nondischargeable credit card debt. By increasing 
the amount of non-dischargeable debt, S. 1301 will create 
hardships for older Americans, who are unlikely to be able to 
increase their income and regain financial stability.
    The negative impact of S. 1301, however, may be felt most 
harshly by older Americans over the age of 65 who suffer a 
significant health problem or job loss. It is very unlikely 
thatthose seniors--many who have already been pushed out of the 
job market--can find suitable new employment. Moreover, when they are 
in financial distress, Social Security and Medicare are often 
insufficient to allow them to maintain their financial stability. S. 
1301, by broadening the definition of nondischargeable debt, may 
eliminate valuable safeguards that protect older Americans from 
financial ruin.

  B. S. 1301 May Make It More Difficult for Minorities to Save Their 
                                 Homes

    Current bankruptcy law recognizes that home ownership is a 
focal point of the American dream. For American homeowners, 
current law provides an opportunity to segregate the consumer 
and medical debt incurred during unemployment or medical 
emergencies from delinquent mortgage payments, and allows 
homeowners to remedy any mortgage arrearages.
    Many minority homeowners commit a larger percentage of 
their take-home pay to their mortgages than the average 
homeowner; often, their homes represent virtually all of their 
family wealth. Thus, when faced with a period of unemployment 
or temporarily disabling illness, African American and Latino 
families are six hundred percent more likely to seek bankruptcy 
protection in order to prevent the loss of their homes. These 
families, who may have already faced discrimination in home 
mortgage lending and housing purchases, and who often face 
inequality in hiring opportunities, seek bankruptcy protection 
to stabilize their economic circumstances and protect the 
middle class lives they have struggled to achieve.
    The changes to bankruptcy law proposed in S. 1301 will 
dramatically decrease the ability of these families to protect 
their homes. If S. 1301 becomes law, these families will not be 
able to focus their limited resources on paying their mortgages 
due to the expansion of non-dischargeable debt and new rules 
governing the treatment and payment of other types of debt; 
thus, they are far more likely to lose their homes. As noted 
above, because African-American and Latino families dedicate a 
larger percentage of their income to their homes and because 
they are forced to file bankruptcy more often, S. 1301 will 
have a disproportionately severe impact on these groups.

          IV. S. 1301 May Deny Debtors Equal Access to Justice

    S. 1301 attempts to implement needs-based bankruptcy 
reforms either by dismissing Chapter 7 cases or compelling 
conversion to Chapter 13. The bill proposes amending Section 
707(b) of the Bankruptcy Code, which currently allows the court 
to dismiss or convert a bankruptcy petition due to 
``substantial abuse'' of the system by the debtor. The bill 
would strike the ``substantial'' requirement and delineate a 
set of factors that a court must consider when deciding whether 
to dismiss or convert a case. As stated earlier, a threshold 
issue would be the debtor's ability to pay at least 20% of his 
unsecured debts. If he is able to do so, he would be forced to 
file Chapter 13. Currently, only the court or the U.S. Trustee 
can initiate a 707(b) motion. S. 1301, however, would allow 
creditors and case trustees to file such motions in any case in 
which the debtor has an income at or above the 1996 national 
median figures. Under the bill, many debtors' access to Chapter 
7 protection would be essentially eliminated.

A. The Detrimental Effects of Allowing Creditors To File 707(b) Motions

    If S. 1301 becomes law, creditors will have a tremendous 
incentive to file--or threaten to file--a 707(b) motion in 
virtually every case. Although some bill proponents argue that 
the bill contains safeguards against such abuse, these 
protections are largely illusory. S. 1301 provides that if the 
court finds that the creditor's 707(b) motion was 
``substantially unjustified,'' the bill would allow for the 
award of costs and fees to the debtor. However, this supposed 
safeguard would be essentially meaningless for debtors who lack 
access to counsel. Indeed, the ``safeguard'' would also impose 
a substantial additional burden on debtors who do have counsel, 
because they would be forced to file yet another motion. 
Experience with fee shifting under other provisions of the 
Bankruptcy Code has revealed that fee shifting is an 
insufficient deterrent. Respondents to 707(b) motions are 
debtors. Forcing people who are, by definition, financially 
distressed to assume the additional cost of litigating the 
merits of a 707(b) motion is unreasonable. In fact, even if the 
debtor wins the 707(b) motion and seeks fees and costs, he must 
access more funds to file another motion charging that the 
creditor's motion was not substantially justified. Creditors 
will, therefore, have little disincentive to file 707(b) 
motions and debtors will be left with little to no real 
recourse against creditor abuse.
    Moreover, under S. 1301, creditors can use their ability to 
file a 707(b) motion as a threat to get debtors to reaffirm 
their debts. Giving creditors such a powerful bargaining chip 
will undoubtedly intimidate many debtors legitimately seeking 
Chapter 7 relief and deter them from seeking the protection of 
the bankruptcy system.

 B. The Detrimental Effects of Allowing Trustees To File 707(b) Motions

    Enabling trustees to file 707(b) motions seems, on its 
face, to be a potentially worthwhile reform. The original 
version of Section 102(A)(3), however, would have made a 
debtor's attorney responsible for the trustee's costs and fees 
if the motion failed. The penalty would not have been 
predicated on bad faith or the filing of a frivolous motion, 
but simply losing the 707(b) motion. Fortunately, the Judiciary 
Committee accepted an amendment that will make the debtor's 
attorney liable only if he was ``not substantially justified'' 
in filing the petition. Even this standard, however, is 
untenable.
    This provision of S. 1301 applies a stricter standard to 
consumer debtors' attorneys than to attorneys in any other 
federal proceeding. The conduct of consumer debtors' attorneys 
should meet the standards set for all attorneys in Rule 11, 
which is incorporated in Federal Rule of Bankruptcy Procedures 
9011.\6\ Every other fee-shifting provision in federal law that 
holds the attorney liable requires affirmative wrongdoing by 
the attorney. There is no legitimate basis for different and 
more punitive standards for consumer bankruptcy attorneys.
---------------------------------------------------------------------------
    \6\ Federal Rule of Bankruptcy Procedure, Rule 9011 provides that 
the court may issue ``sanctions upon the attorney [or] law firm'' 
representing a party in a bankruptcy proceeding if the attorney filed a 
paper that was for an ``improper purpose'' or was ``frivolous.''
---------------------------------------------------------------------------
    Ultimately, this provision punishes debtors, not only their 
attorneys. Very few debtors' attorneys are likely to risk their 
own finances and welfare for a Chapter 7 bankruptcy filing. The 
cumulative effect of this proposal is that many truly needy 
debtors will be denied the benefit of counsel if they wish to 
file for Chapter 7 protection, thus, forcing them to file pro 
se.
    Pro se debtors are particularly susceptible to exploitation 
by well-organized, powerful institutional creditors. The 
inherent disadvantages of filing pro se will only be 
exacerbated by the proposed measures. Pro se cases are often 
dismissed for trivial, procedural mistakes such as incorrect or 
untimely filings. This bill, by likely increasing the number of 
pro se cases, will increase the number of such dismissals. For 
example, Section 303 of the bill creates a presumption of bad 
faith when a case is dismissed for failure to file the papers 
in proper form. This provision, combined with the likely 
increase in pro se filers, will mean that many debtors who are 
legitimately seeking bankruptcy protection will be denied such 
relief due to administrative error and will have a difficult 
time re-entering the system due to the new repeat filing 
prohibition.
    Moreover, if the bill's current attorney's fees provision 
is maintained, it would have the perverse result of increasing 
systemic abuses. As noted above, attorneys will likely raise 
their fees, therefore, more debtors will turn to less 
expensive, non-attorney petition preparers. Many non-attorney 
preparers are helpful to debtors, but, in some cases, 
unscrupulous, non-attorney petition preparers have been known 
to abuse the system. If attorneys are forced to raise their 
fees, even more pro se debtors will turn to these preparers, 
and some will pay for poor work and faulty legal advice.
    As noted above, these attorneys' fees provisions are 
designed to intimidate lawyers into counseling against Chapter 
7 filings. Not only is this fact troubling in and of itself, 
but it also creates a conflict of interest between a debtor's 
attorney and his client. Even if the client would be better 
served by a Chapter 7 filing, the lawyer would be faced with 
the dubious incentive to counsel the client to file Chapter 13 
in order to protect the attorney's financial interests. Rule 
1.7(b) of the Rules of Professional Conduct specifically 
prohibits a lawyer from handling a case ``if representation of 
that client may be materially limited by the lawyer's * * * own 
interests.'' This bill would create a scenario in which 
debtors' attorneyswould arguably be in violation of this rule 
on a regular basis. S. 1301, thus, sets the stage for extremely 
problematic attorney-client dynamics that will ultimately harm 
vulnerable consumers.

 C. The Existing Prohibition Against Debtors Filing In Forma Pauperis 
               Presents an Additional Barrier to Justice

    The existing prohibition against debtors filing in forma 
pauperis is an additional barrier to debtors' access to justice 
in the bankruptcy system. Ironically, bankruptcy is the only 
federal proceeding in which a poor person cannot file in forma 
pauperis. Currently the filing fee for consumer bankruptcy is 
$175, a considerable amount of money for the indigent--those 
who truly need bankruptcy protection. A study by the Federal 
Judicial Center of the in forma pauperis pilot project 
concluded last year revealed that permitting in forma pauperis 
filings enable low income consumers to use the bankruptcy 
system without having an appreciable effect on the filing rate 
overall. The Judiciary Committee, by a 9 to 9 vote, rejected an 
amendment that would have eliminated this counterintuitive 
prohibition. Allowing this anomaly to remain as part of the 
Bankruptcy Code amounts to yet another aspect of the consumer 
bankruptcy system that reduces access to justice for those poor 
people the system was designed to protect.

  D. S. 1301 May Create Advantages for Wealthier, More Sophisticated 
                                Debtors

    Finally, recall that S. 1301 would in some circumstances 
compel those who are able to pay at least 20% of their 
unsecured debt after standardized living expenses and secured 
debt to file Chapter 13. Debtors of some sophistication and/or 
who have access to counsel could manipulate their financial 
situations to make it appear as if they are incapable of 
meeting the threshold requirements and are, therefore, entitled 
to Chapter 7 protection under the bill. Some of the ways in 
which wealthier, knowledgeable debtors could manipulate the 
system include: reducing his or her income or having a spouse 
quit a job, increasing his or her debt (e.g., buying a new 
car), or increasing his or her unsecured debt (e.g., taking an 
expensive vacation paid for on credit cards before declaring 
bankruptcy). Thus, the proposed reforms actually facilitate 
abuse of the system by wealthier, more sophisticated debtors 
who have access to counsel. Many minorities and elderly 
Americans seeking bankruptcy protection do not have access to 
such counsel. This puts our neediest citizens at even greater 
risk of financial ruin.

    V. Bankruptcy Reform Legislation Must Address the Issue of Debt 
                             Reaffirmation

    One of our main concerns is that this legislation will 
significantly increase the opportunity for abusive behavior by 
creditors. One of the main areas of abuse in recent years has 
been the solicitation and enforcement of reaffirmation 
agreements--both legal and illegal. A reaffirmation is an 
agreement made between a debtor and creditor to continue paying 
off a debt despite bankruptcy. In short, a promise to continue 
paying the debt even after bankruptcy.
    Often reaffirmations are made for good reasons. Many people 
want to keep their cars, so they reaffirm the debt. Other 
people want to keep one of their credit cards and in order to 
do so, they reaffirm the debt. Unfortunately, however, other 
people reaffirm debt because they cannot fight coercive 
creditor tactics.
    This problem is very real. In one Boston bankruptcy court, 
Sears had 2,733 illegal reaffirmation agreements that had been 
entered into without complying with the law. Nationwide, in a 
two year period, more than 80,000 people were affected by these 
abusive reaffirmations. There is an ongoing federal criminal 
investigation of this problem.
    The U.S. Attorney in Boston filed suit alleging that Sears 
had committed mail and wire fraud in its reaffirmation 
practices. He commented that ``In obtaining these agreements, 
Sears deceived debtors into thinking they were obligated to pay 
back debts which had already been discharged by the Bankruptcy 
Court.''
    The attorneys general in 40 states also began 
investigations into reaffirmation practices. And, as a result, 
Sears was forced to agree to pay $165 million to consumers and 
the attorney general is looking into these practices. In 
Illinois, for example, almost 2,300 residents were affected and 
Sears reimbursed them nearly $2 million.
    But it does not stop with Sears. Federated Department 
stores--which includes Bloomingdale's, Macy's, and Sterns--
agreed to pay $14.64 million in settlement of several state 
suits involving Alabama, California, Illinois, Massachusetts, 
New Jersey, Ohio, Pennsylvania, South Carolina, Tennessee and 
11 other states. The U.S. Trustees office commented that 
Federated ``enticed and threatened customers who filed for 
bankruptcy * * * to sign contracts agreeing to repay their 
debts to Federated.''
    In addition, Montgomery Ward had to provide refunds on 
about 30,000 accounts and is now reviewing 180,000 other 
agreements. GE Capital Corp, Discover Card, May Department 
Stores, and AT&T are other companies that have faced similar 
problems.
    These types of practices contribute to significant problems 
in the bankruptcy system. Not only are the practices of many 
creditors offensive to the letter of the law, but in many 
instances creditors obtain reaffirmations by behavior that can 
only be called extortionate. Oftentimes, creditors threaten to 
repossess largely worthless household goods knowing that the 
desperate debtor, anxious to keep goods of some sentimental 
value or goods that are vital, will reaffirm the debt under 
pressure.
    S. 1301 will make a terrible problem worse. This 
legislation contains numerous provisions that will increase the 
power of a creditor to coerce a reaffirmation. The measure 
broadens the ability of creditors to threaten to repossess 
household goods. In allowscreditors to threaten to bring 
motions asserting that debts accumulated 90 days before bankruptcy were 
not ``necessary.'' It will allow creditors to threaten to assert that a 
certain debt was fraudulent or that it was incurred to pay an otherwise 
non-dischargeable debt. Creditors will be able to bring 707(b) motions. 
They will be able to threaten dismissal motions if paperwork is not in 
perfect order. The list goes on. And every new provision in S. 1301 
that provides a new leverage point for creditors is a prescription for 
extortionate reaffirmations.
    These types of reaffirmations present real problems for two 
reasons: first, they force people to unknowingly give up their 
legitimate and legal rights, and second, reaffirmations are the 
financial equivalent of an undischarged debt. In short, every 
new reaffirmation that can be coerced as a result of this bill 
is another debt that is competing in a post-bankruptcy world 
with debts like child support, alimony, taxes, student loans, 
mortgages and car payments. As we have previously discussed, 
this competition for scarce resources is a prescription for 
peril.
    The majority asserts that S. 1301 contains provisions that 
will mitigate abusive reaffirmations. But this is a bit like 
putting one finger in the dyke while using the others to turn 
the switch to open the flood gates.
    The bill does contain some provisions that attempt to 
address creditor abuses. But these provisions barely confront 
the problem. The majority points to the provision that would 
impose penalties on creditors who file reaffirmations that do 
not comply with section 524. They then assert that this will 
deal with coercive reaffirmations. This is not the case for two 
reasons. First, section 524 has virtually no impact on stopping 
coercive practices, and second, people in bankruptcy only 
rarely have the wherewithal to seek enforcement of penalties 
for failure to comply with section 524.
    Section 524 contains a series of disclosure requirements. 
For example, a reaffirmation agreement must contain a notice of 
the right of the debtor to rescind the agreement. It must also 
clearly disclose that the reaffirmation is not required under 
bankruptcy law. While well intentioned, these disclosure 
requirements are of little use in dealing with coercive 
creditor tactics. Being told that you can rescind and that the 
agreement is not mandatory has little impact when 
counterbalanced by the threat that your microwave or child's 
swing set may be repossessed or that a series of expensive 
motions that you cannot defend may be brought against you.
    Creditors have been remarkably effective in developing 
coercive tactics. They know that debtors are acutely vulnerable 
to these tactics. A bankrupt debtor is virtually incapable of 
opposing a creditor motion. Bankruptcy debtors simply cannot 
afford the legal fees to defend a motion. The vast majority of 
the time, then, they simply and quickly accede to anything the 
creditor wants.
    Most abusive or coercive creditor behavior occurs in the 
shadows. Reaffirmations are solicited in the hallways of the 
court house or by phone at night. The threats that lead to 
reaffirmation are implied or sometimes overt. And the debtors 
who deal with this behavior are poor and virtually 
unrepresented by counsel. To suggest that a string of changes 
to the code will solve the problem is to turn a blind eye to 
the real world where the threat of a motion is more effective 
than an actual motion. In the real world, bankruptcy debtors, 
who typically make less than $18,000 a year, cannot afford to 
find a lawyer to contest a motion, much less win the motion and 
then pursue sanctions--which are largely discretionary.
    In addition to pointing out the sanctions authorized in 
Section 203, the majority asserts that the section also bars 
creditors from using many collection tactics if they refused an 
offer of compromise. Again, this is an illusory provision. As 
written, the debtor must prove that he made an effort to 
negotiate a reasonable alternative repayment schedule and that 
the creditor unreasonably refused to negotiate. The sad fact is 
that this provision will merely benefit the well-off and 
manipulative debtor who is trying to game the system, but it 
will be virtually useless for the poor and under represented, 
i.e. the average, debtor.
    Finally, the majority points to a provision dealing with 
predatory loans to the elderly. The majority, however, cannot 
even support that provision unreservedly. It says that the one 
worthy provision in the bill ``may need technical refinements 
to avoid excessive litigation and abuse.'' We dare not venture 
to guess what will fall under the rubric of ``technical'' 
changes. And we are not surprised to learn that at least as to 
consumer friendly provisions, the majority is suddenly 
concerned about ``excessive litigation.''

   VI. The Consumer Credit Industry Shares Responsibility for Rising 
                      Consumer Bankruptcy Filings

    Congress is concerned about the increasing number of 
families that file bankruptcy every year. Proponents and 
opponents of the Consumer Bankruptcy Reform Act have vigorously 
debated the source of this problem. Many proponents of the 
legislation argue that consumer abuses have precipitated the 
rise in filings. Accordingly, they believe sweeping legislative 
reform is necessary to curb abuses and eliminate so-called, 
``bankruptcies of convenience.''
    We disagree with their assessment of the problem and the 
solution. The only support offered for the assertions of the 
proponents of the legislation about consumer abuse come from 
studies paid for by the credit industry. These studies have 
been thoroughly discredited by the Government Accounting Office 
and the Congressional Budget Office. Virtually all independent 
academic studies and all government studies of the increase in 
bankruptcy demonstrate that the rise in bankruptcy filings 
follows equally sharp rises in the amount of consumer debt per 
household.\7\ Proponents urge significant structural change to 
the consumer bankruptcy system with no verifiable data to 
document the source of the problem, no independent analysis of 
whether this legislation will solve any problems, and no 
consideration of the unintended consequences of such a sweeping 
change.
---------------------------------------------------------------------------
    \7\ E. Warren, Consumer Bankruptcy: Issues Summary (April 2, 1998).
---------------------------------------------------------------------------
     More families are in bankruptcy because more families are 
carrying too much debt. Bankruptcy is the hospital for families 
overloaded with debt. If we saw a sharp rise in hospital 
admissions, we would ask what had happened to the health of our 
people--not how much we could change the hospital treatment 
rules. To consider changes in the bankruptcy laws without 
addressing broader questions about consumer lending practices 
is irresponsible, and is likely to do more injury to already 
troubled families.

A. Credit Card Issuers Are Aggressively Targeting Consumers Who Cannot 
  Afford Additional Debt, Increasing the Risk That They Will File for 
                               Bankruptcy

    Because of the high profitability of consumer credit 
lending, credit card issuers are using many tools to increase 
their customer base and encourage debtors to carry large card 
balances. They aggressively solicit new customers, encourage 
debtors to make minimum payments which will not decrease the 
loan principal, offer ``teaser'' interest rates designed to 
encourage customers to increase debt, switch credit rates with 
no advance notification to customers, use confusing and 
sometimes misleading descriptions of interest calculations, 
fail to disclose how long or how expensive repayment will be 
using minimum monthly payments, market cards to college and 
high school students, and increase credit limits for customers 
who carry large debt balances without further credit 
investigation or even a request from the customer.
    Although credit card issuers are aggressively targeting 
American families, many families have fewer resources to pay 
their debts. The real incomes of the bottom 60 percent of 
American consumers have declined since 1989. More than one of 
every nine families pay more than 40 percent of their income in 
debt service, and credit card usage has grown fastest in recent 
years among debtors with the lowest incomes. Since the early 
1990s, Americans with incomes below the poverty level nearly 
doubled their credit card usage, and those in the $10,000 to 
$25,000 income bracket are similarly positioned.
    Credit card issuers make no effort to educate consumers 
about the true costs and risks of credit card debt. They give 
increasingly complex credit terms designed to increase the 
likelihood of longer payments over time. Effectively, consumer 
interest rates have risen with the tacking on of a series of 
fees and charges. For example, credit card industry analysts 
estimate that if an individual made typical monthly payments, 
it would take 34 years to eliminate a $2,500 credit card debt. 
Total payments would exceed 300 percent of the original 
principal. Most borrowers are not aware of this fact, and, 
unlike mortgage loans and car loans, credit card statements do 
not disclose the amortization rates or the total interest that 
will be paid if the cardholder makes only the minimum monthly 
payment.\8\
---------------------------------------------------------------------------
    \8\ George M. Salem and Aaron C. Clark, GKM Banking Industry 
Report, Bank Credit Cards: Loan Loss Risks are Growing, p.25 (June 11, 
1996).
---------------------------------------------------------------------------
     Despite current economic growth, it is not surprising that 
these families are more likely to file for bankruptcy. Their 
incomes are lower and their debt loads are higher. They are 
carrying more short-term, high interest credit card debt, and, 
as a result, they are more susceptible to financial failure 
and, eventually, bankruptcy.
    Although credit card debt is not the sole factor 
responsible for consumer bankruptcies, for many families, it 
may be a critical component of financial failure. The credit 
card industry's willingness to ignore the practical effect of 
their lending practices while advocating legislation that 
increases the amount of unsecured debt that may not be 
discharged no matter how hopeless the debtor's financial 
condition is of grave concern to us. Such legislation is not in 
the best interest of consumers. It is designed only to increase 
the already burgeoning profit margins of the credit card 
industry.

    B. The Credit Card Industry Is Willing To Take Greater Risks To 
                            Increase Profits

                             1. Background

    Since 1993, credit card lending has been the fastest 
growing component of consumer lending. The growth of the 
industry was precipitated by the deregulation of consumer 
credit interest rates in the late 1970s, which gave states 
greater flexibility to raise interest rates (See, Marquette 
National Bank of Minneapolis v. First of Omaha Service Corp., 
439 U.S. 299 (1978) and Smiley v. Citibank (South Dakota), 
N.A., 116 S.Ct. 1730 (1996)).
    In the Marquette case, the Court determined that the 
National Banking Act permits national banks to charge out-of-
state customers the maximum interest rate allowable in the 
bank's home state. Similarly, the Court determined in the 
Smiley case that national banks may export late-payment fees, 
annual fees, cash advance fees, and other fees related to the 
extension of credit.
    Credit card issuers and some states capitalized on the new 
environment created by these decisions and deregulation. ``Some 
states quickly seized the opportunity to deregulate interest 
and other banking functions to attract banks and other consumer 
lenders * * * [M]ost leading banking states had relaxed or 
repealed their interest rate ceilings by 1982, and the bank 
credit market was functionally deregulated.'' \9\ Lenders then 
began to broaden their customer base by extending credit to 
those further down the spectrum of credit quality.\10\
---------------------------------------------------------------------------
    \9\ Diane Ellis, The Effect of Consumer Interest Rate Deregulation 
on Credit Card Volumes, Charge-offs, and the Personal Bankruptcy Rate, 
Bank Trends 98-05, at pg. 3, (Division of Insurance, FDIC, February 
1998).
    \10\ Id.at 5.
---------------------------------------------------------------------------

  2. Aggressive Solicitation of Customers Who Represent A Greater Risk

    The result is aggressive marketing and a loosening of 
underwriting standards in an effort to attract more credit card 
customers and increase profits.

          More than two and a half billion card solicitations 
        were mailed every year between 1994 and 1996. This 
        means more than 41 mailings went out each year to every 
        American household--not counting telephone 
        solicitations. Based on industry estimates, those 
        offers add up to about $243,000 of credit per household 
        per year. At this rate, in a little over four years, 
        the credit card companies have offered about a million 
        dollars of credit to every household in the United 
        States.\11\
---------------------------------------------------------------------------
    \11\ George M. Salem and Aaron C. Clark, supra note 8, at 5.

In addition to mail solicitations, in 1996, for example, credit 
card companies logged 24.1 million telemarketing hours.
    Some credit card issuers argue that solicitations should be 
compared to fast food advertising and ``[j]ust as consumers 
ought not go have a Big Mac every time they see a McDonald's 
ad, they probably ought not avail themselves of every credit 
card solicitation they receive.'' \12\ Americans do not avail 
themselves of every credit card solicitation, but they have 
responded to the billions of dollars in advertising that have 
urged them to buy on credit without considering either the 
long-term consequences or how high-cost, short-term debt 
increases their economic vulnerability to some other economic 
shock. Credit card issuers suggest that a credit product is no 
more difficult to understand than a Big Mac and requires no 
more sophisticated analysis than whether to buy one with cheese 
or one without. But as the bankruptcy files amply demonstrate, 
the long-term effects of credit that outstrips income can be 
catastrophic. Borrowing decisions are important and require 
sober reflection and detailed information. They should not be 
made so lightly as the credit card issuers'' advertisements 
urge.
---------------------------------------------------------------------------
    \12\ Shenk, Bankrupt Policy, The New Republic, May 18, 1998, at 16, 
17 (quoting William Binzel, a spokesperson for the credit card 
industry).
---------------------------------------------------------------------------
    Aggressive solicitation has dramatically increased the 
number of credit cards issued to consumers. Three-quarters of 
all households have at least one credit card, and three-
quarters of those households carry credit card debt from month-
to-month. Of great concern is the fact that solicitations are 
not limited to working adults. Direct solicitation of college 
and high school students has increased in recent years. Cards 
are available at many colleges to almost any student--no 
income, no credit history, and no parental signature 
required.\13\ The National Bankruptcy Review Commission 
received an advertisement for a two-day workshop for creditors 
entitled, ``Competing in the Sub Prime Credit Card Market,'' 
including a presentation entitled, ``Targeting College 
Students: Real Life 101,'' with tips on how to ``target the 
money makers of tomorrow.''
---------------------------------------------------------------------------
    \13\ Report of the National Bankruptcy Review Commission 93 
(October 20, 1997); George M. Salem and Aaron C. Clark, GKM Banking 
Industry Report, Bank Credit Cards: Loan Loss Risks are Growing, pg. 9 
(June 11, 1996).
---------------------------------------------------------------------------
    We fully support efforts to eliminate discriminatory 
lending practices, but the relaxation of industry standards is 
of great concern. The democratization of credit should not be 
confused with overly aggressive solicitation of customers who 
are clearly unable to accommodate additional debt and the 
failure to inform customers about the full risks of the 
products they use. Credit card issuers have a responsibility to 
carefully consider the credit worthiness of their potential 
customers in an effort to limit the number of consumer 
bankruptcies.\14\
---------------------------------------------------------------------------
    \14\ Although humorous, the following example makes it clear that 
credit card issuers will solicit the business of almost anyone--or 
anything. Last year, Barbara Fazio of Windsor, Connecticut received a 
credit card solicitation for her 9-year-old cat, Daisy. Fazio had 
answered a television advertisement for free insulation and used her 
cat's name as a joke. Six weeks later, Visa offered Daisy a Gold Card 
with a $2,500 line of credit.
---------------------------------------------------------------------------

 3. Credit Card Issuers Are Selling High Priced, High Profit Debt--Not 
                          Consumer Protection

    Credit card issuers are not motivated to consider the best 
interests of their potential customers. Credit card issuers 
earn approximately 75 percent of their revenues from the 
interest paid by borrowers who do not pay in full every month. 
Several companies charge fees or cancel cards if customers pay 
in full every month.\15\ For example, Beneficial National Bank 
of Delaware canceled 12,000 customers' MasterCards because the 
customers paid their balances every month. NationsBank and GE 
Rewards MasterCard have imposed fees or canceled cards for 
customers who pay their bills in full.
---------------------------------------------------------------------------
    \15\ David S. Evans & Richard L. Schmalensee, The Economics of the 
Payment Card Industry, Fig. 3 (1993).
---------------------------------------------------------------------------
    Of even greater concern is the aggressive targeting of 
those who have filed bankruptcy. Industry analysts explain that 
these debtors are attractive because they have proven that they 
will take on credit and, by law, they cannot seek a bankruptcy 
discharge for another six years.\16\
---------------------------------------------------------------------------
    \16\ Dr. Michael Staten, Director, Credit Research Center, Krannert 
School of Management, Purdue University, Working Paper No.58, The 
Impact of Post-Bankruptcy Credit on the Number of Personal Bankruptcies 
(January 1993).
---------------------------------------------------------------------------
    In addition to discouraging debt payment, credit card 
issuers have identified new means to increase profits through 
credit card lending--the securitization of credit card debt. 
Asset backed securities are debt or investment securities 
backed by receivables such as credit card, automobile, or home 
equity loans. Securitization creates its own growth imperative. 
By promising investors steady or even increased returns from 
customer debt over time, credit issuers must persuade more 
people to borrow more money or find new customers to replace 
those who have paid off their debts. To meet these contractual 
commitments, securitization may encourage credit card issuers 
to pursue customers that are less credit worthy. Credit card 
issuers loaned consumers $422 billion by the end of 1997; 
credit card loans totaling $191 billion were securitized and 
sold by the companies.
    Increased sophistication in credit collection also 
increases the willingness of credit card issuers to lend to 
poor credit risks. Computer analysis, direct telephoning, more 
effective mail campaigns, better ability to reach relatives and 
employers, and other techniques permit creditors to wring more 
out of accounts that would have been written off just a few 
years ago. Investors have learned about the growth industry for 
bad debt. For example, Commercial Financial Services (CFS) 
acquires credit card debt that has been charged off as 
uncollectible from 25 of the largest credit card issuers, 
packages the debt into securities, sells the securities to 
investors, and pursues new collection activities against the 
customers. CFS securitized $1 billion in charged-off credit 
cards in 1997 and plans to securitize $1.5 billion in 1998.\17\ 
Armed with tools that make poor lending practices profitable, 
credit card issuers expand credit availability and increase 
consumer credit problems, including bankruptcy.
---------------------------------------------------------------------------
    \17\ See, Office of the Comptroller of the Currency, Comptroller's 
Handbook on Credit Card Lending, at 44-48 (September 1996); CFS Stays 
Private While Getting Bigger, Private Placement Report, January 12, 
1998, 1, 1998, WL 5034591.
---------------------------------------------------------------------------

C. Industry Regulators and Analysts Have Expressed Concern About Credit 
                         Card Issuer Practices

    The risks taken by credit card issuers have not escaped 
criticism and concern by industry regulators and analysts. The 
Office of the Comptroller of the Currency issued an Advisory 
Letter on September 25, 1996, that alerted national banks to 
the risks associated with preapproved solicitations of credit 
cards. The letter said:

          Although accounting for only a relatively small 
        percentage of total commercial bank assets, credit card 
        loans have grown faster than any other type of consumer 
        loans over the past 3 years. Recently there have been 
        pronounced increases in the rates of default and 
        delinquency for credit card loans.
          Aggressive competition recently has pressured some 
        banks to forgo customary and effective testing of new 
        credit card products and preapproved solicitation 
        campaigns in hopes of capturing a product market before 
        a competitor. Despite the relatively small average loan 
        size and high net interest margins in credit card 
        lending, the default and delinquency trends are areas 
        of concern for both bankers and regulators.

    The alert was issued by the OCC almost two years ago, but 
there are few signs that credit card issuers have reassessed 
their solicitation and lending practices. The FDIC has noted 
that ``by marketing high-risk debt to customers who are at 
substantial risk for non- payment, credit card issuers have 
contributed to the rise in consumer bankruptcies.'' \18\
---------------------------------------------------------------------------
    \18\ Diane Ellis, supra note 8.
---------------------------------------------------------------------------
    There are private solutions to the problems of high 
bankruptcies and increasing bad debts. Industry consultants 
estimate that credit card companies could cut their bankruptcy 
losses by more than 50 percent if they would institute minimal 
credit screening.\19\ Instead, however, this legislation would 
provide a government subsidy for bad debt collection while it 
increased the rewards for credit card issuers who aggressively 
market high cost credit products to customers already in 
financial trouble. There are a number of factors that 
contribute to the rise in consumer bankruptcy filings. It is a 
complex problem and simplistic answers are short-sighted and 
potentially harmful to millions of consumers. Congress must 
consider the many factors that have created this problem, 
including credit card issuer solicitation and lending 
practices.
---------------------------------------------------------------------------
    \19\ Fair, Isaac & Co. released a new bankruptcy predictor that it 
says can eliminate 54 percent of bankruptcy losses by screening 
potential nonpayers from the bottom 10 percent of credit card holders. 
Fair, Isaac & Co. @www.fairisaac.com; Credit Cards: Fight for 
Bankruptcy Law Reform Masks Truth, 162 Am. Banker 30 (September 8, 
1997).
---------------------------------------------------------------------------

                            VII. Conclusion

    In conclusion, we want to stress that we do not oppose 
efforts to reform the bankruptcy system--there are problems 
that should be addressed by Congress. We do, however, strongly 
object to the hurried manner in which S. 1301 was debated and 
voted upon in the Judiciary Committee. The result is a bill 
that does not appropriately address debtor and creditor abuses.
    We will, of course, continue to work with proponents of the 
bill to improve S. 1301. To that end, a number of amendments 
should be adopted during the Senate floor debate. Before 
passing comprehensive reform legislation, the Senate should: 
(1) ensure that the interests of women and children are not 
pushed aside in favor of the interests of credit card 
companies, (2) address the predatory lending practices that 
disproportionately affect older Americans, (3) protect debtors' 
access to the bankruptcy system and to justice, (4) ensure 
procedural safeguards that will protect consumers from bad 
faith debt reaffirmation agreements, and (5) pass reforms that 
will eliminate the abuses of the consumer credit industry. It 
is only through efforts such as these, that Congress can truly 
``reform'' the bankruptcy system for the benefit of all 
Americans.

                                   Ted Kennedy.
                                   Russ Feingold.

                      XI. CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, changes in existing law made by 
S. 130, as reported, are shown as follows (existing law which 
would be omitted is enclosed in bold brackets, new matter is 
printed in italic, and existing law in which no change is 
proposed is shown in roman type):

UNITED STATES CODE

           *       *       *       *       *       *       *


TITLE 11--BANKRUPTCY

           *       *       *       *       *       *       *


                     CHAPTER 1--GENERAL PROVISIONS

Sec.
101. Definitions.
     * * * * * * *
111. Credit counseling services; financial management instructional 
          courses.

Sec. 101. Definitions

    [In this title--] In this title:
          (1) The term ``accountant'' means accountant 
        authorized under applicable law to practice public 
        accounting, and includes professional accounting 
        association, corporation, or partnership, if so 
        authorized[;].
          (2) The term ``affiliate'' means--
                  (A) entity that directly or indirectly owns, 
                controls, or holds with power to vote, 20 
                percent or more of the outstanding voting 
                securities of the debtor, other than an entity 
                that holds such securities--

           *       *       *       *       *       *       *

                  (D) entity that operates the business or 
                substantially all of the property of the debtor 
                under a lease or operating agreement[;].
          [(3) Redesignated (21B)]
          (4) The term ``attorney'' means attorney, 
        professional law association, corporation, or 
        partnership, authorized under applicable law to 
        practice law[;].
          (5) The term ``claim'' means--
                  (A) * * *
                  (B) right to an equitable remedy for breach 
                of performance if such breach gives rise to a 
                right to payment, whether or not such right to 
                an equitable remedy is reduced to judgment, 
                fixed, contingent, matured, unmatured, 
                disputed, undisputed, secured, or unsecured[;].
          (6) The term ``commodity broker'' means futures 
        commission merchant, foreign futures commission 
        merchant, clearing organization, leverage transaction 
        merchant, or commodity options dealer, as defined in 
        section 761 of this title, with respect to which there 
        is a customer, as defined in section 761 of this 
        title[;].
          (7) The term ``community claim'' means claim that 
        arose before the commencement of the case concerning 
        the debtor for which property of the kind specified in 
        section 541(a)(2) of this title is liable, whether or 
        not there is any such property at the time of the 
        commencement of the case[;].
          (8) The term ``consumer debt'' means debt incurred by 
        an individual primarily for a personal, family, or 
        household purpose[;].
          (9) The term ``corporation''--
                  (A) includes--

           *       *       *       *       *       *       *

                  (B) does not include limited partnership[;].
          (10) The term ``creditor'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) entity that has a community claim[;].
          (11) The term ``custodian'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) trustee, receiver, or agent under 
                applicable law, or under a contract, that is 
                appointed or authorized to take charge of 
                property of the debtor for the purpose of 
                enforcing a lien against such property, or for 
                the purpose of general administration of such 
                property for the benefit of the debtor's 
                creditors[;].
          (12) The term ``debt'' means liability on a claim[;].
          [(12A)] (13) The term ``debt for child support'' 
        means a debt of a kind specified in section 523(a)(5) 
        of this title for maintenance or support of a child of 
        the debtor[;].
          [(13)] (14) The term ``debtor'' means person or 
        municipally concerning which a case under this title 
        has been commenced[;].
          [(13A)] (15) The term ``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 co-
                operative unit[;].
          [(14)] (16) The term ``disinterested person'' means 
        person that--
                  (A) is not a creditor, an equity security 
                holder, or an insider;

           *       *       *       *       *       *       *

                  (E) 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 an investment banker 
                specified in subparagraph (B) or (C) of this 
                paragraph, or for any other reason[;].
          [(14A)] (17) The term ``dependent child'' means, with 
        respect to an individual, a child who has not attained 
        the age of 18 and who is a dependent of that 
        individual, within the meaning of section 152 of the 
        Internal Revenue Code[;].
          [(15)] (18) The term ``entity'' includes person, 
        estate, trust, governmental unit, and United States 
        trustee[;].
          [(16)] (19) The term ``equity security'' means--
                  (A) share in a corporation, whether or not 
                transferable or denominated ``stock'', or 
                similar security;
                  (B) interest of a limited partner in a 
                limited partnership; or
                  (C) warrant or right, other than a right to 
                convert, to purchase, sell, or subscribe to a 
                share, security, or interest of a kind 
                specified in subparagraph (A) or (B) of this 
                paragraph[;].
          [(17)] (20) The term ``equity security holder'' means 
        holder of an equity security of he debtor[;].
          [(18)] (21) The term ``family farmer'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                          (i) more than 80 percent of the value 
                        of its assets consists of assets 
                        related to the farming operation;

           *       *       *       *       *       *       *

                          (iii) if such corporation issues 
                        stock, such stock is not publicly 
                        traded[;].
          [(19)] (22) The term ``family farmer with regular 
        annual income'' means family farmer whose annual income 
        is sufficiently stable and regular to enable such 
        family farmer to make payments under a plan under 
        chapter 12 of this title[;].
          [(20)] (23) The term ``farmer'' means (except when 
        such term appears in the term ``family farmer'') person 
        that received more than 80 percent of such person's 
        gross income during the taxable year of such person 
        immediately preceding the taxable year of such person 
        during which the case under this title concerning such 
        person was commenced from a farming operation owned or 
        operated by such person[;].
          [(21)] (24) The term ``farming operation'' includes 
        farming, tillage of the soil, dairy farming, ranching, 
        production or raising of crops, poultry, or livestock, 
        and production of poultry or livestock products in an 
        unmanufactured state[;].
          [(21A)] (25) The term ``farmout agreement'' means a 
        written agreement in which--
                  (A) * * *
                  (B) such other entity (either directly or 
                through its agents or its assigns), as 
                consideration, agrees to perform drilling, 
                reworking, recompleting, testing, or similar or 
                related operations, to develop or produce 
                liquid or gaseous hydrocarbons on the 
                property[;].
          [(21B)] (26) The term ``Federal depository 
        institutions regulatory agency'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) with respect to any insured depository 
                institution for which the Federal Deposit 
                Insurance Corporation has been appointed 
                conservator or receiver, the Federal Deposit 
                Insurance Corporation[;].
          [(22)] (27) The term ``financial institution'' means 
        a person that is a commercial or savings bank, 
        industrial savings bank, savings and loan association, 
        or trust company and, when any such person is acting as 
        agent or custodian for a customer in connection with a 
        securities contract, as defined in section 741 of this 
        title, such customer[;].
          [(23)] (28) The term ``foreign proceeding'' means 
        proceeding, whether judicial or administrative and 
        whether or not under bankruptcy law, in a foreign 
        country in which the debtor's domicile, residence, 
        principal place of business, or principal assets were 
        located at the commencement of such proceeding, for the 
        purpose of liquidating an estate, adjusting debts by 
        composition, extension, or discharge, or effecting a 
        reorganization[;].
          [(24)] (29) The term ``foreign representative'' means 
        duly selected trustee, administrator, or other 
        representative of an estate in a foreign proceeding[;].
          [(25)] (30) The term ``forward contract'' means a 
        contract (other than a commodity contract) for the 
        purchase, sale, or transfer of a commodity, as defined 
        in section 761(8) of this title, 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 two days after 
        the date the contract is entered into, including, but 
        not limited to, a repurchase transaction, reverse 
        repurchase transaction, consignment, lease, swap, hedge 
        transaction, deposit, loan, option, allocated 
        transaction, unallocated transaction, or any 
        combination thereof or option thereon[;].
          [(26)] (31) The term ``forward contract merchant'' 
        means a person whose business consists in whole or in 
        part of entering into forward contracts as or with 
        merchants in a commodity, as defined in section 761(8) 
        of this title, 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[;].
          [(27)] (32) The term ``government unit'' means United 
        States; State; Commonwealth; District; Territory; 
        municipality; foreign state; department, agency, or 
        instrumentality of the United States (but not a United 
        States trustee while serving as a trustee in a case 
        under this title), a State, a Commonwealth, a District, 
        a Territory, a municipality, or a foreign state; or 
        other foreign or domestic government[;].
          [(27A)] (33) The term ``household goods'' has the 
        meaning given that term in section 444.1(i) of title 
        16, of the Code of Federal Regulations (as in effect on 
        the effective date of this paragraph), which is part of 
        the regulations issued by the Federal Trade Commission 
        that are commonly known as the ``Trade Regulation Rule 
        on Credit Practices,'' except that the term shall also 
        include any tangible personal property reasonably 
        necessary for the maintenance or support of a dependent 
        child[;].
          [(27B)] (35) The term ``incidental property'' means, 
        with respect to a debtor's principle residence--
                  (A) property commonly conveyed with a 
                principal residence in the area where the real 
                estate is located;
                  (B) all easements, rights, appurtenances, 
                fixtures, rents, royalties, mineral rights, oil 
                or gas rights or profits, water rights, escrow 
                funds, or insurance proceeds; and
                  (C) all replacements or additions[;].
          [(28)] (35) The term ``indenture'' means mortgage, 
        deed of trust, or indenture, under which there is 
        outstanding a security, other than a voting-trust 
        certificate, constituting a claim against the debtor, a 
        claim secured by a lien on any of the debtor's 
        property, or an equity security of the debtor[;].
          [(29] (36) The term ``indenture trustee means trustee 
        under an indenture[;].
          [(30)] (37) The term ``individual with regular 
        income'' means individual whose income is sufficiently 
        stable and regular to enable such individual to make 
        payments under a plan under chapter 13 of this title, 
        other than a stockbroker or a commodity broker[;].
          [(31)] (38) The term ``insider'' includes--
                  (A) if the debtor is an individual--

           *       *       *       *       *       *       *

                  (F) managing agent of the debtor[;].
          [(32)] (39) ``insolvent'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) with reference to a municipality, 
                financial condition such that the municipality 
                is--
                          (i) generally not paying its debts as 
                        they become due unless such debts are 
                        the subject of a bona fide dispute[;].
                                or
                          (ii) unable to pay its debts as they 
                        become due[;].
          [(33)] (40) The term ``institution-affiliated 
        party''--
                  (A) * * *
                  (B) with respect to an insured credit union 
                has the meaning given it in section 206(r) of 
                the Federal Credit Union Act[;].
          [(34)] (41) The term ``insured credit union'' has the 
        meaning given it in section 101(7) of the Federal 
        Credit Union Act[;].
          [(35)] (42) The term ``insured depository 
        institution''--
                  (A) has the meaning given it in section 
                3(c)(2) of the Federal Deposit Insurance Act; 
                and
                  (B) includes an insured credit union (except 
                in the case of [paragraphs (21B) and (33)(A)] 
                paragraphs (23) and (35) of this subsection[;].
          [(35A)] (43) The term ``intellectual property'' 
        means--
                  (A) trade secret;

           *       *       *       *       *       *       *

                  (F) mask work protected under chapter 9 of 
                title 17; to the extent protected by applicable 
                nonbankruptcy law[; and].
          [(36)] (44) The term ``judicial lien'' means lien 
        obtained by judgment, levy, sequestration, or other 
        legal or equitable process or proceeding[;].
          [(37)] (45) The term ``lien'' means charge against or 
        interest in property to secure payment of a debt or 
        performance of an obligation[;].
          [(38)] (46) The term ``margin payment'' means, for 
        purposes of the forward contract provisions of this 
        title, payment or deposit of cash, a security or other 
        property, that is commonly known in the forward 
        contract trade as original margin, initial margin, 
        maintenance margin, or variation margin, including 
        mark-to-market payments, or variation payments[; and].
          [(39)] (47) The term ``mask work'' has the meaning 
        given it in section 901(a)(2) of title 17.
          [(40)] (48) The term ``municipality'' means political 
        subdivision or public agency or instrumentality of a 
        State[;].
          [(41)] (49) The term ``person'' includes individual, 
        partnership, and corporation, but does not include 
        governmental unit, except that a governmental unit 
        that--
                  (A) acquires an asset from a person--

           *       *       *       *       *       *       *

                  (C) is the legal or beneficial owner of an 
                asset of--
                          (i) an employee pension benefit plan 
                        that is a governmental plan, as defined 
                        in section 414(d) of the Internal 
                        Revenue Code of 1986; or
                          (ii) and eligible deferred 
                        compensation plan, as defined in 
                        section 457(b) of the Internal Revenue 
                        Code of 1986;
                shall be considered, for purposes of section 
                1102 of this title, to be a person with respect 
                to such asset or such benefit[;].
          [(42)] (50) The term ``petition'' means petition 
        filed under section 301, 302, 303, or 304 of this 
        title, as the case may be, commencing a case under this 
        title[;].
          [(42A)] (51) The term ``production payment'' means a 
        term overriding royalty satisfiable in cash or in 
        kind--
                  (A) contingent on the production of a liquid 
                or gaseous hydrocarbon from particular real 
                property; and
                  (B) from a specified volume, or a specified 
                value, from liquid or gaseous hydrocarbon 
                produced from such property, and determined 
                without regard to production costs[;].
          [(43)] (52) The term ``purchaser'' means transferee 
        of a voluntary transfer, and includes immediate or 
        mediate transferee of such a transferee[;].
          [(44)] (53) The term ``railroad'' means common 
        carrier by railroad engaged in the transportation of 
        individuals or property or owner of trackage facilities 
        leased by such a common carrier[;].
          [(45)] (54) The term ``relative'' means individual 
        related by affinity or consanguinity within the third 
        degree as determined by the common law, or individual 
        in a step or adoptive relationship within such third 
        degree[;].
          [(46)] (55) The term ``repo participant'' means an 
        entity that, on any day during the period beginning 90 
        days before the date of the filing of the petition, has 
        an outstanding repurchase agreement with the debtor[;].
          [(47)] (56) The term ``repurchase agreement'' (which 
        definition also applies to a reverse repurchase 
        agreement) means an agreement, including related terms, 
        which provides for the transfer of certificates of 
        deposit, eligible bankers' acceptances, or securities 
        that are direct obligations of, or that are fully 
        guaranteed as to principal and interest 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, 
        or securities with a simultaneous agreement by such 
        transferee to transfer to the transferor thereof 
        certificates of deposit, eligible bankers' acceptances, 
        or securities as described above, at a date certain not 
        later than one year after such transfers or on demand, 
        against the transfer of funds[;].
          [(48)] (57) The term ``securities clearing agency'' 
        means person that is registered as a clearing agency 
        under section 17A of the Securities Exchange Act of 
        1934 or whose business is confined to the performance 
        of functions of a clearing agency with respect to 
        exempted securities, as defined in section 3(a)(12) of 
        such Act for the purposes of such section 17A[;].
          [(49)] (58) ``security''--
                  (A) includes--

           *       *       *       *       *       *       *

                  (B) does not include--
                          (i) currency, check, draft, bill of 
                        exchange, or bank letter of credit;

           *       *       *       *       *       *       *

                          (vii) debt or evidence of 
                        indebtedness of goods sold and 
                        delivered or services rendered[;].
          [(50)] (59) ``The term ``security agreement'' means 
        agreement that creates or provides for a security 
        interest[;].
          [(51)] (60) The term ``security interest'' means lien 
        created by an agreement[;].
          [(51A)] (61) The term ``settlement payment'' means, 
        for purposes of the forward contract provisions of this 
        title, a preliminary settlement payment, a partial 
        settlement payment, an interim settlement payment, a 
        settlement payment on account, a final settlement 
        payment, a net settlement payment, or any other similar 
        payment commonly used in the forward contract trade[;].
          [(51B)] (62) The term ``single asset real estate'' 
        means real property constituting a single property or 
        project, other than residential real property with 
        fewer than 4 residential units, which generates 
        substantially all of the gross income a debtor whi is 
        not a family farmer and on which no substantial 
        business is being conducted by a debtor other than the 
        business of operating the real property and activities 
        incidental [thereto having aggregate noncontingent, 
        liquidated secured debts in an amount no more than 
        $4,000,000;].
          [(51C)] (63) The term ``small business'' means a 
        person engaged in commercial or business activities 
        (but does not include a person whose primary activity 
        is the business of owning or operating real property 
        and activities incidental thereto) whose aggregate 
        noncontingent liquidated secured and unsecured debts as 
        of the date of the petition do not exceed 
        $2,000,000[;].
          [(52)] (64) The term ``State'' includes the District 
        of Columbia and Puerto Rico, except for the purpose of 
        defining who may be a debtor under chapter 9 of this 
        title[;].
          [(53)] (65) The term ``statutory lien'' means lien 
        arising solely by force of a statute on specified 
        circumstances or conditions, or lien of distress for 
        rent, whether or not statutory, but does not include 
        security interest or judicial lien, whether or not such 
        interest or lien is provided by or is dependent on a 
        statute and whether or not such interest or lien is 
        made fully effective by statute[;].
          [(53A)] (66) The term ``stockbroker'' means person--
                  (A) with respect to which there is a 
                customer, as defined in section 741 of this 
                title; and
                  (B) that is engaged in the business of 
                effecting transactions in securities--
                          (i) for the account of others; or
                          (ii) with members of the general 
                        public, from or for such person's own 
                        account[;]
          [(53B)] (67) The term ``swap agreement'' means--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) a master agreement for any of the 
                foregoing together with all supplements[;].
          [(53C)] (68) The term ``swap participant'' means an 
        entity that, at any time before the filing of the 
        petition, has an outstanding swap agreement with the 
        debtor[;].
          [(53D)] (69) The term ``timeshare plan'' means and 
        shall include that interest purchased in any 
        arrangement, plan, scheme, or similar device, but not 
        including exchange programs, whether by membership, 
        agreement, tenancy in common, sale, lease, deed, rental 
        agreement, license, right to use agreement, or by any 
        other means, whereby a purchaser, in exchange for 
        consideration, receives a right to use accommodations, 
        facilities, or recreational sites, whether improved or 
        unimproved, for a specific period of time less than a 
        full year during any given year, but not necessarily 
        for consecutive years, and which extends for a period 
        of more than three years. A ``timeshare interest'' is 
        that interest purchased in a timeshare plan which 
        grants the purchaser the right to use and occupy 
        accommodations, facilities, or recreational sites, 
        whether improved or unimproved, pursuant to a timeshare 
        plan[;].
          [(54) ``stockbroker'' means person--
                  [(A) with respect to which there is a 
                customer, as defined in section 741(2) of this 
                title; and
                  [(B) that is engaged in the business of 
                effecting transactions in securities--
                          [(i) for the account of others; or
                          [(ii) with members of the general 
                        public, from or for such person's own 
                        account;]
          [(54)] (70) 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[;].
          [(55)] (71) The term ``United States'', when used in 
        a geographical sense, includes all locations where the 
        judicial jurisdiction of the United States extends, 
        including territories and possessions of the United 
        States[;].
          [(56A] (72) The term ``term overriding royalty'' 
        means an interest in liquid or gaseous hydrocarbons in 
        place or to be produced from particular real property 
        that entitles the owner thereof to a share of 
        production, or the value thereof, for a term limited by 
        time, quantity, or value realized[;].

           *       *       *       *       *       *       *


Sec. 104. Adjustment of dollar amounts

    (a) * * *
    (b)(1) On April 1, 1998, and at each 3-year interval ending 
on April 1 thereafter, each dollar amount in effect under 
sections 109(e), 303(b), 507(a), [522(d),] 522(f)(3), 
707(b)(5), and 523(a)(2)(C) immediately before such April 1 
shall be adjusted--

           *       *       *       *       *       *       *

    (2) Not later than March 1, 1998, and at each 3-year 
interval ending on March 1 thereafter, the Judicial Conference 
of the United States shall publish in the Federal Register the 
dollar amounts that will become effective on such April 1 under 
sections 109(e), 303(b), 507(a), [522(d),] 522(f)(3), 
707(b)(5), and 523(a)(2)(C) of this title.

           *       *       *       *       *       *       *


Sec. 108. Extension of time

    (a) If applicable * * *

           *       *       *       *       *       *       *

    (c) Except as provided in section 524 of this title, if 
applicable nonbankruptcy law, an order entered in a 
nonbankruptcy proceeding, or an agreement fixes a period for 
commencing or continuing a civil action in a court other than a 
bankruptcy court on a claim against the debtor, or against an 
individual with respect to which such individual is protected 
under section 1201 or 1301 of this title, and such period has 
not expired before the date of the filing of the petition, then 
such period does not expire until the later of--
          (1) the end of such period, including any suspension 
        of such period occurring on or after the commencement 
        of the case; or
          (2) 30 days after notice of the termination or 
        expiration of the stay under section 362, [922, 1201, 
        or] 922, 1201, or 1301 of this title, as the case may 
        be, with respect to such claim.

Sec. 109. Who may be a debtor

    (a) * * *
    (b) A person may be a debtor under chapter 7 of this title 
only if such person is not--
          (1) a railroad;
          (2) a domestic insurance company, bank, savings bank, 
        cooperative bank, savings and loan association, 
        building and loan association, homestead association, a 
        small business investment company licensed by the Small 
        Business Administration under [subsection (c) or (d) 
        of] section 301 of the Small Business Investment Act of 
        1958, credit union, or industrial bank or similar 
        institution which is an insured bank as defined in 
        section 3(h) of the Federal Deposit Insurance Act; or

           *       *       *       *       *       *       *

    (h) Notwithstanding any other provision of this section, an 
individual may not be a debtor under this title unless that 
individual has, during the 90-day period preceding the date of 
filing of the petition of that individual, made a good-faith 
attempt to create a debt repayment plan outside the judicial 
system for bankruptcy law (commonly referred to as the 
``bankruptcy system''), through a credit counseling program 
(offered through credit counseling services described in 
section 111(a)) that has been approved by--
          (1) the United States trustee; or
          (2) the bankruptcy administrator for the district in 
        which the petition is filed.

Sec. 110. Penalty for persons who negligently or fraudulently prepare 
                    bankruptcy petitions

    (a) In this section--

           *       *       *       *       *       *       *

    (j)(1) A debtor for whom a bankruptcy petition preparer has 
prepared a document for filing, the trustee, a creditor, or the 
United States trustee in the district in which the bankruptcy 
petition preparer resides, has conducted business, or the 
United States trustee in any other district in which the debtor 
resides may bring a civil action to enjoin a bankruptcy 
petition preparer from engaging in any conduct in violation of 
this section or from further acting as a bankruptcy petition 
preparer.

           *       *       *       *       *       *       *

    (3) The court shall award to a debtor, trustee, or creditor 
that brings a successful action under this subsection 
reasonable [attorney's] attorneys' fees and costs of the 
action, to be paid by the bankruptcy petition preparer.

           *       *       *       *       *       *       *


Sec. 111. Credit counseling services; financial management 
                    instructional courses

    (a) The clerk of each district shall maintain a list of 
credit counseling services that provide 1 or more programs 
described in section 109(h) and that have been approved by--
          (1) the United States trustee; or
          (2) the bankruptcy administrator for the district.
    (b) The United States trustee or each bankruptcy 
administrator referred to in subsection (a)(1) shall--
          (1) make available to debtors who are individuals and 
        instructional course concerning personal financial 
        management, under the direction of the bankruptcy 
        court; and
          (2) maintain a list of instructional courses 
        concerning personal financial management that are 
        operated by a private entity and that have been 
        approved by the United States trustee or that 
        bankruptcy administrator.

           *       *       *       *       *       *       *


CHAPTER 3--CASE ADMINISTRATION

           *       *       *       *       *       *       *


Subchapter II--Officers

           *       *       *       *       *       *       *


Sec. 328. Limitation on compensation of professional persons

    (a) The trustee, or a committee appointed under section 
1102 of this title, with the court's approval, may employ or 
authorize the employment of a professional person under section 
327 or 1103 of this title, as the case may be, on any 
reasonable terms and conditions of employment, including on a 
retainer, on an hourly basis, on a fixed or percentage fee 
basis, or on a contingent fee basis. Notwithstanding such terms 
and conditions, the court may allow compensation different from 
the compensation provided under such terms and conditions after 
the conclusion of such employment, if such terms and conditions 
prove to have been improvident in light of developments not 
capable of being anticipated at the time of fixing of such 
terms and conditions.

           *       *       *       *       *       *       *


Subchapter III--Administration

           *       *       *       *       *       *       *


Sec. 341. Meetings of creditors and equity security holders

    (a) * * *

           *       *       *       *       *       *       *

    (c) The court may not preside at, and may not attend, any 
meeting under this section including any final meeting of 
creditors. Notwithstanding any local court rule, provision of a 
State constitution, any other Federal or State law that is not 
a bankruptcy law, or other requirement that representation a 
the meeting of creditors under subsection (a) be by an 
attorney, a creditor holding a consumer debt or any 
representative of the creditor (which may include an entity or 
an employee of an entity and may be a representative for more 
than one creditor) shall be permitted to appear at and 
participate in the meeting of creditors in a case under chapter 
7 or 13, either alone or in conjunction with an attorney for 
the creditor. Nothing in this subsection shall be construed to 
require any creditor to be represented by an attorney at any 
meeting of creditors.

           *       *       *       *       *       *       *


Sec. 342. Notice

    (a) * * *
    [(b) Prior to the commencement of a case under this title 
by an individual whose debts are primarily consumer debts, the 
clerk shall give written notice to such individual that 
indicates each chapter of this title under which such 
individual may proceed.]
    (b) Before the commencement of a case under this title by 
an individual whose debts are primarily consumer debts, that 
individual shall be given or obtain (as required in section 
521(a)(1), as part of the certification process under 
subchapter 1 of chapter 5) a written notice prescribed by the 
United States trustee for the district in which the petition is 
filed pursuant to section 586 of title 28. The notice shall 
contain the following:
          (1) A brief description of chapters 7, 11, 12, and 13 
        and the general purpose, benefits, and costs of 
        proceeding under each of those chapters.
          (2) A brief description of services that may be 
        available to that individual from an independent 
        nonprofit debt counseling service.
          (3)(A) The name, address, and telephone number of 
        each nonprofit debt counseling service with an office 
        located in the district in which the petition is filed, 
        if any.
          (B) Any nonprofit debt counseling service described 
        in subparagraph (A) that has registered with the clerk 
        of the bankruptcy court on or before December 10 of the 
        preceding year shall be included in the list referred 
        to in that clause, unless the chief bankruptcy judge of 
        the district involved, after giving notice to the debt 
        counseling service and the United States trustee and 
        opportunity for a hearing, orders, for good cause, that 
        a particular debt counseling service shall not be so 
        listed.
    (c) If notice is required to be given by the debtor to a 
creditor under this title, any rule, any applicable law, or any 
order of the court, such notice shall contain the name, 
address, and taxpayer identification number of the debtor[, but 
the failure of such notice to contain such information shall 
not invalidate the legal effect of such notice].
    (d)(1) If the credit agreement between the debtor and the 
creditor or the last communication before the filing of the 
petition in a voluntary case from the creditor to a debtor who 
is an individual states an account number of the debtor that is 
the current account number of the debtor with respect to any 
debt held by the creditor against the debtor, the debtor shall 
include that account number in any notice to the creditor 
required to be given under this title.
    (2) If the creditor has specified to the debtor, in the 
last communication before the filing of the petition, an 
address at which the creditor wishes to receive correspondence 
regarding the debtor's account, any notice to the creditor 
required to be given by the debtor under this title shall be 
given at such address.
    (3) For purposes of this section, the term ``notice'' shall 
include--
          (A) any correspondence from the debtor to the 
        creditor after the commencement of the case;
          (B) any statement of the debtor's intention under 
        section 521(a)(2);
          (C) notice of the commencement of any proceeding in 
        the case to which the creditor is a party; and
          (D) any notice of a hearing under section 1324.
    (e)(1) At any time, a creditor, in a case of an individual 
under chapter 7 or 13, may file with the court and serve on the 
debtor a notice of the address to be used to notify the 
creditor in that case.
    (2) If the court or the debtor is required to give the 
creditor notice, not later than 5 days after receipt of the 
notice under paragraph (1), that notice shall be given at that 
address.
    (f) An entity may file with the court a notice stating its 
address for notice in cases under chapter 7 or 13. After the 
date that is 30 days following the filing of that notice, any 
notice in any case filed under chapter 7 or 13 given by the 
court shall be to that address unless specific notice is given 
under subsection (e) with respect to a particular case.
    (g)(1) Notice given to a creditor other than as provided in 
this section shall not be effective notice until that notice 
has been brought to the attention of the creditor.
    (2) If the creditor has designated a person or department 
to be responsible for receiving notices concerning bankruptcy 
cases and has established reasonable procedures so that 
bankruptcy notices received by the creditor will be delivered 
to that department or person, notice shall not be brought to 
the attention of the creditor until that notice is received by 
that person or department.

           *       *       *       *       *       *       *


Sec. 346. Special tax provisions

    (a) * * *

           *       *       *       *       *       *       *

    (g)(1) Neither gain nor loss shall be recognized on a 
transfer--
          (A) * * *

           *       *       *       *       *       *       *

          (C) in a case under chapter 11 or 12 of this title 
        concerning a corporation, of property from the estate 
        to a corporation that is an affiliate participating in 
        a joint plan with the debtor, or that is a successor to 
        the debtor under the plan[, except that gain or loss 
        may be recognized to the same extent that such transfer 
        results in the recognition of gain or loss under 
        section 371 of the Internal Revenue Code of 1986].

           *       *       *       *       *       *       *


Sec. 348. Effect of conversion

    (a) * * *

           *       *       *       *       *       *       *

    (f)(1) Except as provided in paragraph (2), when a case 
under chapter 13 of this title is converted to a case under 
another chapter under this title--
          (A) property of the estate in the converted case 
        shall consist of property of the estate, as of the date 
        of filing of the petition, that remains in the 
        possession of or is under the control of the debtor on 
        the date of conversion; [and]
          (B) valuations of property and of allowed secured 
        claims in the chapter 13 case shall apply [in the 
        converted case, with allowed secured claims] only in a 
        case converted to chapter 11 or 12 but not in a case 
        converted to chapter 7, with allowed secured claims in 
        cases under chapters 11 and 12 reduced to the extent 
        that they have been paid in accordance with the chapter 
        13 plan[.]; and
          (C) with respect to cases converted from chapter 13, 
        the claim of any creditor holding security as of the 
        date of the petition shall continue to be secured by 
        that security unless the full amount of that claim 
        determined under applicable nonbankruptcy law has been 
        paid in full as of the date of conversion, 
        notwithstanding any valuation or determination of the 
        amount of an allowed secured claim made for the 
        purposes of the chapter 13 proceeding.
    (2) If the debtor converts a case under chapter 13 of this 
title to a case under another chapter under this title in bad 
faith, the property of the estate in the converted case shall 
consist of the property of the estate as of the date of 
conversion.

           *       *       *       *       *       *       *


Subchapter IV--Administrative Powers

           *       *       *       *       *       *       *


Sec. 362. Automatic stay

    (a) * * *

           *       *       *       *       *       *       *

    (b) The filing of a petition under section 301, 302, or 303 
of this title, or of an application under section 5(a)(3) of 
the Securities Investor Protection Act of 1970, does not 
operate as a stay--
          (1) * * *

           *       *       *       *       *       *       *

          (17) under subsection (a) of this section, of the 
        setoff by a swap participant, of any mutual debt and 
        claim under or in connection with any swap agreement 
        that constitutes the setoff of a claim against the 
        debtor for any payment due from the debtor under or in 
        connection with any swap agreement against any payment 
        due to the debtor from the swap participant under or in 
        connection with any swap agreement or against cash, 
        securities, or other property of the debtor held by or 
        due from such swap participant to guarantee, secure or 
        settle any swap agreement; [or]
          (18) under subsection (a) of the creation or 
        perfection of a statutory lien for an ad valorem 
        property tax imposed by the District of Columbia, or a 
        political subdivision of a State, if such tax comes due 
        after the filing of the petition[.];
The provisions of paragraphs (12) and (13) of this subsection 
shall apply with respect to any such petition filed on or 
before December 31, 1989.
          (19) under subsection (a) with respect to the 
        withholding of income pursuant to an order as specified 
        in section 466(b) of the Social Security Act (42 U.S.C. 
        666(b));
          (20) under subsection (a) with respect to the 
        withholding, suspension, or restriction of drivers' 
        licenses, professional and occupational licenses, and 
        recreational licenses pursuant to State law, as 
        specified in section 466(a)(15) of the Social Security 
        Act (42 U.S.C. 666(a)(15)) or with respect to the 
        reporting of overdue support owed by an absent parent 
        to any consumer reporting agency as specified in 
        section 466(a)(7) of the Social Security Act (42 U.S.C. 
        666(a)(7));
          (21) under subsection (a) of this section of any 
        transfer that is not avoidable under section 544 and 
        that is not avoidable under section 549;
          (22) under subsection (a)(3) of this section, of the 
        continuation of any eviction, unlawful detainer action, 
        or similar proceeding by a lessor against a debtor 
        involving residential real property in which the debtor 
        resides as a tenant under a rental agreement; or
          (23) under subsection (a)(3) of this section, of the 
        commencement of any eviction, unlawful detainer action, 
        or similar proceeding by a lessor against a debtor 
        involving residential real property in which the debtor 
        resides as a tenant under a rental agreement that has 
        terminated.
    (c)(1) Except as provided in subsections (d), [(e), and 
(f)] (e), (f), and (h) of this section--
          [(1) the stay] (A) the stay of an action against 
        property of the estate under subsection (a) of this 
        section continues until such property is no longer 
        property of the estate; and
          [(2) the stay] (B) the stay of any other act under 
        subsection (a) of this section continues until the 
        earliest of--
                  [(A) the time] (i) the time the case is 
                closed;
                  [(B) the time] (ii) the time the case is 
                dismissed; or
                  [(C)] (iii) if the case is a case under 
                chapter 7 of this title concerning an 
                individual or a case under chapter 9, 11, 12, 
                or 13 of this title, the time a discharge is 
                granted or denied.
          (2) Except as provided in subsections (d) through 
        (f), the stay under subsection (a) with respect to any 
        action taken with respect to a debt or property 
        securing such debt or with respect to any lease shall 
        terminate with respect to the debtor on the 30th day 
        after the filing of the later case if--
                  (A) a single or joint case is filed by or 
                against an individual debtor under chapter 7, 
                11, or 13; and
                  (B) a single or joint case of that debtor 
                (other than a case refiled under a chapter 
                other than chapter 7 after dismissal under 
                section 707(b)) was pending during the 
                preceding year but was dismissed.
          (3) If a party in interest so requests, the court may 
        extend the stay in a particular case with respect to 1 
        or more creditors (subject to such conditions or 
        limitations as the court may impose) after providing 
        notice and a hearing completed before the expiration of 
        the 30-day period described in paragraph (2) only if 
        the party in interest demonstrates that the filing of 
        the later case is in good faith with respect to the 
        creditors to be stayed.
          (4) A case shall be presumed to have not been filed 
        in good faith (except that such presumption may be 
        rebutted by clear and convincing evidence to the 
        contrary)--
                  (A) with respect to the creditors involved, 
                if--
                          (i) more than 1 previous case under 
                        any of chapters 7, 11, or 13 in which 
                        the individual was a debtor was pending 
                        during the 1-year period described in 
                        paragraph (1);
                          (ii) a previous case under any of 
                        chapters 7, 11, or 13 in which the 
                        individual was a debt or was dismissed 
                        within the period specified in 
                        paragraph (2) after--
                                  (I) the debtor, after having 
                                received from the court a 
                                request to do so, failed to 
                                file or amend the petition or 
                                other documents as required by 
                                this title; or
                                  (II) the debtor, without 
                                substantial excuse, failed to 
                                perform the terms of a plan 
                                that was confirmed by the 
                                court; or
                          (iii)(I) during the period commencing 
                        with the dismissal of the next most 
                        previous case under chapter 7, 11, or 
                        13 there has not been a substantial 
                        change in the financial or personal 
                        affairs of the debtor;
                          (II) if the case is a chapter 7 case, 
                        there is no other reason to conclude 
                        that the later case will be concluded 
                        with a discharge; or
                          (III) if the case is a chapter 11 or 
                        13 case, there is not a confirmed plan 
                        that will be fully performed; and
                  (B) with respect to any creditor that 
                commenced an action under subsection (d) in a 
                previous case in which the individual was a 
                debtor, if, as of the date of dismissal of that 
                case, that action was still pending or had been 
                resolved by terminating, conditioning, or 
                limiting the stay with respect to actions of 
                that creditor.
                  (5)(A) If a request is made for relief from 
                the stay under subsection (a) with respect to 
                real or personal property of any kind, and the 
                request is granted in whole or in part, the 
                court may, in addition to making any other 
                order under this subsection, order that the 
                relief so granted shall be in rem either--
                          (i) for a definite period of not less 
                        than 1 year; or
                          (ii) indefinitely.
                  (B)(i) After an order is issued under 
                subparagraph (A), the stay under subsection (a) 
                shall not apply to any property subject to such 
                an in rem order in any case of the debtor.
                  (ii) If an in rem order issued under 
                subparagraph (A) so provides, the stay shall, 
                in addition to being inapplicable to the debtor 
                involved, not apply with respect to an entity 
                under this title if--
                          (I) the entity had reason to know of 
                        the order at the time that the entity 
                        obtained an interest in the property 
                        affected; or
                          (II) the entity was notified of the 
                        commencement of the proceeding for 
                        relief from the stay, andat the time of 
the notification, no case in which the entity was a debtor was pending.
                  (6) For purposes of this section, a case is 
                pending during the period beginning with the 
                issuance of the order for relief and ending at 
                such time as the case involved is closed.

           *       *       *       *       *       *       *

    (e)(1) Thirty days after a request under subsection (d) of 
this section for relief from the stay of any act against 
property of the estate under subsection (a) of this section, 
such stay is terminated with respect to the party in interest 
making such request, unless the court, after notice and a 
hearing, orders such stay continued in effect pending the 
conclusion of, or as a result of, a final hearing and 
determination under subsection (d) of this section. A hearing 
under this subsection may be a preliminary hearing, or may be 
consolidated with the final hearing under subsection (d) of 
this section. The court shall order such stay continued in 
effect pending the conclusion of the final hearing under 
subsection (d) of this section if there is a reasonable 
likelihood that the party opposing relief from such stay will 
prevail at the conclusion of such final hearing. If the hearing 
under this subsection is a preliminary hearing, then such final 
hearing shall be concluded not later than thirty days after the 
conclusion of such preliminary hearing, unless the 30-day 
period is extended with the consent of the parties in interest 
or for a specific time which the court finds is required by 
compelling circumstances.
  (2) Notwithstanding paragraph (1), in the case of an 
individual filing under chapter 7, 11, or 13, the stay under 
subsection (a) shall terminate on the date that is 60 days 
after a request is made by a party in interest under subsection 
(d), unless--
          (A) a final decision is rendered by the court during 
        the 60-day period beginning on the date of the request; 
        or
          (B) that 60-day period is extended--
                  (i) by agreement of all parties in interest; 
                or
                  (ii) by the court for such specific period of 
                time as the court finds is required for good 
                cause.

           *       *       *       *       *       *       *

    [(h) An individual injured by any willful violation of a 
stay provided by this section shall recover actual damages, 
including costs and attorneys' fees, and, in appropriate 
circumstances, may recover punitive damages.]
  (h) In an individual case under chapter 7, 11, or 13 the stay 
provided by subsection (a) is terminated with respect to 
property of the estate securing in whole or in part a claim 
that is in an amount greater than $3,000, or subject to an 
unexpired lease with a remaining term of at least 1 year (in 
any case in which the debtor owes at least $3,000 for a 1-year 
period), if within 30 days after the expiration of the 
applicable period under section 521(a)(2)--
          (1)(A) the debtor fails to timely file a statement of 
        intention to surrender or retain the property; or
          (B) if the debtor indicates in the filing that the 
        debtor will retain the property, the debtor fails to 
        meet an applicable requirement to--
                  (i) either--
                          (I) redeem the property pursuant to 
                        section 722; or
                          (II) reaffirm the debt the property 
                        secures pursuant to section 524(c); or
                  (ii) assume the unexpired lease pursuant to 
                section 365(d) if the trustee does not do so; 
                or
          (2) the debtor fails to timely take the action 
        specified in a statement of intention referred to in 
        paragraph (1)(A) (as amended, if that statement is 
        amended before expiration of the period for taking 
        action), unless--
                  (A) the statement of intention specifies 
                reaffirmation; and
                  (B) the creditor refuses to reaffirm the debt 
                on the original contract terms for the debt.
  (i)(1) An individual who is injured by any willful violation 
of a stay provided in this section shall be entitled to 
recover--
          (A) actual damages; and
          (B) reasonable costs, including attorneys' fees.
  (2) In addition to recovering actual damages, costs, and 
attorneys' fees under paragraph (1), an individual described in 
paragraph (1) may recover punitive damages in appropriate 
circumstances.

           *       *       *       *       *       *       *


            CHAPTER 5--CREDITORS, THE DEBTOR, AND THE ESTATE

Subchapter I--Creditors and Claims

           *       *       *       *       *       *       *


Sec. 502. Allowance of claims or interests

    (a) A claim * * *
    (b) Except as provided in subsections (e)(2), (f), (g), (h) 
and (i) of this section, if such objection to a claim is made, 
the court, after notice and a hearing, shall determine the 
amount of such claim in lawful currency of the United States as 
of the date of the filing of the petition, and shall allow such 
claim in such amount, except to the extent that--
          (1) such claim is unenforceable against the debtor 
        and property of the debtor, under any agreement or 
        applicable law for a reason other than because such 
        claim is contingent or unmatured;

           *       *       *       *       *       *       *

          (8) such claim results from a reduction, due to late 
        payment, in the amount of an otherwise applicable 
        credit available to the debtor in connection with an 
        employment tax on wages, salaries, or commissions 
        earned from the debtor; [or]
          (9) proof of such claim is not timely filed, except 
        to the extent tardily filed as permitted under 
        paragraph (1), (2), or (3) of section 726(a) of this 
        title or under the Federal Rules of Bankruptcy 
        Procedure, except that a claim of a governmental unit 
        shall be timely filed if it is filed before 180 days 
        after the date of the order for relief or such later 
        time as the Federal Rules of Bankruptcy Procedure may 
        provide[.]; or
          (10) the claim is based on a secured debt if the 
        creditor has failed to comply with the requirements of 
        subsection (a), (b), (c), (d), (e), (f), (g), (h), or 
        (i) of section 129 of the Truth in Lending Act (15 
        U.S.C. 1639).

           *       *       *       *       *       *       *

    (j) A claim * * *
    (k)(1) The court may award the debtor reasonable attorneys' 
fees and costs if, after an objection if filed by a debtor, the 
court--
          (A)(i) disallows the claim; or
          (ii) reduces the claim by an amount greater than 20 
        percent of the amount of the initial claim filed by a 
        party in interest; and
          (B) finds the position of the party filing the claim 
        is not substantially justified.
    (2) If the court finds that the position of a claimant 
under this section is not substantially justified, the court 
may, in addition to awarding a debtor reasonable attorneys' 
fees and costs under paragraph (1), award such damages as may 
be required by the equities of the case.

Sec. 503. Allowance of administrative expenses

    (a) An entity may timely file a request for payment of an 
administrative expense, or may tardily file such request if 
permitted by the court for cause.
    (b) After notice and a hearing, there shall be allowed, 
administrative expenses, other than claims allowed under 
section 502(f) of this title, including--
          (1)(A) the actual, necessary costs and expenses of 
        preserving the estate, including wages, salaries, or 
        commissions for services rendered after the 
        commencement of the case;

           *       *       *       *       *       *       *

          (4) reasonable compensation for professional services 
        rendered by an attorney or an accountant of an entity 
        whose expense is allowed under subparagraph (A), (B), 
        (C), (D), or (E) of paragraph (3) of this subsection, 
        based on the time, the nature, the extent, and the 
        value of such services, and the cost of comparable 
        services other than in a case under this title, and 
        reimbursement for actual, necessary expenses incurred 
        by such attorney or accountant;

           *       *       *       *       *       *       *


Sec. 506. Determination of secured status

    (a) An allowed * * *

           *       *       *       *       *       *       *

    (e) Subsection (a) shall not apply to an allowed claim to 
the extent attributable in whole or in part to the purchase 
price of personal property acquired by the debtor during the 
90-day period preceding the date of filing of the petition.

Sec. 507. Priorities

    (a) The following expenses and claims have priority in the 
following order, except that, notwithstanding any other 
provision of this title, any expense or claim entitled to 
priority under paragraph (7) shall have first priority over any 
other expense or claim that has priority under any other 
provision of this subsection:
          (1) First, administrative expenses allowed under 
        section 503(b) of this title, and any fees and charges 
        assessed against the estate under chapter 123 or title 
        28.

           *       *       *       *       *       *       *

          (3) Third, allowed unsecured claims, but only to the 
        extent of $4,000 for each individual or corporation, as 
        the case may be, earned within 90 days before the date 
        of the filing of the petition or the date of the 
        cessation of the debtor's business, whichever occurs 
        first, for--
                  (A) wages, salaries, or commissions, 
                including vacation, severance, and sick leave 
                pay earned by an individual; or
                  (B) sales commissions earned by an individual 
                or by a corporation with only 1 employee, 
                acting as an independent contractor in the sale 
                of goods or services for the debtor in the 
                ordinary course of the debtor's business if, 
                and only if, during the 12 months preceding 
                that date, at least 75 percent of the amount 
                that the individual or corporation earned by 
                acting as an independent contractor in the sale 
                of goods or services was earned from the 
                debtor[;].

           *       *       *       *       *       *       *

          (7) Seventh allowed unsecured claims for debts to a 
        spouse, former spouse, or child of the debtor, for 
        alimony to, maintenance for, or support of such spouse 
        or child, in connection with a separation agreement, 
        divorce decree or other order of a court of record, 
        determination made in accordance with State or 
        territorial law by a governmental unit, or property 
        settlement agreement, but not to the extent that such 
        debt--

           *       *       *       *       *       *       *


Subchapter II--Debtor's Duties and Benefits

           *       *       *       *       *       *       *


Sec. 521. Debtor's duties

    (a) The debtor shall--
          [(1) file a list of creditors, and unless the court 
        orders otherwise, a schedule of assets and liabilities, 
        a schedule of current income and current expenditures, 
        and a statement of the debtor's financial affairs;]
          (1) file--
                  (A) a list of creditors; and
                  (B) unless the court orders otherwise--
                          (i) a schedule of assets and 
                        liabilities;
                          (ii) a schedule of current income and 
                        current expenditures;
                          (iii) a statement of the debtor's 
                        financial affairs and, if applicable, a 
                        certificate--
                                  (I) of an attorney whose name 
                                is on the petition as the 
                                attorney for the debtor or any 
                                bankruptcy petition preparer 
                                signing the petition pursuant 
                                to section 110)b)(1) indicating 
                                that such attorney or 
                                bankruptcy petition preparer 
                                delivered to the debtor any 
                                notice required by section 
                                342(b); or
                                  (II) if no attorney for the 
                                debtor is indicated and no 
                                bankruptcy petition preparer 
                                signed the petition, of the 
                                debtor that such notice was 
                                obtained and read by the 
                                debtor;
                          (iv) copies of any Federal tax 
                        returns, including any schedules or 
                        attachments, filed by the debtor for 
                        the 3-year period preceding the order 
                        for relief;
                          (v) copies of all payment advices or 
                        other evidence of payment, if any, 
                        received by the debtor from any 
                        employer of the debtor in the period 60 
                        days prior to the filing of the 
                        petition;
                          (vi) a statement of the amount of 
                        projected monthly net income, itemized 
                        to show how calculated; and
                          (vii) a statement disclosing any 
                        reasonably anticipated increase in 
                        income or expenditures over the 12-
                        month period following the date of 
                        filing;

           *       *       *       *       *       *       *

          (2) if an individual debtor's schedule of assets and 
        liabilities includes [consumer] debts which are secured 
        by property of the estate--
                  (A) * * *
                  (B) within [forty-five days after the filing 
                of a notice of intent under this section] 30 
                days after the first meeting of creditors under 
                section 341(a), or within such additional time 
                as the court, for cause, within such [forty-
                five day period] 30 day period fixes, the 
                debtor shall perform his intention with respect 
                to such property, as specified by subparagraph 
                (A) of this paragraph; and
                  (C) nothing in subparagraphs (A) and (B) of 
                this paragraph shall alter the debtor's or the 
                trustee's rights with regard to such property 
                under this title, except as provided in section 
                362(h);

           *       *       *       *       *       *       *

          (5) appear at the hearing required under section 
        524(d) of this title.
    (b)(1) At any time, a creditor, in the case of an 
individual under chapter 7 or 13, may file with the court 
notice that the creditor requests the petition, schedules, and 
a statement of affairs filed by the debtor in the case and the 
court shall make those documents available to the creditor who 
requests those documents.
    (2) At any time, a creditor, in a case under chapter 13, 
may file with the court notice that the creditor requests the 
plan filed by the debtor in the case and the court shall make 
that plan available to the creditor who requests that plan.
    (c) An individual debtor in a case under chapter 7 or 13 
shall file with the court--
          (1) at the time filed with the taxing authority, all 
        tax returns, including any schedules or attachments, 
        with respect to the period from the commencement of the 
        case until such time as the case is closed;
          (2) at the time filed with the taxing authority, all 
        tax returns, including any schedules or attachments, 
        that were not filed with the taxing authority when the 
        schedules under subsection (a)(1) were filed with 
        respect to the period that is 3 years before the order 
        for relief;
          (3) any amendments to any of the tax returns, 
        including schedules or attachments, described in 
        paragraph (1) or (2); and
          (4) in a case under chapter 13, a statement subject 
        to the penalties of perjury by the debtor of the 
        debtor's income and expenditures in the preceding tax 
        year and monthly income, that shows how the amounts are 
        calculated--
                  (A) beginning on the date that is the later 
                of 90 days after the close of the debtor's tax 
                year or 1 year after the order for relief, 
                unless a plan has been confirmed; and
                  (B) thereafter, on or before the date that is 
                45 days before each anniversary of the 
                confirmation of the plan until the case is 
                closed.
    (d)(1) A statement referred to in subsection (c)(4) shall 
disclose--
          (A) the amount and sources of income of the debtor;
          (B) the identity of any persons responsible with the 
        debtor for the support of any dependents of the debtor; 
        and
          (C) the identity of any persons who contributed, and 
        the amount contributed, to the household in which the 
        debtor resides.
    (2) The tax returns, amendments, and statement of income 
and expenditures described in paragraph (1) shall be available 
to the United States trustee, any bankruptcy administrator, any 
trustee, and any party in interest for inspection and copying, 
subject to the requirements of subsection (e).
    (e)(1) Not later than 30 days after the date of enactment 
of the Consumer Bankruptcy Reform Act of 1998, the Director of 
the Administrative Office of the United States Courts shall 
establish procedures for safeguarding the confidentiality of 
any tax information required to be provided under this section.
    (2) The procedures under paragraph (1) shall include 
restrictions on creditor access to tax information that is 
required to be provided under this section.
    (3) Not later than 1 year after the date of enactment of 
the Consumer Bankruptcy Reform Act of 1998, the Director of the 
Administrative Office of the United States Courts shall 
prepare, and submit to Congress a report that--
          (A) assesses the effectiveness of the procedures 
        under paragraph (1); and
          (B) if appropriate, includes proposed legislation--
                  (i) to further protect the confidentiality of 
                tax information; and
                  (ii) to provide penalties for the improper 
                use by any person of the tax information 
                required to be provided under this section.
    (e) In addition to the requirements under subsection (a), 
an individual debtor shall file with the court--
          (1) a certificate from the credit counseling service 
        that provided the debtor services under section 109(h) 
        or other substantial evidence of a good-faith attempt 
        to create a debt repayment plan outside the bankruptcy 
        system in the manner prescribed in section 109(h); and
          (2) a copy of the debt repayment plan developed under 
        section 109(h) through the credit counseling service 
        referred to in paragraph (1).

Sec. 522. Exemptions

    (a) In this section--

           *       *       *       *       *       *       *

    (b) Notwithstanding * * *

           *       *       *       *       *       *       *

          (2)(A) subject to subsection (n), any property that 
        is exempt under Federal law, other than subsection (d) 
        of this section, or State or local law that is 
        applicable on the date of the filing of the petition at 
        the place in which the debtor's domicile has been 
        located for the 180 days immediately preceding the date 
        of the filing of the petition, or for a longer portion 
        of such 180-day period than in any other place; and

           *       *       *       *       *       *       *

    (c) Unless the case is dismissed, property exempted under 
this section is not liable during or after the case for any 
debt of the debtor that arose, or that is determined under 
section 502 of this title as if such debt had arisen, before 
the commencement of the case, except--
          (1) a debt of a kind specified in section 523(a)(1) 
        or 523(a)(5) of this title,  except that, 
        notwithstanding any other Federal law or State law 
        relating to exempted property, such exempt property 
        shall be liable for debts of a kind specified in 
        paragraph (1) or (5) of section 523(a);

           *       *       *       *       *       *       *

    (f)(1) Notwithstanding any waiver of exemptions but subject 
to paragraph (3), the debtor may avoid the fixing of a lien on 
an interest of the debtor in property to the extent that such 
lien impairs an exemption to which the debtor would have been 
entitled under subsection (b) of this section, if such lien 
is--
          (A) a judicial lien, other than a judicial lien that 
        secures a debt--
                  (i) to a spouse, former spouse, or child of 
                the debtor, for alimony to, maintenance for, or 
                support of such spouse or child, in connection 
                with a separation agreement, divorce decree or 
                other order of a court of record, determination 
                made in accordance with State or territorial 
                law by a governmental unit, or property 
                settlement agreement; and
                  (ii) to the extent that such debt--
                          (I) is not assigned to another 
                        entity, voluntarily, by operation of 
                        law, or otherwise; and
                          (II) [includes a liability designated 
                        as] is for a liability that is 
                        designated as, and is actually in the 
                        nature of,  alimony, maintenance, or 
                        support[, unless such liability is 
                        actually in the nature of alimony, 
                        maintenance or support.]; or

           *       *       *       *       *       *       *

    (g) Notwithstanding sections 550 and 551 of this title, the 
debtor may exempt under subsection (b) of this section property 
that the trustee recovers under section 510(c)(2), 542, 543, 
550, 551, or 553 of this title, to the extent that the debtor 
could have exempted such property under subsection (b) of this 
section if such property had not been transferred, if--
          (1)(A) such transfer was not a voluntary transfer of 
        such property by the debtor; and
          (B) the debtor did not conceal such property; or
          (2) the debtor could have avoided such transfer under 
        [subsection (f)(2)] subsection (f)(1)(B) of this 
        section.

           *       *       *       *       *       *       *

    (n)(1) Except as provided in paragraph (2), as a result of 
electing under subsection (b)(2)(A) to exempt property under 
State or local law, a debtor may not exempt any amount of 
interest that exceeds in the aggregate $100,000 in value in--
          (A) real or personal property that the debtor or a 
        dependent of the debtor uses as a residence;
          (B) a cooperative that owns property that the debtor 
        or a dependent of the debtor uses as a residence; or
          (C) a burial plot for the debtor or a dependent of 
        the debtor.
    (2) The limitation under paragraph (1) shall not apply to 
an exemption claimed under subsection (b)(2)(A) by a family 
farmer for the principal residence of that farmer.

Sec. 523. Exceptions to discharge

    (a) A discharge under section 727, 1141, 1228(a), 1228(b), 
or 1328(b) of this title does not discharge an individual 
debtor from any debt--
          (1) for a tax or a customs duty--

           *       *       *       *       *       *       *

          (2) for money, property, services, or an extension, 
        renewal, or refinancing of credit, to the extent 
        obtained by--
                  (A) false pretenses, [a false representation] 
                a material false representation upon which the 
                defrauded person justifiably relied, or actual 
                fraud, other than a statement respecting the 
                debtor's or an insider's financial condition[;] 
                (and, for purposes of this subparagraph, 
                consumer debts owed in an aggregate amount 
                greater than or equal to $400 incurred for 
                goods or services not reasonably necessary for 
                the maintenance or support of the debtor or a 
                dependent child of the debtor to a single 
                creditor that are incurred during the 90-day 
                period preceding the date of the order for 
                relief shall be presumed to be nondischargeable 
                under this subparagraph); or
                  (B) use of a statement in writing--
                          (i) that is materially false;

           *       *       *       *       *       *       *

                          (iv) that the debtor caused to be 
                        made or published with intent to 
                        deceive; [or]
                  [(C) for purposes of subparagraph (A) of this 
                paragraph, consumer debts owed to a single 
                creditor and aggregating more than $1,000 for 
                ``luxury goods or services'' incurred by an 
                individual debtor on or within 60 days before 
                the order for relief under this title, or cash 
                advances aggregating more than $1,000 that are 
                extensions of consumer credit under an open end 
                credit plan obtained by an individual debtor on 
                or within 60 days before the order for relief 
                under this title, are presumed to be 
                nondischargeable; ``luxury goods or services'' 
                do not include goods or services reasonably 
                acquired for the support or maintenance of the 
                debt or a dependent of the debtor; an extension 
                of consumer credit under an open end credit 
                plan is to be defined for purposes of this 
                subparagraph as it is defined in the Consumer 
                Credit Protection Act;]
          (3) neither listed nor scheduled under section 521(1) 
        of this title, with the name, if known to the debtor, 
        of the credit to whom such debt is owed, in time to 
        permit--
                  (A) if such debt is not of a kind specified 
                in paragraph (2), (4), [or (6))] (6), or (15) 
                of this subsection, timely filing of a proof of 
                claim, unless such credit had notice or actual 
                knowledge of the case in time for such timely 
                filing; or
                  (B) if such debt is of a kind specified in 
                paragraph (2), (4), [or (6)] (6), or (15) of 
                this subsection, timely filing of a proof of 
                claim and timely request for a determination of 
                discharge-ability of such debt under one of 
                such paragraphs, unless such creditor had 
                notice or actual knowledge of the case in time 
                for such timely filing and request;

           *       *       *       *       *       *       *

          [(5) to a spouse, former spouse, or child of the 
        debtor, for alimony to, maintenance for, or support of 
        such spouse or child, in connection with a separation 
        agreement, divorce decree or other of a court of 
        record, determination made in accordance with State or 
        territorial law by a governmental unit, or property 
        settlement agreement, but not to the extent that--]
          (5) to a spouse, former spouse, or child of the 
        debtor--
                  (A) for actual alimony to, maintenance for, 
                or support of that spouse or child;
                  (B) that was incurred by the debtor in the 
                course of a divorce or separation or in 
                connection with a separation agreement, 
                property settlement agreement, divorce decree, 
                other order of a court of record, or 
                determination made in accordance with State or 
                territorial law by a governmental unit; or
                  (C) that is described in subparagraph (A) or 
                (B) and that is assigned pursuant to section 
                408(a)(3) of the Social Security Act (42 U.S.C. 
                608(a)(3)), or to the Federal Government, a 
                State, or any political subdivision of a State,
        but not to the extent that the debt (other than a debt 
        described in subparagraph (C)) is assigned to another 
        entity, voluntarily, by operation of law, or otherwise;

           *       *       *       *       *       *       *

          (9) for death or personal injury caused by the 
        debtor's operation of a motor vehicle, watercraft, or 
        aircraft if such operation was unlawful because the 
        debtor was intoxicated from using alcohol, a drug, or 
        another substance;

           *       *       *       *       *       *       *

          (14) incurred to pay a tax to the United States that 
        would be nondischargeable pursuant to paragraph (1);
          (14A) incurred to pay a debt that is nondischargeable 
        by reason of section 727, 1141, 1228 (a) or (b), or 
        1328(b), or any other provision of this subsection, 
        except for any debt incurred to pay such a 
        nondischargeable debt in any case in which--
                  (A)(i) the debtor who paid the 
                nondischargeable debt is a single parent who 
                has 1 or more dependent children at the time of 
                the order for relief; or
                  (ii) there is an allowed claim for alimony 
                to, maintenance for, or support of a spouse, 
                former spouse, or child of the debtor payable 
                under a judicial or administrative order to 
                that spouse or child (but not to any other 
                person) that was unpaid by the debtor as of the 
                date of the petition; and
                  (B) the creditor is unable to demonstrate 
                that the debtor intentionally incurred the debt 
                to pay the nondischargeable debt;
          (15) to a spouse, former spouse, or child of the 
        debtor and not of the kind described in paragraph (5) 
        that is incurred by the debtor in the course of a 
        divorce or separation or in connection with a 
        separation agreement, divorce decree or other order of 
        a court of record, a determination made in accordance 
        with State or territorial law by a governmental unit 
        unless--

           *       *       *       *       *       *       *

          (17) for a fee imposed [by a court] on a prisoner by 
        any court for the filing of a case, motion, complaint, 
        or appeal, or for other costs and expenses assessed 
        with respect to such filing, regardless of an assertion 
        of poverty by the debtor under [section 1915(b) or (f)] 
        subsection (b) or (f)(2) of section 1915 of title 28 
        (or a similar non-Federal law), or the debtor's status 
        as a prisoner, as defined in section 1915(h) of title 
        28 (or a similar non-Federal law); or

           *       *       *       *       *       *       *

    (c)(1) Except as provided in subsection (a)(3)(B) of this 
section, the debtor shall be discharged from a debt of a kind 
specified in paragraph (2), (4), (6), or (15) of subsection (a) 
of this section, unless, on request of the creditor to whom 
such debt is owed, and after notice and a hearing, the court 
determines such debt to be excepted from discharge under 
paragraph (2), (4), [(6), or (15)] or (6), as the case may be, 
of subsection (a) of this section.
    [(d) If a creditor requests a determination of 
dischargeability of a consumer debt under subsection (a)(2) of 
this section, and such debt is discharged, the court shall 
grant judgment in favor of the debtor for the costs of, and a 
reasonable attorney's fee for, the proceeding if the court 
finds that the position of the creditor was not substantially 
justified, except that the court shall not award such costs and 
fees if special circumstances would make the award unjust.]
    (d)(1) Subject to paragraph (3), if a creditor requests a 
determination of dischargeability of a consumer debt under this 
section and that debt is discharged, the court shall award the 
debtor reasonable attorneys' fees and costs.
    (2) In addition to making an award to a debtor under 
paragraph (1), if the court finds that the position of a 
creditor in a proceeding covered under this section is not 
substantially justified, the court may award reasonable 
attorneys' fees and costs under paragraph (1) and such damages 
as may be required by the equities of the case.
    (3)(A) A creditor may not request a determination of 
dischargeability of a consumer debt under subsection (a)(2) 
if--
          (i) before the filing of the petition, the debtor 
        made a good faith attempt pursuant to section 109(h) to 
        negotiate a reasonable alternative repayment schedule 
        (including making an offer of a reasonable alternative 
        repayment schedule); and
          (ii) that creditor refused to negotiate an 
        alternative payment schedule, and that refusal was not 
        reasonable.
    (B) For purposes of this paragraph, the debtor shall have 
the burden of proof of establishing that--
          (i) an offer made by that debtor under subparagraph 
        (A)(i) was reasonable; and
          (ii) the refusal to negotiate by the creditor 
        involved was not reasonable.
    (e) Any institution-affiliated party of [a insured] an 
insured depository institution shall be considered to be acting 
in a fiduciary capacity with respect to the purposes of 
subsection (a) (4) or (11).

Sec. 524. Effect of discharge

    (a) A charge in a case under this title--
          (1) voids * * *

           *       *       *       *       *       *       *

          (3) operates as an injunction against the 
        commencement or continuation of an action, the 
        employment of process, or an act, to collect or recover 
        from, or offset against, property of the debtor of the 
        kind specified in section 541(a)(2) of this title that 
        is acquired after the commencement of the case, on 
        account of any allowable community claim, except a 
        community claim that is excepted from discharge under 
        [section 523, 1228(a)(1), or 1328(a)(1) of this title, 
        or that] section 523, 1228(a)(1), or 1328(a)(1) of this 
        title, or that would be so excepted, determined in 
        accordance with the provisions of section 523(c) and 
        523(d) of this title, in a case concerning the debtor's 
        spouse commenced on the date of the filing of the 
        petition in the case concerning the debtor, whether or 
        not discharge of the debt based on such community claim 
        is waived.
    (h) Application to Existing Injunctions.--For purposes of 
subsection (g)--
          (1) subject to paragraph (2), if an injunction of the 
        kind described in subsection (g)(1)(B) was issued 
        before the date of the enactment of this Act, as part 
        of a plan of reorganization confirmed by an order 
        entered before such date then the injunction shall be 
        considered to meet the requirements of subsection 
        (g)(2)(B) for purposes of subsection (g)(2)(A), and to 
        satisfy subsection (g)(4)(A)(ii), if--

           *       *       *       *       *       *       *

    (i) The willful failure of a creditor to credit payments 
received under a plan confirmed under this title (including a 
plan of reorganization confirmed under chapter 11 of this 
title) in the manner required by the plan (including crediting 
the amounts required under the plan) shall constitute a 
violation of an injunction under subsection (a)(2).
    (j) An individual who is injured by the failure of a 
creditor to comply with the requirements for a reaffirmation 
agreement under subsections (c) and (d), or by any willful 
violation of the injunction under subsection (a)(2), shall be 
entitled to recover--
          (1) the greater of--
                  (A)(i) the amount of actual damages; 
                multiplied by
                  (ii) 3; or
                  (B) $5,000; and
          (2) costs and attorney's fees.

Sec. 525. Protection against discriminatory treatment

    (a) Except * * *

           *       *       *       *       *       *       *

    (c)(1) A governmental unit that operates a student grant or 
loan program and a person engaged in a business that includes 
the making of loans guaranteed or insured under a student loan 
program may not deny a student grant, loan, loan guarantee, or 
loan insurance to a person that is or has been a debtor under 
this title or a bankrupt or debtor under the Bankruptcy Act, or 
another person with whom the debtor or bankrupt has been 
associated, because the debtor or bankrupt is or has been a 
debtor under this title or a bankrupt or debtor under the 
Bankruptcy Act, has been insolvent before the commencement of a 
case under this title or during the pendency of the case but 
before the debtor is granted or denied a discharge, or has not 
paid a debt that is dischargeable in the case under this title 
or that was discharged under the Bankruptcy Act.
    (2) In this section, ``student loan program'' means [the 
program operated under part B, D, or E of] any program operated 
under title IV of the Higher Education Act of 1965 or a similar 
program operated under State or local law.

                       Subchapter III--The Estate

Sec.
541. Property of the estate.
     * * * * * * *
[556. Contractual right to liquidate a commodity contract or forward 
          contract.]
556. Contractual right to liquidate a commodities contract or forward 
          contract.
     * * * * * * *

Sec. 541. Property of the estate

    (a) The * * *

           *       *       *       *       *       *       *

    (b) Property of the estate does not include--
          (1) any power that the debtor may exercise solely for 
        the benefit of an entity other than the debtor;

           *       *       *       *       *       *       *

                  (A)(i) the debtor has transferred or has 
                agreed to transfer such interest pursuant to a 
                farmount agreement or any written agreement 
                directly related to a farmount agreement; and

           *       *       *       *       *       *       *

                  (B)(i) the debtor has transferred such 
                interest pursuant to a written conveyance of a 
                production payment to an entity that does not 
                participate in the operation of the property 
                from which such production payment is 
                transferred; and
                  (ii) but the operation of this paragraph, the 
                estate could include the interest referred to 
                in clause (i) by virtue of section 365 or 542 
                of this title; or

           *       *       *       *       *       *       *


Sec. 546. Limitations on avoiding powers

    (a) An action or proceeding under section 544, 545, 547, 
548, or 553 of this title may not be commenced after the 
earlier of--

           *       *       *       *       *       *       *

    (g) Notwithstanding sections 544, 545, 547, 548(a)(1)(B) 
and 548(b) of this title, the trustee may not avoid a transfer 
under a swap agreement, made by or to a swap participant, in 
connection with a swap agreement and that is made before the 
commencement of the case, except under section 548(a)(1)(A) of 
this title.
    [(g)] (h) Notwithstanding the rights and powers of a 
trustee under sections 544(a), 545, 547, 549, and 553, if the 
court determines on a motion by the trustee made not later than 
120 days after the date of the order for relief in a case under 
chapter 11 of this title and after notice and a hearing, that a 
return is in the best interests of the estate, the debtor, with 
the consent of a creditor, may return goods shipped to the 
debtor by the creditor before the commencement of the case, and 
the creditor may offset the purchase price of such goods 
against any claim of the creditor against the debtor that arose 
before the commencement of the case.

Sec. 547. Preferences

    (a) In this section--
          (1) ``inventory'' means * * *

           *       *       *       *       *       *       *

    (b) Except as provided in [subsection (c)] subsections (c) 
and (h) of this section, the trustee may avoid any transfer of 
an interest of the debtor in property--

           *       *       *       *       *       *       *

    (h) If the trustee avoids under subsection (b) a security 
interest given between 90 days and 1 year before the date of 
the filing of the petition, by the debtor to an entity that is 
not an insider for the benefit of a creditor that is an 
insider, such security interest shall be considered to be 
avoided under this section only with respect to the creditor 
that is an insider.

           *       *       *       *       *       *       *


Sec. 549. Postpetition transactions

    (a) Except as provided in subsection (b) or (c) of this 
section, the trustee may avoid a transfer of property of the 
estate--

           *       *       *       *       *       *       *

    (c) The trustee may not avoid under subsection (a) of this 
section a transfer of an interest in real property to a good 
faith purchaser without knowledge of the commencement of the 
case and for present fair equivalent value unless a copy or 
notice of the petition was filed, where a transfer of such real 
property may be recorded to perfect such transfer, before such 
transfer is so perfected that a bona fide purchaser of [such 
property] such real property, against whom applicable law 
permits such transfer to be perfected, could not acquire an 
interest that is superior to [the interest] such interest of 
such good faith purchaser. A good faith purchaser without 
knowledge of the commencement of the case and for less than 
present fair equivalent value has a lien on the property 
transferred to the extent of any present value given, unless a 
copy or notice of the petition was so filed before such 
transfer was so perfected.

           *       *       *       *       *       *       *


Sec. 552. Postpetition effect of security interest

    (a) Except * * *
    (b)(1) Except as provided in sections 363, 506(c), 522, 
544, 545, 547, and 548 of this title, if the debtor and an 
entity entered into a security agreement before the 
commencement of the case and if the security interest created 
by such security agreement extends to property of the debtor 
acquired before the commencement of the case and to proceeds, 
[product] products, offspring, or profits of such property, 
then such security interest extends to such proceeds, [product] 
products, offspring, or profits acquired by the estate after 
the commencement of the case to the extent provided by such 
security agreement and by applicable nonbankruptcy law, except 
to any extent that the court, after notice and a hearing and 
based on the equities of the case, orders otherwise.

           *       *       *       *       *       *       *


Sec. 553. Setoff

    (a) Except * * *

           *       *       *       *       *       *       *

    (b)(1) Except with respect to a setoff of a kind described 
in section 362(b)(6), 362(b)(7), [362(b)(14)] 362(b)(17), 
365(h), 546(h), or 365(i)(2) of this title, if a creditor 
offsets a mutual debt owing to the debtor against a claim 
against the debtor on or within 90 days before the date of the 
filing of the petition, then the trustee may recover from such 
creditor the amount so offset to the extent that any 
insufficiency on the date of such setoff is less than the 
insufficiency on the later of--

           *       *       *       *       *       *       *


                         CHAPTER 7--LIQUIDATION

               Subchapter I--Officers and Administration

Sec.
701. Interim trustee.
     * * * * * * *
[707. Dismissal.]
707. Dismissal of a case or conversion to a case under chapter 13.

Sec. 706. Conversion

    (a) The debtor * * *

           *       *       *       *       *       *       *

    (c) The court may not convert a case under this chapter to 
a case under chapter 12 or 13 of this title unless the debtor 
requests or consents to such conversion.

           *       *       *       *       *       *       *


[Sec. 707. Dismissal]

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

    (a) The court may dismiss a case under this chapter only 
after notice and a hearing and only for cause, including--

           *       *       *       *       *       *       *

    (b)(1) After notice and a hearing, the court, on its own 
motion or on a motion by the United States trustee, [but not] 
or at the request or suggestion of any party in interest, may 
dismiss a case filed by an individual debtor under this chapter 
whose debts are primarily consumer debts, or, with the debtor's 
consent, convert such a case to a case under chapter 13 of this 
title, if it finds that the granting of relief would be a 
[substantial abuse] abuse of the provisions of this chapter. 
[There shall be a presumption in favor of granting the relief 
requested by the debtor.] In making a determination whether to 
dismiss a case under this section, the court may not take into 
consideration whether a debtor has made, or continues to make, 
charitable contributions (that meet the definition of 
``charitable contribution'' under section 548(d)(3)) to any 
qualified religious or charitable entity or organization (as 
the term is defined in section 548(d)(4)).
  (2) In considering under paragraph (1) whether the granting 
of relief would be an abuse of the provisions of this chapter, 
the court shall consider whether--
          (A) under section 1325(b)(1), on the basis of the 
        current income of the debtor, the debtor could pay an 
        amount greater than or equal to 20 percent of unsecured 
        claims that are not considered to be priority claims 
        (as determined under subchapter I of chapter 5); or
          (B) the debtor filed a petition for the relief in bad 
        faith.
  (3)(A) If a panel trustee appointed under section 586(a)(1) 
of title 28 brings a motion for dismissal or conversion under 
this subsection and the court grants that motion and finds that 
the action of the counsel for the debtor in filing under this 
chapter was not substantially justified, the court shall order 
the counsel for the debtor to reimburse the trustee for all 
reasonable costs in prosecuting the motion, including 
reasonable attorneys' fees.
  (B) If the court finds that the attorney for the debtor 
violated Rule 9011, at a minimum, the court shall order--
          (i) the assessment of an appropriate civil penalty 
        against the counsel for the debtor; and
          (ii) the payment of the civil penalty to the panel 
        trustee or the United States trustee.
  (C) In the case of a petition referred to in subparagraph 
(B), the signature of an attorney shall constitute a 
certificate that the attorney has--
          (i) performed a reasonable investigation into the 
        circumstances that gave rise to the petition; and
          (ii) determined that the petition--
                  (I) is well grounded in fact; and
                  (II) is warranted by existing law or a good 
                faith argument for the extension, modification, 
                or reversal of existing law and does not 
                constitute an abuse under paragraph (1) of this 
                subsection.
  (4)(A) Except as provided in subparagraph (B), the court may 
award a debtor all reasonable costs in contesting a motion 
brought by a party in interest (other than a panel trustee) 
under this subsection (including reasonable attorneys' fees) 
if--
          (i) the court does not grant the motion; and
          (ii) the court finds that--
                  (I) the position of the party that brought 
                the motion was not substantially justified; or
                  (II) the party brought the motion solely for 
                the purpose of coercing a debtor into waiving a 
                right guaranteed to the debtor under this 
                title.
  (B) A party in interest that has a claim of an aggregate 
amount less than $1,000 shall not be subject to subparagraph 
(A).
  (5) However, a party in interest may not bring a motion under 
this section if the debtor and the debtor's spouse combined, as 
of the date of the order for relief, have current monthly total 
income equal to or less than the national median household 
monthly income calculated on a monthly basis for a household of 
equal size. However, for a household of more than 4 
individuals, the median income shall be that of a household of 
4 individuals plus $583 for each additional member of that 
household.
    (c)(1) Notwithstanding subsection (a), and subject to 
paragraph (2), if an individual debtor in a voluntary case 
under chapter 7 or 13 fails to file all of the information 
required under section 521(a)(1) within 45 days after the 
filing of the petition commencing the case, the case shall be 
automatically dismissed effective on the 46th day after the 
filing of the petition.
    (2) With respect to a case described in paragraph (1), any 
party in interest may request the court to enter an order 
dismissing the case. The court shall, if so requested, enter an 
order of dismissal not later than 5 days after that request.
    (3) Upon request of the debtor made within 45 days after 
the filing of the petition commencing a case described in 
paragraph (1), the court may allow the debtor an additional 
period of not to exceed 20 days to file the information 
required under section 521(a)(1) if the court finds 
justification for extending the period for the filing.

           *       *       *       *       *       *       *


Subchapter II--Collection, Liquidation, and Distribution of the Estate

           *       *       *       *       *       *       *


Sec. 726. Distribution of property of the estate

    (a) Except as provided in section 510 of this title, 
property of the estate shall be distributed--

           *       *       *       *       *       *       *

    (b) Payment on claims of a kind specified in paragraph (1), 
(2), (3), (4), (5), (6), (7), or (8) of section 507(a) of this 
title, or in paragraph (2), (3), (4), or (5) of subsection (a) 
of this section, shall be made pro rata among claims of the 
kind specified in each such particular paragraph, except that 
in a case that has been converted to this chapter under section 
[1009,] 1112, 1208, or 1307 of this title, a claim allowed 
under section 503(b) of this title incurred under this chapter 
after such conversion has priority over a claim allowed under 
section 503(b) of this title incurred under any other chapter 
of this title or under this chapter before such conversion and 
over any expenses of a custodian superseded under section 543 
of this title.

           *       *       *       *       *       *       *


Sec. 727. Discharge

    (a) The court shall grant the debtor a discharge, unless--
          (1) the debtor is not an individual;

           *       *       *       *       *       *       *

          (9) the debtor has been granted a discharge under 
        section 1228 or 1328 of this title, or under section 
        660 or 661 of the Bankruptcy Act, in a case commenced 
        within six years before the date of the filing of the 
        petition, unless payments under the plan in such case 
        totaled at least--
                  (A) 100 percent of the allowed unsecured 
                claims in such case; or
                  (B)(i) 70 percent of such claims; and
                  (ii) the plan was proposed by the debtor in 
                good faith, and was the debtor's best effort; 
                [or]
          (10) the court approves a written waiver of discharge 
        executed by the debtor after the order for relief under 
        this chapter[.]; or
          (11) after the filing of the petition, the debtor 
        failed to complete an instructional course concerning 
        personal financial management described in section 111 
        that was administered or approved by--
                  (A) the United States trustee; or
                  (B) the bankruptcy administrator for the 
                district in which the petition is filed.

           *       *       *       *       *       *       *

    (c)(1) The trustee, a creditor, or the United States 
trustee may object to the granting of a discharge under 
subsection (a) of this section.
    (2) On request of a party in interest, the court may order 
the trustee to examine the acts and conduct of the debtor to 
determine whether a ground exists for denial of discharge.
    (3)(A) A creditor may not request a determination of 
dischargeability of a consumer debt under subsection (a)(2) 
if--
          (i) before the filing of the petition, the debtor 
        made a good faith effort to negotiate a reasonable 
        alternative repayment schedule (including making an 
        offer of a reasonable alternative repayment schedule); 
        and
          (ii) that creditor refused to negotiate an 
        alternative payment schedule, and that refusal was not 
        reasonable.
    (B) For purposes of this paragraph, the debtor shall have 
the burden of proof of establishing that--
          (i) an offer made by that debtor under subparagraph 
        (A)(i) was reasonable; and
          (ii) the refusal to negotiate by the creditor 
        involved to was not reasonable.

           *       *       *       *       *       *       *

    (e) The trustee, a creditor, or the United States trustee 
may request a revocation of a discharge--
          (1) under subsection (d)(1) of this section within 
        one year after such discharge is granted; or
          (2) under subsection (d)(2) or (d)(3) of this section 
        before the later of--
                  (A) one year after the granting of such 
                discharge; and
                  (B) the date the case is closed.
    (f)(1) The court may award the debtor reasonable attorneys' 
fees and costs in any case in which a creditor files a motion 
to deny relief to a debtor under this section and that motion--
          (A) is denied; or
          (B) is withdrawn after the debtor has replied.
    (2) If the court finds that the position of a party filing 
a motion under this section is not substantially justified, the 
court may assess against the creditor such damages as may be 
required by the equities of the case.

           *       *       *       *       *       *       *


            CHAPTER 9--ADJUSTMENT OF DEBTS OF A MUNICIPALITY

Subchapter I--General Provisions

           *       *       *       *       *       *       *


Sec. 901. Applicability of other sections of this title

    (a) Sections 301, 344, 347(b), 349, 350(b), 361, 362, 
364(c), 364(d), 364(e), 364(f), 365, 366, 501, 502, 503, 504, 
506, 507(a)(1), 509, 510, 524(a)(1), 524(a)(2), 544, 545, 546, 
547, 548, 549(a), 549(c), 549(d), 550, 551, 552, 553, 557, 
1102, 1103, 1109, 1111(b), 1122, 1123(a)(1), 1123(a)(2), 
1123(a)(3), 1123(a)(4), 1123(a)(5), 1123(b), 1123(d), 1124, 
1125, 1126(a), 1126(b), 1126(c), 1126(e), 1126(f), 1126(g), 
1127(d), 1128, 1129(a)(2), 1129(a)(3), 1129(a)(6), 1129(a)(8), 
1129(a)(10), 1129(b)(1), 1129(b)(2)(A), 1129(b)(2)(B), 1142(b), 
1143, 1144, and 1145 of this title apply in a case under this 
chapter.

           *       *       *       *       *       *       *


                       CHAPTER 11--REORGANIZATION

Subchapter I--Officers and Administration

           *       *       *       *       *       *       *


Sec. 1104. Appointment of trustee or examiner

    (a) At any time * * *

           *       *       *       *       *       *       *

    (b)(1)  Except as provided in section 1163 of this title, 
on the request of a party in interest made not later than 30 
days after the court orders the appointment of a trustee under 
subsection (a), the United States trustee shall convene a 
meeting of creditors for the purpose of electing one 
disinterested person to serve as trustee in the case. The 
election of a trustee shall be conducted in the manner provided 
in subsections (a), (b), and (c) of section 702 of this title.
    (2)(A) If an eligible, disinterested trustee is elected at 
a meeting of creditors under paragraph (1), the United States 
trustee shall file a report certifying that election. Upon the 
filing of a report under the preceding sentence--
          (i) the trustee elected under paragraph (1) shall be 
        considered to have been selected and appointed for 
        purposes of this section; and
           (ii) the service of any trustee appointed under 
        subsection (d) shall terminate.
    (B) In the case of any dispute arising out of an election 
under subparagraph (A), the court shall resolve the dispute.

           *       *       *       *       *       *       *


Subchapter IV--Railroad Reorganization

           *       *       *       *       *       *       *


Sec. 1170. Abandonment of railroad line

    (a) The court, after notice and a hearing, may authorize 
the abandonment of all or a portion of a railroad line if such 
abandonment is--

           *       *       *       *       *       *       *

    (e)(1) In authorizing any abandonment of a railroad line 
under this section, the court shall require the rail carrier to 
provide a fair arrangement at least as protective of the 
interests of employees as that established under [section 
11347] section 11326(a) of title 49.

           *       *       *       *       *       *       *


Sec. 1172. Contents of plan

    (a) In addition to the provisions required or permitted 
under section 1123 of this title, a plan--

           *       *       *       *       *       *       *

    (c)(1) In approving an application under section (b) of 
this section, the Board shall require the rail carrier to 
provide a fair arrangement at least as protective of the 
interests of employees as that established under [section 
11347] section 11326(a) of title 49.

           *       *       *       *       *       *       *


CHAPTER 12--ADJUSTMENT OF DEBTS OF A FAMILY FARMER WITH REGULAR ANNUAL 
INCOME

           *       *       *       *       *       *       *


Subchapter II--The Plan

           *       *       *       *       *       *       *


Sec. 1228. Discharge

    (a) As soon as practicable after completion by the debtor 
all payments under the plan, other than payments to holders of 
allowed claims provided for under section 1222(b)(5) or 
[1222(b)(10)] 1222(b)(9) of this title, unless the court 
approves a written waiver of discharge executed by the debtor 
after the order for relief under this chapter, the court shall 
grant the debtor a discharge of all debts provided for by the 
plan allowed under section 503 of this title or disallowed 
under section 502 of this title, except any debt--
          (1) provided for under section 1222(b)(5) or 
        [1222(b)(10)] 1222(b)(9) of this title; or

           *       *       *       *       *       *       *

    (c) A discharge granted under subsection (b) of this 
section discharges the debtor from all unsecured debts provided 
for by the plan or disallowed under section 502 of this title, 
except any debt--
          (1) provided for under section 1222(b)(5) or 
        [1222(b)(10)] 1222(b)(9) of this title; or

           *       *       *       *       *       *       *


  CHAPTER 13--ADJUSTMENT OF DEBTS OF AN INDIVIDUAL WITH REGULAR INCOME

         Subchapter I--Officers, Administration, and the Estate

Sec.
1301. Stay of action against codebtor.
     * * * * * * *
1307. Conversion or dismissal.
1307A. Adequate protection in chapter 13 cases.

Sec. 1301. Stay of action against codebtor

    (a) Except * * *

           *       *       *       *       *       *       *

    (b)(1) A creditor may present a negotiable instrument, and 
may give notice of dishonor of such an instrument.
  (2)(A) Notwithstanding subsection (c) and except as provided 
in subparagraph (B), in any case in which the debtor did not 
receive the consideration for the claim held by a creditor, the 
stay provided by subsection (a) shall apply to that creditor 
for a period not to exceed 30 days beginning on the date of the 
order for relief, to the extent the creditor proceeds against--
          (i) the individual that received that consideration; 
        or
          (ii) property not in the possession of the debtor 
        that secures that claim.
  (B) Notwithstanding subparagraph (A), the stay provided by 
subsection (a) shall apply in any case in which the debtor is 
primarily obligated to pay the creditor in whole or in part 
with respect to a claim described in subparagraph (A) under a 
legally binding separation or property settlement agreement or 
divorce or dissolution decree with respect to--
          (i) an individual described in subparagraph (A)(i); 
        or
          (ii) property described in subparagraph (A)(ii).
  (3) Notwithstanding subsection (c), the stay provided by 
subsection (a) shall terminate as of the date of confirmation 
of the plan, in any case in which the plan of the debtor 
provides that the debtor's interest in personal property 
subject to a lease with respect to which the debtor is the 
lessee will be surrendered or abandoned or no payments will be 
made under the plan on account of the debtor's obligations 
under the lease.

           *       *       *       *       *       *       *


Sec. 1307. Conversion or dismissal

    (a) The 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.

           *       *       *       *       *       *       *

    (f) Notwithstanding any other provision of this section, a 
case may not be converted to a case under another chapter of 
this title unless the debtor may be a debtor under such 
chapter.

Sec. 1307A. Adequate protection in chapter 13 cases

  (a)(1)(A) On or before the date that is 30 days after the 
filing of a case under this chapter, the debtor shall make cash 
payments in an amount determined under paragraph (2)(A), to--
          (i) any lessor of personal property; and
          (ii) any creditor holding a claim secured by personal 
        property to the extent that the claim is attributable 
        to the purchase of that property by the debtor.
  (B) The debtor or the plan shall continue making the adequate 
protection payments until the earlier of the date on which--
          (i) the creditor begins to receive actual payments 
        under the plan; or
          (ii) the debtor relinquishes possession of the 
        property referred to in subparagraph (A) to--
                  (I) the lessor or creditor; or
                  (II) any third party acting under claim of 
                right, as applicable.
    (2) The payments referred to in paragraph (1)(A) shall be 
determined by the court.
    (b)(1) Subject to the limitations under paragraph (2), the 
court may, after notice and hearing, change the amount and 
timing of the dates of payment of payments made under 
subsection (a).
    (2)(A) The payments referred to in paragraph (1) shall be 
payable not less frequently than monthly.
    (B) The amount of a payment referred to in paragraph (1) 
shall not be less than the reasonable depreciation of the 
personal property described in subsection (a)(1), determined on 
a month-to-month basis.
    (c) Notwithstanding section 1326(b), the payments referred 
to in subsection (a)(1)(A) shall be continued in addition to 
plan payments under a confirmed plan until actual payments to 
the creditor begin under that plan, if the confirmed plan 
provides--
          (1) for payments to a creditor or lessor described in 
        subsection (a)(1); and
          (2) for the deferral of payments to such creditor or 
        lessor under the plan until the payment of amounts 
        described in section 1326(b).
    (d) Notwithstanding sections 362, 542, and 543, a lessor or 
creditor described in subsection (a) may retain possession of 
property described in that subsection that was obtained in 
accordance with applicable law before the date of filing of the 
petition until the first payment under subsection (a)(1)(A) is 
received by the lessor or creditor.

                        Subchapter II--The Plan

[Sec. 1321. Filing of plan

    [The debtor shall file a plan.]

Sec. 1321. Filing of plan

    The debtor shall file a plan not later than 90 days after 
the order for relief under this chapter, except that the court 
may extend such period if the need for an extension is 
attributable to circumstances for which the debtor should not 
justly be held accountable.

Sec. 1322. Contents of plan

    (a) The plan shall--

           *       *       *       *       *       *       *

    (b) Subject to subsections (a) and (c) of this section, the 
plan may--
          (1) designate a class or classes or unsecured claims, 
        as provided in section 1122 of this title, but may not 
        discriminate unfairly against any class so designated; 
        however, such plan may treat claims for a consumer debt 
        of the debtor if an individual is liable on such 
        consumer debt with the debtor differently than other 
        unsecured claims[;] and provide for the payment of any 
        claim entitled to priority under section 507(a)(7) 
        before the payment of any other claim entitled to 
        priority under section 507(a), notwithstanding the 
        priorities established under section 507(a);

           *       *       *       *       *       *       *


Sec. 1324. Confirmation hearing

    [After] (a) Except as provided in subsection (b) and after 
notice, the court shall hold a hearing on confirmation of the 
plan. A party in interest may object to confirmation of the 
plan. That hearing shall be held not later than 45 days after 
the filing of the plan, unless the court, after providing 
notice and a hearing, orders otherwise.
    (b) If not later than 5 days after receiving notice of a 
hearing on confirmation of the plan, a creditor objects to the 
confirmation of the plan, the hearing on confirmation of the 
plan may be held no earlier than 20 days after the first 
meeting of creditors under section 341(a).

Sec. 1325. Confirmation of plan

    (a) Except as provided in subsection (b), the court shall 
confirm a plan if--
          (1) the plan complies with the provisions of this 
        chapter and with the other applicable provisions of 
        this title;

           *       *       *       *       *       *       *

          [(5) with respect to each allowed secured claim 
        provided for by the plan--]
          (5) with respect to an allowed claim provided for by 
        the plan that is secured under applicable non-
        bankruptcy law by reason of a lien on property in which 
        the estate has an interest or is subject to a setoff 
        under section 553--
                  (A) the holder of such claim has accepted the 
                plan;
                  [(B)(i) the plan provides that the holder of 
                such claim retain the lien securing such claim; 
                and]
                  (B)(i) the plan provides that the holder of 
                such claim retain the lien securing such claim 
                until the debt that is the subject of the claim 
                is fully paid for, as provided under the plan; 
                and

           *       *       *       *       *       *       *

                  (C) the debtor surrenders the property 
                securing such claim to such holder; [and]
          (6) the debtor will be able to make all payments 
        under the plan and to comply with the plan[.]; and
          (7) if the debtor is required by a judicial or 
        administrative order to pay alimony to, maintenance 
        for, or support of a spouse, former spouse, or child of 
        the debtor, the debtor has paid all amounts payable 
        under that order for alimony, maintenance, or support 
        that are due after the date on which the petition is 
        filed.
For purposes of paragraph (5), section 506 shall not apply to a 
claim described in that paragraph.

           *       *       *       *       *       *       *


Sec. 1328. Discharge

    (a) As soon as practicable after completion by the debtor 
of all payments under the plan, and with respect to a debtor 
who is required by a judicial or administrative order to pay 
alimony to, maintenance for, or support of a spouse, former 
spouse, or child of the debtor, only after the debtor certifies 
as of the later of the date of that completion or the date of 
certification that all amounts payable under that order for 
alimony, maintenance, or support that are due before the date 
of that certification have been paid in accordance with the 
plan if applicable, or if the underlying debt is not treated by 
the plan, paid in full, unless the court approves a written 
waiver of discharge executed by the debtor after the order for 
relief under this chapter, the court shall grant the debtor a 
discharge of all debts provided for by the plan or disallowed 
under section 502 of this title, except any debt--
          [(1) provided for under section 1322(b)(5) of this 
        title;
          [(2) of the kind specified in paragraph (5), (8), or 
        (9) of section 523(a) of this title; or
          [(3) for restitution, or a criminal fine, included in 
        a sentence on the debtor's conviction of a crime.]
          (1) provided for under section 1322(b)(5);
          (2) of the kind specified in paragraph (2), (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.

           *       *       *       *       *       *       *

    (f) 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 that was 
administered or approved by--
          (1) the United States trustee; or
          (2) the bankruptcy administrator for the district in 
        which the petition is filed.

           *       *       *       *       *       *       *


TITLE 18--CRIMES AND CRIMINAL PROCEDURE

           *       *       *       *       *       *       *


PART I.--CRIMES

           *       *       *       *       *       *       *


CHAPTER 9--BANKRUPTCY

           *       *       *       *       *       *       *


Sec. 156. Knowing disregard of bankruptcy law or rule

    (a) Definitions.--In this section--
          (1) the term ``bankruptcy petition preparer'' means a 
        person, other than the debtor's attorney or an employee 
        of such an attorney, who prepares for compensation a 
        document for filing[.]; and
          (2) the term ``document for filing'' means a petition 
        or any other document prepared for filing by a debtor 
        in a United States bankruptcy court or a United States 
        district court in connection with a case under [this 
        title] title 11.

           *       *       *       *       *       *       *


TITLE 28--JUDICIARY AND JUDICIAL PROCEDURE

           *       *       *       *       *       *       *


PART I--ORGANIZATION OF COURTS

           *       *       *       *       *       *       *


                      CHAPTER 6--BANKRUPTCY JUDGES

Sec.
151. Designation of bankruptcy courts.
     * * * * * * *
158. Appeals.
159. Bankruptcy statistics.
     * * * * * * *

Sec. 152. Appointment of bankruptcy judges

    (a)(1) [The United States court of appeals for the circuit 
shall appoint bankruptcy judges for the judicial districts 
established in paragraph (2) in such numbers as are established 
in such paragraph.] Each bankruptcy judge to be appointed for a 
judicial district as provided in paragraph (2) shall be 
appointed by the United States court of appeals for the circuit 
in which such district is located. Such appointments shall be 
made after considering the recommendations of the Judicial 
Conference submitted pursuant to subsection (b). Each 
bankruptcy judge shall be appointed for a term of fourteen 
years, subject to the provisions of subsection (e). However, 
upon the expiration of the term, a bankruptcy judge may, with 
the approval of the judicial council of the circuit, continue 
to perform the duties of the office until the earlier of the 
date which is 180 days after the expiration of the term or the 
date of the appointment of a successor. Bankruptcy judges shall 
serve as judicial officers of the United States district court 
established under Article III of the Constitution.

           *       *       *       *       *       *       *


Sec. 156. Staff; expenses

    (a) Each * * *

           *       *       *       *       *       *       *

    (f) For purposes * * *
  (g)(1) In this subsection, the term ``travel expenses''--
          (A) means the expenses incurred by a bankruptcy judge 
        for travel that is not directly related to any case 
        assigned to such bankruptcy judge; and
          (B) shall not include the travel expenses of a 
        bankruptcy judge if--
                  (i) the payment for the travel expenses is 
                paid by such bankruptcy judge from the personal 
                funds of such bankruptcy judge; and
                  (ii) such bankruptcy judge does not receive 
                funds (including reimbursement) from the United 
                States or any other person or entity for the 
                payment of such travel expenses.
  (2) Each bankruptcy judge shall annually submit the 
information required under paragraph (3) to the chief 
bankruptcy judge for the district in which the bankruptcy judge 
is assigned.
  (3)(A) Each chief bankruptcy judge shall submit an annual 
report to the Director of the Administrative Office of the 
United States Courts on the travel expenses of each bankruptcy 
judge assigned to the applicable district (including the travel 
expenses of the chief bankruptcy judge of such district).
  (B) The annual report under this paragraph shall include--
          (i) the travel expenses of each bankruptcy judge, 
        with the name of the bankruptcy judge to whom the 
        travel expenses apply;
          (ii) a description of the subject matter and purpose 
        of the travel relating to each travel expense 
        identified under clause (i), with the name of the 
        bankruptcy judge to whom the travel applies; and
          (iii) the number of days of each travel described 
        under clause (ii), with the name of the bankruptcy 
        judge to whom the travel applies.
  (4)(A) The Director of the Administrative Office of the 
United States Courts shall--
          (i) consolidate the reports submitted under paragraph 
        (3) into a single report; and
          (ii) annually submit such consolidated report to 
        Congress.
  (B) The consolidated report submitted under this paragraph 
shall include the specific information required under paragraph 
(3)(B), including the name of each bankruptcy judge with 
respect to clauses (i), (ii), and (iii) of paragraph (3)(B).

           *       *       *       *       *       *       *


Sec. 159. Bankruptcy statistics

  (a) The clerk of each district shall compile statistics 
regarding individual debtors with primarily consumer debts 
seeking relief under chapters 7, 11, and 13 of title 11. Those 
statistics shall be in a form prescribed by the Director of the 
Administrative Office of the United States Courts (referred to 
in this section as the `Office').
  (b) The Director shall--
          (1) compile the statistics referred to in subsection 
        (a);
          (2) make the statistics available to the public; and
          (3) not later than October 31, 1998, and annually 
        thereafter, prepare, and submit to Congress a report 
        concerning the information collected under subsection 
        (a) that contains an analysis of the information.
  (c) The compilation required under subsection (b) shall--
          (1) be itemized, by chapter, with respect to title 
        11;
          (2) be presented in the aggregate and for each 
        district; and
          (3) include information concerning--
                  (A) the total assets and total liabilities of 
                the debtors described in subsection (a), and in 
                each category of assets and liabilities, as 
                reported in the schedules prescribed pursuant 
                to section 2075 of this title and filed by 
                those debtors;
                  (B) the current total monthly income, 
                projected monthly net income, and average 
                income and average expenses of those debtors as 
                reported on the schedules and statements that 
                each such debtor files under sections 111, 521, 
                and 1322 of title 11;
                  (C) the aggregate amount of debt discharged 
                in the reporting period, determined as the 
                difference between the total amount of debt and 
                obligations of a debtor reported on the 
                schedules and the amount of such debt reported 
                in categories which are predominantly 
                nondischargeable;
                  (D) the average period of time between the 
                filing of the petition and the closing of the 
                case;
                  (E) for the reporting period--
                          (i) the number of cases in which a 
                        reaffirmation was filed; and
                          (ii)(I) the total number of 
                        reaffirmations filed;
                          (II) of those cases in which a 
                        reaffirmation was filed, the number in 
                        which the debtor was not represented by 
                        an attorney; and
                          (III) of those cases, the number of 
                        cases in which the reaffirmation was 
                        approved by the court;
                  (F) with respect to cases filed under chapter 
                13 of title 11, for the reporting period--
                          (i)(I) the number of cases in which a 
                        final order was entered determining the 
                        value of property securing a claim in 
                        an amount less than the amount of the 
                        claim; and
                          (II) the number of final orders 
                        determining the value of property 
                        securing a claim issued;
                          (ii) the number of cases dismissed 
                        for failure to make payments under the 
                        plan; and
                          (iii) the number of cases in which 
                        the debtor filed another case within 
                        the 6 years previous to the filing; and
                  (G) the extent of creditor misconduct and any 
                amount of punitive damages awarded by the court 
                for creditor misconduct.

           *       *       *       *       *       *       *


PART II--DEPARTMENT OF JUSTICE

           *       *       *       *       *       *       *


CHAPTER 39--UNITED STATES TRUSTEES

           *       *       *       *       *       *       *


Sec. 581. United States trustees

           *       *       *       *       *       *       *


[HISTORICAL AND STATUTORY NOTES]

           *       *       *       *       *       *       *


``SEC. 302. EFFECTIVE DATES; APPLICATION OF AMENDMENTS.

    ``(a) General Effective Date.--* * *

           *       *       *       *       *       *       *

    ``(d) Application of Amendments to Judicial Districts.--
          ``(1) Certain * * *

           *       *       *       *       *       *       *

          ``(3) Judicial districts for the states of alabama 
        and north carolina.--(A) Notwithstanding paragraphs (1) 
        and (2), and any other provision of law, the amendments 
        made by subtitle A of title II of this Act [enacting 
        section 307 of Title 11, amending sections 101, 102, 
        105, 303, 321, 322, 324, 326, 327, 330, 341, 343, 345, 
        701, 703, 704, 705, 707, 727, 1102, 1104, 1105, 1112, 
        1129, 1163, 1202, 1302, 1307, and 1326 of Title 11, and 
        repealing sections 1501 to 151326 of Title 11], and 
        section 1930(a)(6) of title 28 of the United States 
        Code (as added by section 117(4) of this Act) [section 
        1930(a)(6) of this title], shall not--
                  ``(i) become effective in or with respect to 
                a judicial district specified in subparagraph 
                (E) until, or
                ``(ii) apply to cases while pending in such 
                district before,
        such district elects to be included in a bankruptcy 
        region established in section 581(a) of Title 28, 
        United States Code, as amended by section 111(a) of 
        this act [subsec. (a) of this section], [or October 1, 
        2002, whichever occurs first,] except that the 
        amendment to section 105(a) of title 11, Unites States 
        Code [section 105(a) of Title 11], shall become 
        effective as of the date of the enactment of the 
        Federal Courts Study Committee Implementation Act of 
        1990 [Dec. 1, 1990].

           *       *       *       *       *       *       *

          ``(F)(i) Subject to clause (ii), with respect to 
        cases under chapters 7, 11, 12, and 13 of title 11, 
        United States Code [section 701 et seq., 1101 et seq., 
        1201 et seq., and 1301 et seq., respectively, of Title 
        11]--
                  ``(I) commenced before the effective date of 
                this act, and
                  ``(II) pending in a judicial district in the 
                State of Alabama or the State of North Carolina 
                before any election made under subparagraph (A) 
                by such district becomes effective [or October 
                1, 2002, whichever occurs first],
        the amendments made by section 113 [amending section 
        586 of this title] and subtitle A of title II of this 
        Act, and section 1930(a)(6) of title 28 of the United 
        States Code (as added by section 117(4) of this Act) 
        [section 1930(a)(6) of this title], shall not apply 
        until [October 1, 2003, or] the expiration of the 1-
        year period beginning on the date such election becomes 
        effective, whichever occurs first.
          ``(ii) For purposes of clause (i), the amendments 
        made by section 113 [amending section 586 of this 
        title] and subtitle A of title II of this act, and 
        section 1930(a)(6) of title 28 of the United States 
        Code (as added by section 117(4) of this Act) [section 
        1930(a)(6) of this title], shall not apply with respect 
        to a case under chapter 7, 11, 12, or 13 of title 11, 
        United States Code [sections 701 et seq., 1101 et seq., 
        1201 et seq., and 1301 et seq., respectively, of title 
        II], if--
                  ``(I) the trustee in the case files the final 
                report and account of administration of the 
                estate, required under section 704 of such 
                title [section 704 of Title 11], or
                  ``(II) a plan is confirmed under section 
                1129, 1225, or 1325 of such title [section 
                1129, 1225, or 1325, respectively of Title 11],
        [before October 1, 2003, or] the expiration of the 1-
        year period beginning on the date such election becomes 
        effective[, whichever occurs first.]

           *       *       *       *       *       *       *


Sec. 586. Duties; supervision by Attorney General

    (a) Each United States trustee, within the region for which 
such United States trustee is appointed, shall--
          (1) establish, maintain, and supervise a panel of 
        private trustees that are eligible and available to 
        serve as trustee in cases under chapter 7 of title 11;

           *       *       *       *       *       *       *

          (5) perform the duties prescribed for the United 
        States trustee under title 11 and this title, and such 
        duties consistent with title 11 and this title as the 
        Attorney General may prescribe; [and]
          [(6) make such reports as the Attorney General 
        directs.]
          (6) make such reports as the Attorney General 
        directs, including the results of audits performed 
        under section (f); and
          (7) on or before January 1 of each calendar year, and 
        also not later than 30 days after any change in the 
        nonprofit debt counseling services registered with the 
        bankruptcy court, prescribed and make available on 
        request the notice described in section 342(b)(3) of 
        title 11 for each district included in the region.

           *       *       *       *       *       *       *

    (e)(1) The Attorney General, after consultation with a 
United States trustee that has appointed an individual under 
subsection (b) of this section to serve as standing trustee in 
cases under chapter 12 or 13 of title 11, shall fix--

           *       *       *       *       *       *       *

  (f)(1)(A) The Attorney General shall establish procedures for 
the auditing of the accuracy and completeness of petitions, 
schedules, and other information which the debtor is required 
to provide under sections 521 and 1322 of title 11, and, if 
applicable, section 111 of title 11, in individual cases filed 
under chapter 7 or 13 of such title.
  (B) The audits described in subparagraph (A) shall be made in 
accordance with generally accepted auditing standards and 
performed by independent certified public accountants or 
independent licensed public accountants. Those procedures 
shall--
          (i) establish a method of selecting appropriate 
        qualified persons to contract with the United States 
        trustee to perform those audits;
          (ii) establish a method of randomly selecting cases 
        to be audited according to generally accepted auditing 
        standards, except that not less than 1 out of every 500 
        cases in each Federal judicial district shall be 
        selected for audit;
          (iii) require audits for schedules of income and 
        expenses which reflect greater than average variances 
        from the statistical norm of the district in which the 
        schedules were filed; and
          (iv) establish procedures for--
                  (I) reporting the results of those audits and 
                any material misstatement of income, 
                expenditures, or assets of a debtor to the 
                Attorney General, the United States Attorney 
                and the court, as appropriate;
                  (II) providing, not less frequently than 
                annually, public information concerning the 
                aggregate results of such audits including the 
                percentage of cases, by district, in which a 
                material misstatement of income or expenditures 
                is reported; and
                  (III) fully funding those audits, including 
                procedures requiring each debtor with 
                sufficient available income or assets to 
                contribute to the payment for those audits, as 
                an administrative expense or otherwise.
  (2) The United States trustee for each district is authorized 
to contract with auditors to perform audits in cases designated 
by the United States trustee according to the procedures 
established under paragraph (1).
  (3) According to procedures established under paragraph (1), 
upon request of a duly appointed auditor, the debtor shall 
cause the accounts, papers, documents, financial records, files 
and all other papers, things, or property belonging to the 
debtor as the auditor requests and that are reasonably 
necessary to facilitate the audit to be made available for 
inspection and copying.
  (4)(A) The report of each audit conducted under this 
subsection shall be filed with the court, the Attorney General, 
and the United States Attorney, as required under procedures 
established by the Attorney General under paragraph (1).
  (B) If a material misstatement of income or expenditures or 
of assets is reported under subparagraph (A), a statement 
specifying that misstatement shall be filed with the court and 
the United States trustee shall--
          (i) give notice thereof to the creditors in the case; 
        and
          (ii) in an appropriate case, in the opinion of the 
        United States trustee, that requires investigation with 
        respect to possible criminal violations, the United 
        States Attorney for the district.

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PART IV--JURISDICTION AND VENUE

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CHAPTER 85--DISTRICT COURTS; JURISDICTION

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Sec. 1334. Bankruptcy cases and proceedings

    (a) Except as provided in subsection (b) of this section, 
the district court shall have original and exclusive 
jurisdiction of all cases under title 11.

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    (d) Any decision to abstain or not to abstain [made under 
this subsection] made under subsection (c) other than a 
decision not to abstain in a proceeding described in subsection 
(c)(2) is not reviewable by appeal or otherwise by the court of 
appeals under section 158(d), 1291, or 1292 of this title or by 
the Supreme Court of the United States under section 1254 of 
this title. [This subsection] Subsection (c) and this 
subsection shall not be construed to limit the applicability of 
the stay provided for by section 362 of title 11, United States 
Code, as such section applies to an action affecting the 
property of the estate in bankruptcy.

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