House Report 106-123 - BANKRUPTCY REFORM ACT OF 1999

[House Report 106-123]
[From the U.S. Government Publishing Office]

106th Congress Rept. 106-123,
1st Session HOUSE OF REPRESENTATIVES Part 1

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BANKRUPTCY REFORM ACT OF 1999

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April 29, 1999.--Ordered to be printed

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

R E P O R T

together with

ADDITIONAL AND DISSENTING VIEWS

[To accompany H.R. 833]

The Committee on the Judiciary, to whom was referred the
bill (H.R. 833) to amend title 11 of the United States Code,
and for other purposes, having considered the same, report
favorably thereon with an amendment and recommend that the bill
as amended do pass.

CONTENTS

Page
The Amendment.................................................... 86
Purpose and Summary.............................................. 86
Background and Need for the Legislation.......................... 86
Hearings......................................................... 95
Committee Consideration.......................................... 97
Vote of the Committee............................................ 98
Committee Oversight Findings..................................... 110
Committee on Government Reform Findings.......................... 110
New Budget Authority and Tax Expenditures........................ 110
Committee Cost Estimate.......................................... 111
Committee Jurisdiction Letters................................... 112
Constitutional Authority Statement............................... 114
Preemption of State Law.......................................... 114
Section-by-Section Analysis and Discussion....................... 114
Agency Views..................................................... 198
Changes in Existing Law Made by the Bill, as Reported............ 229
Additional Views................................................. 376
Dissenting Views................................................. 381
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Bankruptcy Reform
Act of 1999''.
(b) Table of Contents.--The table of contents of this Act is as
follows:

Sec. 1. Short title; table of contents.

TITLE I--CONSUMER BANKRUPTCY PROVISIONS

Subtitle A--Needs based bankruptcy

Sec. 101. Conversion.
Sec. 102. Dismissal or conversion.
Sec. 103. Notice of alternatives.
Sec. 104. Debtor financial management training test program.

Subtitle B--Consumer Bankruptcy Protections

Sec. 105. Definitions.
Sec. 106. Enforcement.
Sec. 107. Sense of the congress.
Sec. 108. Discouraging abusive reaffirmation practices.
Sec. 109. Promotion of alternative dispute resolution.
Sec. 110. Enhanced disclosure for credit extensions secured by a
dwelling.
Sec. 111. Dual use debit card.
Sec. 112. Enhanced disclosures under an open-end credit plan.
Sec. 113. Protection of savings earmarked for the postsecondary
education of children.
Sec. 114. Effect of discharge.
Sec. 115. Limiting trustee liability.
Sec. 116. Reinforce the fresh start.
Sec. 117. Discouraging bad faith repeat filings.
Sec. 118. Curbing abusive filings.
Sec. 119. Debtor retention of personal property security.
Sec. 120. Relief from the automatic stay when the debtor does not
complete intended surrender of consumer debt collateral.
Sec. 121. Giving secured creditors fair treatment in chapter 13.
Sec. 122. Restraining abusive purchases on secured credit.
Sec. 123. Fair valuation of collateral.
Sec. 124. Domiciliary requirements for exemptions.
Sec. 125. Restrictions on certain exempt property obtained through
fraud.
Sec. 126. Rolling stock equipment.
Sec. 127. Discharge under chapter 13.
Sec. 128. Bankruptcy judgeships.
Sec. 129. Additional amendments to title 11, United States Code.
Sec. 130. Amendment to section 1325 of title 11, United States Code.
Sec. 131. Application of the codebtor stay only when the stay protects
the debtor.
Sec. 132. Adequate protection for investors.
Sec. 133. Limitation on luxury goods.
Sec. 134. Giving debtors the ability to keep leased personal property
by assumption.
Sec. 135. Adequate protection of lessors and purchase money secured
creditors.
Sec. 136. Automatic stay.
Sec. 137. Extend period between bankruptcy discharges.
Sec. 138. Definition of domestic support obligation.
Sec. 139. Priorities for claims for domestic support obligations.
Sec. 140. Requirements to obtain confirmation and discharge in cases
involving domestic support obligations.
Sec. 141. Exceptions to automatic stay in domestic support obligation
proceedings.
Sec. 142. Nondischargeability of certain debts for alimony,
maintenance, and support.
Sec. 143. Continued liability of property.
Sec. 144. Protection of domestic support claims against preferential
transfer motions.
Sec. 145. Clarification of meaning of household goods.
Sec. 146. Nondischargeable debts.
Sec. 147. Monetary limitation on certain exempt property.
Sec. 148. Bankruptcy fees.
Sec. 149. Collection of child support.
Sec. 150. Excluding employee benefit plan participant contributions and
other property from the estate.
Sec. 151. Clarification of postpetition wages and benefits.
Sec. 152. Exceptions to automatic stay in domestic support obligation
proceedings.
Sec. 153. Automatic stay inapplicable to certain proceedings against
the debtor.

TITLE II--DISCOURAGING BANKRUPTCY ABUSE

Sec. 201. Reenactment of chapter 12.
Sec. 202. Meetings of creditors and equity security holders.
Sec. 203. Protection of retirement savings in bankruptcy.
Sec. 204. Protection of refinance of security interest.
Sec. 205. Executory contracts and unexpired leases.
Sec. 206. Creditors and equity security holders committees.
Sec. 207. Amendment to section 546 of title 11, United States Code.
Sec. 208. Limitation.
Sec. 209. Amendment to section 330(a) of title 11, United States Code.
Sec. 210. Postpetition disclosure and solicitation.
Sec. 211. Preferences.
Sec. 212. Venue of certain proceedings.
Sec. 213. Period for filing plan under chapter 11.
Sec. 214. Fees arising from certain ownership interests.
Sec. 215. Claims relating to insurance deposits in cases ancillary to
foreign proceedings.
Sec. 216. Defaults based on nonmonetary obligations.
Sec. 217. Sharing of compensation.
Sec. 218. Priority for administrative expenses.

TITLE III--GENERAL BUSINESS BANKRUPTCY PROVISIONS

Sec. 301. Definition of disinterested person.
Sec. 302. Miscellaneous improvements.
Sec. 303. Extensions.
Sec. 304. Local filing of bankruptcy cases.
Sec. 305. Permitting assumption of contracts.

TITLE IV SMALL BUSINESS BANKRUPTCY PROVISIONS

Sec. 401. Flexible rules for disclosure Statement and plan.
Sec. 402. Definitions.
Sec. 403. Standard form disclosure Statement and plan.
Sec. 404. Uniform national reporting requirements.
Sec. 405. Uniform reporting rules and forms for small business cases.
Sec. 406. Duties in small business cases.
Sec. 407. Plan filing and confirmation deadlines.
Sec. 408. Plan confirmation deadline.
Sec. 409. Prohibition against extension of time.
Sec. 410. Duties of the United States trustee.
Sec. 411. Scheduling conferences.
Sec. 412. Serial filer provisions.
Sec. 413. Expanded grounds for dismissal or conversion and appointment
of trustee or examiner.
Sec. 414. Study of operation of title 11 of the United States Code with
respect to small businesses.
Sec. 415. Payment of interest.

TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS

Sec. 501. Petition and proceedings related to petition.
Sec. 502. Applicability of other sections to chapter 9.

TITLE VI--STREAMLINING THE BANKRUPTCY SYSTEM

Sec. 601. Creditor representation at first meeting of creditors.
Sec. 602. Audit procedures.
Sec. 603. Giving creditors fair notice in chapter 7 and 13 cases.
Sec. 604. Dismissal for failure to timely file schedules or provide
required information.
Sec. 605. Adequate time to prepare for hearing on confirmation of the
plan.
Sec. 606. Chapter 13 plans to have a 5-year duration in certain cases.
Sec. 607. Sense of the Congress regarding expansion of rule 9011 of the
Federal Rules of Bankruptcy Procedure.
Sec. 608. Elimination of certain fees payable in chapter 11 bankruptcy
cases.
Sec. 609. Study of bankruptcy impact of credit extended to dependent
students.
Sec. 610. Prompt relief from stay in individual cases.
Sec. 611. Stopping abusive conversions from chapter 13.
Sec. 612. Bankruptcy appeals.
Sec. 613. GAO study.

TITLE VII--BANKRUPTCY DATA

Sec. 701. Improved bankruptcy statistics.
Sec. 702. Uniform rules for the collection of bankruptcy data.
Sec. 703. Sense of the Congress regarding availability of bankruptcy
data.

TITLE VIII--BANKRUPTCY TAX PROVISIONS

Sec. 801. Treatment of certain liens.
Sec. 802. Effective notice to government.
Sec. 803. Notice of request for a determination of taxes.
Sec. 804. Rate of interest on tax claims.
Sec. 805. Tolling of priority of tax claim time periods.
Sec. 806. Priority property taxes incurred.
Sec. 807. Chapter 13 discharge of fraudulent and other taxes.
Sec. 808. Chapter 11 discharge of fraudulent taxes.
Sec. 809. Stay of tax proceedings.
Sec. 810. Periodic payment of taxes in chapter 11 cases.
Sec. 811. Avoidance of statutory tax liens prohibited.
Sec. 812. Payment of taxes in the conduct of business.
Sec. 813. Tardily filed priority tax claims.
Sec. 814. Income tax returns prepared by tax authorities.
Sec. 815. Discharge of the estate's liability for unpaid taxes.
Sec. 816. Requirement to file tax returns to confirm chapter 13 plans.
Sec. 817. Standards for tax disclosure.
Sec. 818. Setoff of tax refunds.

TITLE IX--ANCILLARY AND OTHER CROSS-BORDER CASES

Sec. 901. Amendment to add chapter 15 to title 11, United States Code.
Sec. 902. Amendments to other chapters in title 11, United States Code.

TITLE X--FINANCIAL CONTRACT PROVISIONS

Sec. 1001. Treatment of certain agreements by conservators or --
receivers of insured depository institutions.
Sec. 1002. Authority of the corporation with respect to failed and
failing institutions.
Sec. 1003. Amendments relating to transfers of qualified financial
contracts.
Sec. 1004. Amendments relating to disaffirmance or repudiation of
qualified financial contracts.
Sec. 1005. Clarifying amendment relating to master agreements.
Sec. 1006. Federal Deposit Insurance Corporation Improvement Act of
1991.
Sec. 1007. Bankruptcy Code amendments.
Sec. 1008. Recordkeeping requirements.
Sec. 1009. Exemptions from contemporaneous execution ---requirement.
Sec. 1010. Damage measure.
Sec. 1011. Sipc stay.
Sec. 1012. Asset-backed securitizations.
Sec. 1013. Federal Reserve collateral requirements.
Sec. 1014. Effective date; application of ---amendments.

TITLE XI--TECHNICAL CORRECTIONS

Sec. 1101. Definitions.
Sec. 1102. Adjustment of dollar amounts.
Sec. 1103. Extension of time.
Sec. 1104. Technical amendments.
Sec. 1105. Penalty for persons who negligently or fraudulently prepare
bankruptcy petitions.
Sec. 1106. Limitation on compensation of professional persons.
Sec. 1107. Special tax provisions.
Sec. 1108. Effect of conversion.
Sec. 1109. Allowance of administrative expenses.
Sec. 1110. Priorities.
Sec. 1111. Exemptions.
Sec. 1112. Exceptions to discharge.
Sec. 1113. Effect of discharge.
Sec. 1114. Protection against discriminatory treatment.
Sec. 1115. Property of the estate.
Sec. 1116. Preferences.
Sec. 1117. Postpetition transactions.
Sec. 1118. Disposition of property of the estate.
Sec. 1119. General provisions.
Sec. 1120. Appointment of elected trustee.
Sec. 1121. Abandonment of railroad line.
Sec. 1122. Contents of plan.
Sec. 1123. Discharge under chapter 12.
Sec. 1124. Bankruptcy cases and proceedings.
Sec. 1125. Knowing disregard of bankruptcy law or rule.
Sec. 1126. Transfers made by nonprofit charitable corporations.
Sec. 1127. Prohibition on certain actions for failure to incur finance
charges.
Sec. 1128. Protection of valid purchase money security interests.
Sec. 1129. Trustees.

TITLE XII--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS

Sec. 1201. Effective date; application of amendments.

TITLE I--CONSUMER BANKRUPTCY PROVISIONS

Subtitle A--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 at the
request or suggestion of'' and
inserting ``the trustee, 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 second and third
sentences and inserting the following:
``(2)(A)(i) In considering under paragraph (1) whether the granting
of relief would be an abuse of the provisions of this chapter, the
court shall presume abuse exists if the debtor's current monthly income
less estimated administrative expenses and reasonable attorneys' fees,
and amounts set forth in clauses (ii) for monthly expenses (which shall
include, if applicable, the continuation of actual expenses of a
dependent child under the age of 18 for tuition, books, and required
fees at a private elementary or secondary school, not exceeding $10,000
per year, which amount shall be adjusted pursuant to section 104(b)),
(iii) for monthly payments on account of secured debts, and (iv) for
monthly unsecured priority debt payments, and multiplied by 60 months
is not less than $6,000.
``(ii) The debtor's monthly expenses shall be the debtor's applicable
monthly expense amounts specified under the National Standards and
Local Standards, and the debtor's applicable monthly expenses for the
categories specifically listed as Other Necessary Expenses issued by
the Internal Revenue Service for the area in which the debtor resides,
as in effect on the date of the entry of the order for relief, for the
debtor, the dependents of the debtor, and the spouse of the debtor in a
joint case, if the spouse is not otherwise a dependent In addition, if
it is demonstrated that it is reasonable and necessary, the debtor may
also subtract an allowance of up to 5% of the food and clothing
categories as specified by the National Standards issued by the
Internal Revenue Service Notwithstanding any other provision of this
clause, the debtor's monthly expenses shall not include any payments
for debts.
``(iii) The debtor's average monthly payments on account of secured
debts shall be calculated as the total of all amounts scheduled as
contractually due to securedcreditors in each month of the 60 months
following the date of the petition, and dividing that total by 60
months.
``(iv) The debtor's monthly unsecured priority debt payments
(including payments for priority child support and alimony claims)
shall be calculated as the total amount of unsecured debts entitled to
priority, and dividing the total by 60 months.
``(v) For the purposes of this subsection, a family or household
shall consist of the debtor, the debtor's spouse, and the debtor's
dependents, but not a legally separated spouse unless the spouse files
a joint case with the debtor.
``(B) In any proceeding brought under this subsection, the
presumption of abuse may be rebutted only by demonstrating
extraordinary circumstances that require additional expenses or
adjustment of current monthly income In order to establish
extraordinary circumstances, the debtor must itemize each additional
expense or adjustment of income and provide documentation for such
expenses or adjustment of income and a detailed explanation of the
extraordinary circumstances which make such expenses or adjustment of
income necessary and reasonable The debtor shall attest under oath to
the accuracy of any information provided to demonstrate that additional
expenses or adjustment to income are required The presumption of abuse
may be rebutted only if such additional expenses or adjustments to
income cause the debtor's current monthly income less estimated
administrative expenses and reasonable attorneys' fees, and the amounts
set forth in clauses (ii), (iii), and (iv) of subparagraph (A) when
multiplied by 60 to be less than $6,000.
``(C) As part of the schedule of current income and expenditures
required under section 521 of this title, the debtor shall include a
statement of the debtor's current monthly income, and the calculations
which determine whether a presumption arises under subparagraph (A)(i),
showing how each amount is calculated The bankruptcy rules promulgated
under section 2075 of title 28, United States Code, shall prescribe a
form for such statement and may provide general rules on its content.
``(D) No judge, United States trustee, panel trustee, bankruptcy
administrator or other party in interest shall bring a motion under
this paragraph 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 regional median household monthly income
calculated on a semiannual 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.
``(3) In considering under paragraph (1) whether the granting of
relief would be an abuse of the provisions of this chapter in a case in
which the presumption in paragraph (2)(A)(i) does not apply or has been
rebutted, the court shall consider--
``(A) whether the debtor filed the petition in bad faith; or
``(B) the totality of the circumstances (including whether
the debtor seeks to reject a personal services contract and the
financial need for such rejection as sought by the debtor) of
the debtor's financial situation demonstrates abuse.
``(4)(A) If a panel trustee appointed under section 586(a)(1) of
title 28 or bankruptcy administrator 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 violated Rule 9011, the court shall assess damages which
may include ordering:
``(i) the counsel for the debtor to reimburse the trustee for
all reasonable costs in prosecuting the motion, including
reasonable attorneys' fees.
``(ii) the assessment of an appropriate civil penalty against
the counsel for the debtor; and
``(iii) the payment of the civil penalty to the panel
trustee, bankruptcy administrator or the United States trustee.
``(B) In the case of a petition filed under sections 301, 302, or 303
of this title and supporting lists, schedules and documents filed under
section 521(a)(1) of this title, the signature of an attorney on the
petition 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, lists, schedules, and
documents--
``(I) are well grounded in fact; and
``(II) are warranted by existing law or a good faith
argument for the extension, modification, or reversal
of existing law and do not constitute an abuse under
paragraph (1) of this subsection.
``(5) The court may award a debtor all reasonable costs in contesting
a motion filed by a party in interest (not including a trustee or the
United States trustee) under this subsection (including reasonable
attorneys' fees) if--
``(A) the court does not grant the motion; and
``(B) 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.
``(6) However, only the court, the United States trustee, or the
trustee may file a motion to dismiss or convert a case under this
subsection if the current monthly income of the debtor and the debtor's
spouse combined, as of the date of the order for relief, when
multiplied by 12, is less than the highest national median family
income last reported by the Bureau of the Census for a family of equal
or lesser size, or in the case of a household of 1 person, the national
median household income for 1 earner Notwithstanding the foregoing, the
national median family income for a family of more than 4 individuals
shall be the national median family income last reported by the Bureau
of the Census for a family of 4 individuals plus $583 for each
additional member of the family.
``(7) 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 that term
is defined in section 548(d)(4)).
``(8) Not later than 3 years after the date of enactment of the
Bankruptcy Reform Act of 1999, the Director of the Executive Office for
United States Trustees shall submit a report, to the Committee on the
Judiciary of the House of Representatives and the Committee on the
Judiciary of the Senate, containing its findings regarding the
utilization of the Internal Revenue Service standards for determining
the current monthly expenses under section 707(b)(1)(A)(ii) of title
11, United States Code, of debtors and the impact that the application
of such standards has had on debtors and on the bankruptcy courts Such
report may include recommendations for amendments to such title,
consistent with the Director's findings.''.
(b) Definitions.--Section 101 of title 11, United States Code, is
amended--
(1) by inserting after paragraph (10) the following:
``(10A) `current monthly income' means the average monthly
income from all sources derived which the debtor, or in a joint
case, the debtor and the debtor's spouse, receive without
regard to whether it is taxable income, in the 180 days
preceding the date of determination, and includes any amount
paid by anyone other than the debtor or, in a joint case, the
debtor and the debtor's spouse, on a regular basis to the
household expenses of the debtor or the debtor's dependents
and, in a joint case, the debtor's spouse if not otherwise a
dependent, but excludes payments to victims of war crimes or
crimes against humanity;''; and
(2) by inserting after paragraph (17) the following:
``(17A) `estimated administrative expenses and reasonable
attorneys' fees' means 10 percent of projected payments under a
chapter 13 plan;''.
(c) Administrative Provisions.--Section 704 of title 11, United
States Code, is amended--
(1) in paragraph (8) by striking ``and'' at the end;
(2) in paragraph (9) by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(10)(A) With respect to an individual debtor, the trustee
shall review all materials filed by the debtor, consider all
information presented at the first meeting of creditors, and
within 10 days after the first meeting of creditors file with
the court a statement as to whether the debtor's case should be
presumed to be an abuse under section 707(b) of this title The
court shall provide a copy of such statement to all creditors
within 5 days after such statement is filed If, based on the
filing of such statement with the court, the trustee determines
that the debtor's case should be presumed to be an abuse under
section 707(b) of this title and if the current monthly income
of the debtor and the debtor's spouse combined, as of the date
of the order for relief, when multiplied by 12, is not less
than the highest national median family income reported for a
family of equal or lesser size, or in the case of a household
of 1 person, the national median household income for 1 earner,
then the trustee shall within 30 days of the filing of such
statement, either--
``(i) file a motion to dismiss or convert under
section 707(b) of this title; or
``(ii) file a statement setting forth the reasons the
trustee or bankruptcy administrator does not believe
that such a motion would be appropriate.
``(B) Notwithstanding subparagraph (A), for purposes of this
paragraph the national family income for a family of more than
4 individuals shall be the national median family income last
reported by the Bureau of the Census for a family of 4
individuals plus $583 for each additional member of the
family.''.
(d) 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.''.

SEC. 103. NOTICE OF ALTERNATIVES.

Section 342(b) of title 11, United States Code, is amended to read as
follows:
``(b) Before the commencement of a case under this title by an
individual whose debts are primarily consumer debts, the clerk shall
give to such individual written notice containing--
``(1) a brief description of--
``(A) chapters 7, 11, 12, and 13 and the general
purpose, benefits, and costs of proceeding under each
of those chapters; and
``(B) the types of services available from credit
counseling agencies; and
``(2) statements specifying that--
``(A) a person who knowingly and fraudulently
conceals assets or makes a false oath or statement
under penalty of perjury in connection with a
bankruptcy case shall be subject to fine, imprisonment,
or both; and
``(B) all information supplied by a debtor in
connection with a bankruptcy case is subject to
examination by the Attorney General.''.

SEC. 104. DEBTOR FINANCIAL MANAGEMENT TRAINING TEST PROGRAM.

(a) Development of Financial Management and Training Curriculum and
Materials.--The Director of the Executive Office for United States
Trustees (in this section referred to as the ``Director'') shall
consult with a wide range of individuals who are experts in the field
of debtor education, including trustees who are appointed under chapter
13 of title 11 of the United States Code and who operate financial
management education programs for debtors, and shall develop a
financial management training curriculum and materials that can be used
to educate individual debtors on how to better manage their finances.
(b) Test--(1) The Director shall select 6 judicial districts of the
United States in which to test the effectiveness of the financial
management training curriculum and materials developed under subsection
(a).
(2) For a 18-month period beginning not later than 270 days after the
date of the enactment of this Act, such curriculum and materials shall
be, for the 6 judicial districts selected under paragraph (1), used as
the instructional course concerning personal financial management for
purposes of section 111 of this title.
(c) Evaluation.--(1) During the 1-year period referred to in
subsection (b), the Director shall evaluate the effectiveness of--
(A) the financial management training curriculum and
materials developed under subsection (a); and
(B) a sample of existing consumer education programs such as
those described in the Report of the National Bankruptcy Review
Commission (October 20, 1997) that are representative of
consumer education programs carried out by the credit industry,
by trustees serving under chapter 13 of title 11 of the United
States Code, and by consumer counselling groups.
(2) Not later than 3 months after concluding such evaluation, the
Director shall submit a report to the Speaker of the House of
Representatives and the President pro tempore of the Senate, for
referral to the appropriate committees of the Congress, containing the
findings of the Director regarding the effectiveness of such
curriculum, such materials, and such programs and their costs.

Subtitle B--Consumer Bankruptcy Protections

SEC. 105. DEFINITIONS.

(a) Definitions.--Section 101 of title 11, United States Code, is
amended--
(1) by inserting after paragraph (2) the following:
``(3) `assisted person' means any person whose debts consist
primarily of consumer debts and whose non-exempt assets are
less than $150,000;'';
(2) by inserting after paragraph (4) the following:
``(4A) `bankruptcy assistance' means any goods or services
sold or otherwise provided to an assisted person with the
express or implied purpose of providing
information, advice, counsel, document preparation or filing, or
attendance at a creditors' meeting or appearing in a proceeding on
behalf of another or providing legal representation with respect to a
proceeding under this title;''; and
(3) by inserting after paragraph (12A) the following:
``(12B) `debt relief agency' means any person who provides
any bankruptcy assistance to an assisted person in return for
the payment of money or other valuable consideration, or who is
a bankruptcy petition preparer pursuant to section 110 of this
title, but does not include any person that is any of the
following or an officer, director, employee or agent thereof--
``(A) any nonprofit organization which is exempt from
taxation under section 501(c)(3) of the Internal
Revenue Code of 1986;
``(B) any creditor of the person to the extent the
creditor is assisting the person to restructure any
debt owed by the person to the creditor; or
``(C) any depository institution (as defined in
section 3 of the Federal Deposit Insurance Act) or any
Federal credit union or State credit union (as those
terms are defined in section 101 of the Federal Credit
Union Act), or any affiliate or subsidiary of such a
depository institution or credit union;''.
(b) Conforming Amendment.--In section 104(b)(1) by inserting
``101(3),'' after ``sections''.

SEC. 106. ENFORCEMENT.

(a) Enforcement.--Subchapter II of chapter 5 of title 11, United
States Code, is amended by adding at the end the following:

``Sec. 526. Debt relief agency enforcement

``(a) A debt relief agency shall not--
``(1) fail to perform any service which the debt relief
agency has told the assisted person or prospective assisted
person the agency would provide that person in connection with
the preparation for or activities during a proceeding under
this title;
``(2) make any statement, or counsel or advise any assisted
person to make any statement in any document filed in a
proceeding under this title, which is untrue and misleading or
which upon the exercise of reasonable care, should be known by
the debt relief agency to be untrue or misleading;
``(3) misrepresent to any assisted person or prospective
assisted person, directly or indirectly, affirmatively or by
material omission, what services the debt relief agency can
reasonably expect to provide that person, or the benefits an
assisted person may obtain or the difficulties the person may
experience if the person seeks relief in a proceeding pursuant
to this title; or
``(4) advise an assisted person or prospective assisted
person to incur more debt in contemplation of that person
filing a proceeding under this title or in order to pay an
attorney or bankruptcy petition preparer fee or charge for
services performed as part of preparing for or representing a
debtor in a proceeding under this title.''.
``(b) Assisted Person Waivers Invalid.--Any waiver by any assisted
person of any protection or right provided by or under this section
shall not be enforceable against the debtor by any Federal or State
court or any other person, but may be enforced against a debt relief
agency.
``(c) Noncompliance.--
``(1) Any contract between a debt relief agency and an
assisted person for bankruptcy assistance which does not comply
with the material requirements of this section shall be treated
as void and may not be enforced by any Federal or State court
or by any other person.
``(2) Any debt relief agency shall be liable to an assisted
person in the amount of any fees or charges in connection with
providing bankruptcy assistance to such person which the debt
relief agency has received, for actual damages, and for
reasonable attorneys' fees and costs if the debt relief agency
is found, after notice and hearing, to have--
``(A) intentionally or negligently failed to comply
with any provision of this section with respect to a
bankruptcy case or related proceeding of the assisted
person;
``(B) provided bankruptcy assistance to an assisted
person in a case or related proceeding which is
dismissed or converted because of the debt relief
agency's intentional or negligent failure to file
bankruptcy papers, including papers specified in
section 521 of this title; or
``(C) intentionally or negligently disregarded the
material requirements of this title or the Federal
Rules of Bankruptcy Procedure applicable to such debt
relief agency.
``(3) In addition to such other remedies as are provided
under State law, whenever the chief law enforcement officer of
a State, or an official or agency designated by a State, has
reason to believe that any person has violated or is violating
this section, the State--
``(A) may bring an action to enjoin such violation;
``(B) may bring an action on behalf of its residents
to recover the actual damages of assisted persons
arising from such violation, including any liability
under paragraph (2); and
``(C) in the case of any successful action under
subparagraph (A) or (B), shall be awarded the costs of
the action and reasonable attorney fees as determined
by the court.
``(4) The United States District Court for any district
located in the State shall have concurrent jurisdiction of any
action under subparagraph (A) or (B) of paragraph (3).
``(5) Notwithstanding any other provision of Federal law and
in addition to any other remedy provided under Federal or State
law, if the court, on its own motion or on the motion of the
United States trustee or the debtor, finds that a person
intentionally violated this section, or engaged in a clear and
consistent pattern or practice of violating this section, the
court may--
``(A) enjoin the violation of such section; or
``(B) impose an appropriate civil penalty against
such person.
``(c) Relation to State Law.--This section shall not annul, alter,
affect or exempt any person subject to those sections from complying
with any law of any State except to the extent that such law is
inconsistent with those sections, and then only to the extent of the
inconsistency.''.
(b) Conforming Amendment.--The table of sections for chapter 5 of
title 11, United States Code, is amended by inserting after the item
relating to section 527, the following:

``526. Debt relief agency enforcement.''.

SEC. 107. SENSE OF THE CONGRESS.

It is the sense of the Congress that States should develop curricula
relating to the subject of personal finance, designed for use in
elementary and secondary schools.

SEC. 108. DISCOURAGING ABUSIVE REAFFIRMATION PRACTICES.

Section 524 of title 11, United States Code, is amended--
(1) in subsection (c)--
(A) in paragraph (2)--
(i) in subparagraph (A) by striking ``and''
at the end;
(ii) in subparagraph (B) by adding ``and'' at
the end; and
(iii) by adding at the end the following:
``(C) if the consideration for such agreement is based on a
wholly unsecured consumer debt (except for debts owed to
creditors defined in section 461(b)(1)(A)(iv) of title 12,
United States Code), such agreement contains a clear and
conspicuous statement which advises the debtor--
``(i) that the debtor is entitled to a hearing before
the court at which the debtor shall appear in person
and at which the court will decide whether the
agreement is an undue hardship, not in the debtor's
best interest, and not the result of a threat by the
creditor to take any action that cannot be legally
taken or that is not intended to be taken; and
``(ii) that if the debtor is represented by counsel,
the debtor may waive the debtor's right to such a
hearing by signing a statement waiving the hearing,
stating that the debtor is represented by counsel, and
identifying such counsel;''; and
(B) in paragraph (6)(A)--
(i) by striking ``and'' at the end of clause
(i);
(ii) by striking the period at the end of
clause (ii) and inserting ``; and''; and
(iii) by adding at the end thereof the
following:
``(iii) not entered into by the debtor as the result
of a threat by the creditor to take any action that
cannot be legally taken or that is not intended to be
taken.''; and
(2) in the 3d sentence of subsection (d)--
(A) by striking ``of this section'' and inserting a
comma; and
(B) by inserting after ``such agreement'' the
following:
``or if the consideration for such agreement is based on a wholly
unsecured consumer debt (except for debts owed to creditors defined in
section 461(b)(1)(A)(iv) of title 12,United States Code) and the debtor
has not waived the debtor's right to a hearing on the agreement in
accordance with subsection (c)(2)(C) of this section''.

SEC. 109. PROMOTION OF ALTERNATIVE DISPUTE RESOLUTION.

(a) Reduction of Claim.--Section 502 of title 11, United States Code,
is amended by adding at the end the following:
``(k)(1) The court, on the motion of the debtor and after a hearing,
may reduce a claim filed under this section based wholly on unsecured
consumer debts by not more than 20 percent, if the debtor can prove by
clear and convincing evidence that the claim was filed by a creditor
who unreasonably refused to negotiate a reasonable alternative
repayment schedule proposed by an approved credit counseling agency
acting on behalf of the debtor, and if--
``(A) such offer was made within the period beginning 60 days
before the filing of the petition;
``(B) such offer provided for payment of at least 60 percent
of the amount of the debt over a period not to exceed the
repayment period of the loan, or a reasonable extension
thereof; and
``(C) no part of the debt under the alternative repayment
schedule is nondischargeable, is entitled to priority under
section 507 of this title, or would be paid a greater
percentage in a chapter 13 proceeding than offered by the
debtor.
``(2) The debtor shall have the burden of proving that the proposed
alternative repayment schedule was made in the 60-day period specified
in subparagraph (A) and that the creditor unreasonably refused to
consider the debtor's proposal.''.
(b) Limitation on Avoidability.--Section 547 of title 11, United
States Code, is amended by adding at the end the following:
``(h) The trustee may not avoid a transfer if such transfer was made
as a part of an alternative repayment plan between the debtor and any
creditor of the debtor created by an approved credit counseling
agency.''.

SEC. 110. ENHANCED DISCLOSURE FOR CREDIT EXTENSIONS SECURED BY A
DWELLING.

(a) Study Required.--During the period beginning 180 days after the
date of enactment of this Act and ending 18 months after the date of
the enactment, the Board of Governors of the Federal Reserve System (in
this section referred to as the ``Board'') shall conduct a study and
submit to Congress a report (including recommendations for any
appropriate legislation) regarding--
(1) whether a consumer engaging in an open-end credit
transaction (as defined pursuant to section 103 of the Truth in
lending Act) secured by the consumer's principal dwelling is
provided adequate information under Federal law, including
under section 127A of the Truth in Lending Act, regarding the
tax deductibility of interest paid on such transaction; and
(2) whether a consumer engaging in a closed-end credit
transaction (as defined pursuant to section 103 of the Truth in
Lending Act) secured by the consumer's principal dwelling is
provided adequate information regarding the tax deductibility
of interest paid on such transaction.
In conducting such study, the Board shall specifically consider whether
additional disclosures are necessary with respect to such open-end or
closed-end credit transactions in which the amount of the credit
extended exceeds the fair market value of the dwelling.
(b) Regulations.--If the Board determines that additional disclosures
are necessary in connection with transactions described in subsection
(a), the Board, pursuant to its authority under the Truth in Lending
Act, may promulgate regulations that would require such additional
disclosures Any such regulations promulgated by the Board under this
section shall not take effect before the end of the 36-month period
after the date of the enactment of this Act.

SEC. 111. DUAL USE DEBIT CARD.

(a) Study Required.--The Board of Governors of the Federal Reserve
System (in this section referred to as the ``Board'') shall conduct a
study of existing protections provided to consumers to limit their
liability for unauthorized use of a debit card or similar access
device.
(b) Specific Considerations.--In conducting the study required by
subsection (a), the Board shall specifically consider the following--
(1) the extent to which existing provisions of section 909 of
the Electronic Fund Transfer Act and the Board's implementing
regulations provide adequate unauthorized use liability
protection for consumers;
(2) the extent to which any voluntary industry rules have
enhanced the level of protection afforded consumers in
connection with such unauthorized use liability; and
(3) whether amendments to the Electronic Funds Transfer Act
or the Board's implementing regulations thereto are necessary
to provide adequate protection for consumers in this area.
(c) Report and Regulations.--Not later than 2 years after the date of
the enactment of this Act, the Board shall make public a report on its
findings with respect to the adequacy of existing protections afforded
consumers with respect to unauthorized-use liability for debit cards
and similar access devices If the Board determines that such
protections are inadequate, the Board, pursuant to its authority under
the Electronic Funds Transfer Act, may issue regulations to address
such inadequacy Any regulations issued by the Board shall not be
effective before 36 months after the date of the enactment of this Act.

SEC. 112. ENHANCED DISCLOSURES UNDER AN OPEN-END CREDIT PLAN.

(a) Initial and Annual Minimum Payment Disclosure.--Section 127(a) of
the Truth in Lending Act (15 U.S.C 1637(a)) is amended by adding at the
end the following:
``(9) In the case of any credit or charge card account under
an open-end consumer credit plan on which a minimum monthly or
periodic payment will be required, other than an account
described in paragraph (8)--
``(A) the following statement: `The minimum payment
amount shown on your billing statement is the smallest
payment which you can make in order to keep the account
in good standing This payment option is offered as a
convenience and you may make larger payments at any
time Making only the minimum payment each month will
increase the amount of interest you pay and the length
of time it takes to repay your outstanding balance.';
``(B) if the plan provides that the consumer will be
permitted to forgo making a minimum payment during a
specified billing cycle, a statement, if applicable,
that if the consumer chooses to forgo making the
minimum payment, finance charges will continue to
accrue; and
``(C) an example, based on an annual percentage rate
and method for determining minimum periodic payments
recently in effect for that creditor, and a $500
outstanding balance, showing the estimated minimum
periodic payment, and the estimated period of time it
would take to repay the $500 outstanding balance if the
consumer paid only the minimum periodic payment on each
monthly or periodic statement and obtained no
additional extensions of credit.
``(10) With respect to one billing cycle per calendar year,
the creditor shall transmit the information required under
paragraph (9) to each consumer to whom the creditor is required
to transit a statement pursuant to subsection (b) for such
billing cycle The creditor shall also transmit to such consumer
for such cycle a worksheet prescribed by the Board to assist
the consumer in determining the consumer's household income and
debt obligations.''.
(b) Periodic Minimum Payment Disclosures.--Section 127(b) of the
Truth in Lending Act (15 U.S.C 1637(b)) is amended by adding at the end
the following:
``(11) The following statement: `The minimum payment amount
shown on your billing statement is the smallest payment which
you can make in order to keep the account in good standing This
payment option is offered as a convenience and you may make
larger payments at any time Making only the minimum payment
each month will increase the amount of interest you pay and the
length of time it takes to repay your outstanding balance.' ''.
(c) Enforcement.--Section 127 of the Truth in Lending Act (15 U.S.C
1637) is amended by adding at the end the following:
``(h) In promulgating regulations to implement the disclosure of an
example required under subsection (a)(9)(C) and (a)(10), the Board
shall set forth a model disclosure to accompany the example stating
that the credit features shown are only an example which does not
obligate the creditor, but is intended to illustrate the approximate
length of time it could take to repay using the assumptions set forth
in subsection (a)(9)(C) without regard to any other factors that could
impact an approximate repayment period, including other credit features
or the consumer's payment or other behavior with respect to the account
Compliance with the disclosures required under subsection (a)(9)(C) and
(a)(10) shall be enforced exclusively by the Federal agencies set forth
in section 108.''.
(d) Regulatory Implementation.--The Board of Governors of the Federal
Reserve System (in this section referred to as the ``Board'') shall
promulgate regulations implementing the amendments made by subsections
(a) and (b) Such regulations shall take effect no earlier than the end
of the 36-month period beginning on the date of the enactment of this
Act.
(e) Study Required.--The Board shall conduct a study to determine
whether consumers have adequate information about borrowing activities
which may result in financial problems In studying this issue, the
Board shall consider the extent to which--
(1) consumers, in establishing new credit arrangements, are
aware of their existing payment obligations, the need to
consider those obligations in deciding to take on new credit,
and how taking on excessive credit can result in financial
difficulty;
(2) minimum periodic payment features offered in connection
with open-end credit plans impact consumer default rates;
(3) consumers always make only the minimum payment throughout
the life of the plan;
(4) consumers are aware that making only minimum payments
will increase the cost and repayment period of an open-end
loan; and
(5) the availability of low minimum payment options is a
cause of consumers experiencing financial difficulty.
(f) Report to Congress.--Before the end of the 2-year period
beginning on the date of the enactment of this Act, the Board shall
submit to Congress a report containing the findings of the Board in
connection with the study required under subsection (e).
(g) Regulations.--The Board shall, by regulation promulgated pursuant
to its authority under the Truth in Lending Act, require additional
disclosures to consumers regarding minimum payment features, including
periodic statement disclosures, if the Board determines that such
disclosures are necessary based on its findings Any such regulations
promulgated by the Board shall not take effect earlier than January 1,
2002.

SEC. 113. PROTECTION OF SAVINGS EARMARKED FOR THE POSTSECONDARY
EDUCATION OF CHILDREN.

Section 522 of title 11, United States Code, is amended--
(1) in subsection (b)(2)--
(A) in subparagraph (A) by striking ``and'' at the
end;
(B) in subparagraph (B) by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following:
``(C) except as provided in paragraph (n), funds placed in an
education individual retirement account (as defined in section
530(b)(1) of the Internal Revenue Code of 1986) not less than
365 days before the date of entry of the order of relief but
only to the extent such funds--
``(i) are not pledged or promised to any entity in
connection with any extension of credit; and
``(ii) are not excess contributions (as described in
section 4973(e) of the Internal Revenue Code of
1986).''; and
(2) by adding at the end the following:
``(n) For purposes of subsection (b)(3)(C), funds placed in an
education individual retirement account shall not be exempt under this
subsection--
``(1) unless the designated beneficiary of such account was a
dependent child of the debtor for the taxable year for which
the funds were placed in such account; and
``(2) to the extent such funds exceed--
``(A) $50,000 in the aggregate in all such accounts
having the same designated beneficiary; or
``(B) $100,000 in the aggregate in all such accounts
attributable to all such dependent children of the
debtor.''.

SEC. 114. 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 any injunction under
subsection (a)(2) which has arisen at the time of the failure.
``(j)(1) An individual who is injured by the willful 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--
``(A) the greater of--
``(i) the amount of actual damages; or
``(ii) $1,000; and
``(B) costs and attorneys' fees.
``(2) An action to recover for a violation specified in paragraph (1)
may not be brought as a class action.''.

SEC. 115. LIMITING TRUSTEE LIABILITY.

(a) Qualification of Trustee.--Section 322 of title 11, United States
Code, is amended--
(1) in subsection (a) by adding at the end the following:
``The trustee in a case under this title is not liable
personally or on such trustee's bond for acts taken within the
scope of the trustee's duties or authority as delineated by
other sections of this title or by order of the court, except
to the extent that the trustee acted with gross negligence
Gross negligence shall be defined as reckless indifference or
deliberate disregard of the trustee's fiduciary duty.''; and
(2) in subsection (c) by inserting ``for any acts within the
scope of the trustee's authority defined in subsection (a)''
before the period at the end.
(b) Role and Capacity of Trustee.--Section 323 of title 11, United
States Code, is amended--
(1) in subsection (b) by inserting at the end the following:
``in the trustee's official capacity as representative of the
estate'' before the period at the end; and
(2) by adding at the end the following:
``(c) The trustee in a case under this title may not be sued, either
personally, in a representative capacity, or against the trustee's bond
in favor of the United States--
``(1) for acts taken in furtherance of the trustee's duties
or authority in a case in which the debtor is subsequently
determined to be ineligible for relief under the chapter in
which the trustee was appointed; or
``(2) for the dissemination of statistics and other
information regarding a case or cases, unless the trustee has
actual knowledge that the information is false.
``(d) The trustee in a case under this title may not be sued in a
personal capacity without leave of the bankruptcy court in which the
case is pending.''.

SEC. 116. REINFORCE THE FRESH START.

(a) Restoration of an Effective Discharge.--Section 523(a)(17) of
title 11, United States Code, is amended--
(1) by striking ``by a court'' and inserting ``by any
court'',
(2) by striking ``section 1915(b) or (f)'' and inserting
``subsection (b) or (f)(2) of section 1915'', and
(3) by inserting ``(or a similar non-Federal law)'' after
``title 28'' each place it appears.

SEC. 117. DISCOURAGING BAD FAITH REPEAT FILINGS.

Section 362(c) of title 11, United States Code, is amended--
(1) in paragraph (1) by striking ``and'' at the end;
(2) in paragraph (2) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following new paragraphs:
``(3) If a single or joint case is filed by or against an
individual debtor under chapter 7, 11, or 13 (other than a case
refiled under a chapter other than chapter 7 after dismisssal
under section 707(b) of this title), and if a single or joint
case of the debtor was pending within the previous 1-year
period but was dismissed, 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 will terminate
with respect to the debtor on the 30th day after the filing of
the later case Upon motion by a party in interest for
continuation of the automatic stay and upon notice and a
hearing, the court may extend the stay in particular cases as
to any or all creditors (subject to such conditions or
limitations as the court may then impose) after notice and a
hearing completed before the expiration of the 30-day period
only if the party in interest demonstrates that the filing of
the later case is in good faith as to the creditors to be
stayed A case is presumptively filed not in good faith (but
such presumption may be rebutted by clear and convincing
evidence to the contrary)--
``(A) as to all creditors if--
``(i) more than 1 previous case under any of
chapter 7, 11, or 13 in which the individual
was a debtor was pending within such 1-year
period;
``(ii) a previous case under any of chapters
7, 11, or 13 in which the individual was a
debtor was dismissed within such 1-year period,
after the debtor failed to file or amend the
petition or other documents as required by this
title or the court without substantial excuse
(but mere inadvertence or negligence shall not
be substantial excuse unless the dismissal was
caused by the negligence of the debtor's
attorney), failed to provide adequate
protection as ordered by the court, or failed
to perform the terms of a plan confirmed by the
court; or
``(iii) there has not been a substantial
change in the financial or personal affairs of
the debtor since the dismissal of the next most
previous case under any of chapters 7, 11, or
13 of this title, or there is not any other
reason to conclude that the later case will be
concluded, if a case under chapter 7 of this
title, with a discharge, and if a chapter 11 or
13 case, a confirmed plan which will be fully
performed;
``(B) as to any creditor that commenced an action
under subsection (d) in a previous case in which the
individual was a debtor if, as of the date of dismissal
of such case, that action was still pending or had been
resolved by terminating, conditioning, or limiting the
stay as to actions of such creditor.
``(4) If a single or joint case is filed by or against an
individual debtor under this title (other than a case refiled
under a chapter other than chapter 7 after a dismissal under
section 707(b) of this title), and if 2 or more single or joint
cases of the debtor were pending within the previous year but
were dismissed, the stay under subsection (a) will not go into
effect upon the filing of the later case On request of a party
in interest, the court shall promptly enter an order confirming
that no stay is in effect If a party in interest requests
within 30 days of the filing of the later case, the court may
order the stay to take effect in the case as to any or all
creditors (subject to such conditions or limitations as the
court may impose), after notice and hearing, only ifthe party
in interest demonstrates that the filing of the later case is in good
faith as to the creditors to be stayed A stay imposed pursuant to the
preceding sentence will be effective on the date of entry of the order
allowing the stay to go into effect A case is presumptively not filed
in good faith (but such presumption may be rebutted by clear and
convincing evidence to the contrary)--
``(A) as to all creditors if--
``(i) 2 or more previous cases under this
title in which the individual was a debtor were
pending within the 1-year period;
``(ii) a previous case under this title in
which the individual was a debtor was dismissed
within the time period stated in this paragraph
after the debtor failed to file or amend the
petition or other documents as required by this
title or the court without substantial excuse
(but mere inadvertence or negligence shall not
be substantial excuse unless the dismissal was
caused by the negligence of the debtor's
attorney), failed to provide adequate
protection as ordered by the court, or failed
to perform the terms of a plan confirmed by the
court; or
``(iii) there has not been a substantial
change in the financial or personal affairs of
the debtor since the dismissal of the next most
previous case under this title, or there is not
any other reason to conclude that the later
case will be concluded, if a case under chapter
7, with a discharge, and if a case under
chapter 11 or 13, with a confirmed plan that
will be fully performed; or
``(B) as to any creditor that commenced an action
under subsection (d) in a previous case in which the
individual was a debtor if, as of the date of dismissal
of such case, such action was still pending or had been
resolved by terminating, conditioning, or limiting the
stay as to action of such creditor.''.

SEC. 118. CURBING ABUSIVE FILINGS.

(a) In General.--Section 362(d) of title 11, United States Code, is
amended--
(1) in paragraph (2), by striking ``or'' at the end;
(2) in paragraph (3), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(4) with respect to a stay of an act against real property
under subsection (a), by a creditor whose claim is secured by
an interest in such real estate, if the court finds that the
filing of the bankruptcy petition was part of a scheme to
delay, hinder, and defraud creditors that involved either--
``(A) transfer of all or part ownership of, or other
interest in, the real property without the consent of
the secured creditor or court approval; or
``(B) multiple bankruptcy filings affecting the real
property.
If recorded in compliance with applicable State laws governing notices
of interests or liens in real property, an order entered pursuant to
this subsection shall be binding in any other case under this title
purporting to affect the real property filed not later than 2 years
after that recording, except that a debtor in a subsequent case may
move for relief from such order based upon changed circumstances or for
good cause shown, after notice and a hearing Any Federal, State, or
local governmental unit which accepts notices of interests or liens in
real property shall accept any certified copy of an order described in
this subsection for indexing and recording.''.
(b) Automatic Stay.--Section 362(b) of title 11, United States Code,
is amended--
(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 inserting after paragraph (18) the following:
``(19) under subsection (a), of any act to enforce any lien
against or security interest in real property following the
entry of an order under section 362(d)(4) of this title as to
that property in any prior bankruptcy case for a period of 2
years after entry of such an order The debtor in a subsequent
case, however, may move the court for relief from such order
based upon changed circumstances or for other good cause shown
(consistent with the standards for good faith in subsection
(c)), after notice and a hearing; or
``(20) under subsection (a), of any act to enforce any lien
against or security interest in real property--
``(A) if the debtor is ineligible under section
109(g) of this title to be a debtor in a bankruptcy
case; or
``(B) if the bankruptcy case was filed in violation
of a bankruptcy court order in a prior bankruptcy case
prohibiting the debtor from being a debtor in another
bankruptcy case.''.

SEC. 119. DEBTOR RETENTION OF PERSONAL PROPERTY SECURITY.

Title 11, United States Code, is amended--
(1) in section 521--
(A) in paragraph (4) by striking ``, and'' at the end
and inserting a semicolon;
(B) in paragraph (5) by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following:
``(6) in an individual case under chapter 7 of this title,
not retain possession of personal property as to which a
creditor has an allowed claim for the purchase price secured in
whole or in part by an interest in that personal property
unless, in the case of an individual debtor, the debtor takes 1
of the following actions within 45 days after the first meeting
of creditors under section 341(a)--
``(A) enters into an agreement with the creditor
pursuant to section 524(c) of this title with respect
to the claim secured by such property; or
``(B) redeems such property from the security
interest pursuant to section 722 of this title.
``If the debtor fails to so act within the 45-day period, the
stay under section 362(a) of this title is terminated with
respect to the personal property of the estate or of the debtor
which is affected, such property shall no longer be property of
the estate, and the creditor may take whatever action as to
such property as is permitted by applicable nonbankruptcy law,
unless the court determines on the motion of the trustee
brought before the expiration of such 45-day period, and after
notice and a hearing, that such property is of consequential
value or benefit to the estate, orders appropriate adequate
protection of the creditor's interest, and orders the debtor to
deliver any collateral in the debtor's possession to the
trustee.''; and
(2) in section 722 by inserting ``in full at the time of
redemption'' before the period at the end.

SEC. 120. RELIEF FROM THE AUTOMATIC STAY WHEN THE DEBTOR DOES NOT
COMPLETE INTENDED SURRENDER OF CONSUMER DEBT
COLLATERAL.

Title 11, United States Code, is amended as follows--
(1) in section 362--
(A) by striking ``(e), and (f)'' in subsection (c)
and inserting in lieu thereof ``(e), (f), and (h)'';
and
(B) by redesignating subsection (h) as subsection (i)
and by inserting after subsection (g) the following:
``(h) In an individual case pursuant to chapter 7, 11, or 13 the stay
provided by subsection (a) is terminated with respect to personal
property of the estate or of the debtor securing in whole or in part a
claim, or subject to an unexpired lease, and such personal property
shall no longer be property of the estate if the debtor fails within
the applicable time set by section 521(a)(2) of this title--
``(1) to file timely any statement of intention required
under section 521(a)(2) of this title with respect to that
property or to indicate therein that the debtor will either
surrender the property or retain it and, if retaining it,
either redeem the property pursuant to section 722 of this
title, reaffirm the debt it secures pursuant to section 524(c)
of this title, or assume the unexpired lease pursuant to
section 365(p) of this title if the trustee does not do so, as
applicable; or
``(2) to take timely the action specified in that statement
of intention, as it may be amended before expiration of the
period for taking action, unless the statement of intention
specifies reaffirmation and the creditor refuses to reaffirm on
the original contract terms;
unless the court determines on the motion of the trustee filed before
the expiration of the applicable time set by section 521(a)(2), and
after notice and a hearing, that such property is of consequential
value or benefit to the estate, orders appropriate adequate protection
of the creditor's interest, and orders the debtor to deliver any
collateral in the debtor's possession to the trustee If the court does
not so determine an order, the stay shall terminate upon the conclusion
of the proceeding on the motion.''; and
(2) in section 521, as amended by sections 603 and 604--
(A) in paragraph (2) by striking ``consumer'';
(B) in paragraph (2)(B)--
(i) by striking ``forty-five days after the
filing of a notice of intent under this
section'' and inserting ``30 days after the
first date set for the meeting of creditors
under section 341(a) of this title''; and
(ii) by striking ``forty-five day'' the
second place it appears and inserting ``30-
day'';
(C) in paragraph (2)(C) by inserting ``except as
provided in section 362(h) of this title'' before the
semicolon; and
(D) by inserting after subsection (b) the following:
``(c) If the debtor fails timely to take the action specified in
subsection (a)(6) of this section, or in paragraphs (1) and (2) of
section 362(h) of this title, with respect to property which a lessor
or bailor owns and has leased, rented, or bailed to the debtor or as to
which a creditor holds a security interest not otherwise voidable under
section 522(f), 544, 545, 547, 548, or 549 of this title, nothing in
this title shall prevent or limit the operation of a provision in the
underlying lease or agreement which has the effect of placing the
debtor in default under such lease or agreement by reason of the
occurrence, pendency, or existence of a proceeding under this title or
the insolvency of the debtor Nothing in this subsection shall be deemed
to justify limiting such a provision in any other circumstance.''.

SEC. 121. GIVING SECURED CREDITORS FAIR TREATMENT IN CHAPTER 13.

Section 1325(a)(5)(B)(i) of title 11, United States Code, is amended
to read as follows:
``(i) the plan provides that the holder of such claim
retain the lien securing such claim until the earlier
of payment of the underlying debt determined under
nonbankruptcy law or discharge under section 1328 of
this title, and that if the case under this chapter is
dismissed or converted without completion of the plan,
such lien shall also be retained by such holder to the
extent recognized by applicable nonbankruptcy law;
and''.

SEC. 122. RESTRAINING ABUSIVE PURCHASES ON SECURED CREDIT.

Section 506 of title 11, United States Code, is amended by adding at
the end the following:
``(e) In an individual case under chapter 7, 11, 12, or 13--
``(1) 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 within 5
years of the filing of the petition, except for the purpose of
applying paragraph (3) of this subsection;
``(2) if such allowed claim attributable to the purchase
price is secured only by the personal property so acquired, the
value of the personal property and the amount of the allowed
secured claim shall be the sum of the unpaid principalbalance
of the purchase price and accrued and unpaid interest and charges at
the contract rate;
``(3) if such allowed claim attributable to the purchase
price is secured by the personal property so acquired and other
property, the value of the security may be determined under
subsection (a), but the value of the security and the amount of
the allowed secured claim shall be not less than the unpaid
principal balance of the purchase price of the personal
property acquired and unpaid interest and charges at the
contract rate; and
``(4) in any subsequent case under this title that is filed
by or against the debtor in the 2-year period beginning on the
date the petition is filed in the original case, the value of
the personal property and the amount of the allowed secured
claim shall be deemed to be not less than the amount provided
under paragraphs (2) and (3) less any payments actually
received.''.

SEC. 123. FAIR VALUATION OF COLLATERAL.

Section 506(a) of title 11, United States Code, is amended by adding
at the end the following:
``In the case of an individual debtor under chapters 7 and 13, such
value with respect to personal property securing an allowed claim shall
be determined based on the replacement value of such property as of the
date of filing the petition without deduction for costs of sale or
marketing With respect to property acquired for personal, family, or
household purpose, replacement value shall mean the price a retail
merchant would charge for property of that kind considering the age and
condition of the property at the time value is determined.''.

SEC. 124. DOMICILIARY REQUIREMENTS FOR EXEMPTIONS.

Section 522(b)(2)(A) of title 11, United States Code, is amended--
(1) by striking ``180'' and inserting ``730''; and
(2) by striking ``, or for a longer portion of such 180-day
period than in any other place'' and inserting ``or if the
debtor's domicile has not been located at a single State for
such 730-day period, the place in which the debtor's domicile
was located for 180 days immediately preceding the 730-day
period or for a longer portion of such 180-day period than in
any other place''.

SEC. 125. RESTRICTIONS ON CERTAIN EXEMPT PROPERTY OBTAINED THROUGH
FRAUD.

Section 522 of title 11, United States Code, as amended by section
113, is amended--
(1) in subsection (b)(2)(A) by inserting ``subject to
subsection (o),'' before ``any property''; and
(2) by adding at the end the following:
``(o) For purposes of subsection (b)(3)(A) and notwithstanding
subsection (a), the value of an interest in--
``(1) real or personal property that the debtor or a
dependent of the debtor uses as a residence;
``(2) a cooperative that owns property that the debtor or a
dependent of the debtor uses as a residence; or
``(3) a burial plot for the debtor or a dependent of the
debtor;
shall be reduced to the extent such value is attributable to any
portion of any property that the debtor disposed of in the 730-day
period ending of the date of the filing of the petition, with the
intent to hinder, delay, or defraud a creditor and that the debtor
could not exempt, or that portion that the debtor could not exempt,
under subsection (b) if on such date the debtor had held the property
so disposed of.''.

SEC. 126. ROLLING STOCK EQUIPMENT.

(a) In General.--Section 1168 of title 11, United States Code, is
amended to read as follows:

``Sec. 1168. Rolling stock equipment

``(a)(1) The right of a secured party with a security interest in or
of a lessor or conditional vendor of equipment described in paragraph
(2) to take possession of such equipment in compliance with an
equipment security agreement, lease, or conditional sale contract, and
to enforce any of its other rights or remedies under such security
agreement, lease, or conditional sale contract, to sell, lease, or
otherwise retain or dispose of such equipment, is not limited or
otherwise affected by any other provision of this title or by any power
of the court, except that the right to take possession and enforce
those other rights and remedies shall be subject to section 362 of this
title, if--
``(A) before the date that is 60 days after the date of
commencement of a case under this chapter, the trustee, subject
to the court's approval, agrees toperform all obligations of
the debtor under such security agreement, lease, or conditional sale
contract; and
``(B) any default, other than a default of a kind described
in section 365(b)(2) of this title, under such security
agreement, lease, or conditional sale contract--
``(i) that occurs before the date of commencement of
the case and is an event of default therewith is cured
before the expiration of such 60-day period;
``(ii) that occurs or becomes an event of default
after the date of commencement of the case and before
the expiration of such 60-day period is cured before
the later of--
``(I) the date that is 30 days after the date
of the default or event of the default; or
``(II) the expiration of such 60-day period;
and
``(iii) that occurs on or after the expiration of
such 60-day period is cured in accordance with the
terms of such security agreement, lease, or conditional
sale contract, if cure is permitted under that
agreement, lease, or conditional sale contract.
``(2) The equipment described in this paragraph--
``(A) is rolling stock equipment or accessories used on
rolling stock equipment, including superstructures or racks,
that is subject to a security interest granted by, leased to,
or conditionally sold to a debtor; and
``(B) includes all records and documents relating to such
equipment that are required, under the terms of the security
agreement, lease, or conditional sale contract, that is to be
surrendered or returned by the debtor in connection with the
surrender or return of such equipment.
``(3) Paragraph (1) applies to a secured party, lessor, or
conditional vendor acting in its own behalf or acting as trustee or
otherwise in behalf of another party.
``(b) The trustee and the secured party, lessor, or conditional
vendor whose right to take possession is protected under subsection (a)
may agree, subject to the court's approval, to extend the 60-day period
specified in subsection (a)(1).
``(c)(1) In any case under this chapter, the trustee shall
immediately surrender and return to a secured party, lessor, or
conditional vendor, described in subsection (a)(1), equipment described
in subsection (a)(2), if at any time after the date of commencement of
the case under this chapter such secured party, lessor, or conditional
vendor is entitled pursuant to subsection (a)(1) to take possession of
such equipment and makes a written demand for such possession of the
trustee.
``(2) At such time as the trustee is required under paragraph (1) to
surrender and return equipment described in subsection (a)(2), any
lease of such equipment, and any security agreement or conditional sale
contract relating to such equipment, if such security agreement or
conditional sale contract is an executory contract, shall be deemed
rejected.
``(d) With respect to equipment first placed in service on or prior
to October 22, 1994, for purposes of this section--
``(1) the term `lease' includes any written agreement with
respect to which the lessor and the debtor, as lessee, have
expressed in the agreement or in a substantially
contemporaneous writing that the agreement is to be treated as
a lease for Federal income tax purposes; and
``(2) the term `security interest' means a purchase-money
equipment security interest.
``(e) With respect to equipment first placed in service after October
22, 1994, for purposes of this section, the term `rolling stock
equipment' includes rolling stock equipment that is substantially
rebuilt and accessories used on such equipment.''.
(b) Aircraft Equipment and Vessels.--Section 1110 of title 11, United
States Code, is amended to read as follows:

``Sec. 1110. Aircraft equipment and vessels

``(a)(1) Except as provided in paragraph (2) and subject to
subsection (b), the right of a secured party with a security interest
in equipment described in paragraph (3), or of a lessor or conditional
vendor of such equipment, to take possession of such equipment in
compliance with a security agreement, lease, or conditional sale
contract, and to enforce any of its other rights or remedies, under
such security agreement, lease, or conditional sale contract, to sell,
lease, or otherwise retain or dispose of such equipment, is not limited
or otherwise affected by any other provision of this title or by any
power of the court.
``(2) The right to take possession and to enforce the other rights
and remedies described in paragraph (1) shall be subject to section 362
of this title if--
``(A) before the date that is 60 days after the date of the
order for relief under this chapter, the trustee, subject to
the approval of the court, agrees to perform all obligations of
the debtor under such security agreement, lease, or conditional
sale contract; and
``(B) any default, other than a default of a kind specified
in section 365(b)(2) of this title, under such security
agreement, lease, or conditional sale contract--
``(i) that occurs before the date of the order is
cured before the expiration of such 60-day period;
``(ii) that occurs after the date of the order and
before the expiration of such 60-day period is cured
before the later of--
``(I) the date that is 30 days after the date
of the default; or
``(II) the expiration of such 60-day period;
and
``(iii) that occurs on or after the expiration of
such 60-day period is cured in compliance with the
terms of such security agreement, lease, or conditional
sale contract, if a cure is permitted under that
agreement, lease, or contract.
``(3) The equipment described in this paragraph--
``(A) is--
``(i) an aircraft, aircraft engine, propeller,
appliance, or spare part (as defined in section 40102
of title 49) that is subject to a security interest
granted by, leased to, or conditionally sold to a
debtor that, at the time such transaction is entered
into, holds an air carrier operating certificate issued
pursuant to chapter 447 of title 49 for aircraft
capable of carrying 10 or more individuals or 6,000
pounds or more of cargo; or
``(ii) a documented vessel (as defined in section
30101(1) of title 46) that is subject to a security
interest granted by, leased to, or conditionally sold
to a debtor that is a water carrier that, at the time
such transaction is entered into, holds a certificate
of public convenience and necessity or permit issued by
the Department of Transportation; and
``(B) includes all records and documents relating to such
equipment that are required, under the terms of the security
agreement, lease, or conditional sale contract, to be
surrendered or returned by the debtor in connection with the
surrender or return of such equipment.
``(4) Paragraph (1) applies to a secured party, lessor, or
conditional vendor acting in its own behalf or acting as trustee or
otherwise in behalf of another party.
``(b) The trustee and the secured party, lessor, or conditional
vendor whose right to take possession is protected under subsection (a)
may agree, subject to the approval of the court, to extend the 60-day
period specified in subsection (a)(1).
``(c)(1) In any case under this chapter, the trustee shall
immediately surrender and return to a secured party, lessor, or
conditional vendor, described in subsection (a)(1), equipment described
in subsection (a)(3), if at any time after the date of the order for
relief under this chapter such secured party, lessor, or conditional
vendor is entitled pursuant to subsection (a)(1) to take possession of
such equipment and makes a written demand for such possession to the
trustee.
``(2) At such time as the trustee is required under paragraph (1) to
surrender and return equipment described in subsection (a)(3), any
lease of such equipment, and any security agreement or conditional sale
contract relating to such equipment, if such security agreement or
conditional sale contract is an executory contract, shall be deemed
rejected.
``(d) With respect to equipment first placed in service on or before
October 22, 1994, for purposes of this section--
``(1) the term `lease' includes any written agreement with
respect to which the lessor and the debtor, as lessee, have
expressed in the agreement or in a substantially
contemporaneous writing that the agreement is to be treated as
a lease for Federal income tax purposes; and
``(2) the term `security interest' means a purchase-money
equipment security interest.''.

SEC. 127. 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) of this title;
``(2) of the kind specified in paragraph (2), (4), (3)(B),
(5), (8), or (9) of section 523(a) of this title;
``(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. 128. BANKRUPTCY JUDGESHIPS.

(a) Short Title.--This section may be cited as the ``Bankruptcy
Judgeship Act of 1999''.
(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 beappointed 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. 129. ADDITIONAL AMENDMENTS TO TITLE 11, UNITED STATES CODE.

Section 507(a) of title 11, United States Code, is amended by
inserting after paragraph (9) the following:
``(10) Tenth, allowed claims for death or personal injuries
resulting from the operation of a motor vehicle or vessel if
such operation was unlawful because the debtor was intoxicated
from using alcohol, a drug or another substance.''.

SEC 130 AMENDMENT TO SECTION 1325 OF TITLE 11, UNITED STATES CODE.

Section 1325(b) of title 11, United States Code, is amended--
(1) in paragraph (1), by inserting ``to unsecured creditors''
after ``to make payments'';
(2) in paragraph (2)--
(A) by inserting ``current monthly'' before
``income'';
(B) by striking ``and which is not'' and inserting
``less amounts'';
(C) by inserting after ``received by the debtor'',
``(other than child support payments, foster care
payments, or disability payments for a dependent child
made in accordance with applicable nonbankruptcy law
and which is reasonably necessary to be expended)'';
and
(D) in subparagraph (A) by inserting after
``dependent of the debtor'' the following: ``, as
determined in accordance with section 707(b)(2)(A) and
if applicable 707(b)(2)(B)''.

SEC. 131. 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. 132. ADEQUATE PROTECTION FOR INVESTORS.

(a) Definition.--Section 101 of title 11, United States Code, is
amended by inserting after paragraph (48) the following:
``(48A) `securities self regulatory organization' means
either a securities association registered with the Securities
and Exchange Commission pursuant to section 15A of the
Securities Exchange Act of 1934 or a national securities
exchange registered with the Securities and Exchange Commission
pursuant to section 6 of the Securities Exchange Act of
1934;''.
(b) Automatic Stay.--Section 362(b) of title 11, United States Code,
as amended by section 118, is amended--
(1) in paragraph (19) by striking ``or'' at the end;
(2) in paragraph (20) by striking the period at the end and a
inserting ``; or''; and
(3) by inserting after paragraph (20) the following:
``(21) under subsection (a), of the commencement or
continuation of an investigation or action by a securities self
regulatory organization to enforce such organization's
regulatory power; of the enforcement of an order or decision,
other than for monetary sanctions, obtained in an action by the
securities self regulatory organization to enforce such
organization's regulatory power; or of any act taken by the
securities self regulatory organization to delist, delete, or
refuse to permit quotation of any stock that does not meet
applicable regulatory requirements.''.

SEC. 133. LIMITATION ON LUXURY GOODS.

Section 523(a)(2)(C) of title 11, United States Code, is amended to
read as follows:
``(C)(i) for purposes of subparagraph (A), consumer
debts owed to a single creditor and aggregating more
than $250 for `luxury goods or services' incurred by an
individual debtor on or within 90 days before the order
for relief under this title, or cash advances
aggregating more than $250 that are extensions of
consumer credit under an open end credit plan obtained
by an individual debtor on or within 90 days before the
order for relief under this title, are presumed to be
nondischargeable; and
``(ii) for purposes of this subparagraph--
``(I) the term `luxury goods or services'
does not include goods or services reasonably
necessary for the support or maintenance of the
debtor or a dependent of the debtor; and
``(II) the term `an extension of consumer
credit under an open end credit plan' has the
same meaning such term has for purposes of the
Consumer Credit Protection Act;''.

SEC. 134. GIVING DEBTORS THE ABILITY TO KEEP LEASED PERSONAL PROPERTY
BY ASSUMPTION.

Section 365 of title 11, United States Code, is amended by adding at
the end the following:
``(p)(1) If a lease of personal property is rejected or not timely
assumed by the trustee under subsection (d), the leased property is no
longer property of the estate and the stay under section 362(a) of this
title is automatically terminated.
``(2) In the case of an individual under chapter 7, the debtor may
notify the creditor in writing that the debtor desires to assume the
lease Upon being so notified, the creditor may, at its option, notify
the debtor that it is willing to have the lease assumed by the debtor
and may, at its option, condition such assumption on cure of any
outstanding default on terms set by the contract If within 30 days
ofthe notice from the creditor the debtor notifies the lessor in
writing that the lease is assumed, the liability under the lease will
be assumed by the debtor and not by the estate The stay under section
362 of this title and the injunction under section 524(a) of this title
shall not be violated by notification of the debtor and negotiation of
cure under this subsection Nothing in this paragraph shall require a
debtor to assume a lease, or a creditor to permit assumption.
``(3) In a case under chapter 11 of this title in which the debtor is
an individual and in a case under chapter 13 of this title, if the
debtor is the lessee with respect to personal property and the lease is
not assumed in the plan confirmed by the court, the lease is deemed
rejected as of the conclusion of the hearing on confirmation If the
lease is rejected, the stay under section 362 of this title and any
stay under section 1301 is automatically terminated with respect to the
property subject to the lease.''.

SEC. 135. 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), 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 required under subparagraph (A) 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 the
contract amount and shall reduce any amount payable under section
1326(a) of the title.
``(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 payments referred to in paragraph (1) shall not
be less than the amount of any weekly, biweekly, monthly, or other
periodic payment scheduled as payable under the contract between the
debtor and creditor.
``(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.
``(e) On or before 60 days after the filling of a case under this
chapter, a debtor retaining possession of personal property subject to
a lease or securing a claim attributable in whole or in part to the
purchase price of such property shall provide each creditor or lessor
reasonable evidence of the maintenance of any required insurance
coverage with respect to the use or ownership of such property and
continue to do so for so long as the debtor retains possession of such
property.''.
(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. 136. AUTOMATIC STAY.

Section 362(b) of title 11, United States Code, as amended by
sections 118 and 132, is amended--
(1) in paragraph (20), by striking ``or'' at the end;
(2) in paragraph (21), by striking the period at the end and
inserting a semicolon; and
(3) by inserting after paragraph (21) the following:
``(22) under subsection (a) of any transfer that is not
avoidable under section 544 of this title and that is not
avoidable under section 549 of this title;
``(23) under subsection (a)(3), of the continuation of any
eviction, unlawful detainer action, or similar proceeding by a
lessor against a debtor involving residential real property in
which the debtor resides as a tenant under a rental agreement
and the debtor has not paid rent to the lessor pursuant to the
terms of the lease agreement or applicable State law after the
commencement and during the course of the case;
``(24) under subsection (a)(3), of the commencement or
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 that has terminated pursuant to
the lease agreement or applicable State law;
``(25) under subsection (a)(3), of any eviction, unlawful
detainer action, or similar proceeding, if the debtor has
previously filed within the last year and failed to pay post-
petition rent during the course of that case; or
``(26) under subsection (a)(3), of eviction actions based on
endangerment to property or person or the use of illegal
drugs.''.

SEC. 137. EXTEND PERIOD BETWEEN BANKRUPTCY DISCHARGES.

Title 11, United States Code, is amended--
(1) in section 727(a)(8) by striking ``six'' and inserting
``8''; and
(2) in section 1328 by adding at the end the following:
``(f) Notwithstanding subsections (a) and (b), the court shall not
grant a discharge of all debts provided for by the plan or disallowed
under section 502 of this title if the debtor has received a discharge
in any case filed under this title within 5 years of the order for
relief under this chapter.''.

SEC. 138. DEFINITION OF DOMESTIC SUPPORT OBLIGATION.

Section 101 of title 11, United States Code, is amended--
(1) by striking paragraph (12A); and
(2) by inserting after paragraph (14) the following:
``(14A) `domestic support obligation' means a debt that
accrues before or after the entry of an order for relief under
this title that is--
``(A) owed to or recoverable by--
``(i) a spouse, former spouse, or child of
the debtor or that child's legal guardian; or
``(ii) a governmental unit;
``(B) in the nature of alimony, maintenance, or
support (including assistance provided by a
governmental unit) of such spouse, former spouse, or
child, without regard to whether such debt is expressly
so designated;
``(C) established or subject to establishment before
or after entry of an order for relief under this title,
by reason of applicable provisions of--
``(i) a separation agreement, divorce decree,
or property settlement agreement;
``(ii) an order of a court of record; or
``(iii) a determination made in accordance
with applicable nonbankruptcy law by a
governmental unit; and
``(D) not assigned to a nongovernmental entity,
unless that obligation is assigned voluntarily by the
spouse, former spouse, child, or parent solely for the
purpose of collecting the debt.''.

SEC. 139. PRIORITIES FOR CLAIMS FOR DOMESTIC SUPPORT OBLIGATIONS.

Section 507(a) of title 11, United States Code, is amended--
(1) by striking paragraph (7);
(2) by redesignating paragraphs (1) through (6) as paragraphs
(2) through (7), respectively;
(3) in paragraph (2), as redesignated, by striking ``First''
and inserting ``Second'';
(4) in paragraph (3), as redesignated, by striking ``Second''
and inserting ``Third'';
(5) in paragraph (4), as redesignated, by striking ``Third''
and inserting ``Fourth'';
(6) in paragraph (5), as redesignated, by striking ``Fourth''
and inserting ``Fifth'';
(7) in paragraph (6), as redesignated, by striking ``Fifth''
and inserting ``Sixth'';
(8) in paragraph (7), as redesignated, by striking ``Sixth''
and inserting ``Seventh''; and
(9) by inserting before paragraph (2), as redesignated, the
following:
``(1) First, allowed claims for domestic support obligations
to be paid in the following order on the condition that funds
received under this paragraph by a governmental unit in a case
under this title be applied:
``(A) Claims that, as of the date of entry of the
order for relief, are owed directly to a spouse, former
spouse, or child of the debtor, or the parent of such
child, without regard to whether the claim is filed by
the spouse, former spouse, child, or parent, or is
filed by a governmental unit on behalf of that person.
``(B) Claims that, as of the date of entry of the
order for relief, are assigned by a spouse, former
spouse, child of the debtor, or the parent of that
child to a governmental unit or are owed directly to a
governmental unit under applicable nonbankruptcy
law.''.

SEC. 140. REQUIREMENTS TO OBTAIN CONFIRMATION AND DISCHARGE IN CASES
INVOLVING DOMESTIC SUPPORT OBLIGATIONS.

Title 11, United States Code, is amended--
(1) in section 1129(a), by adding at the end the following:
``(14) If the debtor is required by a judicial or
administrative order or statute to pay a domestic support
obligation, the debtor has paid all amounts payable under such
order or statute for such obligation that become payable after
the date on which the petition is filed.'';
(2) 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 or statute to pay a domestic support
obligation, the debtor has paid all amounts payable under such
order for such obligation that become payable after the date on
which the petition is filed.''; and
(3) in section 1328(a), as amended by section 127, 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 a domestic support obligation,
certifies that all amounts payable under such order or statute
that are due on or before the date of the certification
(including amounts due before or after the petition was filed)
have been paid'' after ``completion by the debtor of all
payments under the plan''.

SEC. 141. EXCEPTIONS TO AUTOMATIC STAY IN DOMESTIC SUPPORT OBLIGATION
PROCEEDINGS.

Section 362(b) of title 11, United States Code, as amended by
sections 118, 132, and 136, is amended--
(1) by striking paragraph (2) and inserting the following:
``(2) under subsection (a)--
``(A) of the commencement or continuation of an
action or proceeding for--
``(i) the establishment of paternity; or
``(ii) the establishment or modification of
an order for domestic support obligations; or
``(B) the collection of a domestic support obligation
from property that is not property of the estate;'';
(2) in paragraph (25), by striking ``or'' at the end;
(3) in paragraph (26), by striking the period at the end and
inserting a semicolon; and
(4) by inserting after paragraph (26) the following:
``(27) 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
``(28) under subsection (a) with respect to--
``(A) 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)(16) of the Social
Security Act (42 U.S.C 666(a)(16)) or with respect to
the reporting of overdue support owedby 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));
``(B) the interception of tax refunds, as specified
in sections 464 and 466(a)(3) of the Social Security
Act (42 U.S.C 664 and 666(a)(3)); or
``(C) the enforcement of medical obligations as
specified under title IV of the Social Security Act (42
U.S.C 601 et seq.).''.

SEC. 142. NONDISCHARGEABILITY OF CERTAIN DEBTS FOR ALIMONY,
MAINTENANCE, AND SUPPORT.

Section 523 of title 11, United States Code, is amended--
(1) in subsection (a), by striking paragraph (5) and
inserting the following:
``(5) for a domestic support obligation;'';
(2) in subsection (a)(15)--
(A) by inserting ``or'' after ``court of record,'';
(B) by striking ``unless--'' and all that follows
through ``debtor'' the last place it appears; and
(3) in subsection (c), by striking ``(6), or (15)'' each
place it appears and inserting ``or (6)''.

SEC. 143. CONTINUED LIABILITY OF PROPERTY.

Section 522 of title 11, United States Code, is amended--
(1) in subsection (c), by striking paragraph (1) and
inserting the following:
``(1) a debt of a kind specified in paragraph (1) or (5) of
section 523(a) (in which case, notwithstanding any provision of
applicable nonbankruptcy law to the contrary, such property
shall be liable for a debt of a kind specified in section
523(a)(5);''; and
(2) in subsection (f)(1)(A), by striking the dash and all
that follows through the end of the subparagraph and inserting
``of a kind that is specified in section 523(a)(5); or''.

SEC. 144. PROTECTION OF DOMESTIC SUPPORT CLAIMS AGAINST PREFERENTIAL
TRANSFER MOTIONS.

Section 547(c)(7) of title 11, United States Code, is amended to read
as follows:
``(7) to the extent such transfer was a bona fide payment of
a debt for a domestic support obligation; or''.

SEC. 145. CLARIFICATION OF MEANING OF HOUSEHOLD GOODS.

Section 101 of title 11, United States Code, is amended by inserting
after paragraph (27) the following:
``(27A) `household goods' includes tangible personal property
normally found in or around a residence, but does not include
motorized vehicles used for transportation purposes;''.

SEC. 146. 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), 1228(b), or 1328(c), or
any other provision of this subsection, if the debtor incurred
the debt to pay such a nondischargeable debt with the intent to
discharge in bankruptcy the newly-created debt, except that all
debts incurred to pay nondischargeable debts, without regard to
intent, are nondischargeable if incurred within 90 days of the
filing of the petition;''.

SEC. 147. MONETARY LIMITATION ON CERTAIN EXEMPT PROPERTY.

Section 522 of title 11, United States Code, as amended by section
125, is amended--
(1) in subsection (b)(2)(A) by striking ``subsection (o)''
and inserting ``subsections (o) and (p)'' before ``any
property''; and
(2) by adding at the end the following:
``(p)(1) Except as provided in paragraphs (2) and (3), as a result of
electing under subsection (b)(3)(A) to exempt property under State or
local law, a debtor may not exempt any interest that exceeds $250,000
in value, in the aggregate, 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)(3)(A) by a family farmer for the
principal residence of that farmer.
``(3) Paragraph (1) shall not apply to debtors if applicable State
law expressly provides by a statute enacted after the effective date of
this paragraph that such paragraph shall not apply to debtors.''.

SEC. 148. BANKRUPTCY FEES.

Section 1930 of title 28, United States Code, is amended--
(1) in subsection (a) by striking ``Notwithstanding section
1915 of this title, the'' and inserting ``The''; and
(2) by adding at the end the following:
``(f)(1) Pursuant to procedures prescribed by the Judicial Conference
of the United States, the district court or the bankruptcy court may
waive the filing fee in a case under chapter 7 of title 11 for an
individual debtor who is unable to pay such fee in installments For
purposes of this paragraph, the term `filing fee' means the filing fee
required by subsection (a), or any other fee prescribed by the Judicial
Conference under subsections (b) and (c) that is payable to the clerk
upon the commencement of a case under chapter 7 of title 11.
``(2) The district court or the bankruptcy court may also waive for
such debtors other fees prescribed pursuant to subsections (b) and (c).
``(3) This subsection does not restrict the district court or the
bankruptcy court from waiving, in accordance with Judicial Conference
policy, fees prescribed pursuant to such subsections for other debtors
and creditors.''.

SEC. 149. COLLECTION OF CHILD SUPPORT.

(a) Duties of Trustee Under Chapter 7.--Section 704 of title 11,
United States Code, as amended by section 102, is amended--
(1) by inserting ``(a)'' before ``The trustee'',
(2) in paragraph (9) by striking ``and'' at the end,
(3) in paragraph (10) by striking the period and inserting
``; and'', and
(4) by adding at the end the following:
``(11) if, with respect to an individual debtor, there is a
claim for support of a child of the debtor or a custodial
parent of such child entitled to receive priority under section
507(a)(1) of this title, provide the applicable notification
specified in subsection (b).
``(b)(1) In any case described in subsection (a)(11), the trustee
shall--
``(A)(i) notify in writing the holder of the claim of the
right of such holder to use the services of a State child
support enforcement agency established under sections 464 and
466 of the Social Security Act for the State in which the
holder resides; and
``(ii) include in the notice under this paragraph the address
and telephone number of the child support enforcement agency;
and
``(B)(i) notify in writing the State child support agency of
the State in which the holder of the claim resides of the
claim;
``(ii) include in the notice under this paragraph the name,
address, and telephone number of the holder of the claim; and
``(iii) at such time as the debtor is granted a discharge
under section 727 of this title, notify the holder of such
claim and the State child support agency of the State in which
such holder resides of--
``(I) the granting of the discharge;
``(II) the last recent known address of the debtor;
and
``(III) with respect to the debtor's case, the name
of each creditor that holds a claim that is not
discharged under paragraph (2), (4), or (14A) of
section 523(a) of this title or that was reaffirmed by
the debtor under section 524(c) of this title.
``(2)(A) If, after receiving a notice under paragraph (1)(B)(iii), a
holder of a claim or a State child support agency is unable to locate
the debtor that is the subject of the notice, such holder or such
agency may request from a creditor described in paragraph
(1)(B)(iii)(III) the last known address of the debtor.
``(B) Notwithstanding any other provision of law, a creditor that
makes a disclosure of a last known address of a debtor in connection
with a request made under subparagraph (A) shall not be liable to the
debtor or any other person by reason of making such disclosure.''.
(b) Duties of Trustee Under Chapter 13.--Section 1302 of title 11,
United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4) by striking ``and'' at the end,
(B) in paragraph (5) by striking the period and
inserting ``; and'', and
(C) by adding at the end the following:
``(6) if, with respect to an individual debtor, there is a
claim for support of a child of the debtor or a custodial
parent of such child entitled to receivepriority under section
507(a)(1) of this title, provide the applicable notification specified
in subsection (d).'', and
(2) by adding at the end the following:
``(d)(1) In any case described in subsection (b)(6), the trustee
shall--
``(A)(i) notify in writing the holder of the claim of the
right of such holder to use the services of a State child
support enforcement agency established under sections 464 and
466 of the Social Security Act for the State in which the
holder resides; and
``(ii) include in the notice under this paragraph the address
and telephone number of the child support enforcement agency;
and
``(B)(i) notify in writing the State child support agency of
the State in which the holder of the claim resides of the
claim; and
``(ii) include in the notice under this paragraph the name,
address, and telephone number of the holder of the claim;
``(iii) at such time as the debtor is granted a discharge
under section 1328 of this title, notify the holder of the
claim and the State child support agency of the State in which
such holder resides of--
``(I) the granting of the discharge;
``(II) the last recent known address of the debtor;
and
``(III) with respect to the debtor's case, the name
of each creditor that holds a claim that is not
discharged under paragraph (2), (4), or (14A) of
section 523(a) of this title or that was reaffirmed by
the debtor under section 524(c) of this title.
``(2)(A) If, after receiving a notice under paragraph (1)(B)(iii), a
holder of a claim or a State child support agency is unable to locate
the debtor that is the subject of the notice, such holder or such
agency may request from a creditor described in paragraph (1)(B)(iii)
the last known address of the debtor.
``(B) Notwithstanding any other provision of law, a creditor that
makes a disclosure of a last known address of a debtor in connection
with a request made under subparagraph (A) shall not be liable to the
debtor or any other person by reason of making such disclosure.''.

SEC. 150. EXCLUDING EMPLOYEE BENEFIT PLAN PARTICIPANT CONTRIBUTIONS AND
OTHER PROPERTY FROM THE ESTATE.

(a) In General.--Section 541(b) of title 11 of the United States Code
is amended--
(1) by striking ``or'' at the end of paragraph (4)(B)(ii);
(2) by striking the period at the end of paragraph (5) and
inserting ``; or''; and
(3) by inserting after paragraph (5) the following:
``(7) any amount or interest in property to the extent that
an employer has withheld amounts from the wages of employees
for contribution to an employee benefit plan subject to title I
of the Employee Retirement Income Security Act of 1974, or to
the extent that the employer has received amounts as a result
of payments by participants or beneficiaries to an employer for
contribution to an employee benefit plan subject to title I of
the Employee Retirement Income Security Act of 1974.''.
(b) Application of Amendment.--The amendment made by this section
shall not apply to cases commenced under title 11 of the United States
Code before the expiration of the 180-day period beginning on the date
of the enactment of this Act.

SEC. 151. CLARIFICATION OF POSTPETITION WAGES AND BENEFITS.

Section 503(b)(1)(A) of title 11, United States Code, is amended to
read as follows:
``(A) the actual, necessary costs and expenses of preserving
the estate, including wages, salaries, or commissions for
services rendered after the commencement of the case, and wages
and benefits attributable to any period of time after
commencement of the case as a result of the debtor's violation
of Federal law, without regard to when the original unlawful
act occurred or to whether any services were rendered;''.

SEC. 152. EXCEPTIONS TO AUTOMATIC STAY IN DOMESTIC SUPPORT OBLIGATION
PROCEEDINGS.

Section 362(b)(2) of title 11, United States Code, is amended--
(1) in subparagraph (A) by striking ``or'' at the end;
(2) in subparagraph (B) by adding ``or'' at the end; and
(3) by adding at the end the following:
``(C) under subsection (a) of--
``(i) the withholding of income for payment
of a domestic support obligation pursuant to a
judicial or administrative order or statute for
such obligation that first becomes payable
after the date on which the petition is filed;
or
``(ii) the withholding of income for payment
of a domestic support obligation owed directly
to the spouse, former spouse or child of the
debtor or the parent of such child, pursuant to
a judicial or administrative order or statute
for such obligation that becomes payable before
the date on which the petition is filed unless
the court finds, after notice and hearing, that
such withholding would render the plan
infeasible;''.

SEC. 153. AUTOMATIC STAY INAPPLICABLE TO CERTAIN PROCEEDINGS AGAINST
THE DEBTOR.

Section 362(b)(2) of title 11, United States Code, as amended by
section 153, is amended--
(1) in subparagraph (B) by striking ``or'' at the end;
(2) by inserting after subparagraph (C) the following:
``(D) the commencement or continuation of a
proceeding concerning a child custody or visitation;
``(E) the commencement or continuation of a
proceeding alleging domestic violence; or
``(F) the commencement or continuation of a
proceeding seeking a dissolution of marriage, except to
the extent the proceeding concerns property of the
estate;''.

TITLE II--DISCOURAGING BANKRUPTCY ABUSE

SEC. 201. REENACTMENT OF CHAPTER 12.

(a) Reenactment.--Chapter 12 of title 11 of the United States Code,
as in effect on March 31, 1999, is hereby reenacted.
(b) Effective Date.--The amendment made by subsection (a) shall take
effect on March 31, 1999.

SEC. 202. MEETINGS OF CREDITORS AND EQUITY SECURITY HOLDERS.

Section 341 of title 11, United States Code, is amended by adding at
the end the following:
``(e) Notwithstanding subsections (a) and (b), the court, on the
request of a party in interest and after notice and a hearing, for
cause may order that the United States trustee not convene a meeting of
creditors or equity security holders if the debtor has filed a plan as
to which the debtor solicited acceptances prior to the commencement of
the case.''.

SEC. 203. PROTECTION OF RETIREMENT SAVINGS IN BANKRUPTCY.

(a) In General.--Section 522 of title 11, United States Code, as
amended by sections 113, 125, and 147 is amended--
(1) in subsection (b)--
(A) in paragraph (2)--
(i) by striking ``(2)(A)'' and inserting:
``(3) Property listed in this paragraph is--
``(A) subject to subsections (o) and (p),'';
(ii) in subparagraph (B), by striking ``and''
at the end;
(iii) in subparagraph (C), by striking the
period at the end and inserting ``; and''; and
(iv) by adding at the end the following:
``(D) retirement funds to the extent that those funds are in
a fund or account that is exempt from taxation under section
401, 403, 408, 408A, 414, 457, or 501(a) of the Internal
Revenue Code of 1986.'';
(B) by striking paragraph (1) and inserting:
``(2) Property listed in this paragraph is property that is specified
under subsection (d), unless the State law that is applicable to the
debtor under paragraph (3)(A) specifically does not so authorize.'';
(C) in the matter preceding paragraph (2)--
(i) by striking ``(b)'' and inserting
``(b)(1)'';
(ii) by striking ``paragraph (2)'' both
places it appears and inserting ``paragraph
(3)'';
(iii) by striking ``paragraph (1)'' each
place it appears and inserting ``paragraph
(2)''; and
(iv) by striking ``Such property is--''; and
(D) by adding at the end of the subsection the
following:
``(4) For purposes of paragraph (3)(D) and subsection (d)(12), the
following shall apply:
``(A) If the retirement funds are in a retirement fund that
has received a favorable determination pursuant to section 7805
of the Internal Revenue Code of 1986, and that determination is
in effect as of the date of the commencement of the case under
section 301, 302, or 303 of this title, those funds shall be
presumed to be exempt from the estate
``(B) If the retirement funds are in a retirement fund that
has not received a favorable determination pursuant to such
section 7805, those funds are exempt from the estate if the
debtor demonstrates that--
``(i) no prior determination to the contrary has been
made by a court or the Internal Revenue Service; and
``(ii) the retirement fund is in substantial
compliance with the applicable requirements of the
Internal Revenue Code of 1986.
``(C) A direct transfer of retirement funds from 1 fund or
account that is exempt from taxation under section 401, 403,
408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of
1986, pursuant to section 401(a)(31) of the Internal Revenue
Code of 1986, or otherwise, shall not cease to qualify for
exemption under paragraph (3)(D) or subsection (d)(12) by
reason of that direct transfer.
``(D)(i) Any distribution that qualifies as an eligible
rollover distribution within the meaning of section 402(c) of
the Internal Revenue Code of 1986 or that is described in
clause (ii) shall not cease to qualify for exemption under
paragraph (3)(D) or subsection (d)(12) by reason of that
distribution.
``(ii) A distribution described in this clause is an amount
that--
``(I) has been distributed from a fund or account
that is exempt from taxation under section 401, 403,
408, 408A, 414, 457, or 501(a) of the Internal Revenue
Code of 1986; and
``(II) to the extent allowed by law, is deposited in
such a fund or account not later than60 days after the
distribution of that amount.''; and
(2) in subsection (d)--
(A) in the matter preceding paragraph (1), by
striking ``subsection (b)(1)'' and inserting
``subsection (b)(2)''; and
(B) by adding at the end the following:
``(12) Retirement funds to the extent that those funds are in
a fund or account that is exempt from taxation under section
401, 403, 408, 408A, 414, 457, or 501(a) of the Internal
Revenue Code of 1986.''.
(b) Automatic Stay.--Section 362(b) of title 11, United States Code,
as amended by sections 118, 132, 136, and 141 is amended--
(1) in paragraph (27), by striking ``or'' at the end;
(2) in paragraph (28), by striking the period and inserting
``; or'';
(3) by inserting after paragraph (28) the following:
``(29) under subsection (a), of withholding of income from a
debtor's wages and collection of amounts withheld, pursuant to
the debtor's agreement authorizing that withholding and
collection for the benefit of a pension, profit-sharing, stock
bonus, or other plan established under section 401, 403, 408,
408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986
that is sponsored by the employer of the debtor, or an
affiliate, successor, or predecessor of such employer--
``(A) to the extent that the amounts withheld and
collected are used solely for payments relating to a
loan from a plan that satisfies the requirements of
section 408(b)(1) of the Employee Retirement Income
Security Act of 1974 or is subject to section 72(p) of
the Internal Revenue Code of 1986; or
``(B) in the case of a loan from a thrift savings
plan described in subchapter III of title 5, that
satisfies the requirements of section 8433(g) of such
title.''; and
(4) by adding at the end of the flush material following
paragraph (29) the following: ``Paragraph (29) does not apply
to any amount owed to a plan referred to in that paragraph that
is incurred under a loan made during the 1-year period
preceding the filing of a petition Nothing in paragraph (29)
may be construed to provide that any loan made under a
governmental plan under section 414(d), or a contract or
account under section 403(b), of the Internal Revenue Code of
1986 constitutes a claim or a debt under this title.''.
(c) Exceptions to Discharge.--Section 523(a) of title 11, United
States Code, is amended--
(1) by striking ``or'' at the end of paragraph (17);
(2) by striking the period at the end of paragraph (18) and
inserting ``; or''; and
(3) by adding at the end the following:
``(19) owed to a pension, profit-sharing, stock bonus, or
other plan established under section 401, 403, 408, 408A, 414,
457, or 501(c) of the Internal Revenue Code of 1986, pursuant
to--
``(A) a loan permitted under section 408(b)(1) of the
Employee Retirement Income Security Act of 1974) or
subject to section 72(p) of the Internal Revenue Code
of 1986; or
``(B) a loan from the thrift savings plan described
in subchapter III of title 5, that satisfies the
requirements of section 8433(g) of such title.
Paragraph (19) does not apply to any amount owed to a plan referred to
in that paragraph that is incurred under a loan made during the 1-year
period preceding the filing of a petition Nothing in paragraph (19) may
be construed to provide that any loan made under a governmental plan
under section 414(d), or a contract or account under section 403(b), of
the Internal Revenue Code of 1986 constitutes a claim or a debt under
this title.''.
(d) Plan Contents.--Section 1322 of title 11, United States Code, is
amended by adding at the end the following:
``(f) A plan may not materially alter the terms of a loan described
in section 362(b)(29) of this title.''.

SEC. 204. PROTECTION OF REFINANCE OF SECURITY INTEREST.

Subparagraphs (A), (B), and (C) of section 547(e)(2) of title 11,
United States Code, are amended by striking ``10'' each place it
appears and inserting ``30''.

SEC. 205. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.

Section 365(d)(4) of title 11, United States Code, is amended to read
as follows:
``(4)(A) Subject to subparagraph (B), in any case under any chapter
in this title, an unexpired lease of nonresidential real property under
which the debtor is the lessee shall be deemed rejected, and the
trustee shall immediately surrender such property to the lessor, if the
trustee does not assume or reject the unexpired lease by the earlier
of--
``(i) the date that is 120 days after the date of the order
for relief; or
``(ii) the date of the entry of an order confirming a plan.
``(B)(i) The court may extend the period determined under
subparagraph (A) for 120 days upon motion of the trustee or the lessor
for cause.
``(ii) If the court grants an extension under clause (i), the court
may grant a subsequent extension only upon prior written consent of the
lessor.''.

SEC. 206. CREDITORS AND EQUITY SECURITY HOLDERS COMMITTEES.

Section 1102(a)(2) of title 11, United States Code, is amended by
inserting before the first sentence the following: ``On its own motion
or on request of a party in interest, and after notice and hearing, the
court may order a change in the membership of a committee appointed
under this subsection, if the court determines that the change is
necessary to ensure adequate representation of creditors or equity
security holders.''.

SEC. 207. AMENDMENT TO SECTION 546 OF TITLE 11, UNITED STATES CODE.

Section 546 of title 11, United States Code, is amended by inserting
at the end thereof:
``(i) Notwithstanding section 545 (2) and (3) of this title, the
trustee may not avoid a warehouseman's lien for storage, transportation
or other costs incidental to the storage and handling of goods, as
provided by section 7-209 of the Uniform Commercial Code.''.

SEC. 208. LIMITATION.

Section 546(c)(1)(B) of title 11, United States Code, is amended by
striking ``20'' and inserting ``45''.

SEC. 209. AMENDMENT TO SECTION 330(A) OF TITLE 11, UNITED STATES CODE.

Section 330(a) of title 11, United States Code, is amended--
(1) in paragraph (3)--
(A) in subparagraph (A) after ``awarded'', by
inserting ``to an examiner, chapter 11 trustee, or
professional person''; and
(B) by redesignating subdivisions (A) through (E) as
clauses (i) through (iv), respectively; and
(2) by adding at the following:
``(B) In determining the amount of reasonable compensation to
be awarded a trustee, the court shall treat such compensation
as a commission based on the results achieved.''.

SEC. 210. POSTPETITION DISCLOSURE AND SOLICITATION.

Section 1125 of title 11, United States Code, is amended by adding at
the end the following:
``(g) Notwithstanding subsection (b), an acceptance or rejection of
the plan may be solicited from a holder of a claim or interest if such
solicitation complies with applicable nonbankruptcy law and if such
holder was solicited before the commencement of the case in a manner
complying with applicable nonbankruptcy law.''.

SEC. 211. PREFERENCES.

Section 547(c) of title 11, United States Code, is amended--
(1) by amending paragraph (2) to read as follows:
``(2) to the extent that such transfer was in payment of a
debt incurred by the debtor in the ordinary course of business
or financial affairs of the debtor and the transferee, and such
transfer was--
``(A) made in the ordinary course of business or
financial affairs of the debtor and the transferee; or
``(B) made according to ordinary business terms;'';
(2) in paragraph (7) by striking ``or'' at the end;
(3) in paragraph (8) by striking the period at the end and
inserting ``; or''; and
(4) by adding at the end the following:
``(9) if, in a case filed by a debtor whose debts are not
primarily consumer debts, the aggregate value of all property
that constitutes or is affected by such transfer is less than
$5,000.''.

SEC. 212. VENUE OF CERTAIN PROCEEDINGS.

Section 1409(b) of title 28, United States Code, is amended by
inserting ``, or a nonconsumer debt against a noninsider of less than
$10,000,'' after ``$5,000''.

SEC. 213. PERIOD FOR FILING PLAN UNDER CHAPTER 11.

Section 1121(d) of title 11, United States Code, is amended--
(1) by striking ``On'' and inserting ``(1) Subject to
paragraph (1), on''; and
(2) by adding at the end the following:
``(2)(A) Such 120-day period may not be extended beyond a date that
is 18 months after the date of the order for relief under this chapter.
``(B) Such 180-day period may not be extended beyond a date that is
20 months after the date of the order for relief under this chapter.''.

SEC. 214. FEES ARISING FROM CERTAIN OWNERSHIP INTERESTS.

Section 523(a)(16) of title 11, United States Code, is amended--
(1) by striking ``dwelling'' the first place it appears;
(2) by striking ``ownership or'' and inserting
``ownership,'';
(3) by striking ``housing'' the first place it appears; and
(4) by striking ``but only'' and all that follows through
``such period,'', and inserting ``or a lot in a homeowners
association, for as long as the debtor or the trustee has a
legal, equitable, or possessory ownership interest in such
unit, such corporation, or such lot,''.

SEC. 215. CLAIMS RELATING TO INSURANCE DEPOSITS IN CASES ANCILLARY TO
FOREIGN PROCEEDINGS.

Section 304 of title 11, United States Code, is amended to read as
follows:

``Sec. 304. Cases ancillary to foreign proceedings

``(a) For purposes of this section--
``(1) the term `domestic insurance company' means a domestic
insurance company, as such term is used in section 109(b)(2);
``(2) the term `foreign insurance company' means a foreign
insurance company, as such term is used in section 109(b)(3);
``(3) the term `United States claimant' means a beneficiary
of any deposit referred to in subsection (b) or any
multibeneficiary trust referred to in subsection (b);
``(4) the term `United States creditor' means, with respect
to a foreign insurance company--
``(A) a United States claimant; or
``(B) any business entity that operates in the United
States and that is a creditor; and
``(5) the term `United States policyholder' means a holder of
an insurance policy issued in the United States.
``(b) The court may not grant relief under chapter 15 of this title
with respect to any deposit, escrow, trust fund, or other security
required or permitted under any applicable State insurance law or
regulation for the benefit of claim holders in the United States.''.

SEC. 216. DEFAULTS BASED ON NONMONETARY OBLIGATIONS.

(a) Executory Contracts and Unexpired Leases.--Section 365 of title
11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (1)(A) by striking the semicolon at
the end and inserting the following:
``other than a default that is a breach of a provision relating
to--
``(i) the satisfaction of any provision (other than a
penalty rate or penalty provision) relating to a
default arising from any failure to perform nonmonetary
obligations under an unexpired lease of real property
(excluding executory contracts that transfer a right or
interest under a filed or issued patent, copyright,
trademark, trade dress, or trade secret), if it is
impossible for the trustee to cure such default by
performing nonmonetary acts at and after the time of
assumption; or
``(ii) the satisfaction of any provision (other than
a penalty rate or penalty provision) relating to a
default arising from any failure to perform nonmonetary
obligations under an executory contract, if it is
impossible for the trustee to cure such default by
performing nonmonetary acts at and after the time of
assumption and if the court determines, based on the
equities of the case, that this subparagraph should not
apply with respect to such default;''; and
(B) by amending paragraph (2)(D) to read as follows:
``(D) the satisfaction of any penalty rate or penalty
provision relating to a default arising from a failure to
perform nonmonetary obligations under an executory contract
(excluding executory contracts that transfer a right or
interest under a filed or issued patent, copyright, trademark,
trade dress, or trade secret) or under an unexpired lease of
real or personal property.'';
(2) in subsection (c)--
(A) in paragraph (2) by adding ``or'' at the end;
(B) in paragraph (3) by striking ``; or'' at the end
and inserting a period; and
(C) by striking paragraph (4);
(3) in subsection (d)--
(A) by striking paragraphs (5) through (9); and
(B) by redesignating paragraph (10) as paragraph (5);
and
(4) in subsection (f)(1) by striking ``; except that'' and
all that follows through the end of the paragraph and inserting
a period.
(b) Impairment of Claims or Interests.--Section 1124(2) of title 11,
United States Code, is amended--
(1) in subparagraph (A) by inserting ``or of a kind that
section 365(b)(1)(A) of this title expressly does not require
to be cured'' before the semicolon at the end;
(2) in subparagraph (C) by striking ``and'' at the end;
(3) by redesignating subparagraph (D) as subparagraph (E);
and
(4) by inserting after subparagraph (C) the following:
``(D) if such claim or such interest arises from any
failure to perform a nonmonetary obligation,
compensates the holder of such claim or such interest
(other than the debtor or an insider) for any actual
pecuniary loss incurred by such holder as a result of
such failure; and''.

SEC. 217. SHARING OF COMPENSATION.

Section 504 of title 11, United States Code, is amended by adding at
the end the following:
``(c) This section shall not apply with respect to sharing, or
agreeing to share, compensation with a bona fide public service
attorney referral program that operates in accordance with non-Federal
law regulating attorney referral services and with rules of
professional responsibility applicable to attorney acceptance of
referrals.''.

SEC. 218. PRIORITY FOR ADMINISTRATIVE EXPENSES.

Section 503(b) of title 11, United States Code, is amended--
(1) by deleting ``and'' at the end of paragraph (5);
(2) by striking the period at the end of paragraph (6) and
inserting ``; and'';
(3) by inserting the following after paragraph (6):
``(7) with respect to a nonresidential real property lease
previously assumed under section 365, and subsequently
rejected, a sum equal to all monetary obligations due,
excluding those arising from or relating to a failure to
operate or penalty provisions, for the period of one year
following the later of the rejection date or date of actual
turnover of the premises, without reduction or setoff for any
reason whatsoever except for sums actually received or to be
received from a nondebtor; and the claim for remaining sums due
for the balance of the term of the lease shall be a claim under
section 502(b)(6).''.

TITLE III--GENERAL BUSINESS BANKRUPTCY PROVISIONS

SEC. 301. DEFINITION OF DISINTERESTED PERSON.

Section 101(14) of title 11, United States Code, is amended to read
as follows:
``(14) `disinterested person' means a person that--
``(A) is not a creditor, an equity security holder,
or an insider;
``(B) is not and was not, within 2 years before the
date of the filing of the petition, a director,
officer, or employee of the debtor; and
``(C) does not have an interest materially adverse to
the interest of the estate or of any class of creditors
or equity security holders, by reason of any direct or
indirect relationship to, connection with, or interest
in, the debtor, or for any other reason;''.

SEC. 302. 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)(1) Subject to paragraphs (2) and (3) and notwithstanding any
other provision of this section, an individual may not be a debtor
under this title unless that individual has, during the 90-day period
preceding the date of filing of the petition of that individual,
received credit counseling, including, at a minimum, participation in
an individual or group briefing that outlined the opportunities for
available credit counseling and assisted that individual in performing
an initial budget analysis, through a credit counseling program
(offered through an approved credit counseling service described in
section 111(a)).
``(2)(A) Paragraph (1) shall not apply with respect to a debtor who
resides in a district for which the United States trustee or bankruptcy
administrator of the bankruptcy court of that district determines that
the approved credit counseling services for that district are not
reasonably able to provide adequate services to the additional
individuals who would otherwise seek credit counseling from those
programs by reason of the requirements of paragraph (1).
``(B) Each United States trustee or bankruptcy administrator that
makes a determination described in subparagraph (A) shall review that
determination not later than one year after the date of that
determination, and not less frequently than every year thereafter.
``(3)(A) Subject to subparagraph (B), the requirements of paragraph
(1) shall not apply with respect to a debtor who submits to the court a
certification that--
``(i) describes exigent circumstances that merit a waiver of
the requirements of paragraph (1);
``(ii) states that the debtor requested credit counseling
services from an approved credit counseling service, but was
unable to obtain the services referred to in paragraph (1)
during the 5-day period beginning on the date on which the
debtor made that request or that the exigent circumstances
require filing before such 5-day period expires; and
``(iii) is satisfactory to the court.
``(B) With respect to a debtor, an exemption under subparagraph (A)
shall cease to apply to that debtor on the date on which the debtor
meets the requirements of paragraph (1), but in no case may the
exemption apply to that debtor after the date that is 30 days after the
debtor files a petition.''.
(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 unless the debtor resides
in a district for which the United States trustee or bankruptcy
administrator of the bankruptcy court of that district
determines that the approved instructional courses are not
adequate to provide service to the additional individuals who
would be required to compete the instructional course by reason
of the requirements of this section Each United States trustee
or bankruptcy administrator that makes such a determination
shall review that determination not later than 1 year after the
date of that determination, and not less frequently than every
year thereafter.''.
(c) Chapter 13 Discharge.--Section 1328 of title 11, United States
Code, as amended by section 137, is amended by adding at the end the
following:
``(g) The court shall not grant a discharge under this section to a
debtor, unless after filing a petition the debtor has completed an
instructional course concerning personal financial management described
in section 111.
``(h) Subsection (g) shall not apply with respect to a debtor who
resides in a district for which the United States trustee or bankruptcy
administrator of the bankruptcy court of that district determines that
the approved instructional courses are not adequate to provide service
to the additional individuals who would be required to complete the
instructional course by reason of the requirements of this section.
``(i) Each United States trustee or bankruptcy administrator that
makes a determination described in subsection (h) shall review that
determination not later than 1 year after the date of that
determination, and not less frequently than every year thereafter.''.
(d) Debtor's Duties.--Section 521 of title 11, United States Code, as
amended by sections 604 and 120, is amended by adding at the end the
following:
``(d) 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); and
``(2) a copy of the debt repayment plan, if any, developed
under section 109(h) through the credit counseling service
referred to in paragraph (1).''.
(e) General Provisions.--
(1) In general.--Chapter 1 of title 11, United States Code,
is amended by adding at the end the following:

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

``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 a list of instructional courses concerning personal
financial management that have been approved by--
``(1) the United States trustee; or
``(2) the bankruptcy administrator for the district.''.
(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.''.

(e) Definitions.--Section 101 of title 11, United States Code, is
amended--
(1) by inserting after paragraph (13) the following:
``(13A) `debtor's principal residence' means a residential
structure including incidental property when the structure
contains 1 to 4 units, whether or not that structure is
attached to real property, and includes, without limitation, an
individual condominium or cooperative unit or mobile or
manufactured home or trailer;'';
(2) by inserting after paragraph (27A), as added by section
318 of this Act, the following:
``(27B) `incidental property' means property incidental to
such residence including, without limitation, property commonly
conveyed with a principal residence where the real estate is
located, window treatments, carpets, appliances and equipment
located in the residence, and easements, appurtenances,
fixtures, rents, royalties, mineral rights, oil and gas rights,
escrow funds and insurance proceeds;'';
(3) in section 362(b), as amended by sections 117, 118, 132,
136, 141 203, 818, and 1007,--
(A) in paragraph (28) by striking ``or'' at the end
thereof;
(B) in paragraph (29) by striking the period at the
end and inserting ``; or''; and
(C) by inserting after paragraph (29) the following:
``(30) under subsection (a), until a prepetition default is
cured fully in a case under chapter 13 of this title by actual
payment of all arrears as required by the plan, of the
postponement, continuation or other similar delay of a
prepetition foreclosure proceeding or sale in accordance with
applicable nonbankruptcy law, but nothing herein shall imply
that such postponement, continuation or other similar delay is
a violation of the stay under subsection (a).''; and
(4) by amending section 1322(b)(2) to read as follows:
``(2) modify the rights of holders of secured claims, other
than a claim secured primarily by a security interest in
property used as the debtor's principal residence at any time
during 180 days prior to the filing of the petition, or of
holders of unsecured claims, or leave unaffected the rights of
holders of any class of claims;''.
(f) Limitation.--Section 362 of title 11, United States Code, is
amended by adding at the end the following:
``(j) If one case commenced under chapter 7, 11, or 13 of this title
is dismissed due to the creation of a debt repayment plan administered
by a credit counseling agency approved pursuant to section 111 of this
title, then for purposes of section 362(c)(3) of this title the
subsequent case commenced under any such chapter shall not be presumed
to be filed not in good faith.''.
(g) Return of Goods Shipped.--Section 546(g) of title 11, United
States Code, as added by section 222(a) of Public Law 103-394, is
amended to read as follows:
``(h) Notwithstanding the rights and powers of a trustee under
sections 544(a), 545, 547, 549, and 553 of this title, 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 hearing, that a return is in the best
interests of the estate, the debtor, with the consent of the creditor,
and subject to the prior rights, if any, of third parties in such
goods, 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. 303. 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. 304. LOCAL FILING OF BANKRUPTCY CASES.

Section 1408 of title 28, United States Code, is amended--
(1) by striking ``Except'' and inserting ``(a) Except''; and
(2) by adding at the end the following:
``(b) For the purposes of subsection (a), if the debtor is a
corporation, the domicile and residence of the debtor are conclusively
presumed to be where the debtor's principal place of business in the
United States is located.''.

SEC. 305. PERMITTING ASSUMPTION OF CONTRACTS.

(a) Section 365(c) of title 11, United States Code, is amended to
read as follows:
``(c)(1) The trustee may not assume or assign an executory contract
or unexpired lease of the debtor, whether or not the contract or lease
prohibits or restricts assignment of rights or delegation of duties,
if--
``(A)(i) applicable law excuses a party to the contract or
lease from accepting performance from or rendering performance
to an assignee of the contract or lease, whether or not the
contract or lease prohibits or restricts assignment of rights
or delegation of duties; and
``(ii) the party does not consent to the assumption or
assignment; or
``(B) the contract is a contract to make a loan, or extend
other debt financing or financial accommodations, to or for the
benefit of the debtor, or to issue a security of the debtor.
``(2) Notwithstanding paragraph (1)(A) and applicable nonbankruptcy
law, in a case under chapter 11 of this title, a trustee in a case in
which a debtor is a corporation, or a debtor in possession, may assume
an executory contract or unexpired lease of the debtor, whether or not
the contract or lease prohibits or restricts assignment of rights or
delegation of duties.
``(3) The trustee may not assume or assign an unexpired lease of the
debtor of nonresidential real property, whether or not the contract or
lease prohibits or restricts assignment of rights or delegation of
duties, if the lease has been terminated under applicable nonbankruptcy
law before the order for relief.''.
(b) Section 365(d) of title 11, United States Code, is amended by
striking paragraphs (5), (6), (7), (8), and (9), and redesignating
paragraph (10) as paragraph (5).
(c) Section 365(e) of title 11, United States Code, is amended to
read as follows:
``(e)(1) Notwithstanding a provision in an executory contract or
unexpired lease, or in applicable law, an executory contract or
unexpired lease of the debtor may not be terminated or modified, and
any right or obligation under such contract or lease may not be
terminated or modified, at any time after the commencement of the case
solely because of a provision in such contract or lease that is
conditioned on--
``(A) the insolvency or financial condition of the debtor at
any time before the closing of the case;
``(B) the commencement of a case under this title; or
``(C) the appointment of or taking possession by a trustee in
a case under this title or a custodian before such
commencement.
``(2) Paragraph (1) does not apply to an executory contract or
unexpired lease of the debtor if the trustee may not assume or assign,
and the debtor in possession may not assume, the contract or lease by
reason of the provisions of subsection (c) of this section.''.
(d) Section 365(f)(1) of title 11, United States Code, is amended by
striking the semicolon and all that follows through ``event''.

TITLE IV SMALL BUSINESS BANKRUPTCY PROVISIONS

SEC. 401. FLEXIBLE RULES FOR DISCLOSURE STATEMENT AND PLAN.

(a) Section 1125(a)(1) of title 11, United States Code, is amended by
inserting before the semicolon following:
``and in determining whether a disclosure statement provides adequate
information, the court shall consider the complexity of the case, the
benefit of additional information to creditors and other parties in
interest, and the cost of providing additional information''.
(b) Section 1125(f) of title 11, United States Code, is amended to
read as follows:
``(f) Notwithstanding subsection (b)--
``(1) the court may determine that the plan itself provides
adequate information and that a separate disclosure statement
is not necessary;
``(2) the court may approve a disclosure statement submitted
on standard forms approved by the court or adopted pursuant to
section 2075 of title 28; and
``(3)(A) the court may conditionally approve a disclosure
statement subject to final approval after notice and a hearing;
``(B) acceptances and rejections of a plan may be solicited
based on a conditionally approved disclosure statement if the
debtor provides adequate information to each holder of a claim
or interest that is solicited, but a conditionally approved
disclosure statement shall be mailed not less than 20 days
before the date of the hearing on confirmation of the plan; and
``(C) the hearing on the disclosure statement may be combined with
the hearing on confirmation of a plan.''.

SEC. 402. DEFINITIONS.

(a) Definitions Section 101 of title 11, United States Code, is
amended by striking paragraph (51C) and inserting the following:
``(51C) `small business case' means a case filed under
chapter 11 of this title in which the debtor is a small
business debtor; and
``(51D) `small business debtor' means (A) a person (including
affiliates of such person that are also debtors under this
title) that has aggregate noncontingent, liquidated secured and
unsecured debts as of the date of the petition orthe order for
relief in an amount not more than $4,000,000 (excluding debts owed to 1
or more affiliates or insiders), except that if a group of affiliated
debtors has aggregate noncontingent liquidated secured and unsecured
debts greater than $4,000,000 (excluding debt owed to 1 or more
affiliates or insiders), then no member of such group is a small
business debtor;''.
(b) Conforming Amendment.--Section 1102(a)(3) of title 11, United
States Code, is amended by inserting ``debtor'' after ``small
business'' .

SEC. 403. STANDARD FORM DISCLOSURE STATEMENT AND PLAN.

The Advisory Committee on Bankruptcy Rules of the Judicial Conference
of the United States shall, within a reasonable period of time after
the date of the enactment of this Act, propose for adoption standard
form disclosure statements and plans of reorganization for small
business debtors (as defined in section 101 of title 11, United States
Code, as amended by this Act), designed to achieve a practical balance
between--
(1) the reasonable needs of the courts, the United States
trustee, creditors, and other parties in interest for
reasonably complete information; and
(2) economy and simplicity for debtors.

SEC. 404. UNIFORM NATIONAL REPORTING REQUIREMENTS.

(a) Reporting Required.--
(1) Title 11 of the United States Code is amended by
inserting after section 307 the following:

``Sec. 308. Debtor reporting requirements

``A small business debtor shall file periodic financial and other
reports containing information including--
``(1) the debtor's profitability, that is, approximately how
much money the debtor has been earning or losing during current
and recent fiscal periods;
``(2) reasonable approximations of the debtor's projected
cash receipts and cash disbursements over a reasonable period;
``(3) comparisons of actual cash receipts and disbursements
with projections in prior reports; and
``(4) whether the debtor is--
``(A) in compliance in all material respects with
postpetition requirements imposed by this title and the
Federal Rules of Bankruptcy Procedure; and
``(B) timely filing tax returns and paying taxes and
other administrative claims when due, and, if not, what
the failures are and how, at what cost, and when the
debtor intends to remedy such failures; and
``(5) such other matters as are in the best interests of the
debtor and creditors, and in the public interest in fair and
efficient procedures under chapter 11 of this title.''.
(2) The table of sections of chapter 3 of title 11, United
States Code, is amended by inserting after the item relating to
section 307 the following:

``308. Debtor reporting requirements.''.

(b) Effective Date.--The amendments made by subsection (a) shall take
effect 60 days after the date on which rules are prescribed pursuant to
section 2075, title 28, United States Code to establish forms to be
used to comply with section 308 of title 11, United States Code, as
added by subsection (a).

SEC. 405. UNIFORM REPORTING RULES AND FORMS FOR SMALL BUSINESS CASES.

(a) Proposal of Rules and Forms.--The Advisory Committee on
Bankruptcy Rules of the Judicial Conference of the United States shall
propose for adoption amended Federal Rules of Bankruptcy Procedure and
Official Bankruptcy Forms to be used by small business debtors to file
periodic financial and other reports containing information, including
information relating to--
(1) the debtor's profitability;
(2) the debtor's cash receipts and disbursements; and
(3) whether the debtor is timely filing tax returns and
paying taxes and other administrative claims when due.
(b) Purpose.--The rules and forms proposed under subsection (a) shall
be designed to achieve a practical balance between--
(1) the reasonable needs of the bankruptcy court, the United
States trustee, creditors, and other parties in interest for
reasonably complete information;
(2) the small business debtor's interest that required
reports be easy and inexpensive to complete; and
(3) the interest of all parties that the required reports
help the small business debtor to understand its financial
condition and plan its future.

SEC. 406. DUTIES IN SMALL BUSINESS CASES.

(a) Duties in Chapter 11 Cases.--Title 11 of the United States Code
is amended by inserting after section 1114 the following:

``Sec. 1115. Duties of trustee or debtor in possession in small
business cases

``(a) In a small business case, a trustee or the debtor in
possession, in addition to the duties provided in this title and as
otherwise required by law, shall--
``(1) append to the voluntary petition or, in an involuntary
case, file within 3 days after the date of the order for
relief--
``(A) its most recent balance sheet, statement of
operations, cash-flow statement, Federal income tax
return; or
``(B) a statement made under penalty of perjury that
no balance sheet, statement of operations, or cash-flow
statement has been prepared and no Federal tax return
has been filed;
``(2) attend, through its responsible individual, meetings
scheduled by the court or the United States trustee, including
initial debtor interviews and meetings of creditors convened
under section 341 of this title;
``(3) timely file all schedules and statements of financial
affairs, unless the court, after notice and a hearing, grants
an extension, which shall not extend such time period to a date
later than 30 days after the date of the order for relief,
absent extraordinary and compelling circumstances;
``(4) file all postpetition financial and other reports
required by the Federal Rules of Bankruptcy Procedure or by
local rule of the district court;
``(5) subject to section 363(c)(2) of this title, maintain
insurance customary and appropriate to the industry;
``(6)(A) timely file tax returns;
``(B) subject to section 363(c)(2) of this title, timely pay
all administrative expense tax claims, except those being
contested by appropriate proceedings being diligently
prosecuted; and
``(C) subject to section 363(c)(2) of this title, establish 1
or more separate deposit accounts not later than 10 business
days after the date of order for relief (or as soon thereafter
as possible if all banks contacted decline the business) and
deposit therein, not later than 1 business day after receipt
thereof or a responsible time set by the court, all taxes
payable for periods beginning after the date the case is
commenced that are collected or withheld by the debtor for
governmental units unless the court waives this requirement
after notice and hearing; and
``(7) allow the United States trustee, or its designated
representative, to inspect the debtor's business premises,
books, and records at reasonable times, after reasonable prior
written notice, unless notice is waived by the debtor.''.
(b) Technical Amendment.--The table of sections of chapter 11, United
States Code, is amended by inserting after the item relating to section
1114 the following:

``1115. Duties of trustee or debtor in possession in small business
cases.''.

SEC. 407. PLAN FILING AND CONFIRMATION DEADLINES.

Section 1121(e) of title 11, United States Code, is amended to read
as follows:
``(e) In a small business case--
``(1) only the debtor may file a plan until after 90 days
after the date of the order for relief, unless a trustee has
been appointed under this chapter, or unless the court, on
request of a party in interest and after notice and hearing,
shortens such time;
``(2) the debtor shall file a plan, and any necessary
disclosure statement, not later than 90 days after the date of
the order for relief, unless the United States Trustee has
appointed under section 1102(a)(1) of this title a committee of
unsecured creditors that the court has determined, before the
90 days has expired, is sufficiently active and representative
to provide effective oversight of the debtor; and
``(3) the time periods specified in paragraphs (1) and (2) of
this subsection and the time fixed in section 1129(e) of this
title for confirmation of a plan, may be extended only as
follows:
``(A) On request of a party in interest made within
the respective periods, and after notice and hearing,
the court may for cause grant one or more extensions,
cumulatively not to exceed 60 days, if the movant
establishes--
``(i) that no cause exists to dismiss or
convert the case or appoint a trustee or
examiner under subparagraphs (A) (I) of section
1112(b) of this title; and
``(ii) that there is a reasonable possibility
the court will confirm a plan within a
reasonable time;
``(B) On request of a party in interest made within
the respective periods, and after notice and hearing,
the court may for cause grant one or more extensions in
excess of those authorized under subparagraph (A) of
this paragraph, if the movant establishes--
``(i) that no cause exists to dismiss or
convert the case or appoint a trustee or
examiner under subparagraphs (A) (I) of section
1112(b)(3) of this title; and
``(ii) that it is more likely than not that
the court will confirm a plan within a
reasonable time; and
``(C) a new deadline shall be imposed whenever an
extension is granted.''.

SEC. 408. PLAN CONFIRMATION DEADLINE.

Section 1129 of title 11, United States Code, is amended by adding at
the end the following:
``(e) In a small business case, the debtor shall confirm a plan not
later than 150 days after the date of the order for relief unless--
``(1) the United States Trustee has appointed, under section
1102(a)(1) of this title, a committee of unsecured creditors
that the court has determined, before the 150 days has expired,
is sufficiently active and representative to provide effective
oversight of the debtor; or
``(2) such 150-day period is extended as provided in section
1121(e)(3) of this title.''.

SEC. 409. PROHIBITION AGAINST EXTENSION OF TIME.

Section 105(d) of title 11, United States Code, is amended--
(1) in paragraph (2)(B)(vi) by striking the period at the end
and inserting ``; and''; and
(2) by adding at the end the following:
``(3) in a small business case, not extend the time periods
specified in sections 1121(e) and 1129(e) of this title except
as provided in section 1121(e)(3) of this title.''.

SEC. 410. DUTIES OF THE UNITED STATES TRUSTEE.

(a) Duties of the United States Trustee.--
Section 586(a) of title 28, United States Code, is amended--
(1) in paragraph (3)--
(A) in subparagraph (G) by striking ``and at the
end'';
(B) by redesignating subparagraph (H) as subparagraph
(I); and
(C) by inserting after subparagraph (G) the
following:
``(H) in small business cases (as defined in section
101 of title 11), performing the additional duties
specified in title 11 pertaining to such cases'';
(2) in paragraph (5) by striking ``and at the end'';
(3) in paragraph (6) by striking the period at the end and
inserting ``; and''; and
(4) by inserting after paragraph (7) the following:
``(7) in each of such small business cases--
``(A) conduct an initial debtor interview as soon as
practicable after the entry of order for relief but
before the first meeting scheduled under section 341(a)
of title 11 at which time the United States trustee
shall begin to investigate the debtor's viability,
inquire about the debtor's business plan, explain the
debtor's obligations to file monthly operating reports
and other required reports, attempt to develop an
agreed scheduling order, and inform the debtor of other
obligations;
``(B) when determined to be appropriate and
advisable, visit the appropriate business premises of
the debtor and ascertain the state of the debtor's
books and records and verify that the debtor has filed
its tax returns; and
``(C) review and monitor diligently the debtor's
activities, to identify as promptly as possible whether
the debtor will be unable to confirm a plan; and
``(8) in cases in which the United States trustee finds
material grounds for any relief under section 1112 of title 11,
the United States trustee shall apply promptly to the court for
relief.''.

SEC. 411. SCHEDULING CONFERENCES.

Section 105(d) of title 11, United States Code, is amended--
(1) in the matter preceding paragraph (1) by striking ``,
may'';
(2) by amending paragraph (1) to read as follows:
``(1) shall hold such status conferences as are necessary to
further the expeditious and economical resolution of the case;
and''; and
(3) in paragraph (2) by striking ``unless inconsistent with
another provision of this title or with applicable Federal
Rules of Bankruptcy Procedure'', and inserting ``may''.

SEC. 412. SERIAL FILER PROVISIONS.

Section 362 of title 11, United States Code, as amended by section
302, is amended--
(1) in subsection (i) as so redesignated by section 122--
(A) by striking ``An'' and inserting ``(1) Except as
provided in paragraph (2), an''; and
(B) by adding at the end the following:
``(2) If such violation is based on an action taken by an entity in
the good-faith belief that subsection (h) applies to the debtor, then
recovery under paragraph (1) against such entity shall be limited to
actual damages.''; and
(2) by inserting after subsection (j), as added by section
302, the following:
``(k)(1) Except as provided in paragraph (2) of this subsection, the
provisions of subsection (a) of thissection shall not apply in a case
in which the debtor--
``(A) is a debtor in a case under this title pending at the
time the petition is filed;
``(B) was a debtor in a case under this title which was
dismissed for any reason by an order that became final in the
2-year period ending on the date of the order for relief
entered with respect to the petition;
``(C) was a debtor in a case under this title in which a
chapter 11, 12, or 13 plan was confirmed in the 2-year period
ending on the date of the order for relief entered with respect
to the petition; or
``(D) is an entity that has succeeded to substantially all of
the assets or business of a debtor described in subparagraph
(A), (B), or (C).
``(2) This subsection shall not apply--
``(A) to a case initiated by an involuntary petition filed by
a creditor that is not an insider or affiliate of the debtor;
or
``(B) after such time as the debtor, after notice and a
hearing, demonstrates by a preponderance of the evidence, that
the filing of such petition resulted from circumstances beyond
the control of the debtor and not foreseeable at the time the
earlier case was filed; and that it is more likely than not
that the court will confirm a plan, other than a liquidating
plan, within a reasonable time.''.

SEC. 413. EXPANDED GROUNDS FOR DISMISSAL OR CONVERSION AND APPOINTMENT
OF TRUSTEE OR EXAMINER.

(a) Expanded Grounds for Dismissal or Conversion.--Section 1112(b) of
title 11, United States Code, is amended to read as follows:
``(b)(1) Except as provided in paragraphs (2) and (4) of this
subsection, and in subsection (c) of this section, on request of a
party in interest, and after notice and a hearing, the court shall
convert a case under this chapter to a case under chapter 7 of this
title or dismiss a case under this chapter, or appoint a trustee or
examiner under section 1104(e) of this title, whichever is in the best
interest of creditors and the estate, if the movant establishes cause
``(2) The court may decline to grant the relief specified in
paragraph (1) of this subsection if the debtor or another party in
interest objects and establishes by a preponderance of the evidence
that--
``(A) it is more likely than not that a plan will be
confirmed within a time as fixed by this title or by order of
the court entered pursuant to section 1121(e)(3), or within a
reasonable time if no time has been fixed; and
``(B) if the cause is an act or omission of the debtor that--
``(i) there exists a reasonable justification for the
act or omission; and
``(ii) the act or omission will be cured within a
reasonable time fixed by the court not to exceed 30
days after the court decides the motion, unless the
movant expressly consents to a continuance for a
specific period of time, or compelling circumstances
beyond the control of the debtor justify an extension.
``(3) For purposes of this subsection, cause includes--
``(A) substantial or continuing loss to or diminution of the
estate;
``(B) gross mismanagement of the estate;
``(C) failure to maintain insurance that poses a material
risk to the estate or the public;
``(D) unauthorized use of cash collateral harmful to 1 or
more creditors;
``(E) failure to comply with an order of the court;
``(F) failure timely to satisfy any filing or reporting
requirement established by this title or by any rule applicable
to a case under this chapter;
``(G) failure to attend the meeting of creditors convened
under section 341(a) of this title;
``(H) failure timely to provide information or attend
meetings reasonably requested by the United States trustee or
bankruptcy administrator;
``(I) failure timely to pay taxes due after the date of the
order for relief or to file tax returns due after the order for
relief;
``(J) failure to file a disclosure statement, or to file or
confirm a plan, within the time fixed by this title or by order
of the court;
``(K) failure to pay any fees or charges required under
chapter 123 of title 28;
``(L) revocation of an order of confirmation under section
1144 of this title;
``(M) inability to effectuate substantial consummation of a
confirmed plan;
``(N) material default by the debtor with respect to a
confirmed plan; and
``(O) termination of a plan by reason of the occurrence of a
condition specified in the plan.
``(4) The court may grant relief under this subsection for cause as
defined in subparagraphs C, F, G, H, or K of paragraph 3 of this
subsection only upon motion of the United States trustee or bankruptcy
administrator or upon the court s own motion.
``(5) The court shall commence the hearing on any motion under this
subsection not later than 30 days after filing of the motion, and shall
decide the motion within 15 days after commencement of the hearing,
unless the movant expressly consents to a continuance for a specific
period of time or compelling circumstances prevent the court from
meeting the time limits established by this paragraph.''.
(b) Additional Grounds for Appointment of Trustee or Examiner.--
Section 1104 of title 11, United States Code, is amended by adding at
the end the following:
``(e) If grounds exist to convert or dismiss the case under section
1112 of this title, the court may instead appoint a trustee or
examiner, if it determines that such appointment is in the best
interests of creditors and the estate.''.

SEC. 414. STUDY OF OPERATION OF TITLE 11 OF THE UNITED STATES CODE WITH
RESPECT TO SMALL BUSINESSES.

Not later than 2 years after the date of the enactment of this Act,
the Administrator of the Small Business Administration, in consultation
with the Attorney General, the Director of the Administrative Office of
United States Trustees, and the Director of the Administrative Office
of the United States Courts, shall--
(1) conduct a study to determine--
(A) the internal and external factors that cause
small businesses, especially sole proprietorships, to
become debtors in cases under title 11 of the United
States Code and that cause certain small businesses to
successfully complete cases under chapter 11 of such
title; and
(B) how Federal laws relating to bankruptcy may be
made more effective and efficient in assisting small
businesses to remain viable; and
(2) submit to the President pro tempore of the Senate and the
Speaker of the House of Representatives a report summarizing
that study.

SEC. 415. PAYMENT OF INTEREST.

Section 362(d)(3) of title 11, United States Code, is amended--
(1) by inserting ``or 30 days after the court determines that
the debtor is subject to this paragraph, whichever is later''
after ``90-day period)''; and
(2) by amending subparagraph (B) to read as follows:
``(B) the debtor has commenced monthly payments
(which payments may, in the debtor's sole discretion,
notwithstanding section 363(c)(2) of this title, be
made from rents or other income generated before or
after the commencement of the case by or from the
property) to each creditor whose claim is secured by
such real estate (other than a claim secured by a
judgment lien or by an unmatured statutory lien), which
payments are in an amount equal to interest at the
then-applicable nondefault contract rate of interest on
the value of the creditor's interest in the real
estate; or''

TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS

SEC. 501. PETITION AND PROCEEDINGS RELATED TO PETITION.

(a) Technical Amendment Relating to Municipalities.--Section 921(d)
of title 11, United States Code, is amended by inserting
``notwithstanding section 301(b)'' before the period at the end.
(b) Conforming Amendment.--Section 301 of title 11, United States
Code, is amended--
(1) by inserting ``(a)'' before ``A voluntary''; and
(2) by amending the last sentence to read as follows:
``(b) The commencement of a voluntary case under a chapter of this
title constitutes an order for relief under such chapter.''.

SEC. 502. APPLICABILITY OF OTHER SECTIONS TO CHAPTER 9.

Section 901(a) of title 11, United States Code, is amended--
(1) by inserting ``555, 556,'' after ``553,''; and
(2) by inserting ``559, 560, 561, 562'' after ``557,''.

TITLE VI--STREAMLINING THE BANKRUPTCY SYSTEM

SEC. 601. 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 and
activities related thereto 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. 602. AUDIT PROCEDURES.

(a) Amendments.--Section 586 of title 28, United States Code, is
amended--
(1) in subsection (a) by amending striking paragraph (6) to
read as follows:
``(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 to
determine the accuracy, veracity, and completeness of petitions,
schedules, and other information which the debtor is required to
provide under sections 521 and 1322 of title 11, and, if applicable,
section 111 of title 11, in individual cases filed under chapter 7 or
13 of such title Such audits shall be in accordance with generally
accepted auditing standards and performed by independent certified
public accountants or independent licensed public accountants.
``(B) Those procedures shall--
``(i) establish a method of selecting appropriate qualified
persons to contract to perform those audits;
``(ii) establish a method of randomly selecting cases to be
audited, except that not less than 1 out of every 250 cases in
each Federal judicial district shall be selected for audit;
``(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 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.
``(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)(A) The report of each audit conducted under this subsection
shall be filed with the court and transmitted to the United States
trustee Each report shall clearly and conspicuously specify any
material misstatement of income or expenditures or of assets identified
by the person performing the audit In any case where a material
misstatement of income or expenditures or of assets has been reported,
the clerk of the bankruptcy court shall give notice of the misstatement
to the creditors in the case.
``(B) If a material misstatement of income or expenditures or of
assets is reported, the United States trustee shall--
``(i) report the material misstatement, if appropriate, to
the United States Attorney pursuant to section 3057 of title
18, United States Code; and
``(ii) if advisable, take appropriate action, including but
not limited to commencing an adversary proceeding to revoke the
debtor's discharge pursuant to section 727(d) of title 11,
United States Code.''.
(b) Amendments to Section 521 of Title 11, U.S.C.--Section 521(a) of
title 11, United States Code, as amended by section 603, is amended in
paragraphs (3) and (4) by adding ``or an auditor appointed pursuant to
section 586 of title 28, United States Code'' after ``serving in the
case''.
(c) Amendments to Section 727 of Title 11, U.S.C.--Section 727(d) of
title 11, United States Code, is amended--
(1) by deleting ``or'' at the end of paragraph (2);
(2) by substituting ``; or'' for the period at the end of
paragraph (3); and
(3) by adding the following at the end the following:
``(4) the debtor has failed to explain satisfactorily--
``(A) a material misstatement in an audit performed
pursuant to section 586(f) of title 28, United States
Code; or
``(B) a failure to make available for inspection all
necessary accounts, papers, documents, financial
records, files, and all other papers, things, or
property belonging to the debtor that are requested for
an audit conducted pursuant to section 586(f) of title
28, United States Code.''.
(d) Effective Date.--The amendments made by this section shall take
effect 18 months after the date of enactment of this Act.

SEC. 603. GIVING CREDITORS FAIR NOTICE IN CHAPTER 7 AND 13 CASES.

(a) Notice.--Section 342 of title 11, United States Code, is
amended--
(1) in subsection (c)--
(A) by striking ``, but the failure of such notice to
contain such information shall not invalidate the legal
effect of such notice''; and
(B) by adding the following at the end:
``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 which is the current account number of the
debtor with respect to any debt held by the creditor against the
debtor, the debtor shall include such account number in any notice to
the creditor required to be given under this title 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, `notice'
shall include, but shall not be limited to, any correspondence from the
debtor to the creditor after the commencement of the case, any
statement of the debtor's intention under section 521(a)(2) of this
title, notice of the commencement of any proceeding in the case to
which the creditor is a party, and any notice of the hearing under
section 1324 of this title.'';
(2) by adding at the end the following:
``(d) At any time, a creditor in a case of an individual debtor under
chapter 7 or 13 may file with the court and serve on the debtor a
notice of the address to be used to notify the creditor in that case
After 5 days following receipt of such notice, any notice the court or
the debtor is required to give the creditor shall be given at that
address.
``(e) An entity may file with the court a notice stating its address
for notice in cases under chapters 7 and 13 After 30 days following the
filing of such notice, any notice in any case filed under chapter 7 or
13 given by the court shall be to that address unless specific notice
is given under subsection (d) with respect to a particular case.
``(f) Notice given to a creditor other than as provided in this
section shall not be effective notice until it has been brought to the
attention of the creditor 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
such department or person, notice will not be brought to the attention
of the creditor until received by such person or department No sanction
under section 362(h) of this title or any other sanction which a court
may impose on account of violations of the stay under section 362(a) of
this title or failure to comply with section 542 or 543 of this title
may be imposed on any action of the creditor unless the action takes
place after the creditor has received notice of the commencement of the
case effective under this section.''.
(b) Debtor's Duties.--Section 521 of title 11, United States Code, as
amended by sections 604, 120, and 302, 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 monthly income
and current expenditures prepared in accordance
with section 707(b)(2);
``(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) of this title
indicating that such attorney or
bankruptcy petition preparer delivered
to the debtor any notice required by
section 342(b) of this title; 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; and
``(vi) a statement disclosing any reasonably
anticipated increase in income or expenditures
over the 12-month period following the date of
filing;'';
(3) by adding at the end the following:
``(e)(1) At any time, a creditor, in the case of an individual under
chapter 7 or 13, may file with the court notice that the creditor
requests the petition, schedules, and a statement of affairs filed by
the debtor in the case and the court shall make those documents
available to the creditor who requests those documents at a reasonable
cost within 5 business days after such request.
``(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 such plan available to the
creditor who requests such plan at a reasonable cost and not later than
5 days after such request
``(f) 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 current
monthly income and expenditures in the preceding tax year and
current monthly income less expenditures for the month
preceding the statement prepared in accordance with section
707(b)(2) that shows how the amounts are calculated--
``(A) beginning on the date that is the later of 90
days after the close of the debtor's tax year or 1 year
after the order for relief, unless a plan has been
confirmed; and
``(B) thereafter, on or before the date that is 45
days before each anniversary of the confirmation of the
plan until the case is closed
``(g)(1) A statement referred to in subsection (f)(4) shall
disclose--
``(A) the amount and sources of income of the debtor;
``(B) the identity of any 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 (h).
``(h)(1) Not later than 30 days after the date of enactment of the
Consumer Bankruptcy Reform Act of 1999, 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 reasonable
restrictions on creditor access to tax information that is required to
be provided under this section to verify creditor identity and to
restrict use of the information except with respect to the case.
``(3) Not later than 1 year after the date of enactment of the
Consumer Bankruptcy Reform Act of 1999, 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) to provide timely and sufficient information to
creditors concerning the case; and
``(B) if appropriate, includes proposed legislation--
``(i) to further protect the confidentiality of tax
information or to make it better available to
creditors; and
``(ii) to provide penalties for the improper use by
any person of the tax information required to be
provided under this section.
``(i) If requested by the United States trustee or a trustee serving
in the case, the debtor provide a document that establishes the
identity of the debtor, including a driver's license, passport, or
other document that contains a photograph of the debtor and such other
personal identifying information relating to the debtor that
establishes the identity of the debtor.''.
(c) Section 1324 of title 11, United States Code, is amended--
(1) by inserting ``(a)'' before ``After''; and
(2) by inserting at the end thereof--
``(c) Whenever a party in interest is given notice of a hearing on
the confirmation or modification of a plan under this chapter, such
notice shall include the information provided by the debtor on the most
recent statement filed with the court pursuant to section
521(a)(1)(B)(ii) or (f)(4) of this title.''.

SEC. 604. DISMISSAL FOR FAILURE TO TIMELY FILE SCHEDULES OR PROVIDE
REQUIRED INFORMATION.

Section 521 of title 11, United States Code, as amended by section
603 is amended by inserting after subsection (a) the following:
``(b)(1) Notwithstanding section 707(a) of this title, and subject to
paragraph (2), if an individual debtor in a voluntary case under
chapter 7 or 13 fails to file all of the information required under
subsection (a)(1) within 45 days after the filing of the petition
commencing the case, the case shall be automatically dismissed
effective on the 46th day after the filing of the petition.
``(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 such request
``(3) Upon request of the debtor made within 45 days after the filing
of the petition commencing a case described in paragraph (1), the court
may allow the debtor an additional period not to exceed 45 days to file
the information required under subsection (a)(1) if the court finds
justification for extending the period for the filing.''.

SEC. 605. ADEQUATE TIME TO PREPARE FOR HEARING ON CONFIRMATION OF THE
PLAN.

(a) Hearing.--Section 1324 of title 11, United States Code, is
amended--
(1) by striking ``After'' and inserting the following:
``(a) Except as provided in subsection (b) and after''; and
(2) by adding at the end the following:
``(b) The hearing on confirmation of the plan may be held not earlier
than 20 days, and not later than 45 days, after the meeting of
creditors under section 341(a) of this title.''.

SEC. 606. CHAPTER 13 PLANS TO HAVE A 5-YEAR DURATION IN CERTAIN CASES.

Title 11, United States Code, is amended--
(1) by amending section 1322(d) to read as follows:
``(d) If the current monthly income of the debtor and the debtor's
spouse combined, when multiplied by 12, is not less than the highest
national median family income last reported by the Bureau of the Census
for a family of equal or lesser size or, in the case of a household of
1 person, not less than the national median household income for 1
earner, the plan may not provide for payments over a period that is
longer than 5 years If the current monthly income of the debtor and the
debtor's spouse combined, when multiplied by 12, is less than the
highest national median family income for a family of equal or lesser
size, or in the case of a household of 1 person, the national median
household income for 1 earner, the plan may not provide for payments
over a period that is longer than 3 years, unless the court, for cause,
approves a longer period, but the court may not approve a period that
is longer than 5 years Notwithstanding the foregoing, the national
median family income for a family of more than 4 individuals shall be
the national median family income last reported by the Bureau of the
Census for a family of 4 individuals plus $583 for each additional
member of the family.'';
(2) in section 1325(b)(1)(B) as amended by section 130--
(A) by striking ``three year period'' and inserting
``applicable commitment period''; and
(B) by inserting at the end of subparagraph (B) the
following: ``The `applicable commitment period' shall
be not less than 5 years if the current monthly income
of the debtor and the debtor's spouse combined, when
multiplied by 12, is not less than the highest national
median family income last reported by the Bureau of the
Census for a family of equal or lesser size, or in the
case of a household of 1 person, the national median
household income for 1 earner Notwithstanding the
foregoing, the national median family income for a
family of more than 4 individuals shall be the national
median family income last reported by the Bureau of the
Census for a family of 4 individuals plus $583 for each
additional member of the family.''; and
(3) in section 1329--
(A) by striking in subsection (c) ``three years'' and
inserting ``the applicable commitment period under
section 1325(b)(1)(B)''; and
(B) by inserting at the end of subsection (c) the
following:
``The duration period shall be 5 years if the current monthly income of
the debtor and the debtor's spouse combined, when multiplied by 12, is
not less than the highest national median family income last reported
by the Bureau of the Census for a family of equal or lesser size or, in
the case of a household of 1 person, the national median household
income for 1 earner, as of the date of the modification and shall be 3
years if the current monthly total income of the debtor and the
debtor's spouse combined, when multiplied by 12, is less than the
highest national median family income last reported by the Bureau of
the Census for a family of equal or lesser size or, in the case of a
household of 1 person, less than the national median household income
for 1 earner as of the date of the modification Notwithstanding the
foregoing, the national median family income for a family of more than
4 individuals shall be the national median family income last reported
by the Bureau of the Census for a family of 4 individuals plus $583 for
each additional member of the family.''.

SEC. 607. SENSE OF THE CONGRESS REGARDING EXPANSION OF RULE 9011 OF THE
FEDERAL RULES OF BANKRUPTCY PROCEDURE.

It is the sense of the Congress that rule 9011 of the Federal Rules
of Bankruptcy Procedure (11 U.S.C App) should be modified to include a
requirement that all documents (including schedules), signed and
unsigned, submitted to the court or to a trustee by debtors who
represent themselves and debtors who are represented by an attorney be
submitted only after the debtor or the debtor's attorney has made
reasonable inquiry to verify that the information contained in such
documents is well grounded in fact, and is warranted by existing law or
a good-faith argument for the extension, modification, or reversal of
existing law.

SEC. 608. ELIMINATION OF CERTAIN FEES PAYABLE IN CHAPTER 11 BANKRUPTCY
CASES.

(a) Amendments.--Section 1930(a)(6) of title 28, United States Code,
is amended--
(1) in the 1st sentence by striking ``until the case is
converted or dismissed, whichever occurs first''; and
(2) in the 2d sentence--
(A) by striking ``The'' and inserting ``Until the
plan is confirmed or the case is converted (whichever
occurs first) the''; and
(B) by striking ``less than $300,000;'' and inserting
``less than $300,000 Until the case is converted,
dismissed, or closed (whichever occurs first and
without regard to confirmation of the plan) the fee
shall be''.
(b) Delayed Effective Date.--The amendments made by subsection (a)
shall take effect on October 1, 1999.

SEC. 609. STUDY OF BANKRUPTCY IMPACT OF CREDIT EXTENDED TO DEPENDENT
STUDENTS.

Not later than 1 year after the date of the enactment of this Act,
the Comptroller General of the United States shall--
(1) conduct a study regarding the impact that the extension
of credit to individuals who are--
(A) claimed as dependents for purposes of the
Internal Revenue Code of 1986; and
(B) enrolled in post-secondary educational
institutions,
has on the rate of cases filed under title 11 of the United
States Code; and
(2) submit to the Speaker of the House of Representatives and
the President pro tempore of the Senate a report summarizing
such study.

SEC. 610. 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 by for good cause as
described in findings made by the court.''.

SEC. 611. 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--
``(i) the claim of any creditor holding security as
of the date of the petition shall continue to be
secured by that security unless the full amount of such
claim determined under applicable nonbankruptcy law has
been paid in full as of the date of conversion,
notwithstanding any valuation or determination of the
amount of an allowed secured claim made for the
purposes of the chapter 13 proceeding; and
``(ii) unless a prebankruptcy default has been fully
cured pursuant to the plan at the time of conversion,
in any proceeding under this title or otherwise, the
default shall have the effect given under applicable
nonbankruptcy law.''.

SEC. 612. BANKRUPTCY APPEALS.

Title 28 of the United States Code is amended by inserting after
section 1292 the following:

``Sec. 1293 Bankruptcy appeals

``(a) The courts of appeals (other than the United States Court of
Appeals for the Federal Circuit) shall have jurisdiction of appeals
from the following:
``(1) Final orders and judgments entered by bankruptcy courts
and district courts in cases under title 11, in proceedings
arising under title 11, and in proceedings arising in or
related to a case under title 11, including final orders in
proceedings regarding the automatic stay of section 362 of
title 11.
``(2) Interlocutory orders entered by bankruptcy courts and
district courts granting, continuing, modifying, refusing or
dissolving injunctions, or refusingto dissolve or modify
injunctions in cases under title 11, in proceedings arising under title
11, and in proceedings arising in or related to a case under title 11,
other than interlocutory orders in proceedings regarding the automatic
stay of section 362 of title 11.
``(3) Interlocutory orders of bankruptcy courts and district
courts entered under section 1104(a) or 1121(d) of title 11, or
the refusal to enter an order under such section.
``(4) An interlocutory order of a bankruptcy court or
district court entered in a case under title 11, in a
proceeding arising under title 11, or in a proceeding arising
in or related to a case under title 11, if the court of appeals
that would have jurisdiction of an appeal of a final order
entered in such case or such proceeding permits, in its
discretion, appeal to be taken from such interlocutory order.
``(b) Final decisions, judgments, orders, and decrees entered by a
bankruptcy appellate panel under subsection (b) of this section.
``(c)(1) The judicial council of a circuit may establish a bankruptcy
appellate panel composed of bankruptcy judges in the circuit who are
appointed by the judicial council, which panel shall exercise the
jurisdiction to review orders and judgments of bankruptcy courts
described in paragraphs (1)-(4) of subsection (a) of this section
unless--
``(A) the appellant elects at the time of filing the appeal;
or
``(B) any other party elects, not later than 10 days after
service of the notice of the appeal;
to have such jurisdiction exercised by the court of appeals.
``(2) An appeal to be heard by a bankruptcy appellate panel under
this subsection (b) shall be heard by 3 members of the bankruptcy
appellate panel, provided that a member of such panel may not hear an
appeal originating in the district for which such member is appointed
or designated under section 152 of this title.
``(3) If authorized by the Judicial Conference of the United States,
the judicial councils of 2 or more circuits may establish a joint
bankruptcy appellate panel.''.

SEC. 613. GAO STUDY.

(a) Study.--Not later than 270 days after the date of the enactment
of this Act, the Comptroller General of the United States shall conduct
a study of the feasibility, effectiveness, and cost of requiring
trustees appointed under title 11 of the United States Code, or the
bankruptcy courts, to provide to the Office of Child Support
Enforcement promptly after the commencement of cases by individual
debtors under such title, the names and social security numbers of such
debtors for the purposes of allowing such Office to determine whether
such debtors have outstanding obligations for child support (as
determined on the basis of information in the Federal Case Registry or
other national database).
(b) Report.--Not later than 300 days after the date of the enactment
of this Act, the Comptroller General shall submit to the Speaker of the
House of Representatives and the President pro tempore of the Senate, a
report containing the results of the study required by subsection (a).

TITLE VII--BANKRUPTCY DATA

SEC. 701. 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, 2000, and annually
thereafter, prepare, and submit to Congress a report concerning
the information collected under subsection (a) that contains an
analysis of the information.
``(c) The compilation required under subsection (b) shall--
``(1) be itemized, by chapter, with respect to title 11;
``(2) be presented in the aggregate and for each district;
and
``(3) include information concerning--
``(A) the total assets and total liabilities of the
debtors described in subsection (a), and in each
category of assets and liabilities, as reported in the
schedules prescribed pursuant to section 2075 of this
title and filed by those debtors;
``(B) the current monthly income, and average income
and average expenses of those debtors as reported on
the schedules and statements that each such debtor
files under sections 521 and 1322 of title 11;
``(C) the aggregate amount of debt discharged in the
reporting period, determined as the difference between
the total amount of debt and obligations of a debtor
reported on the schedules and the amount of such debt
reported in categories which are predominantly
nondischargeable;
``(D) the average period of time between the filing
of the petition and the closing of the case;
``(E) for the reporting period--
``(i) the number of cases in which a
reaffirmation was filed; and
``(ii)(I) the total number of reaffirmations
filed;
``(II) of those cases in which a
reaffirmation was filed, the number 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, the
number of cases dismissed for failure to make
payments under the plan, the number of cases
refiled after dismissal, and the number of
cases in which the plan was completed,
separately itemized with respect to the number
of modifications made before completion of the
plan, if any; and
``(iii) the number of cases in which the
debtor filed another case within the 6 years
previous to the filing;
``(G) the number of cases in which creditors were
fined for misconduct and any amount of punitive damages
awarded by the court for creditor misconduct; and
``(H) the number of cases in which sanctions under
rule 9011 of the Federal Rules of Bankruptcy Procedure
were imposed against debtor's counsel and damages
awarded under such Rule.''.
(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. 702. UNIFORM RULES FOR THE COLLECTION OF BANKRUPTCY DATA.

(a) Amendment.--Title 28 of the United States Code is amended by
inserting after section 589a the following:

``Sec. 589b. Bankruptcy data

``(a) Rules.--The Attorney General shall, within a reasonable time
after the effective date of this section, issue rules requiring uniform
forms for (and from time to time thereafter to appropriately modify and
approve)--
``(1) final reports by trustees in cases under chapters 7,
12, and 13 of title 11; and
``(2) periodic reports by debtors in possession or trustees,
as the case may be, in cases under chapter 11 of title 11.
``(b) Reports.--All reports referred to in subsection (a) shall be
designed (and the requirements as to place and manner of filing shall
be established) so as to facilitate compilation of data and maximum
possible access of the public, both by physical inspection at 1 or more
central filing locations, and by electronic access through the Internet
or other appropriate media.
``(c) Required Information.--The information required to be filed in
the reports referred to in subsection (b) shall be that which is in the
best interests of debtors and creditors, and in the public interest in
reasonable and adequate information to evaluate the efficiency and
practicality of the Federal bankruptcy system Inissuing rules proposing
the forms referred to in subsection (a), the Attorney General shall
strike the best achievable practical balance between--
``(1) the reasonable needs of the public for information
about the operational results of the Federal bankruptcy system;
and
``(2) economy, simplicity, and lack of undue burden on
persons with a duty to file reports.
``(d) Final Reports.--Final reports proposed for adoption by trustees
under chapters 7, 12, and 13 of title 11 shall, in addition to such
other matters as are required by law or as the Attorney General in the
discretion of the Attorney General, shall propose, include with respect
to a case under such title--
``(1) information about the length of time the case was
pending;
``(2) assets abandoned;
``(3) assets exempted;
``(4) receipts and disbursements of the estate;
``(5) expenses of administration;
``(6) claims asserted;
``(7) claims allowed; and
``(8) distributions to claimants and claims discharged
without payment,
in each case by appropriate category and, in cases under chapters 12
and 13 of title 11, date of confirmation of the plan, each modification
thereto, and defaults by the debtor in performance under the plan.
``(e) Periodic Reports.--Periodic reports proposed for adoption by
trustees or debtors in possession under chapter 11 of title 11 shall,
in addition to such other matters as are required by law or as the
Attorney General, in the discretion of the Attorney General, shall
propose, include--
``(1) information about the standard industry classification,
published by the Department of Commerce, for the businesses
conducted by the debtor;
``(2) length of time the case has been pending;
``(3) number of full-time employees as at the date of the
order for relief and at end of each reporting period since the
case was filed;
``(4) cash receipts, cash disbursements and profitability of
the debtor for the most recent period and cumulatively since
the date of the order for relief;
``(5) compliance with title 11, whether or not tax returns
and tax payments since the date of the order for relief have
been timely filed and made;
``(6) all professional fees approved by the court in the case
for the most recent period and cumulatively since the date of
the order for relief (separately reported, in for the
professional fees incurred by or on behalf of the debtor,
between those that would have been incurred absent a bankruptcy
case and those not); and
``(7) plans of reorganization filed and confirmed and, with
respect thereto, by class, the recoveries of the holders,
expressed in aggregate dollar values and, in the case of
claims, as a percentage of total claims of the class
allowed.''.
(b) Technical Amendment.--The table of sections of chapter 39 of
title 28, United States Code, is amended by adding at the end the
following:

``589b. Bankruptcy data.''.

SEC. 703. SENSE OF THE CONGRESS REGARDING AVAILABILITY OF BANKRUPTCY
DATA.

It is the sense of the Congress that--
(1) the national policy of the United States should be that
all data held by bankruptcy clerks in electronic form, to the
extent such data reflects only public records (as defined in
section 107 of title 11 of the United States Code), should be
released in a usable electronic form in bulk to the public
subject to such appropriate privacy concerns and safeguards as
the Judicial Conference of the United States may determine; and
(2) there should be established a bankruptcy data system in
which--
(A) a single set of data definitions and forms are
used to collect data nationwide; and
(B) data for any particular bankruptcy case are
aggregated in the same electronic record.

TITLE VIII--BANKRUPTCY TAX PROVISIONS

SEC. 801. TREATMENT OF CERTAIN LIENS.

(a) Treatment of Certain Liens.--Section 724 of title 11, United
States Code, is amended--
(1) in subsection (b), in the matter preceding paragraph (1),
by inserting ``(other than to the extent that there is a
properly perfected unavoidable tax lien arising in connection
with an ad valorem tax on real or personal property of the
estate)'' after ``under this title'';
(2) in subsection (b)(2), after ``507(a)(1)'', insert
``(except that such expenses, other than claims for wages,
salaries, or commissions which arise after the filing of a
petition, shall be limited to expenses incurred under chapter 7
of this title and shall not include expenses incurred under
chapter 11 of this title)''; and
(3) by adding at the end the following:
``(e) Before subordinating a tax lien on real or personal property of
the estate, the trustee shall--
``(1) exhaust the unencumbered assets of the estate; and
``(2) in a manner consistent with section 506(c) of this
title, recover from property securing an allowed secured claim
the reasonable, necessary costs and expenses of preserving or
disposing of that property.
``(f) Notwithstanding the exclusion of ad valorem tax liens set forth
in this section and subject to the requirements of subsection (e)--
``(1) claims for wages, salaries, and commissions that are
entitled to priority under section 507(a)(3) of this title; or
``(2) claims for contributions to an employee benefit plan
entitled to priority under section 507(a)(4) of this title,
may be paid from property of the estate which secures a tax lien, or
the proceeds of such property.''.
(b) Determination of Tax Liability.--Section 505(a)(2) of title 11,
United States Code, is amended--
(1) in subparagraph (A), by striking ``or'' at the end;
(2) in subparagraph (B), by striking the period at the end
and inserting ``; or''; and
(3) by adding at the end the following:
``(C) the amount or legality of any amount arising in
connection with an ad valorem tax on real or personal property
of the estate, if the applicable period for contesting or
redetermining that amountunder any law (other than a bankruptcy
law) has expired.''.

SEC. 802. EFFECTIVE NOTICE TO GOVERNMENT.

(a) Effective Notice to Governmental Units.--Section 342 of title 11,
United States Code, as amended by section 603, is amended by adding at
the end the following:
``(g) If a debtor lists a governmental unit as a creditor in a list
or schedule, any notice required to be given by the debtor under this
title, any rule, any applicable law, or any order of the court, shall
identify the department, agency, or instrumentality through which the
debtor is indebted The debtor shall identify (with information such as
a taxpayer identification number, loan, account or contract number, or
real estate parcel number, where applicable), and describe the
underlying basis for the governmental unit's claim If the debtor's
liability to a governmental unit arises from a debt or obligation owed
or incurred by another individual, entity, or organization, or under a
different name, the debtor shall identify such individual, entity,
organization, or name.
``(h) The clerk shall keep and update quarterly, in the form and
manner as the Director of the Administrative Office of the United
States Courts prescribes, and make available to debtors, a register in
which a governmental unit may designate a safe harbor mailing address
for service of notice in cases pending in the district A governmental
unit may file a statement with the clerk designating a safe harbor
address to which notices are to be sent, unless such governmental unit
files a notice of change of address.''.
(b) Adoption of Rules Providing Notice.--The Advisory Committee on
Bankruptcy Rules of the Judicial Conference shall, within a reasonable
period of time after the date of the enactment of this Act, propose for
adoption enhanced rules for providing notice to State, Federal, and
local government units that have regulatory authority over the debtor
or which may be creditors in the debtor's case Such rules shall be
reasonably calculated to ensure that notice will reach the
representatives of the governmental unit, or subdivision thereof, who
will be the proper persons authorized to act upon the notice At a
minimum, the rules should require that the debtor--
(1) identify in the schedules and the notice, the
subdivision, agency, or entity in respect of which such notice
should be received;
(2) provide sufficient information (such as case captions,
permit numbers, taxpayer identification numbers, or similar
identifying information) to permit the governmental unit or
subdivision thereof, entitled to receive such notice, to
identify the debtor or the person or entity on behalf of which
the debtor is providing notice where the debtor may be a
successor in interest or may not be the same as the person or
entity which incurred the debt or obligation; and
(3) identify, in appropriate schedules, served together with
the notice, the property in respect of which the claim or
regulatory obligation may have arisen, if any, the nature of
such claim or regulatory obligation and the purpose for which
notice is being given.
(c) Effect of Failure of Notice.--Section 342 of title 11, United
States Code, as amended by section 603 and subsection (a), is amended
by adding at the end the following:
``(i) A notice that does not comply with subsections (d) and (e)
shall not be effective unless the debtor demonstrates, by clear and
convincing evidence, that timely notice was given in a manner
reasonably calculated to satisfy the requirements of this section was
given, and that--
``(1) either the notice was timely sent to the safe harbor
address provided in the register maintained by the clerk of the
district in which the case was pending for such purposes; or
``(2) no safe harbor address was provided in such list for
the governmental unit and that an officer of the governmental
unit who is responsible for the matter or claim had actual
knowledge of the case in sufficient time to act.''.

SEC. 803. NOTICE OF REQUEST FOR A DETERMINATION OF TAXES.

Section 505(b) of title 11, United States Code, is amended by
striking ``Unless'' at the beginning of the second sentence thereof and
inserting ``If the request is made substantially in the manner
designated by the governmental unit and unless''.

SEC. 804. RATE OF INTEREST ON TAX CLAIMS.

(a) Amendment.--Chapter 5 of title 11, United States Code, is amended
by adding at the end the following:

``Sec. 511. Rate of interest on tax claims

``If any provision of this title requires the payment of interest on
a tax claim or requires the payment of interest to enable a creditor to
receive the present value of the allowed amount of a tax claim, the
rate of interest shall be as follows:
``(1) In the case of ad valorem tax claims, whether secured
or unsecured, other unsecured tax claims where interest is
required to be paid under section 726(a)(5) of this title,
secured tax claims, and administrative tax claims paid under
section 503(b)(1) of this title, the rate shall be determined
under applicable nonbankruptcy law.
``(2) In the case of all other tax claims, the minimum rate
of interest shall be the Federal short-term rate rounded to the
nearest full percent, determined under section 1274(d) of the
Internal Revenue Code of 1986, plus 3 percentage points.
``(A) In the case of claims for Federal income taxes,
such rate shall be subject to any adjustment that may
be required under section 6621(d) of the Internal
Revenue Code of 1986.
``(B) In the case of taxes paid under a confirmed
plan or reorganization, such rate shall be determined
as of the calendar month in which the plan is
confirmed.''.
(b) Conforming Amendment.--The table of sections of chapter 5 of
title 11, United States Code, is amended by inserting after the item
relating to section 510 the following:

``511. Rate of interest on tax claims.''.

SEC. 805. TOLLING OF PRIORITY OF TAX CLAIM TIME PERIODS.

Section 507(a)(8)(A) of title 11, United States Code, as so
redesignated, is amended--
(1) in clause (i) by inserting after ``petition'' and before
the semicolon ``, plus any time, plus 6 months, during which
the stay of proceedings was in effect in a prior case under
this title''; and
(2) amend clause (ii) to read as follows:
``(ii) assessed within 240 days before the
date of the filing of the petition, exclusive
of--
``(I) any time plus 30 days during
which an offer in compromise with
respect of such tax, was pending or in
effect during such 240-day period;
``(II) any time plus 30 days during
which an installment agreement with
respect of such tax was pending or in
effect during such 240-day period, up
to 1 year; and
``(III) any time plus 6 months during
which a stay of proceedings against
collections was in effect in a prior
case under this title during such 240-
day period.''.

SEC. 806. PRIORITY PROPERTY TAXES INCURRED.

Section 507(a)(8)(B) of title 11, United States Code, is amended by
striking ``assessed'' and inserting ``incurred''.

SEC. 807. CHAPTER 13 DISCHARGE OF FRAUDULENT AND OTHER TAXES.

Section 1328(a)(2) of title 11, United States Code, is amended by
inserting ``(1),'' after ``paragraph''.

SEC. 808. CHAPTER 11 DISCHARGE OF FRAUDULENT TAXES.

Section 1141(d) of title 11, United States Code, is amended by adding
at the end the following:
``(6) Notwithstanding the provisions of paragraph (1), the
confirmation of a plan does not discharge a debtor which is a
corporation from any debt for a tax or customs duty with respect to
which the debtor made a fraudulent return or willfully attempted in any
manner to evade or defeat such tax.''.

SEC. 809. STAY OF TAX PROCEEDINGS.

(a) Section 362 Stay Limited to Prepetition Taxes.--Section 362(a)(8)
of title 11, United States Code, is amended by striking the period at
the end and inserting ``, in respect of a tax liability for a taxable
period ending before the order for relief.''.
(b) Appeal of Tax Court Decisions Permitted.--Section 362(b)(9) of
title 11, United States Code, is amended--
(1) in subparagraph (C) by striking ``or'' at the end;
(2) in subparagraph (D) by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(E) the appeal of a decision by a court or
administrative tribunal which determines a tax
liability of the debtor without regard to whether such
determination was made prepetition or postpetition.''.

SEC. 810. PERIODIC PAYMENT OF TAXES IN CHAPTER 11 CASES.

Section 1129(a)(9) of title 11, United States Code, is amended--
(1) in subparagraph (B) by striking ``and'' at the end; and
(2) in subparagraph (C)--
(A) by striking ``deferred cash payments, over a
period not exceeding six years after the date of
assessment of such claim,'' and inserting ``regular
installment payments in cash, but in no case with a
balloon provision, and no more than three months apart,
beginning no later than the effective date of the plan
and ending on the earlier of five years after the
petition date or the last date payments are to be made
under the plan to unsecured creditors,'';
(B) by striking the period at the end and inserting
``; and''; and
(3) by adding at the end the following:
``(D) with respect to a secured claim which would be
described in section 507(a)(8) of this title but for
its secured status, the holder of such claim will
receive on account of such claim cash payments of not
less than is required in subparagraph (C) and over a
period no greater than is required in such
subparagraph.''.

SEC. 811. AVOIDANCE OF STATUTORY TAX LIENS PROHIBITED.

Section 545(2) of title 11, United States Code, is amended by
striking the semicolon at the end and inserting ``, except where such
purchaser is a purchaser described in section 6323 of the Internal
Revenue Code of 1986 or similar provision of State or local law;''.

SEC. 812. PAYMENT OF TAXES IN THE CONDUCT OF BUSINESS.

(a) Payment of Taxes Required.--Section 960 of title 28, United
States Code, is amended--
(1) by inserting ``(a)'' before ``Any''; and
(2) by adding at the end the following:
``(b) Such taxes shall be paid when due in the conduct of such
business unless--
``(1) the tax is a property tax secured by a lien against
property that is abandoned within a reasonable time after the
lien attaches, by the trustee of a bankruptcy estate, pursuant
to section 554 of title 11; or
``(2) payment of the tax is excused under a specific
provision of title 11.
``(c) In a case pending under chapter 7 of title 11, payment of a tax
may be deferred until final distribution is made under section 726 of
title 11 if--
``(1) the tax was not incurred by a trustee duly appointed
under chapter 7 of title 11; or
``(2) before the due date of the tax, the court has made a
finding of probable insufficiency of funds of the estate to pay
in full the administrative expenses allowed under section
503(b) of title 11 that have the same priority in distribution
under section 726(b) of title 11 as such tax.''.
(b) Payment of Ad Valorem Taxes Required.--Section 503(b)(1)(B) of
title 11, United States Code, is amended in clause (i) by inserting
after ``estate,'' and before ``except'' the following: ``whether
secured or unsecured, including property taxes for which liability is
in rem only, in personam or both,''.
(c) Request for Payment of Administrative Expense Taxes Eliminated.--
Section 503(b)(1) of title 11, United States Code, is amended by adding
at the end the following:
``(D) notwithstanding the requirements of subsection (a) of
this section, a governmental unit shall not be required to file
a request for the payment of a claim described in subparagraph
(B) or (C);''.
(d) Payment of Taxes and Fees as Secured Claims.--Section 506 of
title 11, United States Code, is amended--
(1) in subsection (b) by inserting ``or State statute'' after
``agreement''; and
(2) in subsection (c) by inserting ``, including the payment
of all ad valorem property taxes in respect of the property''
before the period at the end.

SEC. 813. TARDILY FILED PRIORITY TAX CLAIMS.

Section 726(a)(1) of title 11, United States Code, is amended by
striking ``before the date on which the trustee commences distribution
under this section'' and inserting ``on or before the earlier of 10
days after the mailing to creditors of the summary of the trustee's
final report or the date on which the trustee commences final
distribution under this section''.

SEC. 814. INCOME TAX RETURNS PREPARED BY TAX AUTHORITIES.

Section 523(a)(1)(B) of title 11, United States Code, is amended--
(1) by inserting ``or equivalent report or notice,'' after
``a return,'';
(2) in clause (i)--
(A) by inserting ``or given'' after ``filed''; and
(B) by striking ``or'' at the end;
(3) in clause (ii)--
(A) by inserting ``or given'' after ``filed''; and
(B) by inserting ``, report, or notice'' after
``return''; and
(4) by adding at the end the following:
``(iii) for purposes of this subsection, a
return--
``(I) must satisfy the requirements
of applicable nonbankruptcy law, and
includes a return prepared pursuant to
section 6020(a) of the Internal Revenue
Code of 1986, or similar State or local
law, or a written stipulation to a
judgment entered by a nonbankruptcy
tribunal, but does not include a return
made pursuant to section 6020(b) of the
Internal Revenue Code of 1986, or
similar State or local law; and
``(II) must have been filed in a
manner permitted by applicable
nonbankruptcy law; or''.

SEC. 815. DISCHARGE OF THE ESTATE'S LIABILITY FOR UNPAID TAXES.

Section 505(b) of title 11, United States Code, is amended in the
second sentence by inserting ``the estate,'' after
``misrepresentation,''.

SEC. 816. REQUIREMENT TO FILE TAX RETURNS TO CONFIRM CHAPTER 13 PLANS.

(a) Filing of Prepetition Tax Returns Required for Plan
Confirmation.--Section 1325(a) of title 11, United States Code, as
amended by section 140, is amended--
(1) in paragraph (6) by striking ``and'' at the end;
(2) in paragraph (7) by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(8) if the debtor has filed all Federal, State, and local
tax returns as required by section 1308 of this title.''.
(b) Additional Time Permitted for Filing Tax Returns.--(1) Chapter 13
of title 11, United States Code, as amended by section 135, is amended
by adding at the end the following:

``Sec. 1308. Filing of prepetition tax returns

``(a) On or before the day prior to the day on which the first
meeting of the creditors is convened under section 341(a) of this
title, the debtor shall have filed with appropriate tax authorities all
tax returns for all taxable periods ending in the 3-year period ending
on the date of filing of the petition.
``(b) If the tax returns required by subsection (a) have not been
filed by the date on which the first meeting of creditors is convened
under section 341(a) of this title, the trustee may continue such
meeting for a reasonable period of time, to allow the debtor additional
time to file any unfiled returns, but such additional time shall be no
more than--
``(1) for returns that are past due as of the date of the
filing of the petition, 120 days from such date;
``(2) for returns which are not past due as of the date of
the filing of the petition, the later of 120 days from such
date or the due date for such returns under the last automatic
extension of time for filing such returns to which the debtor
is entitled, and for which request has been timely made,
according to applicable nonbankruptcy law; and
``(3) upon notice and hearing, and order entered before the
lapse of any deadline fixed according to this subsection, where
the debtor demonstrates, by clear and convincing evidence, that
the failure to file the returns as required is because of
circumstances beyond the control of the debtor, the court may
extend the deadlines set by the trustee as provided in this
subsection for--
``(A) a period of no more than 30 days for returns
described in paragraph (1) of this subsection; and
``(B) for no more than the period of time ending on
the applicable extended due date for the returns
described in paragraph (2).
``(c) For purposes of this section only, a return includes a return
prepared pursuant to section 6020 (a) or (b) of the Internal Revenue
Code of 1986 or similar State or local law, or a written stipulation to
a judgment entered by a nonbankruptcy tribunal.''.
(2) The table of sections of chapter 13 of title 11, United States
Code, is amended by inserting after the item relating to section 1307
the following:

``1308. Filing of prepetition tax returns.''.

(c) Dismissal or Conversion on Failure To Comply.--Section 1307 of
title 11, United States Code, is amended--
(1) by redesignating subsections (e) and (f) as subsections
(f) and (g), respectively; and
(2) by inserting after subsection (d) the following:
``(e) Upon the failure of the debtor to file tax returns under
section 1308 of this title, on request of a party in interest or the
United States trustee and after notice and a hearing, the court shall
dismiss a case or convert a case under this chapter to a case under
chapter 7 of this title, whichever is in the best interests of
creditors and the estate.''.
(d) Timely Filed Claims.--Section 502(b)(9) of title 11, United
States Code, is amended by striking the period at the end and inserting
``, and except that in a case under chapter 13 of this title, a claim
of a governmental unit for a tax in respect of a return filed under
section 1308 of this title shall be timely if it is filed on or before
60 days after such return or returns were filed as required.''.
(e) Rules for Objections to Claims and to Confirmation.--It is the
sense of the Congress that the Advisory Committee on Bankruptcy Rules
of the Judicial Conference should, within a reasonable period of time
after the date of the enactment of this Act, propose for adoption
amended Federal Rules of Bankruptcy Procedure which provide that--
(1) notwithstanding the provisions of Rule 3015(f), in cases
under chapter 13 of title 11, United States Code, a
governmental unit may object to the confirmation of a plan on
or before 60 days after the debtor files all tax returns
required under sections 1308 and 1325(a)(7) of title 11, United
States Code; and
(2) in addition to the provisions of Rule 3007, in a case
under chapter 13 of title 11, United States Code, no objection
to a tax in respect of a return required to be filed under such
section 1308 shall be filed until such return has been filed as
required.

SEC. 817. STANDARDS FOR TAX DISCLOSURE.

Section 1125(a) of title 11, United States Code, is amended in
paragraph (1)--
(1) by inserting after ``records,'' the following:
``including a full discussion of the potential material
Federal, State, and local tax consequences of the plan to the
debtor, any successor to the debtor, and a hypothetical
investor domiciled in the State in which the debtor resides or
has its principal place of business typical of the holders of
claims or interests in the case,'';
(2) by inserting ``such'' after ``enable''; and
(3) by striking ``reasonable'' where it appears after
``hypothetical'' and by striking ``typical of holders of claims
or interests'' after ``investor''.

SEC. 818. SETOFF OF TAX REFUNDS.

Section 362(b) of title 11, United States Code, as amended by
sections 118, 132, 136, and 203, is amended--
(1) in paragraph (29) by striking ``or'';
(2) in paragraph (30) by striking the period at the end and
inserting ``; or''; and
(3) by inserting after paragraph (30) the following:
``(31) under subsection (a) of the setoff of an income tax
refund, by a governmental unit, in respect of a taxable period
which ended before the order for relief against an income tax
liability for a taxable period which also ended before the
order for relief, unless--
``(A) prior to such setoff, an action to determine
the amount or legality of such tax liability under
section 505(a) was commenced; or
``(B) where the setoff of an income tax refund is not
permitted because of a pending action to determine the
amount or legality of a tax liability, the governmental
unit may hold the refund pending the resolution of the
action.''.

TITLE IX--ANCILLARY AND OTHER CROSS-BORDER CASES

SEC. 901. AMENDMENT TO ADD CHAPTER 15 TO TITLE 11, UNITED STATES CODE.

(a) In General.--Title 11, United States Code, is amended by
inserting after chapter 13 the following:

``CHAPTER 15--ANCILLARY AND OTHER CROSS-BORDER CASES

``Sec.
``1501. Purpose and scope of application.

``SUBCHAPTER I--GENERAL PROVISIONS

``1502. Definitions.
``1503. International obligations of the United States.
``1504. Commencement of ancillary case.
``1505. Authorization to act in a foreign country.
``1506. Public policy exception.
``1507. Additional assistance.
``1508. Interpretation.

``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT

``1509. Right of direct access.
``1510. Limited jurisdiction.
``1511. Commencement of case under section 301 or 303.
``1512. Participation of a foreign representative in a case under this
title.
``1513. Access of foreign creditors to a case under this title.
``1514. Notification to foreign creditors concerning a case under this
title.

``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF

``1515. Application for recognition of a foreign proceeding.
``1516. Presumptions concerning recognition.
``1517. Order recognizing a foreign proceeding.
``1518. Subsequent information.
``1519. Relief that may be granted upon petition for recognition of a
foreign proceeding.
``1520. Effects of recognition of a foreign main proceeding.
``1521. Relief that may be granted upon recognition of a foreign
proceeding.
``1522. Protection of creditors and other interested persons.
``1523. Actions to avoid acts detrimental to creditors.
``1524. Intervention by a foreign representative.

``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES

``1525. Cooperation and direct communication between the court and
foreign courts or foreign representatives.
``1526. Cooperation and direct communication between the trustee and
foreign courts or foreign representatives.
``1527. Forms of cooperation.

``SUBCHAPTER V--CONCURRENT PROCEEDINGS

``1528. Commencement of a case under this title after recognition of a
foreign main proceeding.
``1529. Coordination of a case under this title and a foreign
proceeding.
``1530. Coordination of more than 1 foreign proceeding.
``1531. Presumption of insolvency based on recognition of a foreign
main proceeding.
``1532. Rule of payment in concurrent proceedings.

``Sec. 1501. Purpose and scope of application

``(a) The purpose of this chapter is to incorporate the Model Law on
Cross-Border Insolvency so as to provide effective mechanisms for
dealing with cases of cross-border insolvency with the objectives of--
``(1) cooperation between--
``(A) United States courts, United States trustees,
trustees, examiners, debtors, and debtors in
possession; and
``(B) the courts and other competent authorities of
foreign countries involved in cross-border insolvency
cases;
``(2) greater legal certainty for trade and investment;
``(3) fair and efficient administration of cross-border
insolvencies that protects the interests of all creditors, and
other interested entities, including the debtor;
``(4) protection and maximization of the value of the
debtor's assets; and
``(5) facilitation of the rescue of financially troubled
businesses, thereby protecting investment and preserving
employment.
``(b) This chapter applies where--
``(1) assistance is sought in the United States by a foreign
court or a foreign representative in connection with a foreign
proceeding;
``(2) assistance is sought in a foreign country in connection
with a case under this title;
``(3) a foreign proceeding and a case under this title with
respect to the same debtor are taking place concurrently; or
``(4) creditors or other interested persons in a foreign
country have an interest in requesting the commencement of, or
participating in, a case or proceeding under this title.
``(c) This chapter does not apply to--
``(1) a proceeding concerning an entity identified by
exclusion in subsection 109(b);
``(2) an individual, or to an individual and such
individual's spouse, who have debts within the limits specified
in section 109(e) and who are citizens of the United States or
aliens lawfully admitted for permanent residence in the United
States; or
``(3) an entity subject to a proceeding under the Securities
Investor Protection Act, a stockbroker subject to subchapter
III of chapter 7 of this title, or a commodity broker subject
to subchapter IV of chapter 7 of this title.

``SUBCHAPTER I--GENERAL PROVISIONS

``Sec. 1502. Definitions

``For the purposes of this chapter, the term--
``(1) `debtor' means an entity that is the subject of a
foreign proceeding;
``(2) `establishment' means any place of operations where the
debtor carries out a nontransitory economic activity;
``(3) `foreign court' means a judicial or other authority
competent to control or supervise a foreign proceeding;
``(4) `foreign main proceeding' means a foreign proceeding
taking place in the country where the debtor has the center of
its main interests;
``(5) `foreign nonmain proceeding' means a foreign
proceeding, other than a foreign main proceeding, taking place
in a country where the debtor has an establishment;
``(6) `trustee' includes a trustee, a debtor in possession in
a case under any chapter of this title, or a debtor under
chapter 9 of this title; and
``(7) `within the territorial jurisdiction of the United
States' when used with reference to property of a debtor refers
to tangible property located within the territory of the United
States and intangible property deemed under applicable
nonbankruptcy law to be located within that territory,
including any property subject to attachment or garnishment
that may properly be seized or garnished by an action in a
Federal or State court in the United States.

``Sec. 1503. International obligations of the United States

``To the extent that this chapter conflicts with an obligation of the
United States arising out of any treaty or other form of agreement to
which it is a party with 1 or more other countries, the requirements of
the treaty or agreement prevail.

``Sec. 1504. Commencement of ancillary case

``A case under this chapter is commenced by the filing of a petition
for recognition of a foreign proceeding under section 1515.

``Sec. 1505. Authorization to act in a foreign country

``A trustee or another entity (including an examiner) may be
authorized by the court to act in a foreign country on behalf of an
estate created under section 541 An entity authorized to act under this
section may act in any way permitted by the applicable foreign law.

``Sec. 1506. Public policy exception

``Nothing in this chapter prevents the court from refusing to take an
action governed by this chapter if the action would be manifestly
contrary to the public policy of the United States.

``Sec. 1507. Additional assistance

``(a) Subject to the specific limitations stated elsewhere in this
chapter the court, upon recognition of a foreign proceeding, the court
may provide additional assistance to a foreign representative under
this title or under other laws of the United States.
``(b) In determining whether to provide additional assistance under
this title or under other laws of the United States, the court shall
consider whether such additional assistance, consistent with the
principles of comity, will reasonably assure--
``(1) just treatment of all holders of claims against or
interests in the debtor's property;
``(2) protection of claim holders in the United States
against prejudice and inconvenience in the processing of claims
in such foreign proceeding;
``(3) prevention of preferential or fraudulent dispositions
of property of the debtor;
``(4) distribution of proceeds of the debtor's property
substantially in accordance with the order prescribed by this
title; and
``(5) if appropriate, the provision of an opportunity for a
fresh start for the individual that such foreign proceeding
concerns.

``Sec. 1508. Interpretation

``In interpreting this chapter, the court shall consider its
international origin, and the need to promote an application of this
chapter that is consistent with the application of similar statutes
adopted by foreign jurisdictions.

``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT

``Sec. 1509. Right of direct access

``(a) A foreign representative may commence a case under section 1504
of this title by filing with the court a petition for recognition of a
foreign proceeding under section 1515 of this title.
``(b) If the court grants recognition under section 1515 of this
title, and subject to any limitations that the court may impose
consistent with the policy of this chapter--
``(1) the foreign representative has the capacity to sue and
be sued in a court in the United States;
``(2) the foreign representative may apply directly to a
court in the United States for appropriate relief in that
court; and
``(3) a court in the United States shall grant comity or
cooperation to the foreign representative.
``(c) A request for comity or cooperation by a foreign representative
in a court in the United States shall be accompanied by a certified
copy of an order granting recognition under section 1517 of this title.
``(d) If the court denies recognition under this chapter, the court
may issue any appropriate order necessary to prevent the foreign
representative from obtaining comity or cooperation from courts in the
United States.
``(e) Whether or not the court grants recognition, and subject to
sections 306 and 1510 of this title, a foreign representative is
subject to applicable nonbankruptcy law.
``(f) Notwithstanding any other provision of this section, the
failure of a foreign representative to commence a case or to obtain
recognition under this chapter does not affect any right the foreign
representative may have to sue in a court in the United State to
collect or recover a claim which is the property of the debtor.''.

``Sec. 1510. Limited jurisdiction

``The sole fact that a foreign representative files a petition under
section 1515 does not subject the foreign representative to the
jurisdiction of any court in the United States for any other purpose.

``Sec. 1511. Commencement of case under section 301 or 303

``(a) Upon recognition, a foreign representative may commence--
``(1) an involuntary case under section 303; or
``(2) a voluntary case under section 301 or 302, if the
foreign proceeding is a foreign main proceeding.
``(b) The petition commencing a case under subsection (a) must be
accompanied by certified copy of an order granting recognition The
court where the petition for recognition has been filed must be advised
of the foreign representative's intent to commence a case under
subsection (a) prior to such commencement.

``Sec. 1512. Participation of a foreign representative in a case under
this title

``Upon recognition of a foreign proceeding, the foreign
representative in that proceeding is entitled to participate as a party
in interest in a case regarding the debtor under this title.

``Sec. 1513. Access of foreign creditors to a case under this title

``(a) Foreign creditors have the same rights regarding the
commencement of, and participation in, a case under this title as
domestic creditors.
``(b)(1) Subsection (a) does not change or codify present law as to
the priority of claims under section 507 or 726 of this title, except
that the claim of a foreign creditor under those sections shall not be
given a lower priority than that of general unsecured claims without
priority solely because the holder of such claim is a foreign creditor.
``(2)(A) Subsection (a) and paragraph (1) do not change or codify
present law as to the allowability of foreign revenue claims or other
foreign public law claims in a proceeding under this title.
``(B) Allowance and priority as to a foreign tax claim or other
foreign public law claim shall be governed by any applicable tax treaty
of the United States, under the conditions and circumstances specified
therein.

``Sec. 1514. Notification to foreign creditors concerning a case under
this title

``(a) Whenever in a case under this title notice is to be given to
creditors generally or to any class or category of creditors, such
notice shall also be given to the known creditors generally, or to
creditors in the notified class or category, that do not have addresses
in the United States The court may order that appropriate steps be
taken with a view to notifying any creditor whose address is not yet
known.
``(b) Such notification to creditors with foreign addresses described
in subsection (a) shall be given individually, unless the court
considers that, under the circumstances, some other form of
notification would be more appropriate No letters rogatory or other
similar formality is required.
``(c) When a notification of commencement of a case is to be given to
foreign creditors, the notification shall--
``(1) indicate the time period for filing proofs of claim and
specify the place for their filing;
``(2) indicate whether secured creditors need to file their
proofs of claim; and
``(3) contain any other information required to be included
in such a notification to creditors under this title and the
orders of the court.
``(d) Any rule of procedure or order of the court as to notice or the
filing of a claim shall provide such additional time to creditors with
foreign addresses as is reasonable under the circumstances.

``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF

``Sec. 1515. Application for recognition of a foreign proceeding

``(a) A foreign representative applies to the court for recognition
of the foreign proceeding in which the foreign representative has been
appointed by filing a petition for recognition.
``(b) A petition for recognition shall be accompanied by--
``(1) a certified copy of the decision commencing the foreign
proceeding and appointing the foreign representative;
``(2) a certificate from the foreign court affirming the
existence of the foreign proceeding and of the appointment of
the foreign representative; or
``(3) in the absence of evidence referred to in paragraphs
(1) and (2), any other evidence acceptable to the court of the
existence of the foreign proceeding and of the appointment of
the foreign representative.
``(c) A petition for recognition shall also be accompanied by a
statement identifying all foreign proceedings with respect to the
debtor that are known to the foreign representative.
``(d) The documents referred to in paragraphs (1) and (2) of
subsection (b) must be translated into English The court may require a
translation into English of additional documents.

``Sec. 1516. Presumptions concerning recognition

``(a) If the decision or certificate referred to in section 1515(b)
indicates that the foreign proceeding is a foreign proceeding as
defined in section 101 and that the person or body is a foreign
representative as defined in section 101, the court is entitled to so
presume.
``(b) The court is entitled to presume that documents submitted in
support of the petition for recognition are authentic, whether or not
they have been legalized.
``(c) In the absence of evidence to the contrary, the debtor's
registered office, or habitual residence in the case of an individual,
is presumed to be the center of the debtor's main interests.

``Sec. 1517. Order recognizing a foreign proceeding

``(a) Subject to section 1506, after notice and a hearing an order
recognizing a foreign proceeding shall be entered if--
``(1) the foreign proceeding is a foreign main proceeding or
foreign nonmain proceeding within the meaning of section 1502;
``(2) the foreign representative applying for recognition is
a person or body as defined in section 101; and
``(3) the petition meets the requirements of section 1515.
``(b) The foreign proceeding shall be recognized--
``(1) as a foreign main proceeding if it is taking place in
the country where the debtor has the center of its main
interests; or
``(2) as a foreign nonmain proceeding if the debtor has an
establishment within the meaning of section 1502 in the foreign
country where the proceeding is pending.
``(c) A petition for recognition of a foreign proceeding shall be
decided upon at the earliest possible time Entry of an order
recognizing a foreign proceeding constitutes recognition under this
chapter.
``(d) The provisions of this subchapter do not prevent modification
or termination of recognition if it is shown that the grounds for
granting it were fully or partially lacking or have ceased to exist,
but in considering such action the court shall give due weight to
possible prejudice to parties that have relied upon the granting of
recognition The case under this chapter may be closed in the manner
prescribed under section 350.

``Sec. 1518. Subsequent information

``From the time of filing the petition for recognition of the foreign
proceeding, the foreign representative shall file with the court
promptly a notice of change of status concerning--
``(1) any substantial change in the status of the foreign
proceeding or the status of the foreign representative's
appointment; and
``(2) any other foreign proceeding regarding the debtor that
becomes known to the foreign representative.

``Sec. 1519. Relief that may be granted upon petition for recognition
of a foreign proceeding

``(a) From the time of filing a petition for recognition until the
court rules on the petition, the court may, at the request of the
foreign representative, where relief is urgently needed to protect the
assets of the debtor or the interests of the creditors, grant relief of
a provisional nature, including--
``(1) staying execution against the debtor's assets;
``(2) entrusting the administration or realization of all or
part of the debtor's assets located in the United States to the
foreign representative or another person authorized by the
court, including an examiner, in order to protect and preserve
the value of assets that, by their nature or because of
othercircumstances, are perishable, susceptible to devaluation or
otherwise in jeopardy; and
``(3) any relief referred to in paragraph (3), (4), or (7) of
section 1521(a).
``(b) Unless extended under section 1521(a)(6), the relief granted
under this section terminates when the petition for recognition is
decided upon.
``(c) It is a ground for denial of relief under this section that
such relief would interfere with the administration of a foreign main
proceeding.
``(d) The court may not enjoin a police or regulatory act of a
governmental unit, including a criminal action or proceeding, under
this section.
``(e) The standards, procedures, and limitations applicable to an
injunction shall apply to relief under this section.

``Sec. 1520. Effects of recognition of a foreign main proceeding

``(a) Upon recognition of a foreign proceeding that is a foreign main
proceeding--
``(1) sections 361 and 362 with respect to the debtor and
that property of the debtor that is within the territorial
jurisdiction of the United States;
``(2) sections 363, 549, and 552 of this title apply to a
transfer of an interest of the debtor in property that is
within the territorial jurisdiction of the United States to the
same extent that the sections would apply to property of an
estate;
``(3) unless the court orders otherwise, the foreign
representative may operate the debtor's business and may
exercise the rights and powers of a trustee under and to the
extent provided by sections 363 and 552; and
``(4) section 552 applies to property of the debtor that is
within the territorial jurisdiction of the United States.''.
``(b) Subsection (a) does not affect the right to commence an
individual action or proceeding in a foreign country to the extent
necessary to preserve a claim against the debtor.
``(c) Subsection (a) does not affect the right of a foreign
representative or an entity to file a petition commencing a case under
this title or the right of any party to file claims or take other
proper actions in such a case.

``Sec. 1521. Relief that may be granted upon recognition of a foreign
proceeding

``(a) Upon recognition of a foreign proceeding, whether main or
nonmain, where necessary to effectuate the purpose of this chapter and
to protect the assets of thedebtor or the interests of the creditors,
the court may, at the request of the foreign representative, grant any
appropriate relief, including--
``(1) staying the commencement or continuation of an
individual action or proceeding concerning the debtor's assets,
rights, obligations or liabilities to the extent they have not
been stayed under section 1520(a);
``(2) staying execution against the debtor's assets to the
extent it has not been stayed under section 1520(a);
``(3) suspending the right to transfer, encumber or otherwise
dispose of any assets of the debtor to the extent this right
has not been suspended under section 1520(a);
``(4) providing for the examination of witnesses, the taking
of evidence or the delivery of information concerning the
debtor's assets, affairs, rights, obligations or liabilities;
``(5) entrusting the administration or realization of all or
part of the debtor's assets within the territorial jurisdiction
of the United States to the foreign representative or another
person, including an examiner, authorized by the court;
``(6) extending relief granted under section 1519(a); and
``(7) granting any additional relief that may be available to
a trustee, except for relief available under sections 522, 544,
545, 547, 548, 550, and 724(a).
``(b) Upon recognition of a foreign proceeding, whether main or
nonmain, the court may, at the request of the foreign representative,
entrust the distribution of all or part of the debtor's assets located
in the United States to the foreign representative or another person,
including an examiner, authorized by the court, provided that the court
is satisfied that the interests of creditors in the United States are
sufficiently protected.
``(c) In granting relief under this section to a representative of a
foreign nonmain proceeding, the court must be satisfied that the relief
relates to assets that, under the law of the United States, should be
administered in the foreign nonmain proceeding or concerns information
required in that proceeding.
``(d) The court may not enjoin a police or regulatory act of a
governmental unit, including a criminal action or proceeding, under
this section.
``(e) The standards, procedures, and limitations applicable to an
injunction shall apply to relief under paragraphs (1), (2), (3), and
(6) of subsection (a).

``Sec. 1522. Protection of creditors and other interested persons

``(a) The court may grant relief under section 1519 or 1521, or may
modify or terminate relief under subsection (c), only if the interests
of the creditors and other interested entities, including the debtor,
are sufficiently protected.
``(b) The court may subject relief granted under section 1519 or
1521, or the operation of the debtor's business under section
1520(a)(3) of this title, to conditions it considers appropriate,
including the giving of security or the filing of a bond.
``(c) The court may, at the request of the foreign representative or
an entity affected by relief granted under section 1519 or 1521, or at
its own motion, modify or terminate such relief.
``(d) Section 1104(d) shall apply to the appointment of an examiner
under this chapter Any examiner shall comply with the qualification
requirements imposed on a trustee by section 322.

``Sec. 1523. Actions to avoid acts detrimental to creditors

``(a) Upon recognition of a foreign proceeding, the foreign
representative has standing in a case concerning the debtor pending
under another chapter of this title to initiate actions under sections
522, 544, 545, 547, 548, 550, and 724(a).
``(b) When the foreign proceeding is a foreign nonmain proceeding,
the court must be satisfied that an action under subsection (a) relates
to assets that, under United States law, should be administered in the
foreign nonmain proceeding.

``Sec. 1524. Intervention by a foreign representative

``Upon recognition of a foreign proceeding, the foreign
representative may intervene in any proceedings in a State or Federal
court in the United States in which the debtor is a party.

``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES

``Sec. 1525. Cooperation and direct communication between the court and
foreign courts or foreign representatives

``(a) Consistent with section 1501, the court shall cooperate to the
maximum extent possible with foreign courts or foreign representatives,
either directly or through the trustee.
``(b) The court is entitled to communicate directly with, or to
request information or assistance directly from, foreign courts or
foreign representatives, subject to the rights of parties in interest
to notice and participation.

``Sec. 1526. Cooperation and direct communication between the trustee
and foreign courts or foreign representatives

``(a) Consistent with section 1501, the trustee or other person,
including an examiner, authorized by the court, shall, subject to the
supervision of the court, cooperate to the maximum extent possible with
foreign courts or foreign representatives.
``(b) The trustee or other person, including an examiner, authorized
by the court is entitled, subject to the supervision of the court, to
communicate directly with foreign courts or foreign representatives.

``Sec. 1527. Forms of cooperation

``Cooperation referred to in sections 1525 and 1526 may be
implemented by any appropriate means, including--
``(1) appointment of a person or body, including an examiner,
to act at the direction of the court;
``(2) communication of information by any means considered
appropriate by the court;
``(3) coordination of the administration and supervision of
the debtor's assets and affairs;
``(4) approval or implementation of agreements concerning the
coordination of proceedings; and
``(5) coordination of concurrent proceedings regarding the
same debtor.

``SUBCHAPTER V--CONCURRENT PROCEEDINGS

``Sec. 1528. Commencement of a case under this title after recognition
of a foreign main proceeding

``After recognition of a foreign main proceeding, a case under
another chapter of this title may be commenced only if the debtor has
assets in the United States The effects of such case shall be
restricted to the assets of the debtor that are within the territorial
jurisdiction of the United States and, to the extent necessary to
implement cooperation and coordination under sections 1525, 1526, and
1527, to other assets of the debtor that are within the jurisdiction of
the court under sections 541(a) of this title, and 1334(e) of title 28,
to the extent that such other assets are not subject to the
jurisdiction and control of a foreign proceeding that has been
recognized under this chapter.

``Sec. 1529. Coordination of a case under this title and a foreign
proceeding

``Where a foreign proceeding and a case under another chapter of this
title are taking place concurrently regarding the same debtor, the
court shall seek cooperation and coordination under sections 1525,
1526, and 1527, and the following shall apply:
``(1) When the case in the United States is taking place at
the time the petition for recognition of the foreign proceeding
is filed--
``(A) any relief granted under sections 1519 or 1521
must be consistent with the relief granted in the case
in the United States; and
``(B) even if the foreign proceeding is recognized as
a foreign main proceeding, section 1520 does not apply.
``(2) When a case in the United States under this title
commences after recognition, or after the filing of the
petition for recognition, of the foreign proceeding--
``(A) any relief in effect under sections 1519 or
1521 shall be reviewed by the court and shall be
modified or terminated if inconsistent with the case in
the United States; and
``(B) if the foreign proceeding is a foreign main
proceeding, the stay and suspension referred to in
section 1520(a) shall be modified or terminated if
inconsistent with the relief granted in the case in the
United States.
``(3) In granting, extending, or modifying relief granted to
a representative of a foreign nonmain proceeding, the court
must be satisfied that the relief relates to assets that, under
the law of the United States, should be administered in the
foreign nonmain proceeding or concerns information required in
that proceeding.
``(4) In achieving cooperation and coordination under
sections 1528 and 1529, the court may grant any of the relief
authorized under section 305.

``Sec. 1530. Coordination of more than 1 foreign proceeding

``In matters referred to in section 1501, with respect to more than 1
foreign proceeding regarding the debtor, the court shall seek
cooperation and coordination under sections 1525, 1526, and 1527, and
the following shall apply:
``(1) Any relief granted under section 1519 or 1521 to a
representative of a foreign nonmain proceeding after
recognition of a foreign main proceeding must be consistent
with the foreign main proceeding.
``(2) If a foreign main proceeding is recognized after
recognition, or after the filing of a petition for recognition,
of a foreign nonmain proceeding, any relief in effect under
section 1519 or 1521 shall be reviewed by the court and shall
be modified or terminated if inconsistent with the foreign main
proceeding.
``(3) If, after recognition of a foreign nonmain proceeding,
another foreign nonmain proceeding is recognized, the court
shall grant, modify, or terminate relief for the purpose of
facilitating coordination of the proceedings.

``Sec. 1531. Presumption of insolvency based on recognition of a
foreign main proceeding

``In the absence of evidence to the contrary, recognition of a
foreign main proceeding is for the purpose of commencing a proceeding
under section 303, proof that the debtor is generally not paying its
debts as such debts become due.

``Sec. 1532. Rule of payment in concurrent proceedings

``Without prejudice to secured claims or rights in rem, a creditor
who has received payment with respect to its claim in a foreign
proceeding pursuant to a law relating to insolvency may not receive a
payment for the same claim in a case under any other chapter of this
title regarding the debtor, so long as the payment to othercreditors of
the same class is proportionately less than the payment the creditor
has already received.''.
(b) Clerical Amendment.--The table of chapters for title 11, United
States Code, is amended by inserting after the item relating to chapter
13 the following:

``15. Ancillary and Other Cross-Border Cases................ 1501''.

SEC. 902. AMENDMENTS TO OTHER CHAPTERS IN TITLE 11, UNITED STATES CODE.

(a) Applicability of Chapters.--Section 103 of title 11, United
States Code, is amended--
(1) in subsection (a), by inserting before the period the
following: ``, and this chapter, sections 307, 304, 555 through
557, 559, and 560 apply in a case under chapter 15''; and
(2) by adding at the end the following:
``(j) Chapter 15 applies only in a case under such chapter, except
that--
``(1) sections 1505, 1513, and 1514 apply in all cases under
this title; and
``(2) section 1509 applies whether or not a case under this
title is pending.''.
(b) Definitions.--Paragraphs (23) and (24) of title 11, United States
Code, are amended to read as follows:
``(23) `foreign proceeding' means a collective judicial or
administrative proceeding in a foreign country, including an
interim proceeding, under a law relating to insolvency or
adjustment of debt in which proceeding the assets and affairs
of the debtor are subject to control or supervision by a
foreign court, for the purpose of reorganization or
liquidation;
``(24) `foreign representative' means a person or body,
including a person or body appointed on an interim basis,
authorized in a foreign proceeding to administer the
reorganization or the liquidation of the debtor's assets or
affairs or to act as a representative of the foreign
proceeding;''.
(c) Amendments to Title 28, United States Code.--
(1) Procedures.--Section 157(b)(2) of title 28, United States
Code, is amended--
(A) in subparagraph (N), by striking ``and'' at the
end;
(B) in subparagraph (O), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following:
``(P) recognition of foreign proceedings and other matters
under chapter 15 of title 11.''.
(2) Bankruptcy cases and proceedings.--Section 1334(c) of
title 28, United States Code, is amended by striking ``Nothing
in'' and inserting ``Except with respect to a case under
chapter 15 of title 11, nothing in''.
(3) Duties of trustees.--Section 586(a)(3) of title 28,
United States Code, is amended by striking ``or 13'' and
inserting ``13, or 15,'' after ``chapter''.
(4) Section 305(a)(2) of title 11, United States Code, is
amended to read:
``(2)(A) a petition under section 1515 of this title for
recognition of a foreign proceeding has been granted; and
``(B) the purposes of chapter 15 of this title would be best
served by such dismissal or suspension.''.
(5) Section 508 of title 11, United States Code, is amended
by striking subsection (a) and by striking out the letter
``(b)'' at the beginning of the second paragraph.

TITLE X--FINANCIAL CONTRACT PROVISIONS

SEC. 1001. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS OR --
RECEIVERS OF INSURED DEPOSITORY INSTITUTIONS.

(a) Definition of Qualified Financial Contract.--Section
11(e)(8)(D)(i) of the Federal Deposit Insurance Act (12 U.S.C
1821(e)(8)(D)(i)) is amended by inserting ``, resolution or order''
after ``any similar agreement that the Corporation determines by
regulation''.
(b) Definition of Securities Contract.--Section 11(e)(8)(D)(ii) of
the Federal Deposit Insurance Act (12 U.S.C 1821(e)(8)(D)(ii)) is
amended to read as follows:
``(ii) Securities contract.--The term
`securities contract'--
``(I) means a contract for the
purchase, sale, or loan of a security,
a certificate of deposit, a mortgage
loan, or any interest in a mortgage
loan, a group or index of securities,
certificates of deposit, or mortgage
loans or interests therein (including
any interest therein or based on the
value thereof) or any option on any of
theforegoing, including any option to
purchase or sell any such security, certificate of deposit, loan,
interest, group or index, or option;
``(II) does not include any purchase,
sale, or repurchase obligation under a
participation in a commercial mortgage
loan unless the Corporation determines
by regulation, resolution, or order to
include any such agreement within the
meaning of such term;
``(III) means any option entered into
on a national securities exchange
relating to foreign currencies;
``(IV) means the guarantee by or to
any securities clearing agency of any
settlement of cash, securities,
certificates of deposit, mortgage loans
or interests therein, group or index of
securities, certificates of deposit, or
mortgage loans or interests therein
(including any interest therein or
based on the value thereof) or option
on any of the foregoing, including any
option to purchase or sell any such
security, certificate of deposit, loan,
interest, group or index or option;
``(V) means any margin loan;
``(VI) means any other agreement or
transaction that is similar to any
agreement or transaction referred to in
this clause;
``(VII) means any combination of the
agreements or transactions referred to
in this clause;
``(VIII) means any option to enter
into any agreement or transaction
referred to in this clause;
``(IX) means a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (III), (IV), (V), (VI), (VII), or
(VIII), together with all supplements
to any such master agreement, without
regard to whether the master agreement
provides for an agreement or
transaction that is not a securities
contract under this clause, except that
the master agreement shall be
considered to be a securities contract
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (III), (IV), (V), (VI),
(VII), or (VIII); and
``(X) means any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in this clause.''.
(c) Definition of Commodity Contract.--Section 11(e)(8)(D)(iii) of
the Federal Deposit Insurance Act (12 U.S.C 1821(e)(8)(D)(iii)) is
amended to read as follows:
``(iii) Commodity contract.--The term
`commodity contract' means--
``(I) with respect to a futures
commission merchant, a contract for the
purchase or sale of a commodity for
future delivery on, or subject to the
rules of, a contract market or board of
trade;
``(II) with respect to a foreign
futures commission merchant, a foreign
future;
``(III) with respect to a leverage
transaction merchant, a leverage
transaction;
``(IV) with respect to a clearing
organization, a contract for the
purchase or sale of a commodity for
future delivery on, or subject to the
rules of, a contract market or board of
trade that is cleared by such clearing
organization, or commodity option
traded on, or subject to the rules of,
a contract market or board of trade
that is cleared by such clearing
organization;
``(V) with respect to a commodity
options dealer, a commodity option;
``(VI) any other agreement or
transaction that is similar to any
agreement or transaction referred to in
this clause;
``(VII) any combination of the
agreements or transactions referred to
in this clause;
``(VIII) any option to enter into any
agreement or transaction referred to in
this clause;
``(IX) a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (II), (III), (IV), (V), (VI),
(VII), or (VIII), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
commodity contract under this clause,
except that the master agreement shall
be considered to be a commodity
contract under this clause only
withrespect to each agreement or transaction under the master agreement
that is referred to in subclause (I), (II), (III), (IV), (V), (VI),
(VII), or (VIII); or
``(X) a security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in this clause.''.
(d) Definition of Forward Contract.--Section 11(e)(8)(D)(iv) of the
Federal Deposit Insurance Act (12 U.S.C 1821(e)(8)(D)(iv)) is amended
to read as follows:
``(iv) Forward contract.--The term `forward
contract' means--
``(I) a contract (other than a
commodity contract) for the purchase,
sale, or transfer of a commodity or any
similar good, article, service, right,
or interest which is presently or in
the future becomes the subject of
dealing in the forward contract trade,
or product or byproduct thereof, with a
maturity date more than 2 days after
the date the contract is entered into,
including, but not limited to, a
repurchase agreement, reverse
repurchase agreement, consignment,
lease, swap, hedge transaction,
deposit, loan, option, allocated
transaction, unallocated transaction,
or any other similar agreement;
``(II) any combination of agreements
or transactions referred to in
subclauses (I) and (III);
``(III) any option to enter into any
agreement or transaction referred to in
subclause (I) or (II);
``(IV) a master agreement that
provides for an agreement or
transaction referred to in subclauses
(I), (II), or (III), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
forward contract under this clause,
except that the master agreement shall
be considered to be a forward contract
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (II), or (III); or
``(V) a security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in subclause (I), (II),
(III), or (IV).''.
(e) Definition of Repurchase Agreement.--Section 11(e)(8)(D)(v) of
the Federal Deposit Insurance Act (12 U.S.C 1821(e)(8)(D)(v)) is
amended to read as follows:
``(v) Repurchase agreement.--The term
`repurchase agreement' (which definition also
applies to a reverse repurchase agreement)--
``(I) mean an agreement, including
related terms, which provides for the
transfer of 1 or more certificates of
deposit, mortgage-related securities
(as such term is defined in the
Securities Exchange Act of 1934),
mortgage loans, interests in mortgage-
related securities or mortgage loans,
eligible bankers' acceptances,
qualified foreign government securities
or securities that are direct
obligations of, or that are fully
guaranteed by, the United States or any
agency of the United States against the
transfer of funds by the transferee of
such certificates of deposit, eligible
bankers' acceptances, securities,
loans, or interests with a simultaneous
agreement by such transferee to
transfer to the transferor thereof
certificates of deposit, eligible
bankers' acceptances, securities,
loans, or interests as described above,
at a date certain not later than 1 year
after such transfers or on demand,
against the transfer of funds, or any
other similar agreement;
``(II) does not include any
repurchase obligation under a
participation in a commercial mortgage
loan unless the Corporation determines
by regulation, resolution, or order to
include any such participation within
the meaning of such term;
``(III) means any combination of
agreements or transactions referred to
in subclauses (I) and (IV);
``(IV) means any option to enter into
any agreement or transaction referred
to in subclause (I) or (III);
``(V) means a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (III), or (IV), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
repurchase agreement under thisclause,
except that the master agreement shall be considered to be a repurchase
agreement under this subclause only with respect to each agreement or
transaction under the master agreement that is referred to in subclause
(I), (III), or (IV); and
``(VI) means a security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in subclause (I), (III),
(IV), or (V).
For purposes of this clause, the term
`qualified foreign government security' means a
security that is a direct obligation of, or
that is fully guaranteed by, the central
government of a member of the Organization for
Economic Cooperation and Development (as
determined by regulation or order adopted by
the appropriate Federal banking authority).''.
(f) Definition of Swap Agreement.--Section 11(e)(8)(D)(iv) of the
Federal Deposit Insurance Act (12 U.S.C 1821(e)(8)(D)(vi)) is amended
to read as follows:
``(vi) Swap agreement.--The term `swap
agreement' means--
``(I) any agreement, including the
terms and conditions incorporated by
reference in any such agreement, which
is an interest rate swap, option,
future, or forward agreement, including
a rate floor, rate cap, rate collar,
cross-currency rate swap, and basis
swap; a spot, same day-tomorrow,
tomorrow-next, forward, or other
foreign exchange or precious metals
agreement; a currency swap, option,
future, or forward agreement; an equity
index or equity swap, option, future,
or forward agreement; a debt index or
debt swap, option, future, or forward
agreement; a credit spread or credit
swap, option, future, or forward
agreement; a commodity index or
commodity swap, option, future, or
forward agreement;
``(II) any agreement or transaction
similar to any other agreement or
transaction referred to in this clause
that is presently, or in the future
becomes, regularly entered into in the
swap market (including terms and
conditions incorporated by reference in
such agreement) and that is a forward,
swap, future, or option on 1 or more
rates, currencies, commodities, equity
securities or other equity instruments,
debt securities or other debt
instruments, or economic indices or
measures of economic risk or value;
``(III) any combination of agreements
or transactions referred to in this
clause;
``(IV) any option to enter into any
agreement or transaction referred to in
this clause;
``(V) a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (II), (III), or (IV), together
with all supplements to any such master
agreement, without regard to whether
the master agreement contains an
agreement or transaction that is not a
swap agreement under this clause,
except that the master agreement shall
be considered to be a swap agreement
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (II), (III), or (IV);
and
``(VI) any security agreement or
arrangement or other credit enhancement
related to any agreements or
transactions referred to in
subparagraph (I), (II), (III), or (IV).
Such term is applicable for purposes of this
title only and shall not be construed or
applied so as to challenge or affect the
characterization, definition, or treatment of
any swap agreement under any other statute,
regulation, or rule, including the Securities
Act of 1933, the Securities Exchange Act of
1934, the Public Utility Holding Company Act of
1935, the Trust Indenture Act of 1939, the
Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Securities Investor
Protection Act of 1970, the Commodity Exchange
Act, and the regulations promulgated by the
Securities and Exchange Commission or the
Commodity Futures Trading Commission.''.
(g) Definition of Transfer.--Section 11(e)(8)(D)(viii) of the Federal
Deposit Insurance Act (12 U.S.C 1821(e)(8)(D)(viii)) is amended to read
as follows:
``(viii) Transfer.--The term `transfer' means
every mode, direct or indirect, absolute or
conditional, voluntary or involuntary, of
disposing of or parting with property or with
an interest in property, including retention of
title as a security interest and foreclosure of
the depository institutions's equity of
redemption.''.
(h) Treatment of Qualified Financial Contracts.--Section 11(e)(8) of
the Federal Deposit Insurance Act (12 U.S.C 1821(e)(8)) is amended--
(1) in subparagraph (A), by striking ``paragraph (10)'' and
inserting ``paragraphs (9) and (10)'';
(2) in subparagraph (A)(i), by striking ``to cause the
termination or liquidation'' and inserting ``such person has to
cause the termination, liquidation, or acceleration'';
(3) by amending subparagraph (A)(ii) to read as follows:
``(ii) any right under any security agreement
or arrangement or other credit enhancement
related to 1 or more qualified financial
contracts described in clause (i);''; and
(4) by amending subparagraph (E)(ii) to read as follows:
``(ii) any right under any security agreement
or arrangement or other credit enhancement
related to 1 or more qualified financial
contracts described in clause (i);''.
(i) Avoidance of Transfers.--Section 11(e)(8)(C)(i) of the Federal
Deposit Insurance Act (12 U.S.C 1821(e)(8)(C)(i)) is amended by
inserting ``section 5242 of the Revised Statutes of the United States
(12 U.S.C 91) or any other Federal or State law relating to the
avoidance of preferential or fraudulent transfers,'' before ``the
Corporation''.

SEC. 1002. AUTHORITY OF THE CORPORATION WITH RESPECT TO FAILED AND
FAILING INSTITUTIONS.

(a) In General.--Section 11(e)(8) of the Federal Deposit Insurance
Act (12 U.S.C 1821(e)(8)) is amended--
(1) in subparagraph (E), by striking ``other than paragraph
(12) of this subsection, subsection (d)(9)'' and inserting
``other than subsections (d)(9) and (e)(10)''; and
(2) by adding at the end the following new subparagraphs:
``(F) Clarification.--No provision of law shall be
construed as limiting the right or power of the
Corporation, or authorizing any court or agency to
limit or delay, in any manner, the right or power of
the Corporation to transfer any qualified financial
contract in accordance with paragraphs (9) and (10) of
this subsection or to disaffirm or repudiate any such
contract in accordance with subsection (e)(1) of this
section.
``(G) Walkaway clauses not effective.--
``(i) In general.--Notwithstanding the
provisions of subparagraphs (A) and (E), and
sections 403 and 404 of the Federal Deposit
Insurance Corporation Improvement Act of 1991,
no walkaway clause shall be enforceable in a
qualified financial contract of an insured
depository institution in default.
``(ii) Walkaway clause defined.--For purposes
of this subparagraph, the term `walkaway
clause' means a provision in a qualified
financial contract that, after calculation of a
value of a party's position or an amount due to
or from 1 of the parties in accordance with its
terms upon termination, liquidation, or
acceleration of the qualified financial
contract, either does not create a payment
obligation of a party or extinguishes a payment
obligation of a party in whole or in part
solely because of such party's status as a
nondefaulting party.''.
(b) Technical and Conforming Amendment.--Section 11(e)(12)(A) of the
Federal Deposit Insurance Act (12 U.S.C 1821(e)(12)(A)) is amended by
inserting ``or the exercise of rights or powers'' after ``the
appointment''.

SEC. 1003. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED FINANCIAL
CONTRACTS.

(a) Transfers of Qualified Financial Contracts to Financial
Institutions.--Section 11(e)(9) of the Federal Deposit Insurance Act
(12 U.S.C 1821(e)(9)) is amended to read as follows:
``(9) Transfer of qualified financial contracts.--
``(A) In general.--In making any transfer of assets
or liabilities of a depository institution in default
which includes any qualified financial contract, the
conservator or receiver for such depository institution
shall either--
``(i) transfer to 1 financial institution,
other than a financial institution for which a
conservator, receiver, trustee in bankruptcy,
or other legal custodian has been appointed or
which is otherwise the subject of a bankruptcy
or insolvency proceeding--
``(I) all qualified financial
contracts between any person or any
affiliate of such person and the
depository institution in default;
``(II) all claims of such person or
any affiliate of such person against
such depository institution under any
such contract (other than any claim
which, under the terms of any such
contract, is subordinated to the claims
of general unsecured creditors of such
institution);
``(III) all claims of such depository
institution against such person or any
affiliate of such person under any such
contract; and
``(IV) all property securing or any
other credit enhancement for any
contract described in subclause (I) or
any claim described in subclause (II)
or (III) under any such contract; or
``(ii) transfer none of the qualified
financial contracts, claims, property or other
credit enhancement referred to in clause (i)
(with respect to such person and any affiliate
of such person).
``(B) Transfer to foreign bank, foreign financial
institution, or branch or agency of a foreign bank or
financial institution.--In transferring any qualified
financial contracts and related claims and property
pursuant to subparagraph (A)(i), the conservator or
receiver for such depository institution shall not make
such transfer to a foreign bank, financial institution
organized under the laws of a foreign country, or a
branch or agency of a foreign bank or financial
institution unless, under the law applicable to such
bank, financial institution, branch or agency, to the
qualified financial contracts, and to any netting
contract, any security agreement or arrangement or
other credit enhancement related to 1 or more qualified
financial contracts, the contractual rights of the
parties to such qualified financial contracts, netting
contracts, security agreements or arrangements, or
other credit enhancements are enforceable substantially
to the same extent as permitted under this section.
``(C) Transfer of contracts subject to the rules of a
clearing organization.--In the event that a conservator
or receiver transfers any qualified financial contract
and related claims, property and credit enhancements
pursuant to subparagraph (A)(i) and such contract is
subject to the rules of a clearing organization, the
clearing organization shall not be required to accept
the transferee as a member by virtue of the transfer.
``(D) Definition.--For purposes of this section, the
term `financial institution' means a broker or dealer,
a depository institution, a futures commission
merchant, or any other institution as determined by the
Corporation by regulation to be a financial
institution.''.
(b) Notice to Qualified Financial Contract Counterparties.--Section
11(e)(10)(A) of the Federal Deposit Insurance Act (12 U.S.C
1821(e)(10)(A)) is amended by amending the flush material following
clause (ii) to read as follows: ``the conservator or receiver shall
notify any person who is a party to any such contract of such transfer
by 5:00 p.m (eastern time) on the business day following the date of
the appointment of the receiver, in the case of a receivership, or the
business day following such transfer, in the case of a
conservatorship.''.
(c) Rights Against Receiver and Treatment of Bridge Banks.--Section
11(e)(10) of the Federal Deposit Insurance Act (12 U.S.C 1821(e)(10))
is further amended--
(1) by redesignating subparagraph (B) as subparagraph (D);
and
(2) by inserting after subparagraph (A) the following new
subparagraphs:
``(B) Certain rights not enforceable.--
``(i) Receivership.--A person who is a party
to a qualified financial contract with an
insured depository institution may not exercise
any right such person has to terminate,
liquidate, or net such contract under paragraph
(8)(A) or section 403 or 404 of the Federal
Deposit Insurance Corporation Improvement Act
of 1991 solely by reason of or incidental to
the appointment of a receiver for the
depository institution (or the insolvency or
financial condition of the depository
institution for which the receiver has been
appointed)--
``(I) until 5:00 p.m (eastern time)
on the business day following the date
of the appointment of the receiver; or
``(II) after the person has received
notice that the contract has been
transferred pursuant to paragraph
(9)(A).
``(ii) Conservatorship.--A person who is a
party to a qualified financial contract with an
insured depository institution may not exercise
any right such person has to terminate,
liquidate, or net such contract under paragraph
(8)(E) or sections 403 or 404 of the Federal
Deposit Insurance Corporation Improvement Act
of 1991, solely by reason of or incidental to
the appointment of a conservator for the
depositoryinstitution (or the insolvency or
financial condition of the depository institution for which the
conservator has been appointed).
``(iii) Notice.--For purposes of this
subsection, the Corporation as receiver or
conservator of an insured depository
institution shall be deemed to have notified a
person who is a party to a qualified financial
contract with such depository institution if
the Corporation has taken steps reasonably
calculated to provide notice to such person by
the time specified in subparagraph (A) of this
subsection.
``(C) Treatment of bridge banks.--The following
institutions shall not be considered a financial
institution for which a conservator, receiver, trustee
in bankruptcy, or other legal custodian has been
appointed or which is otherwise the subject of a
bankruptcy or insolvency proceeding for purposes of
subsection (e)(9)--
``(i) a bridge bank; or
``(ii) a depository institution organized by
the Corporation, for which a conservator is
appointed either--
``(I) immediately upon the
organization of the institution; or
``(II) at the time of a purchase and
assumption transaction between such
institution and the Corporation as
receiver for a depository institution
in default.''.

SEC. 1004. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION OF
QUALIFIED FINANCIAL CONTRACTS.

Section 11(e) of the Federal Deposit Insurance Act (12 U.S.C 1821(e))
is further amended--
(1) by redesignating paragraphs (11) through (15) as
paragraphs (12) through (16), respectively; and
(2) by inserting after paragraph (10) the following new
paragraph:
``(11) Disaffirmance or repudiation of qualified financial
contracts.--In exercising the rights of disaffirmance or
repudiation of a conservator or receiver with respect to any
qualified financial contract to which an insured depository
institution is a party, the conservator or receiver for such
institution shall either--
``(A) disaffirm or repudiate all qualified financial
contracts between--
``(i) any person or any affiliate of such
person; and
``(ii) the depository institution in default;
or
``(B) disaffirm or repudiate none of the qualified
financial contracts referred to in subparagraph (A)
(with respect to such person or any affiliate of such
person).''.

SEC. 1005. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.

Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance Act (12
U.S.C 1821(e)(8)(D)(vii)) is amended to read as follows:
``(vii) Treatment of master agreement as 1
agreement.--Any master agreement for any
contract or agreement described in any
preceding clause of this subparagraph (or any
master agreement for such master agreement or
agreements), together with all supplements to
such master agreement, shall be treated as a
single agreement and a single qualified
financial contract If a master agreement
contains provisions relating to agreements or
transactions that are not themselves qualified
financial contracts, the master agreement shall
be deemed to be a qualified financial contract
only with respect to those transactions that
are themselves qualified financial
contracts.''.

SEC. 1006. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF
1991.

(a) Definitions.--Section 402 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C 4402) is amended--
(1) in paragraph (6)--
(A) by redesignating subparagraphs (B) through (D) as
subparagraphs (C) through (E), respectively;
(B) by inserting after subparagraph (A) the following
new subparagraph:
``(B) an uninsured national bank or an uninsured
State bank that is a member of the Federal Reserve
System if the national bank or State member bank is not
eligible to make application to become an insured bank
under section 5 of the Federal Deposit Insurance
Act;''; and
(C) by amending subparagraph (C) (as redesignated) to
read as follows:
``(C) a branch or agency of a foreign bank, a foreign
bank and any branch or agency of the foreign bank, or
the foreign bank that establishedthe branch or agency,
as those terms are defined in section 1(b) of the International Banking
Act of 1978;'';
(2) in paragraph (11), by adding before the period ``and any
other clearing organization with which such clearing
organization has a netting contract'';
(3) by amending paragraph (14)(A)(i) to read as follows:
``(i) means a contract or agreement between 2
or more financial institutions, clearing
organizations, or members that provides for
netting present or future payment obligations
or payment entitlements (including liquidation
or closeout values relating to such obligations
or entitlements) among the parties to the
agreement; and''; and
(4) by adding at the end the following new paragraph:
``(15) Payment.--The term `payment' means a payment of United
States dollars, another currency, or a composite currency, and
a noncash delivery, including a payment or delivery to
liquidate an unmatured obligation.''.
(b) Enforceability of Bilateral Netting Contracts.--Section 403 of
the Federal Deposit Insurance Corporation Improvement Act of 1991 (12
U.S.C 4403) is amended--
(1) by amending subsection (a) to read as follows:
``(a) General Rule.--Notwithstanding any other provision of State or
Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance Act or any order
authorized under section 5(b)(2) of the Securities Investor Protection
Act of 1970, the covered contractual payment obligations and the
covered contractual payment entitlements between any 2 financial
institutions shall be netted in accordance with, and subject to the
conditions of, the terms of any applicable netting contract (except as
provided in section 561(b)(2) of title 11).''; and
(2) by adding at the end the following new subsection:
``(f) Enforceability of Security Agreements.--The provisions of any
security agreement or arrangement or other credit enhancement related
to 1 or more netting contracts between any 2 financial institutions
shall be enforceable in accordance with their terms (except as provided
in section 561(b)(2) of title 11) and shall not be stayed, avoided, or
otherwise limited by any State or Federal law (other than paragraphs
(8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal Deposit
Insurance Act and section 5(b)(2) of the Securities Investor Protection
Act of 1970).''.
(c) Enforceability of Clearing Organization Netting Contracts.--
Section 404 of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (12 U.S.C 4404) is amended--
(1) by amending subsection (a) to read as follows:
``(a) General Rule.--Notwithstanding any other provision of State or
Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance Act and any order
authorized under section 5(b)(2) of the Securities Investor Protection
Act of 1970, the covered contractual payment obligations and the
covered contractual payment entitlements of a member of a clearing
organization to and from all other members of a clearing organization
shall be netted in accordance with and subject to the conditions of any
applicable netting contract (except as provided in section 561(b)(2) of
title 11, United States Code).''; and
(2) by adding at the end the following new subsection:
``(h) Enforceability of Security Agreements.--The provisions of any
security agreement or arrangement or other credit enhancement related
to 1 or more netting contracts between any 2 members of a clearing
organization shall be enforceable in accordance with their terms
(except as provided in section 561(b)(2) of title 11, United States
Code) and shall not be stayed, avoided, or otherwise limited by any
State or Federal law other than paragraphs (8)(E), (8)(F), and (10)(B)
of section 11(e) of the Federal Deposit Insurance Act and section
5(b)(2) of the Securities Investor Protection Act of 1970.''.
(d) Enforceability of Contracts With Uninsured National Banks and
Uninsured Federal Branches and Agencies.--The Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C 4401 et seq.) is
amended--
(1) by redesignating section 407 as section 408; and
(2) by adding after section 406 the following new section:

``SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL BANKS AND
UNINSURED FEDERAL BRANCHES AND AGENCIES.

``(a) In General.--Notwithstanding any other provision of law,
paragraphs (8), (9), (10), and (11) of section 11(e) of the Federal
Deposit Insurance Act shall apply to an uninsured national bank or
uninsured Federal branch or Federal agency except--
``(1) any reference to the `Corporation as receiver' or `the
receiver or the Corporation' shall refer to the receiver of an
uninsured national bank or uninsuredFederal branch or Federal
agency appointed by the Comptroller of the Currency;
``(2) any reference to the `Corporation' (other than in
section 11(e)(8)(D) of such Act), the `Corporation, whether
acting as such or as conservator or receiver', a `receiver', or
a `conservator' shall refer to the receiver or conservator of
an uninsured national bank or uninsured Federal branch or
Federal agency appointed by the Comptroller of the Currency;
and
``(3) any reference to an `insured depository institution' or
`depository institution' shall refer to an uninsured national
bank or an uninsured Federal branch or Federal agency.
``(b) Liability.--The liability of a receiver or conservator of an
uninsured national bank or uninsured Federal branch or agency shall be
determined in the same manner and subject to the same limitations that
apply to receivers and conservators of insured depository institutions
under section 11(e) of the Federal Deposit Insurance Act.
``(c) Regulatory Authority.--
``(1) In general.--The Comptroller of the Currency, in
consultation with the Federal Deposit Insurance Corporation,
may promulgate regulations to implement this section.
``(2) Specific requirement.--In promulgating regulations to
implement this section, the Comptroller of the Currency shall
ensure that the regulations generally are consistent with the
regulations and policies of the Federal Deposit Insurance
Corporation adopted pursuant to the Federal Deposit Insurance
Act.
``(d) Definitions.--For purposes of this section, the terms `Federal
branch', `Federal agency', and `foreign bank' have the same meaning as
in section 1(b) of the International Banking Act.''.

SEC. 1007. BANKRUPTCY CODE AMENDMENTS.

(a) Definitions of Forward Contract, Repurchase Agreement, Securities
Clearing Agency, Swap Agreement, Commodity Contract, and Securities
Contract.--Title 11, United States Code, is amended--
(1) in section 101--
(A) in paragraph (25)--
(i) by striking ``means a contract'' and
inserting ``means--
``(A) a contract'';
(ii) by striking ``, or any combination
thereof or option thereon;'' and inserting ``,
or any other similar agreement;''; and
(iii) by adding at the end the following:
``(B) any combination of agreements or transactions
referred to in subparagraphs (A) and (C);
``(C) any option to enter into an agreement or
transaction referred to in subparagraph (A) or (B);
``(D) a master agreement that provides for an
agreement or transaction referred to in subparagraph
(A), (B), or (C), together with all supplements to any
such master agreement, without regard to whether such
master agreement provides for an agreement or
transaction that is not a forward contract under this
paragraph, except that such master agreement shall be
considered to be a forward contract under this
paragraph only with respect to each agreement or
transaction under such master agreement that is
referred to in subparagraph (A), (B) or (C); or
``(E) a security agreement or arrangement, or other
credit enhancement related to any agreement or
transaction referred to in subparagraph (A), (B), (C),
or (D), but not to exceed the actual value of such
contract, option, agreement, or transaction on the date
of the filing of the petition;'';
(B) in paragraph (46), by striking ``on any day
during the period beginning 90 days before the date
of'' and replacing it with ``at any time before'';
(C) by amending paragraph (47) to read as follows:
``(47) `repurchase agreement' (which definition also applies
to a reverse repurchase agreement) means--
``(i) an agreement, including related terms,
which provides for the transfer of 1 or more
certificates of deposit, mortgage-related
securities (as defined in the Securities
Exchange Act of 1934), mortgage loans,
interests in mortgage-related securities or
mortgage loans, eligible bankers' acceptances,
qualified foreign government securities; or
securities that are direct obligations of, or
that are fully guaranteed by, the United States
or any agency of the United States against the
transfer of funds by the transferee of such
certificates of deposit, eligible bankers'
acceptances, securities, loans, or interests;
with a simultaneousagreement by such transferee
to transfer to the transferor thereof certificates of deposit, eligible
bankers' acceptance, securities, loans, or interests of the kind
described above, at a date certain not later than 1 year after such
transfer or on demand, against the transfer of funds;
``(ii) any combination of agreements or
transactions referred to in clauses (i) and
(iii);
``(iii) an option to enter into an agreement
or transaction referred to in clause (i) or
(ii);
``(iv) a master agreement that provides for
an agreement or transaction referred to in
clause (i), (ii), or (iii), together with all
supplements to any such master agreement,
without regard to whether such master agreement
provides for an agreement or transaction that
is not a repurchase agreement under this
paragraph, except that such master agreement
shall be considered to be a repurchase
agreement under this paragraph only with
respect to each agreement or transaction under
the master agreement that is referred to in
clause (i), (ii), or (iii); or
``(v) a security agreement or arrangement or
other credit enhancement related to any
agreement or transaction referred to in clause
(i), (ii), (iii), or (iv), but not to exceed
the actual value of such contract on the date
of the filing of the petition; and
``(B) does not include a repurchase obligation under
a participation in a commercial mortgage loan;
and, for purposes of this paragraph, the term `qualified
foreign government security' means a security that is a direct
obligation of, or that is fully guaranteed by, the central
government of a member of the Organization for Economic
Cooperation and Development;'';
(D) in paragraph (48) by inserting ``or exempt from
such registration under such section pursuant to an
order of the Securities and Exchange Commission'' after
``1934''; and
(E) by amending paragraph (53B) to read as follows:
``(53B) `swap agreement'
``(A) means--
``(i) any agreement, including the terms and
conditions incorporated by reference in such
agreement, which is an interest rate swap,
option, future, or forward agreement, including
a rate floor, rate cap, rate collar, cross-
currency rate swap, and basis swap; a spot,
same day-tomorrow, tomorrow-next, forward, or
other foreign exchange or precious metals
agreement; a currency swap, option, future, or
forward agreement; an equity index or an equity
swap, option, future, or forward agreement; a
debt index or a debt swap, option, future, or
forward agreement; a credit spread or a credit
swap, option, future, or forward agreement; or
a commodity index or a commodity swap, option,
future, or forward agreement;
``(ii) any agreement or transaction similar
to any other agreement or transaction referred
to in this paragraph that--
``(I) is presently, or in the future
becomes, regularly entered into in the
swap market (including terms and
conditions incorporated by reference
therein); and
``(II) is a forward, swap, future, or
option on 1 or more rates, currencies
commodities, equity securities, or
other equity instruments, debt
securities or other debt instruments,
or on an economic index or measure of
economic risk or value;
``(iii) any combination of agreements or
transactions referred to in this paragraph;
``(iv) any option to enter into an agreement
or transaction referred to in this paragraph;
``(v) a master agreement that provides for an
agreement or transaction referred to in clause
(i), (ii), (iii), or (iv), together with all
supplements to any such master agreement, and
without regard to whether the master agreement
contains an agreement or transaction that is
not a swap agreement under this paragraph,
except that the master agreement shall be
considered to be a swap agreement under this
paragraph only with respect to each agreement
or transaction under the master agreement that
is referred to in clause (i), (ii), (iii), or
(iv); or
``(B) any security agreement or arrangement or other
credit enhancement related to any agreements or
transactions referred to in subparagraph (A); and
``(C) is applicable for purposes of this title only
and shall not be construed or applied so as to
challenge or affect the characterization, definition,
or treatment of any swap agreement under any other
statute, regulation, or rule, including the Securities
Act of 1933, the Securities Exchange Act of 1934, the
Public Utility Holding Company Act of 1935, the Trust
Indenture Act of 1939, the Investment Company Act of
1940, the Investment Advisers Act of 1940, the
Securities Investor Protection Act of 1970, the
Commodity Exchange Act, and the regulations prescribed
by the Securities and Exchange Commission or the
Commodity Futures Trading Commission.'';
(2) by amending section 741(7) to read as follows:
``(7) `securities contract'--
``(A) means--
``(i) a contract for the purchase, sale, or
loan of a security, a certificate of deposit, a
mortgage loan or any interest in a mortgage
loan, a group or index of securities,
certificates of deposit or mortgage loans or
interests therein (including an interest
therein or based on the value thereof), or
option on any of the foregoing, including an
option to purchase or sell any such security
certificate of deposit, loan, interest, group
or index or option;
``(ii) any option entered into on a national
securities exchange relating to foreign
currencies;
``(iii) the guarantee by or to any securities
clearing agency of a settlement of cash,
securities, certificates of deposit mortgage
loans or interests therein, group or index of
securities, or mortgage loans or interests
therein (including any interest therein or
based on the value thereof), or option on any
of the foregoing, including an option to
purchase or sell any such security certificate
of deposit, loan, interest, group or index or
option;
``(iv) any margin loan;
``(v) any other agreement or transaction that
is similar to an agreement or transaction
referred to in this paragraph;
``(vi) any combination of the agreements or
transactions referred to in this paragraph;
``(vii) any option to enter into any
agreement or transaction referred to in this
paragraph;
``(viii) a master agreement that provides for
an agreement or transaction referred to in
clause (i), (ii), (iii), (iv), (v), (vi), or
(vii), together with all supplements to any
such master agreement, without regard to
whether the master agreement provides for an
agreement or transaction that is not a
securities contract under this paragraph,
except that such master agreement shall be
considered to be a securities contract under
this paragraph only with respect to each
agreement or transaction under such master
agreement that is referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii); or
``(ix) any security agreement or arrangement,
or other credit enhancement, related to any
agreement or transaction referred to in this
paragraph, but not to exceed the actual value
of such contract on the date of the filing of
the petition; and
``(B) does not include any purchase, sale, or
repurchase obligation under a participation in a
commercial mortgage loan.''; and
(3) in section 761(4)--
(A) by striking ``or'' at the end of subparagraph
(D); and
(B) by adding at the end the following:
``(F) any other agreement or transaction that is
similar to an agreement or transaction referred to in
this paragraph;
``(G) any combination of the agreements or
transactions referred to in this paragraph;
``(H) any option to enter into an agreement or
transaction referred to in this paragraph;
``(I) a master agreement that provides for an
agreement or transaction referred to in subparagraph
(A), (B), (C), (D), (E), (F), (G), or (H), together
with all supplements to such master netting agreement,
without regard to whether the master netting agreement
provides for an agreement or transaction that is not a
commodity contract under this paragraph, except that
the master agreement shall be considered to be a
commodity contract under this paragraph only with
respect to each agreement or transaction underthe
master agreement that is referred to in subparagraph (A), (B), (C),
(D), (E), (F), (G), or (H); or
``(J) a security agreement or arrangement, or other
credit enhancement related to any agreement or
transaction referred to in this paragraph, but not to
exceed the actual value of such contract on the date of
the filing of the petition;''.
(b) Definitions of Financial Institution, Financial Participant, and
Forward Contract Merchant.--Section 101 of title 11, United States
Code, is amended--
(1) by amending paragraph (22) to read as follows:
``(22) `financial institution' means--
``(A) a Federal reserve bank, or an entity (domestic
or foreign) that is a commercial or savings bank,
industrial savings bank, savings and loan association,
trust company, or receiver or conservator for such
entity and, when any such Federal reserve bank,
receiver, conservator or entity is acting as agent or
custodian for a customer in connection with a
securities contract, as defined in section 741 of this
title, such customer; or
``(B) in connection with a securities contract, as
defined in section 741 of this title, an investment
company registered under the Investment Company Act of
1940;'';
(2) by inserting after paragraph (22) the following:
``(22A) `financial participant' means an entity that, at the
time it enters into a securities contract, commodity contract
or forward contract, or at the time of the filing of the
petition, has 1 or more agreements or transactions that is
described in section 561(a)(2) with the debtor or any other
entity (other than an affiliate) of a total gross dollar value
of at least $1,000,000,000 in notional or actual principal
amount outstanding on any day during the previous 15-month
period, or has gross mark-to-market positions of at least
$100,000,000 (aggregated across counterparties) in 1 or more
such agreement or transaction with the debtor or any other
entity (other than an affiliate) on any day during the previous
15-month period;''; and
(3) by amending paragraph (26) to read as follows:
``(26) `forward contract merchant' means a Federal reserve
bank, or an entity whose business consists in whole or in part
of entering into forward contracts as or with merchants or in a
commodity, as defined or in section 761 of this title, or any
similar good, article, service, right, or interest which is
presently or in the future becomes the subject of dealing or in
the forward contract trade;''.
(c) Definition of Master Netting Agreement and Master Netting
Agreement Participant.--Section 101 of title 11, United States Code, is
amended by inserting after paragraph (38) the following new paragraphs:
``(38A) `master netting agreement' means an agreement
providing for the exercise of rights, including rights of
netting, setoff, liquidation, termination, acceleration, or
closeout, under or in connection with 1 or more contracts that
are described in any 1 or more of paragraphs (1) through (5) of
section 561(a), or any security agreement or arrangement or
other credit enhancement related to 1 or more of the foregoing
If a master netting agreement contains provisions relating to
agreements or transactions that are not contracts described in
paragraphs (1) through (5) of section 561(a), the master
netting agreement shall be deemed to be a master netting
agreement only with respect to those agreements or transactions
that are described in any 1 or more of the paragraphs (1)
through (5) of section 561(a);
``(38B) `master netting agreement participant' means an
entity that, at any time before the filing of the petition, is
a party to an outstanding master netting agreement with the
debtor;''.
(d) Swap Agreements, Securities Contracts, Commodity Contracts,
Forward Contracts, Repurchase Agreements, and Master Netting Agreements
Under the Automatic-Stay.--
(1) In general.--Section 362(b) of title 11, United States
Code, as amended by sections 118, 132, 136, 142, 203 and 818,
is amended--
(A) in paragraph (6), by inserting ``, pledged to,
and under the control of,'' after ``held by'';
(B) in paragraph (7), by inserting ``, pledged to,
and under the control of,'' after ``held by'';
(C) by amending paragraph (17) to read as follows:
``(17) under subsection (a), of the setoff by a swap
participant of a mutual debt and claim under or in connection
with 1 or more swap agreements that constitutes the setoff of a
claim against the debtor for any payment or othertransfer of
property due from the debtor under or in connection with any swap
agreement against any payment due to the debtor from the swap
participant under or in connection with any swap agreement or against
cash, securities, or other property held by, pledged to, and under the
control of, or due from such swap participant to margin guarantee,
secure, or settle a swap agreement;'';
(D) in paragraph (30) by striking ``or'' at the end;
(E) in paragraph (31) by striking the period at the
end and inserting ``; or''; and
(F) by inserting after paragraph (31) the following
new paragraph:
``(32) under subsection (a), of the setoff by a master
netting agreement participant of a mutual debt and claim under
or in connection with 1 or more master netting agreements or
any contract or agreement subject to such agreements that
constitutes the setoff of a claim against the debtor for any
payment or other transfer of property due from the debtor under
or in connection with such agreements or any contract or
agreement subject to such agreements against any payment due to
the debtor from such master netting agreement participant under
or in connection with such agreements or any contract or
agreement subject to such agreements or against cash,
securities, or other property held by, pledged or and under the
control of, or due from such master netting agreement
participant to margin, guarantee, secure, or settle such
agreements or any contract or agreement subject to such
agreements, to the extent such participant is eligible to
exercise such offset rights under paragraph (6), (7), or (17)
for each individual contract covered by the master netting
agreement in issue.''.
(2) Limitation.--Section 362 of title 11, United States Code,
as amended by sections 120, 302, and 412, is amended by adding
at the end the following:
``(l) Limitation.--The exercise of rights not subject to the stay
arising under subsection (a) pursuant to paragraph (6), (7), or (17),
or (31) of subsection (b) shall not be stayed by any order of a court
or administrative agency in any proceeding under this title.''.
(e) Limitation of Avoidance Powers Under Master Netting Agreement.--
Section 546 of title 11, United States Code, as amended by sections 207
and 302, is amended--
(1) in subsection (g) (as added by section 103 of Public Law
101-311)--
(A) by striking ``under a swap agreement'';
(B) by striking ``in connection with a swap
agreement'' and inserting ``under or in connection with
any swap agreement''; and
(2) by adding at the end the following:
``(j) Notwithstanding sections 544, 545, 547, 548(a)(2)(B), and
548(b) of this title, the trustee may not avoid a transfer made by or
to a master netting agreement participant under or in connection with
any master netting agreement or any individual contract covered thereby
that is made before the commencement of the case, except under section
548(a)(1)(A) of this title, and except to the extent the trustee could
otherwise avoid such a transfer made under an individual contract
covered by such master netting agreement.''.
(f) Fraudulent Transfers of Master Netting Agreements.--Section
548(d)(2) of title 11, United States Code, is amended--
(1) in subparagraph (C), by striking ``and'';
(2) in subparagraph (D), by striking the period and inserting
``; and''; and
(3) by adding at the end the following new subparagraph:
``(E) a master netting agreement participant that receives a
transfer in connection with a master netting agreement or any
individual contract covered thereby takes for value to the
extent of such transfer, except, with respect to a transfer
under any individual contract covered thereby, to the extent
such master netting agreement participant otherwise did not
take (or is otherwise not deemed to have taken) such transfer
for value.''.
(g) Termination or Acceleration of Securities Contracts.--Section 555
of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:

``Sec. 555. Contractual right to liquidate, terminate, or accelerate a
securities contract'';

and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(h) Termination or Acceleration of Commodities or Forward
Contracts.--Section 556 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:

``Sec. 556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract''; and

(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(i) Termination or Acceleration of Repurchase Agreements.--Section
559 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:

``Sec. 559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement''; and

(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(j) Liquidation, Termination, or Acceleration of Swap Agreements.--
Section 560 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:

``Sec. 560. Contractual right to liquidate, terminate, or accelerate a
swap agreement''; and

(2) in the first sentence, by striking ``termination of a
swap agreement'' and inserting ``liquidation, termination, or
acceleration of 1 or more swap agreements''; and
(3) by striking ``in connection with any swap agreement'' and
inserting ``in connection with the termination, liquidation, or
acceleration of 1 or more swap agreements''.
(k) Liquidation, Termination, Acceleration, or Offset Under a Master
Netting Agreement and Across Contracts.--(1) Title 11, United States
Code, is amended by inserting after section 560 the following:

``Sec. 561. Contractual right to terminate, liquidate, accelerate, or
offset under a master netting agreement and across
contracts

``(a) In General.--Subject to subsection (b), the exercise of any
contractual right, because of a condition of the kind specified in
section 365(e)(1), to cause the termination, liquidation, or
acceleration of or to offset or net termination values, payment amounts
or other transfer obligations arising under or in connection with 1 or
more (or the termination, liquidation, or acceleration of 1 or more)--
``(1) securities contracts, as defined in section 741(7);
``(2) commodity contracts, as defined in section 761(4);
``(3) forward contracts;
``(4) repurchase agreements;
``(5) swap agreements; or
``(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by operation of any
provision of this title or by any order of a court or administrative
agency in any proceeding under this title.
``(b) Exception.--
``(1) A party may exercise a contractual right described in
subsection (a) to terminate, liquidate, or accelerate only to
the extent that such party could exercise such a right under
section 555, 556, 559, or 560 for each individual contract
covered by the master netting agreement in issue.
``(2) If a debtor is a commodity broker subject to subchapter
IV of chapter 7 of this title--
``(A) a party may not net or offset an obligation to
the debtor arising under, or in connection with, a
commodity contract against any claim arising under, or
in connection with, other instruments, contracts, or
agreements listed in subsection (a) except to the
extent the party has positive net equity in the
commodity accounts at the debtor, as calculated under
subchapter IV; and
``(B) another commodity broker may not net or offset
an obligation to the debtor arising under, or in
connection with, a commodity contract entered into or
held on behalf of a customer of the debtor against any
claim arising under, or in connection with, other
instruments, contracts, or agreements listed in
subsection (a).
``(c) Definition.--As used in this section, the term `contractual
right' includes a right set forth in a rule or bylaw of a national
securities exchange, a national securities association, or a securities
clearing agency, a right set forth in a bylaw of a clearing
organization or contract market or in a resolution of the governing
board thereof, and a right, whether or not evidenced in writing,
arising under common law, under law merchant, or by reason of normal
business practice.''.
(2) Conforming amendment.--The table of sections of chapter 9 of
title 11, United States Code, is amended by inserting after the item
relating to section 560 the following:

``561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across contracts.

(l) Ancillary Proceedings.--Section 304 of title 11, United States
Code, as amended by section 215, is amended by adding at the end the
following:
``(c) Any provisions of this title relating to securities contracts,
commodity contracts, forward contracts, repurchase agreements, swap
agreements, or master netting agreements shall apply in a case
ancillary to a foreign proceeding under this section or any other
section of this title, so that enforcement of contractual provisions of
such contracts and agreements in accordance with their terms will not
be stayed or otherwise limited by operation of any provision of this
title or by order of a court in any case under this title, and to limit
avoidance powers to the same extent as in a proceeding under chapter 7
or 11 of this title (such enforcement not to be limited based on the
presence or absence of assets of the debtor in the United States).''.
(m) Commodity Broker Liquidations.--Title 11, United States Code, is
amended by inserting after section 766 the following:

``Sec. 767. Commodity broker liquidation and forward contract
merchants, commodity brokers, stockbrokers,
financial institutions, securities clearing
agencies, swap participants, repo participants, and
master netting agreement participants

``Sec. 753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, securities clearing agencies, swap
participants, repo participants, and master netting
agreement participants

``Notwithstanding any other provision of this title, the exercise of
rights by a forward contract merchant, commodity broker, stockbroker,
financial institution, securities clearing agency, swap participant,
repo participant, financial participant, or master netting agreement
participant under this title shall not affect the priority of any
unsecured claim it may have after the exercise of such rights.''.
(o) Setoff.--Section 553 of title 11, United States Code, is
amended--
(1) in subsection (a)(3)(C), by inserting ``(except for a
setoff of a kind described in section 362(b)(6), 362(b)(7),
362(b)(17), 362(b)(19), 555, 556, 559, 560 or 561 of this
title)'' before the period; and
(2) in subsection (b)(1), by striking ``362(b)(14),'' and
inserting ``362(b)(17), 362(b)(19), 555, 556, 559, 560, 561''.
(p) Securities Contracts, Commodity Contracts, and Forward
Contracts.--Title 11, United States Code, is amended--
(1) in section 362(b)(6), by striking ``financial
institutions,'' each place such term appears and inserting
``financial institution, financial participant'';
(2) in section 546(e), by inserting ``financial
participant,'' after ``financial institution,'';
(3) in section 548(d)(2)(B), by inserting ``financial
participant,'' after ``financial institution,'';
(4) in section 555--
(A) by inserting ``financial participant,'' after
``financial institution,''; and
(B) by inserting before the period at the end ``, a
right set forth in a bylaw of a clearing organization
or contract market or in a resolution of the governing
board thereof, and a right, whether or not in writing,
arising under common law, under law merchant, or by
reason of normal business practice''; and
(5) in section 556, by inserting ``, financial participant''
after ``commodity broker''.
(q) Conforming Amendments.--Title 11 of the United States Code is
amended--
(1) in the table of sections of chapter 5--
(A) by amending the items relating to sections 555
and 556 to read as follows:

``555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
``556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract.'';

and
(B) by amending the items relating to sections 559
and 560 to read as follows:

``559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
``560. Contractual right to liquidate, terminate, or accelerate a swap
agreement.'';

and
(2) in the table of sections of chapter 7--
(A) by inserting after the item relating to section
766 the following:

``767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions, securities
clearing agencies, swap participants, repo participants, and master
netting agreement participants.'';

and
(B) by inserting after the item relating to section
752 the following:

``753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions, securities
clearing agencies, swap participants, repo participants, and master
netting agreement participants.''.

SEC. 1008. RECORDKEEPING REQUIREMENTS.

Section 11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C
1821(e)(8)) is amended by adding at the end the following new
subparagraph:
``(H) Recordkeeping requirements.--The Corporation,
in consultation with the appropriate Federal banking
agencies, may prescribe regulations requiring more
detailed recordkeeping with respect to qualified
financial contracts (including market valuations) by
insured depository institutions.''.

SEC. 1009. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION ---REQUIREMENT.

Section 13(e)(2) of the Federal Deposit Insurance Act (12 U.S.C
1823(e)(2)) is amended to read as follows:
``(2) Exemptions from contemporaneous execution
requirement.--An agreement to provide for the lawful
collateralization of--
``(A) deposits of, or other credit extension by, a
Federal, State, or local governmental entity, or of any
depositor referred to in section 11(a)(2), including an
agreement to provide collateral in lieu of a surety
bond;
``(B) bankruptcy estate funds pursuant to section
345(b)(2) of title 11, United States Code;
``(C) extensions of credit, including any overdraft,
from a Federal reserve bank or Federal home loan bank;
or
``(D) 1 or more qualified financial contracts, as
defined in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph (1)(B) solely
because such agreement was not executed contemporaneously with
the acquisition of the collateral or because of pledges,
delivery, or substitution of the collateral made in accordance
with such agreement.''.

SEC. 1010. DAMAGE MEASURE.

(a) Title 11, United States Code, as amended by section 1007, is
amended--
(1) by inserting after section 561 the following:

``Sec. 562. Damage measure in connection with swap agreements,
securities contracts, forward contracts, commodity
contracts, repurchase agreements, or master netting
agreements

``If the trustee rejects a swap agreement, securities contract as
defined in section 741 of this title, forward contract, commodity
contract (as defined in section 761 of this title) repurchase
agreement, or master netting agreement pursuant to section 365(a) of
this title, or if a forward contract merchant, stockbroker, financial
institution, securities clearing agency, repo participant, financial
participant, master netting agreement participant, or swap participant
liquidates, terminates, or accelerates such contract or agreement,
damages shall be measured as of the earlier of--
``(1) the date of such rejection; or
``(2) the date of such liquidation, termination, or
acceleration.''; and
(2) in the table of sections of chapter 5 by inserting after
the item relating to section 561 the following:

``562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity contracts, repurchase
agreements, or master netting agreements.''.

(b) Claims Arising From Rejection.--Section 502(g) of title 11,
United States Code, is amended--
(1) by designating the existing text as paragraph (1); and
(2) by adding at the end the following:
``(2) A claim for damages calculated in accordance with section 561
of this title shall be allowed under subsection (a), (b), or (c), or
disallowed under subsection (d) or (e), as if such claim had arisen
before the date of the filing of the petition.''.

SEC. 1011. SIPC STAY.

Section 5(b)(2) of the Securities Investor Protection Act of 1970 (15
U.S.C 78eee(b)(2)) is amended by adding after subparagraph (B) the
following new subparagraph:
``(C) Exception from stay.--
``(i) Notwithstanding section 362 of title
11, United States Code, neither the filing of
an application under subsection (a)(3) nor any
order or decree obtained by Securities Investor
Protection Corporation from the court shall
operate as a stay of any contractual rights of
a creditor to liquidate, terminate, or
accelerate a securities contract, commodity
contract, forward contract, repurchase
agreement, swap agreement, or master netting
agreement, each as defined in title 11, to
offset or net termination values, payment
amounts, or other transfer obligations arising
under or in connection with 1 or more of such
contracts or agreements, or to foreclose on any
cash collateral pledged by the debtor whether
or not with respect to 1 or more of such
contracts or agreements.
``(ii) Notwithstanding clause (i), such
application, order, or decree may operate as a
stay of the foreclosure on securities
collateral pledged by the debtor, whether or
not with respect to 1 or more of such contracts
or agreements, securities sold by the debtor
under a repurchase agreement or securities lent
under a securities lending agreement.
``(iii) As used in this section, the term
`contractual right' includes a right set forth
in a rule or bylaw of a national securities
exchange, a national securities association, or
a securities clearing agency, a right set forth
in a bylaw of a clearing organization or
contract market or in a resolution of the
governing board thereof, and a right, whether
or not in writing, arising under common law,
under law merchant, or by reason of normal
business practice.''.

SEC. 1012. ASSET-BACKED SECURITIZATIONS.

Section 541 of title 11, United States Code, as amended by section
150, is amended--
(1) by redesignating paragraph (5) of subsection (b) as
paragraph (6);
(2) by inserting after paragraph (4) of subsection (b) the
following new paragraph:
``(5) any eligible asset (or proceeds thereof), to the extent
that such eligible asset was transferred by the debtor, before
the date of commencement of the case, to an eligible entity in
connection with an asset-backed securitization, except to the
extent such asset (or proceeds or value thereof) may be
recovered by the trustee under section 550 by virtue of
avoidance under section 548(a);''; and
(3) by adding at the end the following new subsection:
``(e) For purposes of this section, the following definitions shall
apply:
``(1) the term `asset-backed securitization' means a
transaction in which eligible assets transferred to an eligible
entity are used as the source of payment on securities, the
most senior of which are rated investment grade by 1 or more
nationally recognized securities rating organizations, issued
by an issuer;
``(2) the term `eligible asset' means--
``(A) financial assets (including interests therein
and proceeds thereof), either fixed or revolving,
including residential and commercial mortgage loans,
consumer receivables, trade receivables, and lease
receivables, that, by their terms, convert into cash
within a finite time period, plus any residual interest
in property subject to receivables included in such
financial assets plus any rights or other assets
designed to assure the servicing or timely distribution
of proceeds to security holders;
``(B) cash; and
``(C) securities.
``(3) the term `eligible entity' means--
``(A) an issuer; or
``(B) a trust, corporation, partnership, or other
entity engaged exclusively in the business of acquiring
and transferring eligible assets directly or indirectly
to an issuer and taking actions ancillary thereto;
``(4) the term `issuer' means a trust, corporation,
partnership, or other entity engaged exclusively in the
business of acquiring and holding eligible assets, issuing
securities backed by eligible assets, and taking actions
ancillary thereto; and
``(5) the term `transferred' means the debtor, pursuant to a
written agreement, represented and warranted that eligible
assets were sold, contributed, or otherwise conveyed with the
intention of removing them from the estate of the debtor
pursuant to subsection (b)(5), irrespective, without limitation
of--
``(A) whether the debtor directly or indirectly
obtained or held an interest in the issuer or in any
securities issued by the issuer;
``(B) whether the debtor had an obligation to
repurchase or to service or supervise the servicing of
all or any portion of such eligible assets; or
``(C) the characterization of such sale,
contribution, or other conveyance for tax, accounting,
regulatory reporting, or other purposes.''.

SEC. 1013. FEDERAL RESERVE COLLATERAL REQUIREMENTS.

The 3d sentence of the 3d undesignated paragraph of section 16 of the
Federal Reserve Act (12 U.S.C 412) is amended by striking ``acceptances
acquired under the provisions of section 13 of this Act'' and inserting
``acceptances acquired under section 10A, 10B, 13, or 13A of this
Act''.

SEC. 1014. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

(a) Effective Date.--This title shall take effect on the date of the
enactment of this Act.
(b) Application of Amendments.--The amendments made by this title
shall apply with respect to cases commenced or appointments made under
any Federal or State law after the date of enactment of this Act, but
shall not apply with respect to cases commenced or appointments made
under any Federal or State law before the date of enactment of this
Act.

TITLE XI--TECHNICAL CORRECTIONS

SEC. 1101. DEFINITIONS.

Section 101 of title 11, United States Code, as amended by sections
102, 105, 132, 138, 301, 302, 402, 902, and 1007, 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 (55) (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 (55), including
paragraph (54), as amended by paragraph (6) of this section, in
entirely numerical sequence.

SEC. 1102. 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. 1103. 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. 1104. TECHNICAL AMENDMENTS.

Title 11 of the United States Code is amended--
(1) in section 109(b)(2) by striking ``subsection (c) or (d)
of''; and
(2) in section 552(b)(1) by striking ``product'' each place
it appears and inserting ``products''.

SEC. 1105. 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. 1106. 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. 1107. 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. 1108. 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. 1109. 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. 1110. PRIORITIES.

Section 507(a) of title 11, United States Code, as amended by section
323, is amended in paragraph (4), as so redesignated by section 142, by
striking the semicolon at the end and inserting a period.

SEC. 1111. EXEMPTIONS.

Section 522(g)(2) of title 11, United States Code, is amended by
striking ``subsection (f)(2)'' and inserting ``subsection (f)(1)(B)''.

SEC. 1112. EXCEPTIONS TO DISCHARGE.

Section 523 of title 11, United States Code, as amended by section
146, 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 (14A) 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)''; and
(5) in subsection (e), by striking ``a insured'' and
inserting ``an insured''.

SEC. 1113. 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. 1114. 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. 1115. PROPERTY OF THE ESTATE.

Section 541(b)(4)(B)(ii) of title 11, United States Code, is amended
by inserting ``365 or'' before ``542''.

SEC. 1116. PREFERENCES.

(a) In General.--Section 547 of title 11, United States Code, is
amended--
(1) in subsection (b), by striking ``subsection (c)'' and
inserting ``subsections (c) and (i)''; and
(2) by adding at the end the following:
``(i) If the trustee avoids under subsection (b) a transfer made
between 90 days and 1 year before the date of the filing of the
petition, by the debtor to an entity that is not an insider for the
benefit of a creditor that is an insider, such transfer may be avoided
under this section only with respect to the creditor that is an
insider.''.
(b) Applicability.--The amendments made by this section shall apply
to any case that is pending or commenced on or after the date of
enactment of this Act.

SEC. 1117. 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. 1118. DISPOSITION OF PROPERTY OF THE ESTATE.

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

SEC. 1119. GENERAL PROVISIONS.

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

SEC. 1120. 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. 1121. 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. 1122. 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. 1123. 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. 1124. 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. 1125. 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. 1126. TRANSFERS MADE BY NONPROFIT CHARITABLE CORPORATIONS.

(a) Sale of Property of Estate.--Section 363(d) of title 11, United
States Code, is amended--
(1) by striking ``only'' and all that follows through the end
of the subsection and inserting ``only--
``(1) in accordance with applicable nonbankruptcy law that
governs the transfer of property by a corporation or trust that
is not a moneyed, business, or commercial corporation or trust;
and
``(2) to the extent not inconsistent with any relief granted
under subsection (c), (d), (e), or (f) of section 362 of this
title.''.
(b) Confirmation of Plan for Reorganization.--Section 1129(a) of
title 11, United States Code, as amended by section 140, is amended by
adding at the end the following:
``(15) All transfers of property of the plan shall be made in
accordance with any applicable provisions of nonbankruptcy law
that govern the transfer of property by a corporation or trust
that is not a moneyed, business, or commercial corporation or
trust.''.
(c) Transfer of Property.--Section 541 of title 11, United States
Code, as amended by section 1102, is amended by adding at the end the
following:
``(f) Notwithstanding any other provision of this title, property
that is held by a debtor that is a corporation described in section
501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax
under section 501(a) of such Code may be transferred to an entity that
is not such a corporation, but only under the same conditions as would
apply if the debtor had not filed a case under this title.''.
(d) Applicability.--The amendments made by this section shall apply
to a case pending under title 11, United States Code, on the date of
enactment of this Act, except that the court shall not confirm a plan
under chapter 11 of this title without considering whether this section
would substantially affect the rights of a party in interest who first
acquired rights with respect to the debtor after the date of the
petition The parties who may appear and be heard in a proceeding under
this section include the attorney general of the State in which the
debtor is incorporated, was formed, or does business.
(e) Rule of Construction.--Nothing in this section shall be deemed to
require the court in which a case under chapter 11 is pending to remand
or refer any proceeding, issue, or controversy to any other court or to
require the approval of any other court for the transfer of property.

SEC. 1127. PROHIBITION ON CERTAIN ACTIONS FOR FAILURE TO INCUR FINANCE
CHARGES.

Section 127 of the Truth in Lending Act (15 U.S.C 1637) is amended by
adding at the end the following:
``(i) Prohibition on Certain Actions for Failure To Incur Finance
Charges.--A creditor of an account under an open end consumer credit
plan may not terminate an account prior to its expiration date solely
because the consumer has not incurred finance charges on the account
Nothing in this subsection shall prohibit a creditor from terminating
an account for inactivity in 3 or more consecutive months.''.

SEC. 1128. PROTECTION OF VALID PURCHASE MONEY SECURITY INTERESTS.

Section 547(c)(3)(B) of title 11, United States Code, is amended by
striking ``20'' and inserting ``30''.

SEC. 1129. TRUSTEES.

(a) Suspension and Termination of Panel Trustees and Standing
Trustees.--Section 586(d) of title 28, United States Code, is amended--
(1) by inserting ``(1)'' after ``(d)''; and
(2) by adding at the end the following:
``(2) A trustee whose appointment under subsection (a)(1) or under
subsection (b) is terminated or who ceases to be assigned to cases
filed under title 11 of the United States Code may obtain judicial
review of the final agency decision by commencing an action in the
United States district court for the district for which the panel to
which the trustee is appointed under subsection (a)(1), or in the
United States district court for the district in which the trustee is
appointed under subsection (b) resides, after first exhausting all
available administrative remedies, which if the trustee so elects,
shall also include an administrative hearing on the record Unless the
trustee elects to have an administrative hearing on the record, the
trustee shall be deemed to have exhausted all administrative remedies
for purposes of this paragraph if the agency fails to make a final
agency decision within 90 days after the trustee requests
administrative remedies The Attorney General shall prescribe procedures
to implement this paragraph The decision of the agency shall be
affirmed by the district court unless it is unreasonable and without
cause based on the administrative record before the agency.''.
(b) Expenses of Standing Trustees.--Section 586(e) of title 28,
United States Code, is amended by adding at the end the following:
``(3) After first exhausting all available administrative remedies,
an individual appointed under subsection (b) may obtain judicial review
of final agency action to deny a claim of actual, necessary expenses
under this subsection by commencing an action in the United States
district court in the district where the individual resides The
decision of the agency shall be affirmed by the district court unless
it is unreasonable and without cause based upon the administrative
record before the agency.
``(4) The Attorney General shall prescribe procedures to implement
this subsection.''.

TITLE XII--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS

SEC. 1201. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

(a) Effective Date.--Except as provided otherwise in this Act, this
Act and the amendments made by this Act shall take effect 180 days
after the date of the enactment of this Act.
(b) Application of Amendments.--Except as otherwise provided in this
Act, the amendments made by this Act shall not apply with respect to
cases commenced under title 11 of the United States Code before the
effective date of this Act.

The Amendment

Inasmuch as H.R. 833, the Bankruptcy Reform Act of 1999,
was ordered reported with a single amendment in the nature of a
substitute, as amended, the contents of this report constitute
an explanation of the bill as so amended.

Purpose and Summary

H.R. 833 is a comprehensive package of reform measures
pertaining to both consumer and business bankruptcy cases. The
purpose of H.R. 833 is to improve bankruptcy law and practice
by restoring personal responsibility and integrity in the
bankruptcy system and by ensuring that it is fair for both
debtors and creditors.
The heart of the bill's consumer bankruptcy reforms is the
implementation of an income/expense screening mechanism
(``needs-based bankruptcy relief'') to ensure that debtors
repay creditors the maximum they can afford. In addition to
implementing needs-based bankruptcy relief, H.R. 833 institutes
a panoply of other consumer bankruptcy reforms designed to
enhance the protections available to debtors and creditors.
H.R. 833 also contains a comprehensive set of reforms
pertinent to business bankruptcies. Many of these provisions
are intended to heighten administrative scrutiny and judicial
oversight of small business bankruptcy cases. In addition, the
bill includes provisions designed to reduce ``systemic risk''
in the financial marketplace. It also creates a new form of
bankruptcy relief for transnational insolvencies, includes
provisions regarding the treatment of tax claims, and requires
the collection of certain data relating to consumer bankruptcy
cases.

Background and Need for the Legislation

Background

On February 24, 1999, Representative George Gekas (for
himself and Representatives Rick Boucher (D-Va. ), Bill
McCollum (R-Fla.), and James P. Moran (D-Va.)) introduced H.R.
833, the Bankruptcy Reform Act of 1999. The bill currently has
more than 100 bipartisan cosponsors. As introduced, H.R. 833
was virtually identical to the conference report on H.R. 3150,
the Bankruptcy Reform Act of 1998, which last year received
overwhelming bipartisan support in the House as evidenced by a
vote of 300 to 125.¹
---------------------------------------------------------------------------
\1\ 144 Cong. Rec. H10239-40 (daily ed. Oct. 9, 1998). The
Committee reported H.R. 3150 favorably, as amended, H.R. Rep. No. 105-
540 (1998), and thereafter, the House passed the bill, as further
amended, by a vote of 306 to 118 on June 10, 1998. 144 Cong. Rec. H4442
(daily ed. June 10, 1998). Later that summer, the Senate Committee on
the Judiciary favorably reported S. 1301, its consumer bankruptcy
legislation. S. Rep. No. 105-253 (1998). The Senate then passed its
version of H.R. 3150 by substituting the text of S. 1301, as amended,
on September 23, 1998. On request of the Senate and consent of the
House, a conference was appointed. On October 9, 1998, the House passed
the conference report, H.R. Rep. No. 105-794 (1998), which had been
filed two days earlier. The conference report was not acted upon by the
Senate prior to the adjournment of the 105th Congress.
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Need for the Legislation

Consumer bankruptcy

Overview. According to statistics released by the
Administrative Office of the United States Courts, more than
1.4 million bankruptcy cases were filed in 1998.²
Bankruptcy filings, after passing the one-million mark for the
first time in the twelve-month period ending June 30, 1996,
``have risen steadily ever since.'' ³ The number of
consumer bankruptcy cases filed per million adults, according
to the Congressional Budget Office, increased nearly 77 percent
between the end of 1994 and the end of 1997.⁴
Paradoxically, this increase in consumer bankruptcy filing
rates is occurring while the economy is basically healthy,
unemployment is low, personal incomes are generally rising, and
consumer confidence is high.⁵
---------------------------------------------------------------------------
\2\ Administrative Office for United States Courts News Release,
Increase in Bankruptcy Filings Slowed in Calendar Year 1998, at 1 (Mar.
1, 1999).
\3\ Id. While the rate of the increase recently decreased (19.1
percent in 1997; 2.7 percent in 1998), bankruptcy filings are at record
levels. Id.
\4\ Congressional Budget Office, A Report of Data and Studies About
Personal Bankruptcy, at 5 (preliminary draft Apr. 16, 1999).
\5\ Id.; see, e.g., Bankruptcy Reform Act of 1999: Hearings on H.R.
833 Before the Subcomm. on Commercial and Admin. Law of the House Comm.
on the Judiciary, 106th Cong. (1999) [hereinafter 1999 Hearings]
(statement of Richard Stana, Associate Director, Administration of
Justice Issues, General Government Division, General Accounting Office,
at 1 (Mar. 17, 1999)).
---------------------------------------------------------------------------
According to some analyses, this increase in consumer
bankruptcy filings has significant adverse economic
consequences. For example, they estimate that more than $40
billion was written off as a result of losses discharged in
bankruptcy cases in 1998, ⁶ which amounts to a loss
of ``at least $110 million every day.'' ⁷ This loss,
according to one study, translates into more than $400 annually
per household.⁸ Last year, one economic analysis
projected that even if the growth rate in personal bankruptcies
slowed to 15 percent over the next three years, the American
economy may absorb a cumulative cost of more than $220
billion.⁹ In addition, certain studies conclude that
some debtors who file for bankruptcy relief do have the ability
to repay some portion of their otherwise dischargeable
debts.¹⁰
---------------------------------------------------------------------------
\6\ 1999 Hearings, supra note 5 (statement of Dean Sheaffer on
behalf of the National Retail Federation, at 1 (Mar. 11, 1999)). A
representative from the banking industry described the adverse economic
consequences of the ``precipitous increase in the number of consumer
bankruptcy filings'' and how it has impacted all Americans. Id.
(statement of Bruce L. Hammonds, on behalf of MBNA America Bank, N.A.,
at 1 (Mar. 11, 1999)). Another witness explained the special concerns
that increased bankruptcy filings present to credit unions and their
members. Id. (statement of Larry Nuss on behalf of the Credit Union
National Association, Inc., at 2 (Mar. 11, 1999)). The Committee
received similar information last year. See, e.g., Bankruptcy Reform
Act of 1998, Responsible Borrower Bankruptcy Protection Act, and
Consumer Lenders and Borrowers Accountability Act of 1998: Hearings on
H.R. 3150, 2500 and 3146 Before the Subcomm. on Commercial and Admin.
Law of the House Comm. on the Judiciary, 105th Cong. (1998)
[hereinafter 1998 Hearings] (statement of WEFA Group Resource Planning
Service, Final Report: The Financial Costs of Personal Bankruptcy, at
16 (Feb. 1998)).
\7\ 1999 Hearings, supra note 5 (statement of Dean Sheaffer on
behalf of the National Retail Federation, at 1 (Mar. 11, 1999))
(emphasis supplied). This witness also testified that bankruptcy
filings were ``out of control.'' Id.
\8\ 1998 Hearings, supra note 6 (statement of WEFA Group Resource
Planning Service, Final Report: The Financial Costs of Personal
Bankruptcy, at 16 (Feb. 1998)); see 1999 Hearings, supra note 5
(statement of Bruce L. Hammonds on behalf of MBNA America Bank, N.A.,
at 1 (Mar. 11, 1999)). Others questioned, however, the economic
benefits of the legislation. See, e.g., 1999 Hearings, supra note 5.
\9\ 1998 Hearings, supra note 6 (statement of WEFA Group Resource
Planning Service, ``Final Report: The Financial Costs of Personal
Bankruptcy,'' at 17-18 (Feb. 1998)).
\10\ See, e.g., Marianne B. Culhane & Michaela M. White, ``Taking
the New Consumer Bankruptcy Model for a Test Drive: Means-Testing Real
Chapter 7 Debtors,--Am. Bankr. L. J.--(to be published 1999)
(concluding that 3.6% of sampled debtors ``emerged as apparent can-
pays''); 1999 Hearings, supra note 5 (statement of Dr. Thomas S. Neubig
on behalf of Ernst & Young LLP--Policy Economics and Quantitative
Analysis Group, at 2 (Mar. 17, 1999)) (stating, ``we can confidently
predict that if the needs based provision had been in effect in 1997,
10 percent of Chapter 7 filers, or about 100,000 filers, would likely
have been required to file a Chapter 13 repayment plan''); id.
(statement of Michael E. Staten on behalf of the Credit Research
Center, at 2-3 (Mar. 17, 1999)) (concluding that, based on the
debtors'' own statements of monthly living expenses, ``about 25 percent
of Chapter 7 debtors could have repaid at least 30 percent of their
non-housing debts over a 5-year repayment plan, after accounting for
monthly expenses and housing payments'' and that ``[a]bout five percent
of Chapter 7 filers appeared capable of repaying all of their non-
housing debt over a 5-year plan,'' although these ``calculations
assumed income would remain unchanged relative to expenses over the
five years'').
---------------------------------------------------------------------------
This legislation responds to many of the factors
contributing to this increase in consumer bankruptcy filings,
such as lack of personal responsibility,¹¹ the
proliferation of serial filings, and the lack of effective
oversight to eliminate abuse in the system. The consumer
bankruptcy provisions of H.R. 833 address the needs of
creditors as well as debtors. The bill's creditor protections
generally are of three types: needs-based bankruptcy reforms,
expanded protections for creditors in general, and protections
for specific types of creditors. The debtor protections allow
debtors to exempt certain education IRA plans, fortify the
Bankruptcy Code's exemptions for certain retirement pension
funds, enhance the professionalism standards for attorneys and
others who assist consumer debtors with their bankruptcy cases,
ensure that debtors receive notice of alternatives to
bankruptcy relief, require debtors to participate in debt
repayment programs, and institute a pilot program to study the
effectiveness of consumer financial management programs.
---------------------------------------------------------------------------
\11\ Some have likened the moral weakness of the present bankruptcy
system to ``shoplifting.'' 1999 Hearings, supra note 5 (statement of
Prof. Todd Zywicki, George Mason Law School, at 3 (Mar. 11, 1999)).
---------------------------------------------------------------------------
Consumer creditor protections: needs-based reforms. Chapter
7 is a form of bankruptcy relief where an individual debtor
receives an immediate discharge of personal liability for
certain debts in exchange for turning over his or her nonexempt
assets to the bankruptcy trustee for distribution to
creditors.¹² This ``unconditional discharge'' in
chapter 7 contrasts with the ``conditional discharge''
provisions of chapter 13, under which a debtor commits to repay
some portion of his or her financial obligations in exchange
for retaining nonexempt assets and receiving a broader
discharge of debt than is available under chapter 7.
---------------------------------------------------------------------------
\12\ Under the Bankruptcy Code, only an individual may obtain a
chapter 7 discharge. 11 U.S.C. 727(a). Thus, a corporation is not
eligible to receive a discharge under chapter 7.
---------------------------------------------------------------------------
Allowing consumer debtors in financial distress to choose
voluntarily an ``unconditional discharge'' has been a part of
American bankruptcy law since the enactment of the Bankruptcy
Act of 1898.¹³ The rationale of an unconditional
discharge was explained by Congress more than 100 years ago:
---------------------------------------------------------------------------
\13\ Bankruptcy Act of 1898, 30 Stat. 544 (1898) (repealed 1978).
---------------------------------------------------------------------------
[W]hen an honest man is hopelessly down financially,
nothing is gained for the public by keeping him down,
but, on the contrary, the public good will be promoted
by having his assets distributed ratably as far as they
will go among his creditors and letting him start
anew.¹⁴

\14\ H.R. Rep. No. 55-65, at 43 (1897).
---------------------------------------------------------------------------
The concept of needs-based bankruptcy relief has also long
been debated by the Congress and others. President Herbert
Hoover, for instance, recommended:

The discretion of the courts in granting or refusing
discharge should be broadened, and they should be
authorized to postpone discharges for a time and
require bankrupts, during the period of suspension to
make some satisfaction out of after-acquired property
as a condition to the granting of a full
discharge.¹⁵
---------------------------------------------------------------------------
\15\ 1 Collier on Bankruptcy ^para. 0.04 (14th ed. 1974).

Congressional recognition of needs-based relief has been
gradual. In 1938, chapter XIII was enacted, a purely voluntary
form of bankruptcy relief that allowed a debtor to voluntarily
propose a plan to repay creditors out of future
earnings.¹⁶ Over the ensuing years, there continued
to be repeated expressions of support for and opposition to
needs-based bankruptcy reform.¹⁷ The Bankruptcy
Reform Act of 1978,¹⁸ however, retained the
principle that a debtor's decision to choose relief premised on
repayment to creditors had to be ``completely voluntary.''
¹⁹
---------------------------------------------------------------------------
\16\ Chandler Act of 1938, 52 Stat. 840 (1938); see 1999 Hearings,
supra note 5 (statement of Prof. Lawrence P. King, Charles Seligson
Professor of Law at New York University School of Law, at 4 (Mar. 16,
1999)).
\17\ See, e.g., Report of the Commission on the Bankruptcy Laws of
the United States--July 1973, H.R. Doc. No. 93-137, pt. I, at 158
(1973) (observing that ``proposals have been made to Congress from time
to time that a debtor able to obtain relief under Chapter XIII
[predecessor of 13] should be denied relief in straight bankruptcy'');
Hearings on H.R. 1057 and H.R. 5771 Before the Subcomm. No. 4 of the
House Committee on the Judiciary, 90th Cong. (1967). Organizations that
testified before Congress in 1967 in support of such reform included
the American Bar Association, the American Bankers Association, the
Chamber of Commerce of the United States, Credit Union National
Association, Inc., the National Federation of Independent Businesses,
and the American Industrial Bankers Association. Id. The Commission on
the Bankruptcy Laws of the United States, while supporting the concept
that repayment plans should be ``fostered,'' nevertheless concluded in
1973 that ``forced participation by a debtor in a plan requiring
contributions out of future income has so little prospect for success
that it should not be adopted as a feature of the bankruptcy system.''
Id. at 159.
\18\ Pub. L. No. 95-598, 92 Stat. 2549 (1978).
\19\ Bankruptcy Law Revision: Report of the Committee on the
Judiciary to Accompany H.R. 8200, H.R. Rep. No. 95-595, at 120 (1977)
(observing that ``[t]he thirteenth amendment prohibits involuntary
servitude'' and suggesting that ``a mandatory chapter 13, by forcing an
individual to work for creditors, would violate this prohibition'').
---------------------------------------------------------------------------
Although as originally enacted, the Bankruptcy Code
provided that a chapter 7 case could only be dismissed for
``cause,'' the Code was in 1984 amended to permit the court to
dismiss a chapter 7 case for ``substantial abuse.''
²⁰ This provision, codified in section 707(b) of the
Bankruptcy Code, was added ``as part of a package of consumer
credit amendments designed to reduce perceived abuses in the
use of chapter 7.'' ²¹ It was intended to respond
``to concerns that some debtors who could easily pay their
creditors might resort to chapter 7 to avoid their
obligations.'' ²² In 1986, section 707(b) was
further amended to allow a United States trustee (a Department
of Justice official) to move for dismissal.
---------------------------------------------------------------------------
\20\ 11 U.S.C. Sec. 707(b).
\21\ Collier on Bankruptcy para. 707.LH[2] (Lawrence P. King et
al., 15th ed. rev. 1999).
\22\ Id. at para. 707.04.
---------------------------------------------------------------------------
Under current practice, section 707(b) motions are
infrequently made for several reasons.First, neither the court
nor the United States trustee is required to make these motions, even
in cases evidencing obvious abuse of the bankruptcy system. Second,
other parties in interest, such as chapter 7 trustees and creditors,
are prohibited from filing these motions. In fact, section 707(b)
provides that a section 707(b) motion may not even be made ``at the
request or suggestion of any party in interest.'' ²³ Third,
the standard for dismissal--substantial abuse--is inherently vague,
which has lead to its disparate interpretation and application by the
bankruptcy bench.²⁴ Some courts, for example, hold that a
debtor's ability to repay a significant portion of his or her debts out
of future income constitutes substantial abuse and therefore is cause
for dismissal.²⁵ Others do not, absent some evidence of
moral turpitude.²⁶ A fourth reason militating against filing
section 707(b) motions is that the Bankruptcy Code codifies a
presumption that favors granting a debtor a discharge.²⁷
---------------------------------------------------------------------------
\23\ 11 U.S.C. 707(b).
\24\ See, e.g., David White, ``Disorder in the Court: Section
707(b) of the Bankruptcy Code,'' 1995-96 Ann. Survey of Bankr. L. 333,
355 (1996) (noting that the courts ``have taken divergent views in an
attempt to define the term'' and have resorted to ``a variety of
methods'').
\25\ See, e.g., In re Kelly, 841 F.2d 908, 913-14 (9th Cir. 1988)
(observing that the ``principal factor to be considered in determining
substantial abuse is the debtor's ability to repay debts for which a
discharge is sought'').
\26\ See, e.g., In re Braley, 103 B.R. 758 (Bankr. E.D. Va. 1989),
aff'd, 110 B.R. 211 (E.D. Va. 1990). Notwithstanding the fact that the
debtors in Braley had disposable monthly income of nearly $2,700, the
bankruptcy court did not dismiss the case for substantial abuse. Id. at
760. The court concluded, ``Based upon this legislative history, we are
persuaded that no future income tests exists in 707(b) and if it did,
as a finding of fact, the Braley family has insufficient future income
to merit barring the door in light of the circumstances of this Navy
family.'' Id at 762.
\27\ Section 707(b) of the Bankruptcy Code mandates that ``[t]here
shall be a presumption in favor of granting the relief requested by the
debtor.'' 11 U.S.C. 707(b).
---------------------------------------------------------------------------
Over the course of its hearings, both this year and last
year, the Subcommittee on Commercial and Administrative Law
received testimony that some chapter 7 debtors do have the
ability to repay their debts ²⁸ and that, if needs-
based reforms and other measures were implemented, the rate of
repayment to creditors would increase as more debtors are
shifted into chapter 13 as opposed to chapter 7.²⁹
---------------------------------------------------------------------------
\28\ See supra note 10.
\29\ See, e.g., 1998 Hearings, supra note 6 (statement of WEFA
Group Resource Planning Service, ``Final Report: The Financial Costs of
Personal Bankruptcy,'' at 20 (Feb. 1998)).
---------------------------------------------------------------------------
H.R. 833's needs-based reforms strengthen section 707(b) in
several respects to ensure that chapter 7 cases presenting
evidence of abuse are promptly eliminated from the bankruptcy
system. They institute a screening mechanism designed to
identify chapter 7 debtors having the ability to repay their
debts and to presume that their cases constitute an abuse
thereby warranting their dismissal. Chapter 7 debtors with
incomes below certain thresholds are not subject to this
presumption of abuse.³⁰
---------------------------------------------------------------------------
\30\ This income threshold ``safe harbor'' should significantly
reduce the number of debtors subject to the needs-based formula
presumption of abuse based on ability to repay.
---------------------------------------------------------------------------
The needs-based reforms of H.R. 833 are implemented as
follows. First, it amends section 707(b) of the Bankruptcy Code
to allow--in addition to the courts and United States
trustees--panel trustees and parties in interest (in certain
circumstances) to seek dismissal of a chapter 7 case or
conversion to chapter 13 on consent of the debtor. Under
current law, only the courts and United States Trustees may
make a motion for dismissal. Second, it revises the ground for
dismissal under section 707(b) from ``substantial abuse'' to
``abuse'' and replaces the present presumption in favor of the
debtor with one that requires the court to presume abuse if the
debtor has income available (after deduction of certain
specified expenses, certain payments on debts, and ten percent
of projected plan payments to account for estimated costs of
administration) of at least $100 per month, determined over a
five-year repayment period. Third, it provides for dismissal of
these cases, unless the debtors consent to conversion to
chapter 13.
Irrespective of a debtor's ability to repay, H.R. 833
provides that a chapter 7 case may be dismissed if the totality
of the circumstances (including whether the case was filed by
the debtor for the purpose of rejecting a personal services
contract) demonstrates abuse, based on the debtor's financial
situation.
Protections for creditors--in general. H.R. 833 contains a
broad range of reforms to provide greater protections for
creditors, while ensuring that the claims of those creditors
entitled to priority treatment, such as spousal and child
support claims, are not adversely impacted. The bill
accomplishes this goal by (1) ensuring that creditors receive
proper and timely notice of important events and proceedings in
a bankruptcy case; (2) prohibiting abusive serial filings and
extending the period between successive discharges; (3)
implementing various provisions designed to improve the
accuracy of the information contained in debtors' schedules,
statements of financial affairs, and other documents; and (4)
limiting abusive use of exemptions. It also clarifies that
creditors holding consumer debts may participate without
counsel at the section 341 meeting of creditors (which provides
an opportunity for creditors to examine the debtor under oath)
and with respect to activities related thereto.
Protection of family support obligations. Domestic support
claimants receive a number of special protections under H.R.
833. The bill creates a uniform and expanded definition of
domestic support obligations to include debts that accrue both
before or after a bankruptcy case is filed. H.R. 833 accords
the highest payment priority for these debts and gives new
priority treatment to certain claims assigned to governmental
units by a spouse, former spouse, child of the debtor, or
parent of a child. The bill mandates that chapter 13 and 11
(reorganization) debtors must be current on their postpetition
domestic support obligations to confirm their plans of
reorganization. The same obligation is imposed on a chapter 13
debtor as a prerequisite to receiving a discharge. To
facilitate the domestic support collection efforts by
governmental units, H.R. 833 creates various exceptions to
automatic stay provisions of the Bankruptcy Code (which enjoin
many forms of creditor collection activities). It also broadens
the categories of nondischargeable family support obligations
with the result that these debts will not be extinguished at
the end of the bankruptcy process.
Protections for secured creditors. H.R. 833 gives secured
creditors a broad variety of enhanced protections: (1) a
prohibition against bifurcation or ``cramdown'' of claims
secured by personal property acquired within five years of the
bankruptcy filing, (2) clarification that the value of a claim
secured by personal property is the replacement value of such
property without deduction for the secured creditor's costs of
sale or marketing, (3) termination of the automatic stay with
respect to personal property if the debtor does not timely
reaffirm the underlying obligation or redeem the property, and
(4) a requirement that a secured claimant retain its lien in a
chapter 13 case until the underlying debt is paid or the debtor
receives a discharge. H.R. 833 also clarifies certain important
issues with respect to the rights of secured creditors in the
bankruptcy context, such as the valuation of a secured
interest, the debtor's retention of secured property, and the
issue of ``ride through'' with respect to personal property.
Protections for unsecured creditors. H.R. 833 contains
various reforms responsive to certain forms of abuse and fraud
in the present bankruptcy system. For example, the bill
substantially limits a debtor's ability to file successive
bankruptcy cases. It addresses abusive practices by consumer
debtors who, for example, knowingly load up with credit card
purchases or recklessly obtain credit and then file for
bankruptcy relief. In addition, H.R. 833 prevents the discharge
of debts based on fraud, embezzlement, and malicious injury in
a chapter 13 case.
Protections for lessors. With respect to the interests of
lessors, H.R. 833 requires chapter 13 debtors to remain current
on their personal property leases and provide proof of adequate
insurance. The bill specifies that a lessor may condition
assumption of a personal property lease on cure of any
outstanding default and it provides that a lessor is not
required to permit such assumption. The bill also addresses a
problem faced by thousands of small landlords across the nation
regarding the widespread practice of tenants who file for
bankruptcy relief so that they can live ``rent free.''
Debtor protections. H.R. 833 codifies various debtor
protections. These include provisions allowing a consumer
debtor to exempt certain education IRA plans for their child's
postsecondary education and fortifying the Bankruptcy Code's
exemption provisions for certain tax-qualified retirement
funds. Under the bill, individuals with primarily consumer
debts must receive notice of alternatives to bankruptcy relief
before they file for bankruptcy and it requires them to be
informed of other matters pertaining to the integrity of the
bankruptcy system. This requirement ensures that debtors are
aware of viable and cost-effective alternatives to bankruptcy.
The bill requires debtors to participate in debt repayment
programs before filing for bankruptcy relief (unless special
circumstances do not permit such participation). In addition,
H.R. 833 directs the Director of the Executive Office for
United States Trustees to institute a consumer financial
management pilot program that will enable the effectiveness and
costs of such programs to be evaluated.
The bill also enhances the standards of practice for
attorneys and others who assist consumer debtors in connection
with their bankruptcy cases. H.R. 833 mandates that certain
services and specified notices be provided to consumers by
professionals and others who render bankruptcy assistance. To
ensure compliance with these provisions, H.R. 833 institutes
variousenforcement mechanisms.
Business Bankruptcy. H.R. 833 contains a comprehensive set
of reforms pertinent to business bankruptcies. They include
provisions addressing the special problems presented by small
business bankruptcies and single asset real estate debtors as
well as provisions dealing with business bankruptcy cases in
general. H.R. 833 establishes a new form of bankruptcy relief
for transnational insolvencies intended to promote
international comity and greater certainty. It also includes
provisions concerning the treatment of certain financial
contracts under the banking laws as well as under the
Bankruptcy Code. H.R. 833 responds to the special needs of
family farmers by making chapter 12 of the Bankruptcy Code, a
form of bankruptcy relief available only to eligible family
farmers, permanent.
Small business/single asset real estate debtors. The small
business and single asset real estate provisions of H.R. 833
are largely derived from consensus recommendations of the
National Bankruptcy Review Commission.³¹ These
provisions have also received broad support from many in the
bankruptcy community, including various bankruptcy judges and
creditor groups, and the Executive Office for United States
Trustees.
---------------------------------------------------------------------------
\31\ See generally Report of the National Bankruptcy Review
Commission, at 303-706 (Oct. 20, 1997).
---------------------------------------------------------------------------
Most chapter 11 cases are filed by small business debtors.
Although the Bankruptcy Code envisions that creditors should
play a major role in the oversight of chapter 11 cases, this
does not often occur with respect to small business debtors.
The main reason is that creditors in these smaller cases do not
have claims large enough to warrant the expenditure of the
necessary time and money to participate actively in these
cases. The resulting lack of creditor oversight creates a
greater need for the United States Trustee to monitor these
cases actively. Nevertheless, the monitoring of these debtors
by United States Trustees varies throughout the nation.
H.R. 833 addresses the special problems presented by small
business cases by instituting a variety of time frames and
enforcement mechanisms to weed out small business debtors who
are not likely to reorganize. It also requires these cases to
be more actively monitored by United States Trustees and the
bankruptcy courts.
With regard to single asset real estate debtors, H.R. 833
makes several amendments to the Bankruptcy Code's provisions.
First, it eliminates the monetary cap from the definition
currently in the Bankruptcy Code. Second, it makes these
debtors subject to the small business provisions of the bill.
Third, H.R. 833 amends the automatic stay provisions by
permitting a single asset real estate debtor to make requisite
interest payments out of rents or other proceeds generated by
the real property.
Financial contracts. Title X of H.R. 833 contains a series
of provisions pertaining to the treatment of certain financial
transactions under the Bankruptcy Code and relevant banking
laws. These provisions are intended to reduce ``systemic risk''
in the banking system and financial marketplace. ³²
They amend provisions of the banking and investment laws, as
well as the Bankruptcy Code, applicable to certain types of
financial transactions. This is to minimize the risk of
disruption when parties to these transactions become bankrupt
or insolvent. In addition to the Bankruptcy Code, the bill
amends the Federal Deposit Insurance Act; Financial
Institutions Reform, Recovery and Enforcement Act of 1989;
Federal Deposit Insurance Corporation Improvement Act of 1991;
Federal Reserve Act; and Securities Investor Protection Act of
1971. Many of these provisions are derived from recommendations
issued by a presidential interagency working group chaired by
Treasury Secretary Robert Rubin ³³ and revisions
espoused by the financial industry. ³⁴ Among these
provisions is one that would treat certain asset-backed
securitizations as valid transfers. Other provisions broaden
the scope of certain definitions to include additional types of
business transactions and limit the authority of a court or
administrative agency to enjoin certain actions.
---------------------------------------------------------------------------
\32\ ``Systemic risk'' is explained as the following:

Systemic risk is the risk that the failure of a firm or
disruption of a market or settlement system will cause
widespread difficulties at other firms, in other market
segments or in the financial system as a whole. If
participants in certain financial activities are unable to
enforce their rights to terminate financial contracts with
an insolvent entity in a timely manner, or to offset or net
their various contractual obligations, the resulting
uncertainty and potential lack of liquidity could increase
---------------------------------------------------------------------------
the risk of an inter-market disruption.

H. Rep. No. 105-688, Part 1, at 2 (1998).
---------------------------------------------------------------------------
\33\ The Working Group's members included representatives from the
Commodity Futures Trading Commission, the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve System, the
Federal Reserve Bank of New York, the Securities and Exchange
Commission, and the Department of the Treasury, including the Office of
the Comptroller of the Currency. Id. at 1.
\34\ The Bond Market Association (a group representing securities
firms and banks that underwrite, trade and sell debt securities) and
the International Swaps and Derivatives Association (an international
financial trade association whose membership is comprised of
commercial, merchant and investment banks that engage in swaps and
other privately negotiated derivatives transactions). See, e.g.,
Statement of John D. Hawke, Jr., Treasury Under Secretary for Domestic
Finance, before the U.S. House of Representatives Committee on Banking
and Financial Services, at 1 (July 24, 1998) (stating that he was
``pleased to report that we have negotiated compromise language with
industry participants who wanted somewhat broader legislation than we
were prepared to propose').
---------------------------------------------------------------------------
Transnational insolvencies. In response to the increasing
globalization of business dealings and operations, the bill
establishes a separate chapter under the Bankruptcy Code
devoted to transnational insolvencies. These provisions are
intended to provide greater legal certainty for trade and
investment as well as to provide for the fair and efficient
administration of these cases.
Other Provisions Having General Impact. H.R. 833 contains
several provisions that generally impact bankruptcy law and
practice. For example, it requires the Executive Office for
United States Trustees to compile various statistics regarding
chapter 7, 11, and 13 cases and to make these data available to
the public. Another provision allows professionals to share
compensation with bona fide public service attorney referral
programs. H.R. 833 mandates that a bankruptcy court conduct a
scheduling conference in a bankruptcy case, if necessary to
further the expeditious and economical resolution of the case.
The bill also revises the Bankruptcy Code's preference
provisions. Under H.R. 833, a defendant in a preference action
may establish that the transfer was made in the ordinary course
of the debtor's financial affairs or business, or that the
transfer was made in accordance with ordinary business terms.
Current law requires the defendant to establish both defenses.
The bill also prevents a preferential transfer action from
being filed unless the transfer exceeds a specified monetary
minimum. In addition, H.R. 833 amends the venue provisions for
preferential transfer actions to require a preference action
based on a transfer of $10,000 or less to be filed in the
district where the defendant resides. Current law fixes this
amount at $1,000.

Hearings
The Committee's Subcommittee on Commercial and
Administrative Law began its consideration of comprehensive
bankruptcy reform more than two years ago. On April 16, 1997,
the Subcommittee conducted a hearing on the operation of the
bankruptcy system, which was combined with a status report from
the National Bankruptcy Review Commission. ³⁵ This
would be the first of 13 hearings that the Subcommittee held on
the subject of bankruptcy reform over the ensuing two years.
³⁶ Eight of these hearings were devoted solely to
consideration of H.R. 833 and its predecessor, H.R. 3150, the
Bankruptcy Reform Act of 1998. Over the course of these
hearings, more than 130 witnesses, representing nearly every
major constituency in the bankruptcy community, testified. With
regard to H.R. 833 alone, testimony was received from 69
witnesses, representing 23 organizations, with additional
material submitted by other individuals and groups.
---------------------------------------------------------------------------
\35\ Hearing Before the Subcommittee on Commercial and
Administrative Law on the Operation of the Bankruptcy System and Status
Report from the National Bankruptcy Review Commission, 105th Cong.
(1997).
\36\ The dates and subject matters of these hearings were as
follows:
April 16, 1997--Hearing on the operation of the bankruptcy system
and status report from the National Bankruptcy Review Commission.
April 30, 1997--Hearing on H.R. 764, Bankruptcy Amendments of 1997,
and H.R. 120, Bankruptcy Law Technical Corrections Act of 1997.
October 9, 1997--Hearing on H.R. 2592, Private Trustee Reform Act
of 1997 and review of post-confirmation fees in Chapter 11 cases.
November 13, 1997--Hearing on the Report of the National Bankruptcy
Review Commission.
February 12, 1998--Hearing on H.R. 2604, Religious Liberty and
Charitable Donation Protection Act of 1997.
March 10-11, 18-19, 1998--Hearings on H.R. 3150, Bankruptcy Reform
Act of 1998, H.R. 3146, Consumer Lenders and Borrowers Bankruptcy
Accountability Act of 1998, and H.R. 2500, Responsible Borrower
Protection Bankruptcy Act.
March 11, 16-18, 1999--Hearings on H.R. 833, the Bankruptcy Reform
Act of 1999.
---------------------------------------------------------------------------
The Subcommittee's first hearing on H.R. 833 was held
jointly with the Senate Subcommittee on Administrative
Oversight and the Courts on March 11, 1999. This marked the
first time in more than 60 years that a bicameral hearing was
held on the subject of bankruptcyreform.³⁷ United
States Senators who testified at the hearing included Senators Charles
Grassley (R-Iowa), Joseph R. Biden (D-Del.) and Christopher J. Dodd (D-
Conn.). House Members included Representatives James P. Moran (D-Va.),
Pete Sessions (R-Texas) and Nick Smith (R-Mich.). Other witnesses
included Dean Sheaffer, Vice President and Director of Credit at
Boscov's Department Store, Inc., representing the National Retail
Federation; Bruce L. Hammonds, Senior Vice Chairman and Chief Operating
Officer, MBNA America Bank, N.A.; the Honorable Carol J. Kenner, United
States Bankruptcy Judge for the District of Massachusetts; Larry Nuss,
Chief Executive Officer, Cedar Falls Community Credit Union,
representing Credit Union National Association, Inc.; Gary Klein,
Senior Attorney with the National Consumer Law Center; the Honorable
Edith Hollan Jones, Judge, United States Court of Appeals for the Fifth
Circuit, and former member of the National Bankruptcy Review
Commission; Judith Greenstone Miller, Clark Hill, PLC, representing the
Commercial Law League of America; Professor Todd Zywicki, George Mason
University School of Law; and Professor Elizabeth Warren, Leo Gottlieb
Professor of Law at Harvard Law School.
---------------------------------------------------------------------------
\37\ Statement of Charles Grassley, U.S. Senator, at 1 (Mar. 11,
1999).
---------------------------------------------------------------------------
Witnesses at the March 16, 1999 hearing included the
following: Representatives James P. Moran (D-Va.), Bill
McCollum (R-Fla.), Nick Smith (R-Mich.), Rick Boucher (D-Va.),
Steven Rothman (D-NJ), Sheila Jackson Lee (D-Tex.), Louise
McIntosh Slaughter (D-NY), and John LaFalce (D-NY). Other
witnesses included: James I. Shepard, a bankruptcy tax
consultant and former member of the National Bankruptcy Review
Commission; Professor Eric Posner of the University of Chicago
Law School; Professor David Skeel of the University of
Pennsylvania Law School; Professor Lawrence P. King, Charles
Seligson Professor of Law at New York University School of Law;
Ralph R. Mabey, a practitioner and former United States
Bankruptcy Judge; the Honorable Joe Lee, United States
Bankruptcy Judge for the Eastern District of Kentucky; Leon
Forman, a practitioner; James E. Smith, President and Chief
Executive Officer, Union State Bank and Trust, representing the
American Bankers Association; Janet Kubica, President and Chief
Executive Officer, Postmark Credit Union, representing the
Credit Union National Association; and Frank Torres,
Legislative Counsel for Consumers Union.
Witnesses at the March 17, 1999 hearing included the
following: George J. Wallace of Eckert, Seamans, Cherin &
Mellott, LLC, representing the Consumer Bankruptcy Reform
Coalition; the Honorable William Brown, United States
Bankruptcy Judge for the Western District of Tennessee,
representing the American Bankruptcy Institute; Professor Todd
Zywicki of George Mason University School of Law; Professor
Kenneth Klee of the University of Cali-

fornia--Los Angeles School of Law, representing the National
Bankruptcy Conference; Jeffrey A. Tassey, Senior Vice President
of Governmental and Legal Affairs for the American Financial
Services Association; Michael Moore, President of Badcock Home
Furnishing Centers, representing the National Retail
Federation; Wayne Sigmon, a partner with the law firm of Gray,
Layton, Kersh, Solomon, Sigmon, Furr and Smith, representing
the National Association of Consumer Bankruptcy Attorneys; the
Honorable Thomas R. Carper, Governor of the State of Delaware,
representing the National Governors' Association; the Honorable
Randall J. Newsome, United States Bankruptcy Judge for the
Northern District of California, representing the National
Conference of Bankruptcy Judges; Robert Waldschmidt, a chapter
7 trustee, representing the National Association of Bankruptcy
Trustees; Henry E. Hildebrand, III, a chapter 13 trustee,
representing the National Association of Chapter 13 Trustees;
Prof. Michael E. Staten, Director of the Credit Research
Center, at the McDonough School of Business, Georgetown
University; Professor Marianne B. Culhane, Creighton University
School of Law; Lisa H. Ryu, Staff Economist at the National
Association of Federal Credit Unions; Dr. Thomas S. Neubig,
Ernst & Young LLP; and Richard M. Stana, Associate Director
Administration of Justice Issues, General Government Division
at the General Accounting Office.
Witnesses at the fourth and final hearing held on March 18,
1999 included the following: Representatives Robert E. Andrews
(D-NJ), James A. Leach (R-Iowa) and Marge Roukema (R-NJ);
Philip L. Strauss, Assistant District Attorney, Family Support
Bureau of the Office of the District Attorney; Joan Entmacher,
Vice President and Director of the Family Economic Center,
National Women's Law Center; Stephanie M. Saperstein, Assistant
Attorney General, Office of the Utah Attorney General,
representing the National Association of Attorneys General;
Professor Karen Gross, New York Law School; the Honorable
Thomas Carlson, United States Bankruptcy Judge for the Northern
District of California; H. Elizabeth Baird, Assistant General
Counsel for the Bank of America Corporation; William H.
Schorling, Klett, Lieber, Rooney & Schorling, representing the
American Bar Association--Business Bankruptcy Section; Charles
M. Tatelbaum, a partner with the law firm of Cummings &
Lockwood, representing the National Association of Credit
Managers; Judith Greenstone Miller, a partner with the law firm
of Clark Hill, PLC, representing the Commercial Law League of
America; Damon Silvers, Associate General Counsel for the
American Federation of Labor and Congress of Industrial
Organizations; Jere W. Glover, Chief Counsel for the Office of
Advocacy, United States Small Business Administration; Ray
Valdes, Tax Collector for Seminole County in Florida, on behalf
of the National Association of County Treasurers and Finance
Officers, the National Association of County Officials, and the
National League of Cities; Don Harris, Special Assistant to the
Attorney General, State of New Mexico, representing the States'
Association of Bankruptcy Attorneys; Paul H. Asofsky, a partner
at the law firm of Weil, Gotshal & Manges, LLP, representing
the American Bar Association--Section of Taxation; the
Honorable Tina Brozman, Chief United States Bankruptcy Judge
for the Southern District of New York; Oliver Ireland,
Associate General Counsel for the Board of Governors of the
Federal Reserve System; Professor Randal C. Picker, Leffmann
Professor of Commercial Law at University of Chicago Law
School, representing the National Bankruptcy Conference; Seth
Grosshandler, a partner at the New York office of Cleary,
Gottlieb, Steen & Hamilton; Joseph Peiffer, Peiffer Law Office;
and Harley D. Bergmeyer, Chairman, President and Chief
Executive Officer of the Saline State Bank, representing the
American Bankers Association.

Committee Consideration

On March 25, 1999, the Subcommittee on Commercial and
Administrative Law met in open session and ordered favorably
reported the bill H.R. 833, with a single amendment in the
nature of a substitute, by a record vote of five to three, a
quorum being present. On April 20, 21, 22 , 27, and 28, 1999,
the Committee met in open session and on April 28, 1999 ordered
favorably reported the bill H.R. 833 with amendment in the
nature of a substitute by a recorded vote of 22 ayes to 13 nays
with one Member voting present, a quorum being present.

Votes of the Committee

1. An amendment by Mr. Hyde modifying the needs-based test
in section 102 to require a minimum payment of at least $100
per month to general unsecured creditors after subtracting 10
percent of projected payments to account for the costs of
administration. On unanimous consent, Mr. Nadler added ``and
reasonable attorney fees'' after every reference to
``administrative expenses'' in the Hyde amendment. Passed 18 to
11.
AYES NAYS
Mr. Hyde Mr. Gekas
Mr. Coble Mr. Smith (TX)
Mr. Hutchinson Mr. Gallegly
Mr. Rogan Mr. Canady
Ms. Bono Mr. Goodlatte
Mr. Bachus Mr. Bryant
Mr. Frank Mr. Chabot
Mr. Nadler Mr. Barr
Mr. Scott Mr. Jenkins
Mr. Watt Mr. Pease
Ms. Lofgren Mr. Graham
Ms. Jackson-Lee
Mr. Meehan
Mr. Delahunt
Mr. Wexler
Mr. Rothman
Ms. Baldwin
Mr. Weiner

2. An amendment by Mr. Hyde to replace the Internal Revenue
Service expense allowance standards with a ``reasonably
necessary'' standard in section 102 and to direct the Executive
Office for United States Trustees to issue guidelines to assist
in making assessments of whether living expenses are
``reasonably necessary.'' Passed 13 to 11.
AYES NAYS
Mr. Hyde Mr. Sensenbrenner
Mr. Rogan Mr. Gekas
Ms. Bono Mr. Coble
Mr. Berman Mr. Smith (TX)
Mr. Nadler Mr. Canady
Mr. Scott Mr. Goodlatte
Mr. Watt Mr. Bryant
Ms. Lofgren Mr. Barr
Mr. Meehan Mr. Jenkins
Mr. Delahunt Mr. Hutchinson
Mr. Wexler Mr. Boucher
Ms. Baldwin
Mr. Weiner

3. An amendment offered by Mr. Watt to an amendment by Mr.
Bryant (to deem an unexpired lease of nonresidential real
property--where the debtor is the lessee--rejected under
certain circumstances) to limit its application to a debtor who
is delinquent on its lease payments. Defeated 7 to 17.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Nadler Mr. Sensenbrenner
Mr. Watt Mr. Gekas
Ms. Lofgren Mr. Coble
Mr. Meehan Mr. Smith (TX)
Ms. Baldwin Mr. Gallegly
Mr. Weiner Mr. Canady
Mr. Goodlatte
Mr. Bryant
Mr. Chabot
Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Frank

4. An amendment by Mr. Nadler to an amendment by Mr. Bryant
(to deem an unexpired lease of nonresidential real property--
where the debtor is the lessee--rejected under certain
circumstances) to permit the court to grant a subsequent
extension (after expiration of the initial 120-day extension),
if such further extension is substantially likely to preserve
five or more jobs. Defeated 6 to 18.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Nadler Mr. Sensenbrenner
Mr. Watt Mr. Gekas
Mr. Meehan Mr. Coble
Ms. Baldwin Mr. Smith (TX)
Mr. Weiner Mr. Gallegly
Mr. Canady
Mr. Goodlatte
Mr. Bryant
Mr. Chabot
Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Frank
Ms. Lofgren

5. An amendment offered by Mr. Nadler to make specified
debts relating to violations of law concerning certain health
care facilities nondischargeable. Defeated 13 to 18.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Frank Mr. Sensenbrenner
Mr. Berman Mr. McCollum
Mr. Nadler Mr. Gekas
Mr. Scott Mr. Coble
Mr. Watt Mr. Smith (TX)
Ms. Lofgren Mr. Gallegly
Ms. Jackson-Lee Mr. Canady
Ms. Waters Mr. Goodlatte
Mr. Delahunt Mr. Bryant
Mr. Wexler Mr. Chabot
Ms. Baldwin Mr. Barr
Mr. Weiner Mr. Jenkins
Mr. Hutchinson
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono

6. An amendment offered by Mr. Nadler to strike a provision
prohibiting class action cases for certain discharge injunction
violations. Defeated 12 to 16.
AYES NAYS
Mr. Hyde Mr. McCollum
Mr. Conyers Mr. Gekas
Mr. Berman Mr. Coble
Mr. Nadler Mr. Smith (TX)
Mr. Scott Mr. Gallegly
Mr. Watt Mr. Canady
Ms. Lofgren Mr. Goodlatte
Ms. Jackson-Lee Mr. Bryant
Mr. Meehan Mr. Chabot
Mr. Delahunt Mr. Jenkins
Ms. Baldwin Mr. Hutchinson
Mr. Weiner Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Scarborough

7. A substitute amendment offered by Mr. Bryant to the
amendment of Ms. Jackson-Lee (ensuring that state
constitutional law prohibiting the forced sale of a homestead
to pay debts is not preempted) to make the $250,000 homestead
limitation inapplicable to debtors in states that enact
legislation opting out of such limitation. Passed 18 to 12.
AYES NAYS
Mr. McCollum Mr. Hyde
Mr. Gekas Mr. Sensenbrenner
Mr. Coble Mr. Pease
Mr. Smith (TX) Mr. Conyers
Mr. Gallegly Mr. Nadler
Mr. Canady Mr. Scott
Mr. Goodlatte Mr. Watt
Mr. Bryant Mr. Meehan
Mr. Chabot Mr. Delahunt
Mr. Barr Mr. Rothman
Mr. Jenkins Ms. Baldwin
Mr. Hutchinson Mr. Weiner
Mr. Cannon
Mr. Graham
Ms. Bono
Mr. Scarborough
Ms. Jackson-Lee
Mr. Wexler

8. An amendment offered by Ms. Jackson Lee (ensuring that
state constitutional law prohibiting the forced sale of a
homestead to pay debts is not preempted), as amended by Mr.
Bryant's amendment, to make the $250,000 homestead limitation
inapplicable to debtors in states that enact legislation opting
out of such limitation. Passed 18 to 15.
AYES NAYS
Mr. McCollum Mr. Hyde
Mr. Gekas Mr. Sensenbrenner
Mr. Coble Mr. Pease
Mr. Smith (TX) Mr. Conyers
Mr. Gallegly Mr. Berman
Mr. Canady Mr. Nadler
Mr. Goodlatte Mr. Scott
Mr. Bryant Mr. Watt
Mr. Chabot Ms. Lofgren
Mr. Barr Ms. Waters
Mr. Jenkins Mr. Meehan
Mr. Hutchinson Mr. Delahunt
Mr. Cannon Mr. Rothman
Mr. Graham Ms. Baldwin
Ms. Bono Mr. Weiner
Mr. Scarborough
Ms. Jackson-Lee
Mr. Wexler

9. An amendment offered by Mr. Watt to require individual
chapter 7 and chapter 13 debtors to file with the court copies
of tax returns and related documents at the request of any
party of interest. Defeated 13 to 13.
AYES NAYS
Mr. Hyde Mr. Sensenbrenner
Mr. Canady Mr. Gekas
Mr. Pease Mr. Coble
Mr. Conyers Mr. Smith (TX)
Mr. Scott Mr. Goodlatte
Mr. Watt Mr. Bryant
Ms. Lofgren Mr. Chabot
Ms. Jackson-Lee Mr. Barr
Mr. Meehan Mr. Jenkins
Mr. Delahunt Mr. Cannon
Mr. Rothman Mr. Rogan
Ms. Baldwin Mr. Graham
Mr. Weiner Ms. Bono

10. An amendment offered by Mr. Meehan to prohibit the
discharge of a debt resulting from the use or purchase of
firearms, if such debt is based on fraud, recklessness, or
misrepresentation or is a product liability claim. Defeated 8
to 19.
AYES NAYS
Mr. Conyers Mr. Hyde
Ms. Lofgren Mr. Sensenbrenner
Ms. Jackson-Lee Mr. Gekas
Mr. Meehan Mr. Coble
Mr. Delahunt Mr. Smith (TX)
Mr. Rothman Mr. Canady
Ms. Baldwin Mr. Goodlatte
Mr. Weiner Mr. Bryant
Mr. Chabot
Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Scott
Mr. Watt

11. An amendment offered by Mr. Delahunt to disallow
certain claims in bankruptcy cases if the creditor engaged in
reckless lending practices. Defeated 10 to 19.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Frank Mr. Sensenbrenner
Mr. Berman Mr. McCollum
Mr. Nadler Mr. Gekas
Mr. Watt Mr. Coble
Ms. Lofgren Mr. Smith
Ms. Jackson-Lee Mr. Gallegly
Mr. Meehan Mr. Canady
Mr. Delahunt Mr. Bryant
Ms. Baldwin Mr. Chabot
Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Boucher

12. Reconsideration of an amendment offered by Mr. Nadler
allowing a debtor to choose state or federal exemption law
(which was agreed to by voice vote the previous day). Defeated
13 to 21.
AYES NAYS
Mr. Canady Mr. Hyde
Mr. Conyers Mr. Sensenbrenner
Mr. Berman Mr. McCollum
Mr. Nadler Mr. Gekas
Mr. Scott Mr. Coble
Mr. Watt Mr. Smith
Ms. Lofgren Mr. Goodlatte
Ms. Jackson-Lee Mr. Bryant
Ms. Waters Mr. Chabot
Mr. Meehan Mr. Barr
Mr. Delahunt Mr. Jenkins
Mr. Wexler Mr. Hutchinson
Ms. Baldwin Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Bachus
Mr. Scarborough
Mr. Frank
Mr. Boucher

13. An amendment offered by Mr. Graham to restore the
Internal Revenue expense allowance standards (as adjusted) and
to require the Executive Office for United States Trustees to
prepare a report of its findings following a three-year study
of the utilization of the Internal Revenue Service standards
for determining current monthly expenses of debtors. Passed 20
to 17.
AYES NAYS
Mr. McCollum Mr. Hyde
Mr. Gekas Mr. Sensenbrenner
Mr. Coble Mr. Bachus
Mr. Smith Mr. Conyers
Mr. Gallegly Mr. Frank
Mr. Canady Mr. Berman
Mr. Goodlatte Mr. Nadler
Mr. Bryant Mr. Scott
Mr. Chabot Mr. Watt
Mr. Barr Ms. Lofgren
Mr. Jenkins Ms. Jackson-Lee
Mr. Hutchinson Ms. Waters
Mr. Pease Mr. Meehan
Mr. Cannon Mr. Delahunt
Mr. Rogan Mr. Wexler
Mr. Graham Ms. Baldwin
Ms. Bono Mr. Weiner
Mr. Scarborough
Mr. Boucher
Mr. Rothman

14. An amendment offered by Mr. Nadler to strike section
132 of the bill, which makes the needs-based formula applicable
to chapter 13. Defeated 9 to 12.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Berman Mr. Gekas
Mr. Nadler Mr. Smith (Tex.)
Mr. Scott Mr. Canady
Mr. Watt Mr. Goodlatte
Ms. Lofgren Mr. Chabot
Ms. Waters Mr. Jenkins
Mr. Delahunt Mr. Pease
Ms. Baldwin Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono

15. An amendment offered by Mr. Watt to replace section 114
of the bill (Enhanced Disclosures under an Open-End Credit
Plan). Defeated 12 to 12.
AYES NAYS
Mr. Canady Mr. Hyde
Mr. Conyers Mr. McCollum
Mr. Frank Mr. Gekas
Mr. Berman Mr. Smith (Tex.)
Mr. Nadler Mr. Gallegly
Mr. Scott Mr. Goodlatte
Mr. Watt Mr. Chabot
Ms. Lofgren Mr. Jenkins
Ms. Waters Mr. Cannon
Mr. Delahunt Mr. Rogan
Ms. Baldwin Mr. Graham
Mr. Weiner Ms. Bono

16. An amendment offered by Mr. Watt to add section 151 to
the bill (Discouraging Reckless Lending Practices). Defeated 12
to 12.
AYES NAYS
Mr. Canady Mr. Hyde
Mr. Conyers Mr. McCollum
Mr. Frank Mr. Gekas
Mr. Berman Mr. Gallegly
Mr. Nadler Mr. Goodlatte
Mr. Scott Mr. Chabot
Mr. Watt Mr. Jenkins
Ms. Lofgren Mr. Cannon
Ms. Waters Mr. Rogan
Mr. Wexler Mr. Graham
Ms. Baldwin Ms. Bono
Mr. Weiner Mr. Boucher

17. An amendment offered by Mr. Nadler to strike a
reference to unsecured creditors in section 1325(b)(1) of the
Bankruptcy Code, as amended by section 132 of the bill.
Defeated 11 to 17.
AYES NAYS
Mr. Hyde Mr. Sensenbrenner
Mr. Conyers Mr. McCollum
Mr. Berman Mr. Gekas
Mr. Nadler Mr. Coble
Mr. Scott Mr. Smith (TX)
Mr. Watt Mr. Gallegly
Ms. Lofgren Mr. Canady
Ms. Waters Mr. Goodlatte
Mr. Delahunt Mr. Bryant
Ms. Baldwin Mr. Chabot
Mr. Weiner Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Ms. Bono
Mr. Frank

18. An amendment offered by Mr. Watt striking section 106
of the bill (Disclosures) and part of section 107 (Debtor's
Bill of Rights). Passed 13 to 12.
AYES NAYS
Mr. Canady Mr. Hyde
Mr. Pease Mr. Sensenbrenner
Mr. Graham Mr. McCollum
Mr. Frank Mr. Gekas
Mr. Nadler Mr. Smith (Tex.)
Mr. Scott Mr. Bryant
Mr. Watt Mr. Chabot
Ms. Lofgren Mr. Barr
Ms. Jackson-Lee Mr. Jenkins
Ms. Waters Mr. Hutchinson
Mr. Meehan Mr. Rogan
Ms. Baldwin Ms. Bono
Mr. Weiner

19. An amendment offered by Mr. Nadler to add section 151
(Discouraging Reckless Lending Practices). Defeated 4 to 19.
AYES NAYS
Mr. Nadler Mr. Hyde
Ms. Jackson-Lee Mr. Sensenbrenner
Mr. Delahunt Mr. McCollum
Ms. Baldwin Mr. Gekas
Mr. Smith (Tex.)
Mr. Canady
Mr. Bryant
Mr. Chabot
Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Scarborough
Mr. Frank
Ms. Lofgren
Ms. Waters

20. An amendment offered by Mr. Gekas, as a substitute to
an amendment offered by Mr. Nadler, providing for exceptions to
the automatic stay with respect to domestic support obligation
proceedings. Passed 17 to 10.
AYES NAYS
Mr. Hyde Mr. Conyers
Mr. Sensenbrenner Mr. Frank
Mr. McCollum Mr. Nadler
Mr. Gekas Mr. Watt
Mr. Gallegly Ms. Lofgren
Mr. Canady Ms. Jackson-Lee
Mr. Goodlatte Ms. Waters
Mr. Bryant Mr. Meehan
Mr. Barr Ms. Baldwin
Mr. Jenkins Mr. Weiner
Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Scarborough

21. An amendment offered by Ms. Jackson-Lee to exclude
federal or state disaster assistance from the income component
of the needs-based formula in section 102 of the bill. Defeated
12 to 21.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Berman Mr. Sensenbrenner
Mr. Nadler Mr. McCollum
Mr. Scott Mr. Gekas
Mr. Watt Mr. Coble
Ms. Lofgren Mr. Smith (Tex.)
Ms. Jackson-Lee Mr. Gallegly
Ms. Waters Mr. Canady
Mr. Meehan Mr. Goodlatte
Mr. Wexler Mr. Bryant
Ms. Baldwin Mr. Chabot
Mr. Weiner Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Bachus
Mr. Frank

22. An amendment offered by Mr. Scott and Mr. Meehan to
exclude veterans benefits from the income component of the
needs-based formula in section 102 of the bill. Defeated 10 to
19.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Nadler Mr. Sensenbrenner
Mr. Scott Mr. Gekas
Mr. Watt Mr. Coble
Ms. Lofgren Mr. Smith (Tex.)
Ms. Jackson-Lee Mr. Canady
Ms. Waters Mr. Goodlatte
Mr. Meehan Mr. Bryant
Mr. Delahunt Mr. Chabot
Ms. Baldwin Mr. Barr
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Bachus
Mr. Frank

23. An amendment offered by Mr. Nadler to exclude
disability payments from the income component of the needs-
based formula in section 102. Defeated 8 to 16.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Nadler Mr. Sensenbrenner
Mr. Scott Mr. McCollum
Mr. Watt Mr. Gekas
Ms. Lofgren Mr. Coble
Ms. Jackson-Lee Mr. Gallegly
Ms. Baldwin Mr. Canady
Mr. Weiner Mr. Goodlatte
Mr. Chabot
Mr. Jenkins
Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Scarborough
Mr. Frank

24. An amendment offered by Mr. Nadler to exclude
compensation to victims of war crimes or crimes against
humanity from the income component of the needs-based formula
of section 102 of the bill. Passed 21 to 7.
AYES NAYS
Mr. Hyde Mr. Gekas
Mr. Sensenbrenner Mr. Coble
Mr. McCollum Mr. Canady
Mr. Gallegly Mr. Jenkins
Mr. Goodlatte Mr. Hutchinson
Mr. Chabot Mr. Pease
Mr. Rogan Mr. Cannon
Mr. Scarborough
Mr. Conyers
Mr. Frank
Mr. Berman
Mr. Nadler
Mr. Scott
Mr. Watt
Ms. Lofgren
Ms. Jackson-Lee
Ms. Waters
Mr. Meehan
Mr. Rothman
Ms. Baldwin
Mr. Weiner

25. An amendment offered by Mr. Gekas striking the
requirement of extraordinary circumstances in section 406 of
the bill (duties in small business cases). Passed 17 to 12.
AYES NAYS
Mr. Hyde Mr. Hutchinson
Mr. Sensenbrenner Mr. Conyers
Mr. Gekas Mr. Frank
Mr. Coble Mr. Berman
Mr. Smith (TX) Mr. Nadler
Mr. Gallegly Mr. Scott
Mr. Canady Mr. Watt
Mr. Goodlatte Ms. Lofgren
Mr. Bryant Ms. Jackson-Lee
Mr. Chabot Ms. Waters
Mr. Jenkins Mr. Wexler
Mr. Pease Ms. Baldwin
Mr. Cannon
Mr. Rogan
Mr. Graham
Mr. Scarborough
Mr. Boucher

26. Amendment offered by Ms. Jackson-Lee to make certain
debts relating to consumption or consumer purchase of a tobacco
product nondischargeable in a chapter 11 case. Defeated 11 to
21.
AYES NAYS
Mr. Conyers Mr. Sensenbrenner
Mr. Berman Mr. Gekas
Mr. Nadler Mr. Coble
Ms. Lofgren Mr. Smith (TX)
Ms. Jackson-Lee Mr. Gallegly
Ms. Waters Mr. Canady
Mr. Meehan Mr. Goodlatte
Mr. Wexler Mr. Bryant
Mr. Rothman Mr. Chabot
Ms. Baldwin Mr. Jenkins
Mr. Weiner Mr. Hutchinson
Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Mr. Bachus
Mr. Scarborough
Mr. Frank
Mr. Boucher
Mr. Scott
Mr. Watt

27. An amendment offered by Ms. Jackson-Lee substituting a
new section 148 of the bill (relating to the definition of
household goods). Passed 21 to 13.
AYES NAYS
Mr. Hyde Mr. McCollum
Mr. Sensenbrenner Mr. Gekas
Mr. Canady Mr. Coble
Mr. Hutchinson Mr. Gallegly
Mr. Rogan Mr. Goodlatte
Mr. Bachus Mr. Bryant
Mr. Conyers Mr. Chabot
Mr. Frank Mr. Jenkins
Mr. Berman Mr. Pease
Mr. Boucher Mr. Cannon
Mr. Nadler Mr. Graham
Mr. Scott Ms. Bono
Mr. Watt Mr. Scarborough
Ms. Lofgren
Ms. Jackson-Lee
Ms. Waters
Mr. Delahunt
Mr. Wexler
Mr. Rothman
Ms. Baldwin
Mr. Weiner

28. An amendment offered by Mr. Nadler making various
amendments to section 143 of the bill (Requirements to Obtain
Confirmation and Discharge in Cases Involving DomesticSupport
Obligations). Defeated 13 to 20.
AYES NAYS
Mr. Conyers Mr. Hyde
Mr. Frank Mr. Sensenbrenner
Mr. Berman Mr. McCollum
Mr. Nadler Mr. Gekas
Mr. Scott Mr. Coble
Mr. Watt Mr. Gallegly
Ms. Lofgren Mr. Canady
Ms. Jackson-Lee Mr. Goodlatte
Ms. Waters Mr. Bryant
Mr. Wexler Mr. Chabot
Mr. Rothman Mr. Jenkins
Ms. Baldwin Mr. Hutchinson
Mr. Weiner Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Bachus
Mr. Scarborough
Mr. Boucher

29. Motion to report favorably the amendment in the nature
of a substitute to H.R. 833, as amended. Passed 22 to 13, with
one present.

AYES NAYS PRESENT

Mr. Hyde Mr. Conyers Mr. Frank
Mr. Sensenbrenner Mr. Berman
Mr. McCollum Mr. Nadler
Mr. Gekas Mr. Scott
Mr. Coble Mr. Watt
Mr. Smith (Tex.) Ms. Lofgren
Mr. Gallegly Ms. Jackson-Lee
Mr. Canady Ms. Waters
Mr. Goodlatte Mr. Meehan
Mr. Bryant Mr. Delahunt
Mr. Chabot Mr. Wexler
Mr. Jenkins Ms. Baldwin
Mr. Hutchinson Mr. Weiner
Mr. Pease
Mr. Cannon
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Bachus
Mr. Scarborough
Mr. Boucher
Mr. Rothman

Committee Oversight Findings

In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.

Committee on Government Reform Findings

No findings or recommendations of the Committee on
Government Reform were received as referred to in clause
3(c)(4) of rule XIII of the Rules of the House of
Representatives.

New Budget Authority and Tax Expenditures

Clause 3(c)(2) of House Rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.

Committee Cost Estimate

The estimate of the Congressional Budget Office (CBO) was
not available at the time of the filing of this report. In
compliance with clause 3(d)(2) of rule XIII of the rules of the
House of Representatives, the Committee believes that the
enactment of H.R. 833 will have a budget effect for fiscal year
2000 and subsequent years similar to that projected by the CBO
for H.R. 3150, the Bankruptcy Reform Act of 1998, a bill
substantially similar to H.R. 833 that was passed by the House
during the 105th Congress, with some differences.
H.R. 833 authorizes 18 new temporary bankruptcy judges
(which H.R. 3150 did not) and extends five existing judgeships,
with salaries and benefits considered as mandatory costs that
the Committee estimates at approximately $11 million a year
over five years. However, the Committee believes that this
provision is necessary to facilitate the improvements proposed
by the legislation and will enhance the efficiency of the
system. In addition, an amendment offered by Mr. Berman was
adopted during the Committee's consideration that would waive
bankruptcy filing fees for indigents. The Committee believes
that this would have an effect on revenues to the government
but is unable to project the extent of that effect other than
to conclude it may not be substantial.
As indicated, H.R. 833 is substantially similar to H.R.
3150. In a letter dated June 5, 1998, the CBO prepared an
initial federal cost estimate and an assessment of H.R. 3150's
impact on state, local, and tribal governments. In that cost
estimate, the CBO stated that implementing H.R. 3150 would have
increased ``discretionary spending by $214 million over the
1999-2003 period, subjectto appropriation of the necessary
funds.'' It also concluded that the bill would have affected direct
spending and governmental receipts, so pay-as-you-go procedures apply.
It estimated that the ``net annual impact on direct spending would be
negligible'' and that a certain provision in Title I of that bill would
have increased receipts ``by about $3 million a year.'' In a
supplemental letter, dated June 10, 1998, the CBO prepared a summary
review of H.R. 3150 for private sector mandates. It found that certain
provisions in the bill pertaining to its needs-based reforms would have
imposed ``new private sector mandates, as defined in the Unfunded
Mandates Reform Act (UMRA) with costs that exceed the statutory
threshold ($100 million in 1996, adjusted for inflation).''
The Committee notes that H.R. 833 could result in some
increased discretionary expenditures with regard to such
matters integral to the reforms proposed as: a debtor financial
management training test program; increased auditing
procedures; the maintenance of tax returns; the compilation and
publication of bankruptcy data and statistics as well as other
provisions. However, costs related to some of these
expenditures, such as increased auditing, are subject to
appropriations and are likely to be offset by enhanced
collections resulting from greater protections accorded to
federal taxing authorities in Title VIII of the H.R. 833, as
amended by the amendment in the nature of a substitute.

Constitutional Authority Statement

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in Article I, Section 8, Clauses 3 and 4 of
the Constitution.

Preemption of State Law

Pursuant to Section 423(e) of the Congressional Budget and
Impoundment Act, the Committee states that the following
provisions of H.R. 833 may preempt state law to the extent
described herein.
Section 108 contains provisions delineating the
responsibilities that a ``debt relief agency'' is held to with
respect to ``an assisted person'' and provides numerous
procedures for those responsibilities to be enforced. Section
108(c) states that neither this section, nor sections 526 and
527, as enacted under the bill, ``annul, alter, affect or
exempt any persons subject to these provisions from complying
with any law of any State except to the extent that such law is
inconsistent with these sections, and then only to the extent
of the inconsistency.'' While the provision is intended to
preempt any inconsistent state laws, the Committee makes no
determination as to which state laws may at this time be
inconsistent.
Section 147 of H.R. 833 provides for a monetary limitation
of certain exempt property not to exceed $250,000 under state
or local law. While this is intended to be a uniform upper
limit on property that can be exempted under state or local
law, the Committee does not place any minimum requirement on
states. Furthermore, the section provides that a state may
enact legislation to make this limitation inapplicable to its
citizens.

Section-by-Section Analysis and Discussion

Title I. Consumer Bankruptcy Provisions

subtitle a. needs based bankruptcy

Section 101. Conversion

Section 101 of the bill amends section 706(c) of the
Bankruptcy Code, which provides that a court may not convert a
chapter 7 case to a case under chapter 12 or chapter 13 unless
the debtor requests such conversion, to add that such
conversion is also permissible if the debtor consents to it.
Section 102. Dismissal or conversion
Section 102 implements H.R. 833's needs-based bankruptcy
reforms by making various amendments to the Bankruptcy Code's
consumer bankruptcy provisions.
Subsection (a) amends section 707(b) of the Bankruptcy Code
to allow--in addition to thecourts and United States Trustees--
panel trustees and parties in interest (in certain circumstances) to
seek dismissal of a chapter 7 case or its conversion to a case under
chapter 13 on consent of the debtor. Under current law, only the courts
and United States Trustees may seek dismissal of a chapter 7 case under
section 707(b).
In addition, it revises the ground for dismissal under
section 707(b) from ``substantial abuse'' to ``abuse'' and
replaces the present presumption in favor of the debtor with
one that requires the court to presume abuse if the debtor has:
(1) a certain threshold of income available after deduction of
specified expenses and liabilities, and (2) income is not less
than adjusted regional median income figures. Codified as
section 707(b)(2), this provision requires the court to presume
abuse exists if the debtor has at least $100 a month available
to pay general (nonpriority) unsecured debts after subtracting
from the debtor's current monthly income (1) ten percent of
projected plan payments to account for estimated administrative
expenses and reasonable attorney's fees, (2) monthly expenses
(as determined under this provision) of the debtor, the
debtor's dependents and the spouse of the debtor (if not
otherwise a dependent), and (3) the debtor's monthly payments
on account of secured and unsecured priority debts.
The court, the United States trustee, trustee or other
party in interest, however, are prohibited from filing a motion
under section 707(b)(2) if the current monthly income of the
debtor and the debtor's spouse combined (as of the date of the
order for relief) equals or is less than the regional median
household income (calculated on a semi-annual basis) for a
household of equal size. For households of more than four
individuals, the median income is that of a household of four
individuals plus $583 for each additional member of that
household.
To determine whether the presumption of abuse based on
ability to repay under section 707(b)(2) of the Bankruptcy Code
applies, section 102 provides that the debtor's monthly
expenses shall consist of: (1) the debtor's actual expenses for
the education of a dependent child under the age of 18 for
tuition, books and required fees at a private elementary or
secondary school, not to exceed $10,000 per year (as adjusted
pursuant to section 104(b) of the Bankruptcy Code), providing
the child was a student at such school before the filing of the
bankruptcy case; and (2) the applicable monthly expense amounts
for certain categories of expenditures specified by the
Internal Revenue Service in connection with the collection and
compromise of delinquent tax obligations.
The specified Internal Revenue Service expense categories
are the National Standards, Local Standards, and Other
Necessary Expenses ³⁸ in effect for the area in
which the debtor resides on the date when the bankruptcy case
is commenced.³⁹ The National Standards category
applies to expenditures for food, housekeeping supplies,
apparel and services (e.g., laundry and dry cleaning), personal
care products, and miscellaneous items (up to $100 for one
person and $25 for each additional person in a debtor's
family).⁴⁰ If the debtor is able to demonstrate that
it is reasonable and necessary, he or she may claim expenses
for food and clothing up to five percent above the amounts
specified by the Internal Revenue Service for these
expenditures.
---------------------------------------------------------------------------
\38\ The Conditional Expenses category of expenditures, although
permitted by the Internal Revenue Service, may not be claimed by a
debtor.
\39\ The Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206 (1998), directs the Internal Revenue Service to
promulgate guidelines instructing its employees to ``determine, on the
basis of the facts and circumstances of each taxpayer, whether the use
of the schedules . . . is appropriate'' and to direct that they not be
used ``to the extent such use would result in the taxpayer not having
adequate means to provide for basic living expenses.'' Internal Revenue
Service Restructuring and Reform Act of 1998, Pub. L. 105-206,
Sec. 3462 (1998).
\40\ Internal Revenue Manual Collecting Contact Handbook (IRM
105.1), at 3-3-4, 3-5, 3-13. (Sept. 25, 1996) [hereinafter ``IRS
Manual'']. The permissible amount is based on the taxpayer's total
gross monthly income and number of persons in the taxpayer's family.
These standards are derived from the Bureau of Labor Statistics
Consumer Expenditure Survey, except for a miscellaneous item expense
category. Id. at 3-5.
---------------------------------------------------------------------------
The Local Standards category applies to two general types
of expenses: (1) housing and utilities (which includes mortgage
or rent, property taxes, interest, necessary maintenance and
repair, insurance, homeowner's and condominium fees,
electricity, telephone, heat, and garbage collection); and (2)
transportation (which includes public transportation, fuel,
state/local license, registration, and inspection fees, tolls
and auto insurance).⁴¹
---------------------------------------------------------------------------
\41\ Id. at 3-13. These standards are determined based on a
combination of national and regional factors. The housing standards are
based on the taxpayer's county of residence and the size of taxpayer's
family. The transportation standard consists of two components: (1)
ownership and (2) maintenance/public transportation costs. Id. at 3-7,
3-13.
---------------------------------------------------------------------------
The ``Other Necessary Expenses'' category does not set
forth specified amounts for the types of expenses to which it
applies.⁴² Accordingly, the debtor must claim his or
her actual expenses for the items listed under this category.
They include the following:
---------------------------------------------------------------------------
\42\ Under the Internal Revenue Manual, the only requirement is
that the expense must provide for (1) the health and welfare of the
taxpayer and the taxpayer's family, or (2) the production of income.
Id. at 3-7.
---------------------------------------------------------------------------
(1) child care;
(2) dependent care: elderly, invalid, or disabled;
(3) taxes;
(4) health care;
(5) court-ordered payments and involuntary
deductions;
(6) minimum payments on secured or legally perfected
debts, if necessary for (a) the health or welfare of
the debtor or the debtor's dependents, or (b) for the
production of income;
(7) life insurance, if limited to term policies
(expensive premiums must be justified), and disability
insurance for self-employed individuals;
(8) education, if it is: (a) for a physically or
mentally handicapped dependent of the debtor and is not
provided by public schools, or (b) a condition of
employment;
(9) union dues, professional association dues;
(10) minimum payments on unsecured debts, if
necessary for (a) the health or welfare of the debtor
or the debtor's dependents, or (b) for the production
of income; ⁴³ and
---------------------------------------------------------------------------
\43\ The Internal Revenue Manual states that payments on credit or
charge cards are not permitted if the taxpayer can repay the tax
liability within 90 days if such payments are eliminated. Id. at 3-7-8.
---------------------------------------------------------------------------
(11) optional telephone service (e.g., call waiting,
caller identification) or long distance calls (if they
meet the necessary expense test of health or welfare
and/or the production of income). ⁴⁴
---------------------------------------------------------------------------
\44\ Id. at 3-7-8. Examples of expenses that, according to the
Internal Revenue Service, may not qualify as Other Necessary Expenses
are voluntary (i.e., not pursuant to a court order) child support
payments and payments to an IRA by a self-employed taxpayer who has no
other source of retirement income. Id. at 3-14-18.
---------------------------------------------------------------------------
If the debtor does not have an applicable expense under
these categories, the debtor may not claim it as an expense for
purposes of this provision. Thus, for example, if the debtor
does not own a car, he or she may not claim the car ownership
and expense allowance under the Internal Revenue Service's
Local Standards. In addition, the expenditures claimed by a
debtor under the specified Internal Revenue expense categories
may not include any payments for debts. ⁴⁵
---------------------------------------------------------------------------
\45\ Section 102(a) also provides that not later than three years
after the bill's date of enactment, the Director of the Executive
Office for United States Trustees shall submit a report to the House
and Senate Judiciary Committees containing its findings regarding the
utilization of the Internal Revenue Service expense standards for
determining current monthly expenses under section 707(b)(2), as
amended. In addition, the report must assess the impact that the
application of these standards has on debtors and the bankruptcy
courts. The report may also include recommendations for amendment of
the Bankruptcy Code.
---------------------------------------------------------------------------
Under section 707(b)(2) of the Bankruptcy Code, as amended
by section 102(a) of the bill, the debtor may deduct from his
or her current monthly income the debtor's average monthly
payments on account of secured debts. These payments are
calculated as the total of all amounts scheduled as
contractually due to the debtor's secured creditors in each
month of the 60 months following the filing of the bankruptcy
case and dividing that total by 60 months. In addition, the
debtor may deduct his or her payments on priority claims, such
as child support and alimony claims, which is calculated as the
total amount of debts entitled to priority, divided by 60
months.
Section 707(b), as amended by section 102(a) of the bill,
provides that, for purposes of this subsection, a family or
household of the debtor consists of the debtor, the debtor's
spouse, and the debtor's dependents. It does not, however,
include a legally separated spouse, unless such spouse filed a
joint case with the debtor.
As amended by section 102(a) of the bill, section 707(b)
provides that the presumption of abuse may be rebutted only if
the debtor demonstrates extraordinary circumstances justifying
additional expenses in excess of the amounts set forth above or
requiring adjustment of the debtor's current monthly income. To
establish extraordinary circumstances, the debtor must provide
a detailed statement under oath explaining why each additional
expense or adjustment of income is necessary and reasonable.
The presumption of abuse may only be rebutted if such
additional expenses or adjustment of income cause the debtor's
current monthly income less various amounts to fall below the
$100 per month threshold.
If the presumption does not apply or has been rebutted, the
court must still consider (1) whether the debtor filed the
chapter 7 case in bad faith; or (2) whether the totality of the
circumstances based on the debtor's financial situation
(including whether the debtor filed the chapter 7 case for the
purpose of having a personal services contract rejected, and
the debtor's financial need for such rejection) demonstrates
abuse.
Should a court grant a motion filed by a trustee or
bankruptcy administrator under section 707(b) and find that the
action of debtor's counsel violated Federal Rule of Bankruptcy
Procedure 9011 (a rule that allows courts to impose sanctions
for frivolous or other inappropriate filings), section 102(a)
mandates that the court shall assess sanctions. Section 102(a)
specifies that these damages may include the payment of the
trustee's reasonable attorney's fees and costs in connection
with the motion. The court may also assess an appropriate civil
penalty against debtor's counsel to be paid to the trustee,
bankruptcy administrator, or the United States trustee.
Section 102(a) also mandates that for a voluntary, joint,
or involuntary case, that a signature of an attorney
constitutes a certificate the attorney has (1) performed a
reasonable investigation into the circumstances that gave rise
to the petition, and (2) determined that the petition,
schedules, lists, and related documents are well grounded in
fact, are warranted by existing law or a good faith argument
for the extension, modification, or reversal of existing law,
and do not constitute an abuse under section 707(b) of the
Bankruptcy Code, as amended.
Under section 102(a) of the bill, a court may award a
debtor all reasonable costs, including reasonable attorney's
fees, incurred by the debtor in contesting a section 707(b)
motion brought by a party in interest (other than a trustee or
the United States trustee), under certain circumstances. These
circumstances exist if the court denies the motion and finds
that either the creditor's action in filing the motion was not
substantially justified or the motion was filed solely for the
purpose of coercing the debtor into waiving a right guaranteed
to the debtor under the Bankruptcy Code.
Section 102(a) specifies that a court, in determining
whether to dismiss a case under section 707, may not take into
consideration whether a debtor has made, or continues to make
charitable contributions, as defined in section 548(d)(3) of
the Bankruptcy Code, to any qualified religious or charitable
entity or organization, as defined in section 548(d)(4) of the
Bankruptcy Code.
Section 102(a) also requires the Director of the Office for
United States Trustees to prepare a report containing findings
with regard to the use of the Internal Revenue Service expense
standards for determining a debtor's current monthly income.
Section 102(b) creates two new definitions under section
101 of the Bankruptcy Code. First, it defines ``current monthly
income'' as the average monthly income from all sources derived
that the debtor or, in a joint case, the debtor and the
debtor's spouse receive, without regard to whether it is
taxable income, in the 180 days preceding the date of
determination. It includes any amount paid on a regular basis
by anyone other than the debtor or, in a joint case, the debtor
and the debtor's spouse to the household expenses of the debtor
or the debtor's dependents and, in a joint case, the debtor's
spouse, if not otherwise a dependent. It excludes compensation
paid to victims of war crimes or crimes against humanity.
Second it defines ``estimated administrative expenses and
reasonable attorneys'' fees as ten percent of projected
payments under a chapter 13 plan.
Section 102(c) requires a trustee, after reviewing all
materials filed by a debtor and considering all information
presented at the first meeting of creditors, to file a
statement with the court as to whether or not the filing of the
chapter 7 case should be presumed to be an abuse under section
707(b)(2). The court must provide a copy of the statement to
all creditors within five days of its filing.
If the trustee determines that the chapter 7 case should be
presumed to be an abuse under section 707(b)(2) and if the
debtor's current monthly income and that of the debtor's spouse
combined is not less than the highest national median family
income for a family of equal or lesser size (or in the case of
a household of one person, the national median household income
for one earner),⁴⁶ section 102(c) of the bill
requires the trustee to file within 30 days of filing such
statement either a motion to dismiss the case under section
707(b) or a statement explaining why such motion is not
appropriate.
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\46\ For families with more than four members, section 102 provides
that the national family income shall be the national median family
income last reported by the Bureau of the Census for a family of four
individuals plus $583 for each additional family member.
---------------------------------------------------------------------------
To implement the income and expense screening mechanism of
this provision, section 102 of the bill amends section 521(a)
of the Bankruptcy Code to require an individual debtor to file
a statement of current monthly income together with the
calculations to permit determination of whether a presumption
of abuse arises under section 707(b)(2)(A)(i), as amended.
Other provisions of section 102 amend section 2075 of title
28 of the United State Code to direct that the Federal Rules of
Bankruptcy Procedure and the Official Forms be revised to
implement these additional mandatory disclosure requirements.
Specifically, the rules must prescribe a form for the statement
of current monthly income that a debtor is required to file
under section 521 of the Bankruptcy Code, as amended by section
102 of this bill. In addition, it provides that general rules
may be promulgated describing the content of such statement.
Section 102(d) makes a clerical amendment to the table of
sections for chapter 7 of title 11.

Section 103. Notice of alternatives

Under current law, the bankruptcy clerk is required to
provide written notice of the forms of bankruptcy relief to
consumer debtors before they file for bankruptcy
relief.⁴⁷ Nevertheless, some debtors may not be
aware that there are alternatives to bankruptcy and the adverse
consequences that bankruptcy relief may present.
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\47\ 11 U.S.C. Sec. 342; Official Form 1--Voluntary Petition. This
notice requirement is effectuated by requiring the consumer debtor and
his or her attorney to sign a statement that appears on the petition
used to commence the bankruptcy case: ``I am aware that I may proceed
under chapter 7, 11, or 12, or 13 of title 11, United States Code,
understand the relief available under such chapter, and choose to
proceed under chapter 7 of such title.''
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To ensure that debtors know about alternatives to
bankruptcy before they file for bankruptcy relief, section 103
mandates that notice of these alternatives to bankruptcy be
supplied to these individuals before they file for bankruptcy
relief.⁴⁸ The notice must provide a brief
description of the various forms of bankruptcy relief and the
general purpose, benefits, and costs of proceeding under each.
In addition, the notice must briefly describe the services
available from a credit counseling service approved by the
United States trustee for that district. The debtor must also
receive a warning specifying that a person who knowingly and
fraudulently conceals assets or makes a false oath or statement
under penalty of perjury shall be subject to fine,
imprisonment, or both. In addition, the debtor must be advised
that all information supplied by a debtor in connection with
the case is subject to examination by the Attorney General.
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\48\ This requirement only applies to individuals with primarily
consumer debts. Section 101(8) of the Bankruptcy Code defines
``consumer debt'' as debt incurred by an individual primarily for a
personal, family, or household purpose.
---------------------------------------------------------------------------

Section 104. Debtor financial management training test program

This provision requires the Director of the Executive
Office for United States Trustees, after consultation with a
wide range of individuals who are experts in the field of
debtor education (such as Chapter 13 trustees who operate
financial management education programs for debtors), to
develop a financial management training curriculum to educate
individual debtors on how to better manage their finances. It
mandates that the Director select six judicial districts in
which to test the effectiveness of the financial management
training curriculum for an 18-month period beginning not later
than 270days after the bill's enactment date. In addition, the
Director must evaluate the effectiveness of: (1) the financial
management training curriculum; and (2) a sample of existing consumer
education programs described in the Report of the National Bankruptcy
Review Commission,⁴⁹ which are representative of consumer
education programs sponsored by the credit industry, Chapter 13
trustees, and consumer counseling groups. Not later than 3 months after
concluding such evaluation, the Director must submit a report to the
Speaker of the House of Representatives and the President pro tempore
of the Senate, for referral to the appropriate committees of the
Congress, containing the findings of the Director regarding the
effectiveness and cost of such curriculum and programs. The
instructional course materials that the Director of the Executive
Office for United States Trustees must make available in the six test
districts must be the materials described in section 111 of the
Bankruptcy Code, as enacted by the bill.
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\49\ Report of the National Bankruptcy Review Commission, at 293-
94; Recommendations for Reform of Consumer Bankruptcy Law by Four
Dissenting Commissioners, at 49-51 (1997).
---------------------------------------------------------------------------

Subtitle B. Consumer Bankruptcy Protections

Section 105. Definitions

Section 105 of the bill creates several mechanisms designed
to regulate the activities of a ``debt relief agency.'' As
defined under this section, a debt relief agency includes any
person who provides ``bankruptcy assistance'' to ``assisted
persons.'' ⁵⁰ It applies to attorneys as well as to
non-attorneys, such as petition preparers. It does not,
however, apply to nonprofit organizations, creditors (to the
extent a creditor assists the debtor to restructure a debt owed
by the debtor to such creditor), or state and federal credit
unions. The term ``bankruptcy assistance'' includes the
provision of any goods or services with the ``express or
implied purpose of providing information, advice, counsel,
document preparation, or filing,'' including the provision of
legal representation.
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\50\ H.R. 833 provides that the term, ``assisted person,'' includes
any person with primarily consumer debts and whose nonexempt assets
were less than $150,000.
---------------------------------------------------------------------------

Section 105A. Requirements for debt relief agencies

Section 105A of H.R. 833 mandates that a debt relief agency
perform all services as stated to the assisted person in
connection with the bankruptcy case. It prohibits a debt relief
agency from advising any assisted person to make an untrue or
misleading statement in connection with a bankruptcy case. In
addition, such agency is prohibited from advising an assisted
person or prospective assisted person to incur additional debt
in contemplation of filing for bankruptcy relief or for the
purpose of paying fees for services rendered by an attorney or
petition preparer in connection with the filing of a bankruptcy
case. An exception applies for debts owed directly to the
attorney or bankruptcy petition preparer for required legal
fees.

Section 106. Enforcement

A series of enforcement and penalty mechanisms with regard
to debt relief agencies are instituted under section 106 of the
bill. It provides that any waiver by an assisted person of the
protections and rights as established by this legislation is
invalid. Section 106 mandates that any debt-relief-agency
contract that does not comply with the requirements specified
in the bill are not enforceable against the debtor. A debt
relief agency may be required to return to the assisted person
all fees such person paid to agency for any of the following
reasons:
(1) the debt relief agency failed to comply with
certain specified requirements;
(2) the debt relief agency provided assistance to a
debtor whose case was dismissed or converted because of
the agency's failure to file any requisite documents
under section 521 of the Bankruptcy Code; or
(3) the debt relief agency negligently or
intentionally disregarded the requirements of the
Bankruptcy Code or Federal Rules of Bankruptcy
Procedure.
Section 106 authorizes states to seek various remedies
⁵¹ for violation of the requirements imposed on debt
relief agencies. It authorizes a federal court, under certain
circumstances, to issue injunctions and to impose appropriate
civil penalties. The United States District Court, under this
provision, has concurrent jurisdiction with the state courts to
hear such actions.
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\51\ These include injunctions, actual damages, and the imposition
of costs, including reasonable attorney's fees.
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Section 107. Sense of the Congress

This provision states that it is the sense of the Congress
that States should develop curricula relating to the subject of
personal finance for use in elementary and secondary schools.

Section 108. Discouraging abusive reaffirmation practices

This provision adds a further requirement with respect to
reaffirmation agreements. If the consideration for the
agreement is based on a wholly unsecured consumer debt, the
agreement must contain a clear and conspicuous statement
advising the debtor that the debtor is entitled to a hearing
before the court at which the debtor shall appear in person.
The purpose of the hearing is to allow the court to determine
if the agreement presents an undue hardship to the debtor,
whether the agreement is in the debtor's best interest, and
whether the debtor entered into the agreement as the result of
a threat by the creditorto take any action that it cannot
legally take or that it does not intend to take. If, however, the
debtor is represented by counsel, the debtor may waive the right to
such hearing by signing a statement waiving the hearing, stating that
the debtor is represented by counsel, and identifying such counsel.
The provisions in this section do not apply to wholly
unsecured debts owed to credit unions.

Section 109. Promotion of alternative dispute resolution

Section 109 of the bill permits the court, on motion of the
debtor and after a hearing, to reduce an unsecured claim for a
consumer debt by up to 20 percent, if the debtor can prove by
clear and convincing evidence that the claim was filed by a
creditor who unreasonably refused to negotiate an alternative
repayment schedule proposed by an approved credit counseling
agency acting on behalf of the debtor. The provision applies
only if: (1) the offer was made within 60 days of the filing of
the petition; (2) the offer provided for payment of at least 60
percent of the amount of the debt over a period not to exceed
the repayment period of the loan, or a reasonable extension
thereof; and (3) no portion of the debt is nondischargeable,
entitled to priority under section 507 of the Bankruptcy Code,
or would be paid more under a chapter 13 plan than the amount
offered by the debtor. The debtor has the burden of proving
that the proposed alternative repayment schedule was made in
the specified 60-day period and that the creditor unreasonably
refused to consider the debtor's proposal.
Section 109 also prevents a trustee from setting aside a
preferential transfer received by a creditor as part of an
alternative repayment plan between the debtor and any creditor
of the debtor created by an approved credit counseling agency.

Section 110. Enhanced disclosure for credit extensions secured by a
dwelling

Section 110 of the bill requires the Board of Governors of
the Federal Reserve to study the adequacy of information
provided to a borrower with regard to the tax deductibility of
interest paid in connection with an open-end credit transaction
secured by the borrower's principal dwelling.

Section 111. Dual use debit card

Section 111 requires the Board of Governors of the Federal
Reserve to study current protections limiting the liability of
consumers for the unauthorized use of a debit card or similar
access device.

Section 112. Enhanced disclosures under an open-end credit plan

Section 112 of the bill amends section 127 of the Truth in
Lending Act to require certain open-end consumer credit plans
with minimum monthly or periodic payments to include the
following language on the billing statement:

The minimum payment amount shown on your billing
statement is the smallest payment which you can make in
order to keep the account in good standing. This
payment option is offered as a convenience and you may
make larger payments at any time. Making only the
minimum payment each month will increase the amount of
interest you pay and the length of time it takes to
repay your outstanding balance.

If the creditor allows a consumer to forgo making a minimum
payment during a specified billing cycle, the billing statement
must state that finance charges will continue to accrue. In
addition, the billing statement must contain an example that
utilizes an annual percentage rate and method for determining
minimum periodic payments recently in effect for that creditor
based on a $500 outstanding balance. The example must disclose
the estimated minimum periodic payment and approximate period
of time it would take to repay the $500 outstanding balance if
the consumer paid only the minimum periodic payment on each
monthly or periodic statement and obtained no additional
extensions of credit. These additional disclosures must be made
with respect to one billing cycle per calendar year. In
addition, it requires the creditor to give the consumer a
worksheet prescribed by the Board of Governors of the Federal
Reserve to assist the consumer in determining his or her
household income and debt obligations.
In addition, section 112 requires the Federal Reserve Board
to promulgate regulations regarding the above and to issue a
model disclosure form to accompany the previously described
example. The statement must advise the consumer that the
example is intended to illustrate the approximate length of
time it could take to repay a $500 balance based on the
assumptions set forth therein without regard to any other
factors that could impact an approximate repayment period.
Compliance with such regulations would be enforceable
exclusively by the Federal agencies. These regulations may not
take effect for three years following the bill's date of
enactment.
Section 114 also requires the Board to conduct a study to
determine whether consumers have adequate information about
borrowing activities that may lead to financial problems. In
studying this issue, the Board must consider the extent to
which:
(1) consumers, in establishing new credit
arrangements, are aware of their existing payment
obligations, the need to consider those obligations in
deciding to take on new credit, and how taking on
excessive credit can result in financial difficulty;
(2) minimum periodic payment features offered in
connection with open-end creditplans impact consumer
default rates;
(3) consumers always make only the minimum payment
throughout the life of the plan;
(4) consumers are aware that making only minimum
payments will increase the cost and repayment period of
an open-end loan; and
(5) the availability of low minimum payment options
is a cause of consumers experiencing financial
difficulty.
The results of the study must be filed with Congress in two
years.
Finally, this provision requires the Federal Reserve Board,
pursuant to its authority under the Truth in Lending Act, to
promulgate regulations requiring additional disclosures to
consumers regarding minimum payment features, if the Board
determines that such disclosures are necessary based on its
findings. Any such regulations must become effective before
January 1, 2002.

Section 113. Protection of savings earmarked for the postsecondary
education of children

This provision permits a debtor to exempt funds placed in
an education individual retirement account (as described in
section 530(b)(1) of the Internal Revenue Code) not less than
365 days before the filing of the bankruptcy case if such funds
have not been pledged or promised to any person in connection
with any extension of credit. Other restrictions include the
following:
(1) the funds are not excess contributions (as
described in section 4973(e) of the Internal Revenue
Code);
(2) the designated beneficiary of the account was a
dependent child of the debtor for the taxable year in
which the funds were placed in the account; and
(3) the amounts in such postsecondary accounts may
not exceed the lesser of $50,000 (in the aggregate) in
accounts attributable to each such dependent child or
$100,000 (in the aggregate) attributable to all such
dependent children.

Section 114. Effect of discharge

This provision makes the willful failure of a creditor to
credit payments received under a confirmed chapter 11, 12, or
13 plan in the manner required by the plan a violation of the
discharge injunction. It also mandates that an individual
injured by the willful failure of a creditor to comply with the
requirements for a reaffirmation agreement, or by any willful
violation of the discharge injunction, is entitled to recover
costs and attorneys' fees and the greater of (1) the amount of
actual damages or (2) $1,000. This provision prevents the
imposition of punitive damages and prohibits the filing of a
class action.

Section 115. Limiting trustee liability

Section 115 of the bill provides that a trustee is not
liable personally or on the trustee's bond for acts taken
within the scope of the trustee's duties or authority, except
to the extent the trustee acted with gross negligence. It
defines gross negligence as reckless indifference or deliberate
disregard of a trustee's fiduciary duty. It also prohibits a
suit against a trustee in his or her personal or representative
capacity, or against the trustee's bond, for certain actions,
including the dissemination of statistics and other
information.

Section 116. Reinforce the fresh start

This provision makes a technical amendment with respect to
the nondischargeability of certain court fees under section
523(a)(17) of the Bankruptcy Code.

Section 117. Discouraging bad faith repeat filings

Under current law, debtors may file successive bankruptcy
cases following the dismissal of their prior cases with limited
exceptions. ⁵² The filing of a bankruptcy case
causes the immediate imposition of an automatic stay, which
prevents creditors from pursuing actions against debtors and
their property. ⁵³ In light of this, some debtors
file successive bankruptcy cases to prevent secured creditors
from foreclosing on their collateral.
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\52\ Section 109(g) of title 11 only imposes a limited ban on
repeat filings. Under this provision, a debtor is ineligible for
bankruptcy relief if, within the preceding 180 days, the prior case was
dismissed based on the debtor's willful failure to abide by orders of
the court or ``to appear before the court in proper prosecution of the
case.'' 11 U.S.C. Sec. 109(g)(1). the preceding 180 days, he or she in
the prior case sought and obtained its dismissal following the filing
of a request for relief from the automatic stay.
\53\ 11 U.S.C. Sec. 362(a). Exceptions to the automatic stay are
set forth in 11 U.S.C. Sec. 362(b).
---------------------------------------------------------------------------
Section 117 of the bill remedies this problem by
terminating the automatic stay with respect to cases where the
debtor has previously filed for bankruptcy relief, under
certain circumstances. A case is deemed to be presumptively
filed in bad faith as to all creditors if:
(1) the debtor was the subject of a bankruptcy case
under chapter 7, 11, or 13 pending within the one-year
period preceding the filing of the instant bankruptcy
case;
(2) a prior chapter 7, 11, or 13 case of the debtor
was dismissed within such one-year period for the
debtor's failure to file any requisite bankruptcy
document or to amend any bankruptcy document without
substantial excuse; ⁵⁴
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\54\ Mere inadvertence or negligence does not constitute
substantial excuse, unless the dismissal was caused by the debtor's
attorney.
---------------------------------------------------------------------------
(3) the prior bankruptcy case was dismissed for the
debtor's failure to provide ``adequate protection'' (as
defined in section 361 of the Bankruptcy Code); or
(4) there has not been a substantial change in the
debtor's financial or personal affairssince the
dismissal of the prior case, or there is no reason to conclude that the
current case will successfully conclude.
In addition, a case is presumptively deemed filed in bad faith
as to any creditor who sought relief from the automatic stay in
the prior case if such action was still pending at the time of
dismissal or had been resolved by the granting of relief from
the automatic stay.
On request of a party in interest, the court must promptly
enter an order confirming that the automatic stay does not
apply in a bankruptcy case. Section 117 also permits the
bankruptcy court to consider in reimposing the automatic stay
in a later-filed bankruptcy case, whether the later case was
filed in good faith as to the creditors who are stayed by the
filing, subject to such conditions or limitations as the court
directs. The presumption of bad faith under this provision may
be rebutted by clear and convincing evidence.
If two or more bankruptcy cases were pending in the one-
year preceding the filing of the pending case, the automatic
stay will not apply in the pending case. A party in interest
may make a request to the court within 30 days of the filing of
the later case to reimpose the automatic stay if the party
demonstrates that the later case was filed in good faith as to
the creditors who are stayed by the filing. The provision
provides that a case is presumptively not filed in good faith
under certain specified circumstances.

Section 118. Curbing abusive filings

Section 118 of the bill terminates the Bankruptcy Code's
automatic stay provisions with respect to creditors secured by
real property if the bankruptcy case was filed as part of a
scheme to delay, hinder, and defraud creditors involving either
a transfer of all or part ownership of the real property
without the consent of the secured creditor or court approval,
or if the bankruptcy case is one of several other bankruptcy
filings affecting the real property.
If recorded in compliance with applicable federal, State,
or local law governing notices of interests or liens in real
property, an order entered pursuant to this provision is
binding in any other bankruptcy case filed within two years
from the date of such recordation. It permits, however, a
debtor in a subsequent case to move for relief from this order
based upon changed circumstances or for good cause shown, after
notice and a hearing. In addition, it requires any federal,
State, or local agency that accepts notices of interests or
liens in property to accept any certified copy of an order
described in this section. Further, it references the good
faith standard of section 362(c) of the Bankruptcy Code, as
amended by the bill. It also responds to another problem
presented by successive filings. Occasionally, debtors transfer
their property interests to others who then file for bankruptcy
relief to invoke the protection of the automatic stay under
section 362 of the Bankruptcy Code. Under section 121 of the
bill, this type of abuse is addressed by allowing bankruptcy
courts to grant prospective in rem relief from the automatic
stay with respect to real or personal property in future
bankruptcy cases filed by the debtor. It also extends this
protection to bankruptcy cases filed by other entities to whom
the subject property was transferred.⁵⁵ In addition,
it requires in rem orders pertaining to real property to be
recorded. Such recording constitutes notice to all parties
having or claiming an interest in such property.
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\55\ Both the majority and minority viewpoints expressed by the
National Bankruptcy Review Commission's members supported in rem relief
from the automatic stay. See Report of the National Bankruptcy Review
Commission at 281-287; Recommendations for Reform of Consumer
Bankruptcy Law by Four Dissenting Commissioners, at 57-59 (1997).
---------------------------------------------------------------------------
This provision also excepts from the automatic stay an act
to enforce any lien against or security interest in real
property if the debtor is ineligible to be a debtor in a
bankruptcy case or the debtor filed the bankruptcy case in
violation of a bankruptcy court order issued in a prior
bankruptcy case filed by the debtor.

Section 119. Debtor retention of personal property security

Section 119 of the bill responds to two areas of
uncertainty in the law with regard to how personal property
interests are treated under the current law. One concerns the
unsettled law as to whether a chapter 7 debtor may retain
personal property without having either to reaffirm the
underlying obligation ⁵⁶ or redeem it.⁵⁷
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\56\ 11 U.S.C. Sec. 524(c).
\57\ 11 U.S.C. Sec. 722. See, e.g., Capital Communications Fed.
Credit Union v. Boodrow (In re Boodrow), 126 F.3d 43, 53 (2d Cir. 1997)
(holding that 11 U.S.C. Sec. 521(2) ``does not prevent a bankruptcy
court from allowing a debtor who is current on loan obligations to
retain the collateral and keep making payments under the original loan
agreement.'').
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Section 129(1) responds to this problem by not allowing an
individual chapter 7 debtor to retain possession of personal
property securing, in whole or in part, a purchase money
security interest unless the debtor, within 45 days after the
first meeting of creditors, enters into a reaffirmation
agreement with the creditor or redeems the property. If the
debtor fails to so act within the prescribed period, the
subject property is no longer property of the estate, unless
the court determines on motion of the trustee filed before the
expiration of the 45-day that the property has consequential
value or would benefit the bankruptcy estate. Thus, if no
timely determination is made, a creditor, under this provision,
would be permitted to take any action with respect to such
property as permitted by applicable nonbankruptcy law.
This section also clarifies that the automatic stay
terminates not only with respect to personal property that is
property of the estate, but to property of the debtor as well.
Further, it provides that the court must order appropriate
adequate protection of the creditor's interest and it directs
the debtor to deliver the collateral to the trustee if the
debtor is in possession of such property.
Subsection 119(2) of the bill also responds to a current
split in authority regarding the debtor's redemption rights
under section 722 of the Bankruptcy Code. While most courts
have interpreted this provision to require chapter 7 debtors to
pay the redemption value in a lump sum payment, some permit
debtors to stretch this payment out over time. This section
specifies that the required payment must be made in full at the
time of redemption.

Section 120. Relief from the automatic stay when the debtor does not
complete intended surrender of consumer debt collateral

This section of the bill provides that the automatic stay
in an individual chapter 7, 11, or 13 case terminates with
respect to property securing, in whole or in part, a claim or
with respect to leased property if the debtor fails to file a
statement of intention with respect to such property. The
debtor must indicate in this statement whether he or she will
surrender the property or retain it and, if retaining it,
whether the debtor will (1) redeem the property, (2) reaffirm
the debt, or (3) assume the obligation if it is an unexpired
lease, if the trustee does not. This provision also terminates
the automatic stay if the debtor fails to undertake the actions
specified in his or her statement of intention, unless the
statement of intention specifies reaffirmation and the creditor
refuses to enter into the reaffirmation agreement on the
original contract terms. An exception pertains where the court
determines, on the motion of the trustee made within the
specified 45-day period and after notice and a hearing, that
such property is of consequential value or benefit to the
estate.
This section also makes the requirement with respect to
filing a statement of intention applicable to all debts, not
just consumer debts, and it requires the debtor to carry out
his or her intention within 30 days from the first date set for
the meeting of creditors. As a result, the debtor's duty to
surrender property, or to reaffirm or redeem, applies to all
secured debts.
In addition, this section provides that a provision in a
lease or agreement that places the debtor in default on the
lease or agreement by reason of the debtor's filing for
bankruptcy relief applies in the bankruptcy case, if otherwise
valid under applicable nonbankruptcy law.
Further, section 120 clarifies that, if the debtor does not
timely file his or her statement of intention or carry out his
or her stated intention with respect to personal property, the
property is no longer property of the estate. It also requires
the court to order appropriate adequate protection of the
creditor's interest and to direct the debtor to deliver the
collateral to the trustee if the debtor is in possession of the
property.

Section 121. Giving secured creditors fair treatment in chapter 13

This provision requires a chapter 13 plan to provide that a
secured creditor must retain its lien until the underlying debt
is paid or the debtor receives a discharge. If the case is
dismissed or converted prior to completion of the plan, section
121 of the bill provides that the secured creditor shall retain
its lien to the extent recognized by applicable nonbankruptcy
law.

Section 122. Restraining abusive purchases on secured credit

This provision addresses the following problem. Under
present law, a debtor, for instance, can finance the purchase
of a new automobile with a showroom value of $20,000 by giving
the lender a security interest in the vehicle. If the debtor
then files for bankruptcy relief one day later, then the value
of the secured creditor's lien must be determined under section
506 of the Bankruptcy Code. Even though the vehicle is one day
old, the amount of the secured creditor's claim is, under
current law, limited to the value of the automobile taking into
account the immediate effect of depreciation upon purchase.
Accordingly, that secured creditor has an allowed secured claim
in a reduced amount based on the value of a used automobile and
an allowed unsecured claim for the difference between the
present value of the automobile and the amount owed to the
secured creditor.
Section 122 of the bill prevents the bifurcation of a
secured claim in an individual chapter 7, 11, 12, or 13 case to
the extent the claim is attributable in whole or in part to the
purchase price of personal property acquired by the debtor
within the five-year period preceding the bankruptcy filing.
``Personal property'' generally includes all property other
than real estate. If the claim is secured only by personal
property, the amount of the claim is the sum of the unpaid
principal balance of the purchase price together with accrued
and unpaid interest along with charges at the contract rate. If
the claim is secured by other property, the amount of the claim
cannot be not less than the unpaid principal balance of the
purchase price of the personal property acquired and unpaid
interest and charges at the contract rate. This amount,
however, must be reduced by any payments actually received.
The valuations under section 122 apply to any subsequent
case filed by or against the debtor in the two-year period
beginning on date the original bankruptcy case is filed.

Section 123. Fair valuation of collateral

Section 123 of the bill provides that the value of personal
property of individual Chapter 7 and 13 debtors is the
``replacement value of such property'' as of the filing date of
the bankruptcy case without deduction for costs of sale or
marketing. With respect to property acquired for personal,
family, or household purposes, replacement value is the price a
retail merchant would charge for property of that kind
considering the age and condition of the property at the time
its value is determined.

Section 124. Domiciliary requirements for exemptions

This provision extends the time that a debtor must be
domiciled in a state before he or she may claim that state's
exemptions to 730 days. In addition, it clarifies that if the
debtor's domicile was not located in a single state for the
730-day period, the state where the debtor was domiciled in the
180-day period preceding the 730-day period controls, or such
longer portion of the 180-day period controls.

Section 125. Restrictions on certain exempt property obtained through
fraud

This provision creates an exception to the exempt property
provisions of the Bankruptcy Code. It provides that the value
of an interest in (1) real or personal property that the debtor
or a dependent of the debtor uses as a residence, (2) a
cooperative that owns property that the debtor or a dependent
of the debtor uses as a residence, or (3) a burial plot must be
reduced to the extent such value derived from the conversion of
nonexempt property in the 730-day period preceding the filing
of the bankruptcy case, if the conversion was done with the
intent to hinder, delay, or defraud a creditor.

Section 126. Rolling stock equipment

Section 126 of the bill amends section 1168 of the
Bankruptcy Code to better define the rights of parties in
rolling stock equipment. It also amends section 1110(a)(1) of
the Bankruptcy Code, which defines the rights of secured
creditors and lessors having an interest in aircraft and
aircraft equipment. It clarifies that a default under a
security agreement, lease, or conditional sale contract with
respect to both types of property must be cured within 60 days
from the filing of the bankruptcy case. Section 126 also
provides that if the default occurs after the expiration of
this time period, it must be cured in accordance with the terms
of the underlying security agreement, lease, or conditional
sales contract.

Section 127. Discharge under chapter 13

Section 129 of the bill prevents the following debts from
being discharged in a chapter 13 case:
(1) debts for money, property, services, or
extensions of credit obtained through fraud or a false
statement in writing;
(2) consumer debts owed to a single creditor that
aggregate to more than $250 for ``luxury goods or
services,'' incurred by an individual debtor within 90
days before the filing of the bankruptcy case, and cash
advances aggregating more than $250 that are extensions
of consumer credit obtained by a debtor under an open-
end credit plan within 90 days before the order for
relief;
(3) debts resulting from fraud or defalcation by the
debtor acting as a fiduciary;
(4) certain debts that require timely request for a
dischargeability determination, if the creditor lacks
notice or does not have actual knowledge of the case in
time to make such request; and
(5) debts for restitution or damages, awarded in a
civil action against the debtor as a result of willful
or malicious conduct by the debtor that caused personal
injury to an individual or the death of an individual.

Section 128. Bankruptcy judgeships

The ever-spiraling number of bankruptcy case filings
clearly creates a need for additional bankruptcy judgeships. In
the 105th Congress, the House responded to this need by passing
H.R. 1596, which would have created additional permanent and
temporary bankruptcy judgeships and extended an existing
temporary position. Section 128 of the bill generally
incorporates H.R. 1596 as it passed the House with provisions
extending five existing temporary judgeships and requiring that
bankruptcy judges submit annual reports to their chief
bankruptcy judges with respect to certain travel expenses.

Section 129. Additional amendments to title 11, United States Code

Section 129 adds a tenth-level priority for claims based on
death or personal injuries resulting from the debtor's
operation of a motor vehicle or vessel while intoxicated.

Section 130. Amendment to section 1325

Section 130 of the bill excepts from the definition of
disposable income under section 102 of the bill child support
payments, foster care payments, or disability payments for a
dependent child made in accordance with applicable
nonbankruptcy law and which are reasonably necessary to be
expended for such purposes. It also clarifies that disposable
income is determined under the needs-based formula set out in
section 102 of the bill.

Section 131. Application of codebtor stay only when the stay protects
the debtor

Section 131 of the bill terminates the chapter 13 codebtor
stay 30 days from the filing of the bankruptcy case where the
debtor did not receive the consideration for the claim held by
a creditor. An exception applies where the debtor is primarily
obligated to pay the creditor with respect to a claim under a
legally binding separation or property settlement agreement, or
a divorce or dissolution decree.
In addition, this section terminates the Chapter 13
codebtor stay as of the date on which the Chapter 13 plan is
confirmed if the plan provides that the debtor's interest in
leased personal property (where the debtor is the lessee) will
be surrendered or abandoned, or if the plan does not provide
for payments to be made on account of such lease obligation.

Section 132. Adequate protection for investors

Section 132 creates an exception to the automatic stay for
certain enforcement actions by a ``securities self regulatory
organization,'' a defined term which is defined in this
provision.

Section 133. Limitation on luxury goods

This provision establishes a presumption that consumer
debts owed to a single creditor and aggregating more than $250
for ``luxury goods or services'' incurred by an individual
debtor within 90 days before the order for relief under this
title, or cash advances aggregating more than $250 that are
extensions of consumer credit under an open-end credit plan
obtained by an individual debtor within 90 days prepetition,
are nondischargeable. The term, ``luxury goods or services,''
does not apply to goods or services reasonably necessary for
the support or maintenance of the debtor or a dependent of the
debtor. In addition, ``an extension of consumer credit under an
open-end credit plan'' has the same meaning under this
provision as it has under the Consumer Credit Protection Act.

Section 134. Giving debtors the ability to keep leased personal
property by assumption

Section 134 of the bill provides that if a personal
property lease is rejected or not timely assumed by the
trustee, the leased property is no longer property of the
estate and the automatic stay terminates. With regard to
individual chapter 7 cases, it allows the debtor to notify the
creditor in writing of his or her desire to assume the lease.
Upon being so notified, the creditor may, at its option, notify
the debtor that it is willing to have the lease assumed and may
condition such assumption on cure of any outstanding default on
terms set by the contract. If, within 30 days of such notice,
the debtor notifies the lessor in writing that the lease is
assumed, the liability under the lease will be assumed by the
debtor and not by the bankruptcy estate.
In an individual chapter 11 or chapter 13 case where the
debtor is the lessee with respect to personal property and the
lease is not assumed in the confirmed plan, the lease is deemed
rejected as of the conclusion of the hearing on confirmation.
If the lease is rejected, the automatic stay as well as the
chapter 13 codebtor stay are automatically terminated with
respect to such property.

Section 135. Adequate protection of lessors and purchase money secured
creditors

This amendment requires a chapter 13 debtor to commence
making postpetition payments in the ``contract amount'' within
30 days of the filing of the bankruptcy case to personal
property lessors and creditors secured by personal property to
the extent that the claim is attributable to the purchase of
such property. It requires these payments to be made until the
creditor receives ``actual payments under the plan'' or the
debtor surrenders the property. While the court may, after
notice and a hearing, alter the amount and timing of the
payments, they must be at least monthly and not less than the
amount of any weekly, biweekly, monthly, or other periodic
payment schedule pursuant to the contract between the debtor
and creditor.
This requirement is in addition to the debtor's obligation
to make payments under a plan, which must be commenced within
30 days after the plan is filed, although the amount of the
plan payments must be reduced by the amount the debtor pays as
adequate protection. In addition, section 135 permits a secured
creditor or lessor to retain possession of property seized
prepetition until the creditor or lessor receives the first
required payment under this provision.
With respect to chapter 13 cases, section 135 requires the
debtor to provide a secured creditor or lessor, within 60 days
from the filing of the case, reasonable evidence of the
maintenance of any required insurance coverage with respect to
the use or ownership of such property. This requirement
pertains for as long as the debtor retains possession of such
property.

Section 136. Automatic stay

Section 136 of the bill amends the Bankruptcy Code's
automatic stay provisions to except the following:
(1) transfers that are not avoidable under section
544 (trustee as lien creditor) or section 549
(postpetition transfers) of the Bankruptcy Code;
(2) the continuation of any eviction, unlawful
detainer action, or similar proceeding by a lessor
against a debtor involving residential real property
where the debtor has not paid rent to the lessor
pursuant to the terms of the lease agreement or
applicable State law after the filing of the bankruptcy
case;
(3) the commencement or continuation of any eviction,
unlawful detainer action, or similar proceeding by a
lessor against a debtor involving residential real
property where the rental agreement has terminated
pursuant to the lease agreement or applicable State
law;
(4) any eviction, unlawful detainer action, or
similar proceeding, if the debtor has filed for
bankruptcy relief within the preceding year and failed
to pay postpetition rent during the prior case; and
(5) eviction actions based on endangerment to
property or person, or the use of illegal drugs.

Section 137. Extend period between bankruptcy discharges

Section 137 of the bill extends the period that a chapter 7
debtor may receive a subsequent chapter 7 discharge from six to
eight years. In addition, it prohibits the issuance of a
discharge in a subsequent chapter 13 case if the debtor
received a discharge within 5 years preceding the filing of the
subsequent chapter 13 case.

Section 138. Definition of domestic support obligation

Section 138 adds a definition to the Bankruptcy Code for
``domestic support obligation.'' It defines this term as a debt
that accrues pre- or postpetition and is owed or recoverable by
a spouse, former spouse, or child of the debtor, or that
child's legal guardian. It also includes a claim by a
governmental unit. To qualify as a domestic support obligation,
the debt must be in the nature of alimony, maintenance, or
support (including assistance provided by a governmental unit)
of such spouse, former spouse, or child, without regard to
whether such debt is expressly so designated. It must be
established or subject to establishment either pre- or
postpetition pursuant to a (i) separation agreement, divorce
decree, or property settlement agreement; (ii) an order of a
court of record; or (iii) a determination made in accordance
with applicable nonbankruptcy law by a governmental unit. It
does not apply to a debt assigned to a nongovernmental entity,
unless it was assigned voluntarily by the spouse, former
spouse, child, or parent solely for the purpose of collecting
the debt.

Section 139. Priorities for claims for domestic support obligations

Section 139 makes domestic support obligations payable
before all other expenses, including expenses of administration
(e.g., fees of the trustee and counsel for the trustee). Within
this priority, allowed claims for domestic support obligations
must be paid on the condition that funds received under this
provision by a governmental unit be applied first to claims
owed directly to a spouse, former spouse, or child of the
debtor, or the parent of such child, without regard to whether
the claim is filed by the spouse, former spouse, child, or
parent, or is filed by a governmental unit on behalf of that
person. Remaining funds may be used to satisfy claims assigned
by a spouse, former spouse, child of the debtor, or the parent
of that child to a governmental unit or which are owed directly
to a governmental unit under applicable nonbankruptcy law.

Section 140. Requirements to obtain confirmation and discharge in cases
involving domestic support obligations

Section 140 of the bill requires, as a condition of
confirmation in a chapter 11 or 13 case, the debtor--if
required by a judicial or administrative order or statute to
pay a domestic support obligation--pay all postpetition amounts
payable under such order or statute. It also requires a chapter
13 debtor to be current with these obligations as a condition
of obtaining a discharge.

Section 141. Exceptions to automatic stay in domestic support
obligation proceedings

Section 141 of the bill creates the following additional
exceptions to the automatic stay: the withholding of income
pursuant to an order as specified in section 466(b) of the
Social Security Act; the withholding, suspension, or
restriction of a driver's license, or a professional,
occupational or recreational license pursuant to State law, as
specified in section 466(a)(16) of the Social Security Act; 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; the interception of tax refunds, as
specified in sections 464 and 466(a)(3) of the Social Security
Act; and the enforcement of medical obligations as specified
under title IV of the Social Security Act.

Section 142. Nondischargeability of certain debts for alimony,
maintenance and support

Section 142 of the bill clarifies that ``domestic support
obligations,'' as defined in section 138 of the bill, are
nondischargeable. It also makes obligations that are not
domestic support obligations, but that are incurred in
connection with a divorce or separation or related action,
nondischargeable.

Section 143. Continued liability of property

This section makes exempt property liable for
nondischargeable tax and domestic support obligations
``notwithstanding any provision of applicable nonbankruptcy law
to the contrary.'' It also makes a technical amendment to
section 522(f)(1)(A) of the Bankruptcy Code, which pertains to
the avoidability of certain liens.

Section 144. Protection of domestic support claims against preferential
transfer motions

This section makes a technical amendment to section
547(c)(7), which prohibits a prepetition transfer from being
avoided as a preferential transfer to the extent it was a bona
fide payment of a debt for a domestic support obligation.

Section 145. Clarification of meaning of household goods

Under current law, debtors must list all personal property
that they own. ⁵⁸ The applicable official bankruptcy
form requires inter alia that a description and current market
valuation of these items be stated. Among the types of personal
property items that are required to be disclosed by debtors are
``household goods.'' ⁵⁹ The Bankruptcy Code,
however, does not define this term.
---------------------------------------------------------------------------
\58\ 11 U.S.C. Sec. 521(1); Official Form 6--Schedule B.
\59\ Official Form 6--Schedule B.
---------------------------------------------------------------------------
Section 145 defines ``household goods'' as including
tangible personal property that is normally found in or around
a residence. The term, however, does not include motorized
vehicles used for transportation purposes.

Section 146. Nondischargeable debts

Section 146 of the bill creates two new categories
ofnondischargeable debts. First, it makes nondischargeable any debt
incurred to pay a nondischargeable debt, without regard to intent, if
such subsequent debt was incurred within 90 days of the filing of the
bankruptcy case. Second, it makes nondischargeable any debt incurred
with the intent to pay a nondischargeable debt, regardless of when such
subsequent debt was incurred.

Section 147. Monetary limitation on certain exempt property

This provision imposes an aggregate monetary limitation of
$250,000 for exempt property consisting of the following:
(1) real or personal property of the debtor or that a
dependent of the debtor uses as a residence;
(2) an interest in a cooperative that owns property,
which the debtor or the debtor's dependent uses as a
residence; or
(3) a burial plot for the debtor or the debtor's
dependent.
Two exceptions apply to this limitation. First, it does not
apply to a family farmer's principal residence. Second, it does
not apply to a debtor who resides in a state that enacts
legislation opting out of this provision.

Section 148. Bankruptcy fees

This provision of the bill amends section 1930 of title 28
of the United States Code to permit a bankruptcy court or the
district court to waive the requisite chapter 7 filing fee for
an individual debtor who is unable to pay such fee in
installments. In addition, this provision permits such courts
to waive other specified fees.

Section 149. Collection of child support

Section 149 requires a chapter 7 and chapter 13 trustee to
provide certain notices to child support claimants and certain
governmental units. First, the trustee must notify the claimant
in writing of the claimant's right to use the services of a
state child support enforcement agency established under
sections 464 and 466 of the Social Security Act located in the
state where the claimant resides. The notice must include the
address and telephone number of the child support agency.
Second, the trustee must supply in writing to the child support
enforcement agency in the state where the claimant resides the
name, address, and telephone number of the child support
claimant.
Thereafter, the trustee must notify both the child support
claimant and the state agency that the debtor was granted a
discharge and supply the debtor's last known address together
with the name of each creditor holding a debt that is not
discharged under section 523(a)(2), (4) or (14A) of the
Bankruptcy Code.
If a child support claimant or state agency is not able to
locate the debtor, this section permits them to request such
information from a creditor holding a nondischargeable debt
described in the prior paragraph.

Section 150. Excluding employee benefit plan participant contributions
and other property from the estate

Section 150 of the bill excludes as property of the estate
any interest in property to the extent that an employer has
withheld it from the wages of employees for the purpose of
contribution to an employee benefit plan subject to title I of
the Employee Retirement Income Security Act of 1974. It also
excludes any interest in property that the employer received as
the result of payments by participants or beneficiaries to an
employer for contribution to an employee benefit plan subject
to title I of the Employee Retirement Income Security Act of
1974. Section 150 applies to bankruptcy cases commenced 180
days after the bill's effective date.

Section 151. Clarification of postpetition wages and benefits

This provision of the bill amends section 503(b)(1)(A) of
the Bankruptcy Code (which accords administrative expense
priority to certain claims for wages, salaries or commissions
for services rendered after the commencement of a bankruptcy
case) to clarify that it includes claims attributable to any
period of time that commences after a bankruptcy case is filed
as a result of the debtor's violation of federal law, without
regard to when the original unlawful act occurred or whether
any services were rendered.

Section 152. Exceptions to automatic stay in domestic support
obligation proceedings

This section of the bill clarifies that the withholding of
the debtor's income for the payment of certain domestic support
obligations is not enjoined by the automatic stay provisions of
section 362 of the Bankruptcy Code.

Section 153. Automatic stay inapplicable to certain proceedings against
the debtor

This section excepts the commencement or continuation of
the following proceedings from the automatic stay: (1) a
proceeding concerning child custody or visitation; (2) an
action alleging domestic violence; and (3) a proceeding seeking
a dissolution of marriage, unless the proceeding concerns
property of the estate.

Title II. Discouraging Bankruptcy Abuse

Section 201. Reenactment of Chapter 12

Chapter 12 is a specialized form of bankruptcy relief
available only to a ``family farmer with regular annual
income,'' ⁶⁰ a defined term. ⁶¹ It
permits eligible family farmers, under the supervision of a
bankruptcy trustee, ⁶² to reorganize their debts
pursuant to a repayment plan. ⁶³ The special
attributes of chapter 12 make it better suited to meet the
particularized needs of family farmers in financial distress
than other forms of bankruptcy relief, such as chapter 11
⁶⁴ and chapter 13.⁶⁵
---------------------------------------------------------------------------
\60\ 11 U.S.C. Sec. 109(f).
\61\ 11 U.S.C. Sec. 101(19).
\62\ 11 U.S.C. Sec. 1202.
\63\ 11 U.S.C. Sec. 1222.
\64\ For example, chapter 12 is typically less complex and
expensive than chapter 11, a form of bankruptcy relief generally
utilized to effectuate large corporate reorganizations.
\65\ Chapter 13, a form of bankruptcy relief for individuals
seeking to reorganize their debts, limits its eligibility to debtors
with debts in lower amounts than permitted for eligibility purposes
under chapter 12. Cf. 11 U.S.C. Sec. Sec. 109(e), 101(18).
---------------------------------------------------------------------------
Chapter 12 was enacted on a temporary seven-year basis as
part of the Bankruptcy Judges, United States Trustees, and
Family Farmer Bankruptcy Act of 1986 ⁶⁶ in response
to the farm financial crisis of the early- to mid-
1980's.⁶⁷ It was subsequently extended on August 6,
1993 to September 30, 1998.⁶⁸ Last year, chapter 12
was further extended until April 1, 1999 as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act,
1999.⁶⁹
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\66\ Pub. L. No. 99-554, Sec. 255, 100 Stat. 3088, 3105 (1986).
\67\ See U.S. Dept. of Agriculture, Info. Bull. No. 724-09, Issues
in Agricultural and Rural Finance: Do Farmers Need a Separate Chapter
in the Bankruptcy Code? (Oct. 1997). As one of the principal proponents
of this legislation explained:

I doubt there will be anything that we do that will have
such an immediate impact in the grassroots of our country
with respect to the situation that exists in most of the
heartland, and that is in the agricultural sector. . . .
* * * * * * *
You know, William Jennings Bryan in his famous speech, the
Cross of Gold, almost 60 years ago [sic], stated these
words: ``Destroy our cities and they will spring up again
as if by magic; but destroy our farms, and the grass will
grow in every city in ouir country.''
This legislation will hopefully stem the tide that we have
seen so recently in the massive bankruptcies in the family
farm area.

132 Cong Rec. 28,147 (1986) (statement of Rep. Mike Synar (D-Okla.)).
---------------------------------------------------------------------------
\68\ Pub. L. No. 103-65, 107 Stat. 311 (1993).
\69\ Pub. L. No. 105-277, Sec. 149 (1998).
---------------------------------------------------------------------------
Section 201 makes chapter 12 a permanent component of the
Bankruptcy Code. The National Bankruptcy Review Commission made
a similar recommendation.⁷⁰
---------------------------------------------------------------------------
\70\ See Report of the National Bankruptcy Review Commission, at
1014-16 (1997).
---------------------------------------------------------------------------
Section 202. Meetings of creditors and equity security holders
Under current law, all chapter 11 debtors must appear for
examination under oath pursuant to section 341 of the
Bankruptcy Code. This examination provides an opportunity for
the United States Trustee, creditors, and other parties in
interest to assess the debtor's financial condition.
On request of a party in interest and after notice and a
hearing, this section allows the bankruptcy court to dispense
with this requirement for cause where the chapter 11 debtor
solicited prepetition acceptances of its plan of
reorganization.⁷¹ This provision particularly
applies to ``prepackaged chapter 11 plans,'' that is, plans
where the debtor, before filing for bankruptcy relief, obtained
the acceptance of creditors and interest holders in its plan of
reorganization.
---------------------------------------------------------------------------
\71\ The National Bankruptcy Review Commission made a similar
recommendation. See Report of the National Bankruptcy Review
Commission, at 487-89 (1997).
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Section 203. Protection of retirement savings in bankruptcy
This provision permits a debtor to exempt certain
retirement funds to the extent that those funds are in a fund
or account that is exempt from taxation under section 401, 403,
408, 408A, 414, 457, or 501(a) of the Internal Revenue Code. It
also applies to retirement monies in a fund that received a
favorable determination pursuant to Internal Revenue Code
section 7805. If the retirement monies are in a retirement fund
that has not received a favorable determination pursuant to
section 7805 of the Internal Revenue Code, those funds are
exempt if the debtor demonstrates that no prior unfavorable
determination has been made by a court or the Internal Revenue
Service, and the retirement fund is in substantial compliance
with the applicable requirements of the Internal Revenue Code.
This section also applies to certain rollover distributions and
ensures that certain retirement funds are exempt under state as
well as federal law.
In addition, this provision creates an exception to the
automatic stay for the withholding of income from a debtor's
wages pursuant to an agreement authorizing such withholding for
the benefit of a pension, profit-sharing, stock bonus, or other
employer-sponsored plan established under Internal Revenue Code
section 401, 403, 408, 408A, 414, 457, or 501(a) to the extent
that the amounts withheld are used solely to repay a loan from
a plan as authorized by section 408(b)(1) of the Employee
Retirement Income Security Act of 1974 or that they are subject
to Internal Revenue Code section 72(p). It also applies to
certain thrift savings plan loans.
Section 203 also excepts from discharge any amount owed to
a pension, profit-sharing, stock bonus, or other plan
established under the Internal Revenue Code section 401, 403,
408, 408A, 414, 457, or 501(c) that is for a loan as authorized
under section 408(b)(1) of the Employee Retirement Income
Security Act of 1974 or that is subject to section 72(p) of the
Internal RevenueCode of 1986. It also applies to certain thrift
savings plan loans. Section 203 prohibits a Chapter 13 plan from
including a provision materially altering the terms of a loan described
above.

Section 204. Protection of refinance of security interest

Section 204 of the bill amends section 547(e)(2) of the
Bankruptcy Code to extend the time period for determining when
a transfer is made based on when it is perfected from ten days
to 30 days.

Section 205. Unexpired leases of nonresidential real property

Under current law, a bankruptcy trustee or a chapter 11
debtor in possession has 60 days to either assume, assign, or
reject a nonresidential lease of real property in which the
bankruptcy estate is a lessee.⁷² In practice,
however, trustees and chapter 11 debtors typically seek and
obtain multiple extensions of this period.
---------------------------------------------------------------------------
\72\ See 11 U.S.C. Sec. 365(d)(4).
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Section 205 of the bill amends section 365(d)(4) of the
Bankruptcy Code to establish finite deadlines by which a
nonresidential lease of real property must be assumed or
rejected. It provides that this period is the earlier of 120
days after the date of the order for relief or the entry of an
order confirming a plan. The failure to act within that period
causes the lease to be deemed rejected automatically.
Section 205 does permit the 120-day period to be extended
for an additional 120 days on motion of the trustee or lessor
for cause. If such extension is granted, the court may permit a
subsequent extension only upon the lessor's written consent.

Section 206. Creditors and equity security holders committees

An important premise of a chapter 11 case is active
creditor participation and oversight. This participation
theoretically fosters the debtor's reorganization and serves an
oversight function as well. One of the principal means by which
creditor participation is encouraged and implemented is through
the appointment of a creditors' committee.⁷³ The
United States trustee is charged with the responsibility to
appoint creditors' and equity security holders' committees. The
membership of a committee ordinarily consists of creditors
holding the seven largest claims that are representative of the
types of creditors in the chapter 11 case.
---------------------------------------------------------------------------
\73\ Correlatively, if the debtor has equity security holders, a
committee representing these interests can also be appointed. See 11
U.S.C. Sec. 1102.
---------------------------------------------------------------------------
Section 206 clarifies that, after notice and a hearing, a
bankruptcy court may, on its own motion or on motion of a party
in interest, order a change in a committee's membership to
ensure adequate representation of other parties in a
case.⁷⁴
---------------------------------------------------------------------------
\74\ The National Bankruptcy Review Commission made a similar
recommendation. See Report of the National Bankruptcy Review
Commission, at 492-01 (1997).
---------------------------------------------------------------------------

Section 207. Amendment to section 546 of title 11, United States Code

Section 207 of the bill amends section 546 of the
Bankruptcy Code to provide that a trustee may not avoid a
warehouse lien for storage, transportation, or other costs
incidental to the storage and handling of goods, as provided by
section 7-209 of the Uniform Commercial Code.

Section 208. Limitation

This section of the bill extends the period in which a
seller may reclaim goods from 20 to 45 days after receipt of
such goods by the debtor.

Section 209. Amendment to section 330(a) of title 11, United States
Code

Section 209 of the bill clarifies that the compensation
provisions of section 330(a)(3)(A) of the Bankruptcy Code apply
to examiners, chapter 11 trustees, and professional persons. It
adds a provision requiring the court to treat compensation
awarded to a trustee as a commission based on results achieved.

Section 210. Postpetition disclosure and solicitation

Under current law, the acceptance or rejection of a chapter
11 plan of reorganization may not be solicited from parties
affected by the plan absent a court-approved disclosure
statement.⁷⁵ The disclosure statement is required to
ensure that these parties receive adequate information about
the plan and its consequences.
---------------------------------------------------------------------------
\75\ See 11 U.S.C. Sec. 1125(b).
---------------------------------------------------------------------------
Section 210 permits postpetition solicitation of creditors
and equity security holders in chapter 11 cases if they were
solicited prepetition in compliance with applicable
nonbankruptcy law.⁷⁶ This creates an exception to
the requirement that these parties receive a court-approved
disclosure statement prior to their solicitation.
---------------------------------------------------------------------------
\76\ The National Bankruptcy Review Commission made a similar
recommendation. See Report of the National Bankruptcy Review
Commission, at 595-98 (1997).
---------------------------------------------------------------------------

Section 211. Preferences

One of the linchpins of the Bankruptcy Code is equality of
treatment among similarly situated creditors. To effectuate
this goal, section 547 of the Bankruptcy Code permits the
avoidance of certain prepetition transfers of property made by
the debtor that effectively prefer some creditors over others.
While the Bankruptcy Code acknowledges defenses to preferential
transfer actions,⁷⁷ defendants cite the difficulty
of establishing certain defenses as well as the attendant
inconvenience and costs of litigation.
---------------------------------------------------------------------------
\77\ See, e.g., 11 U.S.C. Sec. 547(c).
---------------------------------------------------------------------------
Section 211 of the bill allows a defendant in a preference
action to establish that the transfer was made in the ordinary
course of the debtor's financial affairs or business or that
the transfer was made in accordance with ordinary business
terms.⁷⁸ Presently, the Bankruptcy Code requires
both of these grounds to be established in order to sustain a
defense to a preferential transfer action.
---------------------------------------------------------------------------
\78\ The National Bankruptcy Review Commission made a similar
recommendation. See Report of the National Bankruptcy Review
Commission, at 800-03 (1997).
---------------------------------------------------------------------------
This section also establishes a threshold amount for a
preferential transfer action.⁷⁹ To file a
preferential transfer action in a case where the claims are not
primarily consumer debts, the aggregate amount of all property
constituting the transfer must be at least $5,000 or more.
---------------------------------------------------------------------------
\79\ Id. at 797-98.
---------------------------------------------------------------------------

Section 212. Venue of certain proceedings

This section of the bill amends the venue provisions for
preferential transfer actions. A preferential transfer action
in the amount of $10,000 or less must be filed in the district
where the defendant resides.⁸⁰ Currently, this
amount is fixed at $1,000.⁸¹
---------------------------------------------------------------------------
\80\ Id. at 799-00.
\81\ See 28 U.S.C. Sec. 1409(b).
---------------------------------------------------------------------------

Section 213. Period for filing plan under chapter 11

Section 213 of the bill mandates that a chapter 11 debtor's
exclusive period for filing a plan may not be extended beyond a
date that is 18 months after the order for relief. It likewise
provides that the debtor's exclusive period for obtaining
acceptances of the plan may not be extended beyond 20 months
after the order for relief.

Section 214. Fees arising from certain ownership interests

Section 214 of the bill amends section 523(a)(16) of the
Bankruptcy Code to clarify that it applies to fees or
assessments arising from the debtor's interest in a
condominium, cooperative or homeowners association
(irrespective of whether or not the debtor physically occupies
such property) for as long as the debtor or the trustee has a
legal, equitable, or possessory ownership interest in such
property.

Section 215. Cases relating to insurance deposits in cases ancillary to
foreign proceedings

Section 215 of the bill amends section 304 of the
Bankruptcy Code to prohibit relief under chapter 15, as enacted
by this bill, with respect to certain types of property. The
property interests that are protected under this provision
include a deposit, escrow, trust fund, or other security
required or permitted under applicable State insurance law or
regulation for the benefit of claim holders in the United
States. Section 215 also defines several relevant terms.

Section 216. Defaults based on nonmonetary obligations

Section 216 of the bill amends section 365(b) of the
Bankruptcy Code in response to the Claremont case,⁸²
which presented the issue of whether the debtors (operators of
several automobile dealerships) had to cure certain nonmonetary
defaults that were, in fact, incurable as a condition of their
assumption and assignment of their dealer agreements to third
parties, which would generate value for the estate.
---------------------------------------------------------------------------
\82\ Worthington v. General Motors Corp. (In re Claremont
Acquisition Corp., Inc.), 113 F.3d 1029 (9th Cir. 1997).
---------------------------------------------------------------------------
Section 365(b)(2)(D) of the Bankruptcy Code provides that
the requirement to cure a default prior to assumption and
assignment does not apply to a default that is a breach of a
provision relating to ``the satisfaction of any penalty rate or
provision relating to a default arising from any failure by the
debtor to perform nonmonetary obligations under the executory
contract or unexpired lease.'' ⁸³
---------------------------------------------------------------------------
\83\ 11 U.S.C. Sec. 365(b)(2)(D).
---------------------------------------------------------------------------
The district court in Claremont, which affirmed the
bankruptcy court's interpretation of this provision, held that
section 365(b)(2)(D) means that ``a trustee or debtor in
possession is not required to cure nonmonetary defaults in
order to assume and assign executory contracts and leases.''
⁸⁴
---------------------------------------------------------------------------
\84\ In re Claremont Acquisition Corp., Inc., 186 B.R. 977, 989-90
(C.D. Cal. 1995).
---------------------------------------------------------------------------
Although this issue arose in the context of the treatment
in bankruptcy of an automobile franchise agreement, a broad
exemption from curing nonmonetary defaults would be
particularly troublesome to equipment lessors. The failure to
adhere to a specified maintenance schedule, for instance, could
cause rapid deterioration or irreparable harm to the leased
equipment. With personal property leases, the failure to
perform nonmonetary obligations is an appropriate bar to a
bankruptcy trustee's assumption of the lease.
The court of appeals in Claremont concluded that
``subsection (D) provides an exception from cure for
satisfaction of ``penalty rates'' and ``penalty provisions,'''
refuting the argument that the clause following ``or'' in (D)
is a catch-all provision excepting from cure any ``nonmonetary
obligations.'' ⁸⁵ Under this construction,
therefore, nonmonetary defaults (with very limited exceptions)
would have to be cured. Such a rule, although reasonable as a
matter of public policy for a lease of equipment that can lose
value quickly, might lead to inappropriate results in other
potential applications. For that reason, the Committee sought
to give legislative expression to principled approaches that
would fairly treat the parties to a range of leases and
executory contracts and protect the interests of creditors
collectively.
---------------------------------------------------------------------------
\85\ Worthington v. General Motors Corp. (In re Claremont
Acquisition Corp., Inc.), 113 F.3d at 1034.
---------------------------------------------------------------------------
Section 216 accords recognition to different policy
considerations that are implicated in leasing arrangements and
executory contracts. For reasons noted above, failure to
perform nonmonetary obligations under a personal property lease
bars assumption. With real estate leases, a bankruptcy trustee
reasonably should be expected to cure defaults that are
curable, but is not to be required to do the impossible and
cure incurable defaults before assumption. The debtor's estate
in the real estate context, for example, should not be deprived
of a retail lease that is a valuable asset and may be needed
for reorganization merely because the store has conducted a
going-out-of-business sale or violated a clause against closing
for a period of time. With contracts requiring substantial
future performance on both sides--so-called executory
contracts--the courts shall determine, based on the equities,
whether incurable defaults prevent assumption. This would be
the fairest approach, for example, with franchise agreements.
In the case of an automobile franchise agreement, for
instance, the trustee for the estate of the dealer must cure
curable defaults and may assume or assign the franchise only
when defaults are impossible to cure and a bankruptcy judge--
based on the equities--determines that the bar to assumption
and assignment should not apply. It is expected that the court
would be mindful of the ability of the trustee or debtor in
possession to meet the manufacturer's contractual requirements
with regard to quality assurance, warranty service, and
trademark protection.
It is not the intention of the Committee to restrict the
ability of the nondebtor party to a lease or executory contract
to obtain compensation for any actual pecuniary loss resulting
from the debtor's incurable nonmonetary default or to obtain
adequate assurance of future performance under such contract or
lease.
Section 216 of the bill also amends section 1124(2) of the
Bankruptcy Code, which concerns the impairment of claims and
interests, to provide that the creditor remains entitled to
compensation for actual pecuniary loss resulting from a default
for the purpose of determining whether the creditor's claim or
interest arising from the default is impaired.

Section 217 Sharing of compensation

Current law prohibits professionals in bankruptcy cases
from sharing their fees with other persons.⁸⁶
Section 217 of the bill carves out a limited exception to this
prohibition to allow compensation to be shared with bona fide
public service attorney referral programs.⁸⁷
---------------------------------------------------------------------------
\86\ See 11 U.S.C. Sec. 504.
\87\ This proposal comports with one adopted by the National
Bankruptcy Review Commission. See Report of the National Bankruptcy
Review Commission, at 892-94 (1997).
---------------------------------------------------------------------------

Section 218. Priority for administrative expenses

Section 218 provides that if a lease is assumed under
section 365 of the Bankruptcy Code and thereafter rejected, the
resulting claim is equal to all monetary obligations due under
the lease (excluding penalties and obligations arising from or
relating to a failure to operate) for a one year period
commencing the latter of the rejection date or actual turnover
of the premises. Any claims for the remaining sums due under
the lease are subject to section 502(b)(6) of the Bankruptcy
Code.

Title III. General Business Bankruptcy Provisions

Section 301. Definition of disinterested person

Section 301 of the bill amends the definition of a
disinterested person under section 101(14) of the Bankruptcy
Code by eliminating its references to investment
bankers.⁸⁸
---------------------------------------------------------------------------
\88\ Section 101(14) of the Bankruptcy Code provides that an
investment banker is not a disinterested person nor an attorney for
such investment banker. See 11 U.S.C. Sec. 101(14)(B), (C), (D).
---------------------------------------------------------------------------

Section 302. Miscellaneous Improvements

Section 302 of the Bankruptcy Code amends section 109 of
the Bankruptcy Code to create an additional eligibility
requirement for individuals seeking bankruptcy relief. Under
this provision, an individual is not eligible for bankruptcy
relief unless such individual received credit counseling during
the 90-day period preceding the filing of his or her bankruptcy
case. The credit counseling must include, at a minimum,
participation in an individual or group briefing that outlined
the opportunities for available credit counseling and assisted
the individual in performing an initial budget analysis.
This requirement does not apply to an individual who
resides in a district for which the United States trustee or
bankruptcy administrator has determined that the approved
counseling services in that district are not reasonably able to
provide adequate services. To effectuate this provision,
section 302(a) requires the United States trustee or bankruptcy
administrator to annually determine whether counseling services
in the district are reasonably able to provide these services.
In addition, this requirement does not apply to a debtor
who submits to the court a certification (1) describing exigent
circumstances that merit a waiver of this requirement, and (2)
stating that the debtor requested credit counseling services
from an approved credit counseling service, but was unable to
obtain them within a specified five-day period. Such
certification mustbe satisfactory to the court. This exemption
terminates when the debtor meets the requirements for credit counseling
participation, but not longer than 30 days after the case is filed.
Section 302(b) of the bill amends section 727(a) of the
Bankruptcy Code to add, as a ground for denying a debtor a
discharge, the failure to complete an instructional course
concerning personal financial management, unless the debtor
resides in a district for which the United States trustee or
bankruptcy administrator has determined that the approved
counseling services in that district are not reasonably able to
provide adequate services.
Section 302(c) of the bill provides that the bankruptcy
court shall not grant a chapter 13 debtor a discharge unless
the debtor completed an instructional course concerning
personal financial management. An exception pertains if the
debtor resides in a district for which the United States
trustee or bankruptcy administrator has determined that the
approved counseling services in that district are not
reasonably able to provide adequate services.
Section 302(d) of the bill amends section 521 of the
Bankruptcy Code to mandate that a debtor file a certificate
from the credit counseling service that rendered the requisite
services described under section 109(h) of the Bankruptcy Code,
as amended. In addition, the debtor must file a copy of the
repayment plan, if any, that was developed through such credit
counseling service.
Section 302(e) of the bill institutes a new provision
requiring the clerk for each district to maintain a list of
credit counseling services that provide certain services and a
list of instructional personal financial management courses
that have been approved by the United States trustee or
bankruptcy administrator for the district.
Section 302(g) of the bill defines the term, ``debtor's
principal residence,'' as a residential structure including
incidental property that contains up to four units, whether or
not such structure is attached to real property. The definition
includes individual condominium or cooperative units as well as
mobile homes, trailers, and manufactured homes.
This provision also defines ``incidental property'' as
property incidental to such residence including, without
limitation, property commonly conveyed with a principal
residence in the area where the residence is located, including
such items as window treatments, carpets, appliances, and
equipment located in the residence as well as easements,
appurtenances, fixtures, rents, royalties, mineral rights, oil
and gas rights, escrow funds and insurance proceeds.
In addition, Section 302(g) of the bill creates an
exception to the automatic stay provisions of the Bankruptcy
Code with respect to the postponement, continuation, or similar
delay of a prepetition foreclosure proceeding or sale pending
in a chapter 13 case where the debtor has not fully cured the
prepetition default with respect to the underlying obligation
that is the subject of such foreclosure proceeding or sale. It
also prevents a chapter 13 debtor from modifying the rights of
a creditor secured by property used as the debtor's principal
residence within the 180-day period preceding the filing of the
bankruptcy case.
Section 302(h) of the bill provides that if a chapter 7,
11, or 13 case is dismissed due to the creation of a debt
repayment plan administered by an approved credit counseling
agency, the presumption under section 362(c)(3) of the
Bankruptcy Code, as amended, in the subsequent case shall not
apply.
Section 302(i) amends section 546(g) of the Bankruptcy Code
to institute certain protections if the court determines, on
motion of the trustee made not later than 120 days after the
order for relief in a chapter 11 case, that a return of goods
is in the best interests of the estate. It provides that the
debtor, on consent of the creditor and subject to prior rights
of third parties, may return goods shipped prepetition and the
creditor may offset the purchase price of such goods against
any prepetition claim it has against the debtor.

Section 303. Extensions

This section of the bill amends section 302(d) of the
Bankruptcy Judges, United States Trustees, and Family Farmer
Bankruptcy Act of 1986 to make the Bankruptcy Administrator
Program permanent.

Section 304. Local filing of bankruptcy cases

Section 304 of the bill amends section 1408 of title 28,
which pertains to the venue of bankruptcy cases, to provide
that if the debtor is a corporation, the domicile and residence
of the debtor are conclusively presumed to be where the
debtor's principal place of business in the United States is
located.

Section 305. Permitting assumption of contracts

Section 365(c)(1) of the Bankruptcy Code prohibits a
trustee from assuming or assigning a contract that is, by its
terms, personal to the debtor and thus, under applicable
nonbankruptcy law, nonassignable. Section 305 makes a technical
correction to section 365(c) of the Bankruptcy Code to clarify
that in a corporate chapter 11 case the trustee or debtor in
possession may assume an executory contract or unexpired lease
of the debtor, whether or not the contract or lease prohibits
or restricts assignment of rights or the delegation of
duties.⁸⁹ This section also makes several technical
amendments to Section 365.
---------------------------------------------------------------------------
\89\ See, e.g., Perlman v. Catapult Entertainment, Inc. (In re
Catapult Entertainment, Inc.), 165 F.3d 747 (9th Cir. 1999) (holding
that where applicable nonbankruptcy law makes an executory contract
nonassignable because the identity of the nondebtor party is material,
a debtor in possession may not assume the contract absent consent of
the nondebtor party).
---------------------------------------------------------------------------

Title IV. Small Business Bankruptcy Provisions

Section 401. Flexible rules for disclosure statements and plans

Under current law, a chapter 11 debtor must obtain court
approval of a disclosure statement before it can solicit
acceptances of its reorganization plan.⁹⁰ The
disclosure statement must provide creditors and other
interested parties basic information about the plan, including
its feasibility and consequences. Typically, court approval is
obtained after a hearing on 25 days' notice to all creditors
and parties in interest. The current process can be costly and
time-consuming.
---------------------------------------------------------------------------
\90\ See 11 U.S.C. Sec. 1125(b).
---------------------------------------------------------------------------
Section 401 of the bill authorizes a bankruptcy court, in
determining whether a disclosure statement provides adequate
information, to consider the complexity of the small business
debtor's case, the benefit of additional information to
creditors and other parties in interest, and the cost of
providing such additional information. If, for example, the
court finds that the plan of reorganization itself provides
adequate information, it may allow the debtor to solicit
acceptances of the plan without having to prepare and send a
disclosure statement along with the plan. In addition, it
permits the court to approve a disclosure statement submitted
on standard forms approved by the court or adopted pursuant to
section 2075 of title 28 of the United States Code. Further, it
permits a court to conditionally approve a disclosure statement
subject to final approval after notice and hearing, which would
then be combined with the confirmation hearing.

Section 402. Definitions

This section defines a ``small business debtor'' as a
person (including affiliates that are also debtors) that has
aggregate noncontingent, liquidated secured and unsecured debts
in the amount of $4 million or less as of the commencement of
the case (excluding debts owed to affiliates or insiders of the
debtor). If a group of affiliate debtors has aggregate
noncontingent, liquidated secured and unsecured debts in excess
of this amount, then no member of such group is a small
business debtor.

Section 403. Standard form disclosure statements and plans

Section 403 directs the Advisory Committee on Bankruptcy
Rules of the Judicial Conference of the United States Courts to
issue standard disclosure statements and plans of
reorganization forms for small business debtors. The forms are
designed to achieve a practical balance between the needs of
the court, those charged with administration of these cases,
and parties in interest concerning reasonably complete
information and the need for economy and simplicity.

Section 404. Uniform national reporting requirements

The United States Trustee Guidelines generally require
chapter 11 debtors to report their financial circumstances on a
monthly basis. These reports are used to determine a chapter 11
debtor's economic viability. If completed accurately, these
reports can provide valuable information about the case to the
bankruptcy court, the United States Trustee, and parties in
interest, such as creditors. In practice, however, some debtors
fail to file these reports or file incomplete or inaccurate
reports, thereby frustrating the ability of those charged with
the oversight of these cases to fulfill their responsibility.
Section 404 of the bill mandates that a small business
debtor file periodic financial reports containing the following
information with regard to:
(1) the debtor's profitability;
(2) reasonable approximations of the debtor's
projected cash receipts and disbursements;
(3) comparisons of actual cash receipts and
disbursements with projections in prior reports;
(4) a statement as to whether or not the debtor is in
compliance with certain other postpetition
requirements; and
(5) a statement as to whether the debtor has timely
filed tax returns and paid taxes and other
administrative expenses when due, among other matters.

Section 405. Uniform reporting rules and forms

This section mandates that the Advisory Committee on
Bankruptcy Rules of the Judicial Conference of the United
States propose Federal Rules of Bankruptcy Procedure and
Official Bankruptcy Forms to be used by small business cases to
file periodic financial and other information set forth in
section 404 of the bill.

Section 406. Duties in small business cases

To implement greater administrative controls over small
business chapter 11 debtors, section 406 of the bill institutes
additional duties that these debtors must perform. First, the
small business debtor must include with the bankruptcy petition
its most recent financial statements, including a balance
sheet, statement of operations, cash flow statement, and
federal income tax return.⁹¹
---------------------------------------------------------------------------
\91\ If the debtor lacks such information, then it must file a
statement under penalty of perjury verifying this fact.
---------------------------------------------------------------------------
Second, the small business debtor is required to attend,
through its responsible individual, meetings scheduled by the
bankruptcy court or the United States Trustee. These meetings
include initial debtor interviews, and scheduling conferences,
as well as the section 341 meetings of creditors. Scheduling
conferences provide an opportunity for the court to fix
deadlines by which aplan must be filed and confirmation
achieved. ``Initial debtor interviews'' provide an opportunity for the
United States Trustee to explain to the debtor various requirements
such as the need to maintain insurance, to file periodic financial
reports, and to remain current on postpetition obligations. Meetings
held pursuant to section 341, alternatively known as ``section 341
meetings'' or the ``first meetings of creditors,'' provide an
opportunity for the debtor to be examined under oath by the United
States Trustee and by other parties in interest, such as creditors.
Section 406 of the bill also requires the small business
debtor to timely file all requisite schedules and the statement
of financial affairs, as well as postpetition financial
reports. In addition, the small business debtor must maintain
insurance that is customary and appropriate for the industry.
With respect to the debtor's tax obligations, this section
establishes special protections. All tax returns must be timely
filed and all postpetition taxes must be paid, except for those
that are contested, subject to section 363(c) of the Bankruptcy
Code.⁹² Separate bank accounts for the deposit of
taxes collected or withheld for government authorities must be
established not later than ten business days following the
entry of the order for relief. Further, this section permits
the United States Trustee to inspect the debtor's books and
records and business premises at reasonable hours and with
proper notice.
---------------------------------------------------------------------------
\92\ Section 363(c)(2) prohibits the use of cash collateral without
consent of those having an interest in such collateral or the court
authorizes such use.
---------------------------------------------------------------------------
Nothing in this section is intended to restrict
applicability of the court's powers under section 105 of the
Bankruptcy Code to this provision.

Section 407. Plan filing and confirmation deadlines

Under current law, a chapter 11 debtor has the exclusive
right to file a plan within the 120 days following the entry of
the order for relief.⁹³ The Bankruptcy Court also
extends to the chapter 11 debtor the exclusive right to effect
confirmation of the plan within 180 days following the entry of
the order for relief.⁹⁴ As a result of amendments
made in 1994 to the Bankruptcy Code, the exclusive period that
a small business debtor has to file a plan and achieve
confirmation were reduced to 100 days and 160 days respectively
from the entry of the order for relief.⁹⁵
---------------------------------------------------------------------------
\93\ See 11 U.S.C. Sec. 1121(b).
\94\ See 11 U.S.C. Sec. 1121(c).
\95\ See 11 U.S.C. Sec. 1121(e). Under this provision, a party in
interest may apply for an order reducing or enlarging this period. 11
U.S.C. Sec. 1121(e)(3).
---------------------------------------------------------------------------
Section 407 reduces the time periods for filing plans and
achieving confirmation for small business debtors. Under this
provision, the small business debtor's exclusive period to file
a plan is 90 days from the entry date of the order for relief,
unless a trustee has been appointed in the case or the
bankruptcy court shorts such period on request of a party in
interest. An exception pertains if a creditors'' committee is
appointed in the case and is sufficiently active to provide
effective oversight of the debtor.
The small debtor's exclusive time period for filing a plan
and achieving confirmation may be extended by the court on
request of a party in interest and for cause. Although the
court may grant one or more extensions, they may not accumulate
to more than 60 days. To obtain an extension, the movant must
establish that: (1) no cause exists to dismiss or convert the
case or to appoint a trustee, and (2) there is a reasonable
possibility that the court will confirm a plan in a reasonable
time. Further extensions are available if the movant
establishes the first ground and that, more likely than not,
the court will confirm a plan within a reasonable time. The
court must impose a new deadline whenever an extension is
granted.

Section 408. Plan confirmation deadline

This section requires a small business debtor to confirm a
plan not later than 150 days after the order for relief, unless
a creditors'' committee, is sufficiently active and
representative to provide effective oversight of the debtor or
the 150-day period is extended pursuant to section 407.

Section 409. Prohibition against extension of time

To ensure that the strict time frames instituted by this
bill are not eviscerated, section 409 of this bill limits a
court's authority to avoid the impact of these provisions. This
section specifically limits the court's authority to use
section 105(a) of the Bankruptcy Code to extend the time frames
fixed for filing and confirming the plans of small business
debtors.

Section 410. Duties of the United States trustee and bankruptcy
administrator

This section mandates that the United States Trustee
conduct an ``initial debtor interview'' of all small business
debtors. This interview, which must be held shortly after the
case is filed, is to be used by the United States Trustee to
begin its investigation of the debtor's viability and business
plan. It also provides an opportunity for the United States
Trustee to explain the debtor's obligation to file monthly
operating reports and other requirements. During the course of
the interview, the United States Trustee attempts to obtain an
agreed scheduling order fixing various time frames, such as the
date for filing a plan and effecting confirmation.
Section 410 also authorizes the United States Trustee to
inspect the debtor's premises, review its books and records,
and verify that the debtor has filed its tax returns, when
appropriate.The United States Trustee, under this provision, is
responsible for diligently monitoring the small business debtor's
activities and determining its ability to confirm a plan. Should the
United States Trustee discover material grounds warranting either
dismissal or conversion of the chapter 11 case to one under chapter 7
for liquidation, this section requires the United States Trustee to
apply promptly for such relief.

Section 411. Scheduling conferences

Under current law, a bankruptcy court may conduct a
scheduling conference on its own motion or on request of a
party in interest in any bankruptcy case. In a chapter 11 case,
for example, a scheduling conference provides an opportunity
for the court to set certain dates by which the debtor must
file and confirm a plan, among other matters.
This section mandates that a bankruptcy court conduct
scheduling conferences in all bankruptcy cases, if necessary,
to further the expeditious and economical resolution of such
cases. Section 411 also amends section 105(d) of the Bankruptcy
Code to eliminate the restriction on the authority of the court
to issue an order under this provision. Current law precludes a
court from issuing an order if it is inconsistent with another
provision in the Bankruptcy Code or applicable Federal Rule of
Bankruptcy Procedure.

Section 412. Serial filer provisions

This section consists of two provisions, the first one of
which is not limited to business bankruptcies. Section 412(1)
provides that if an individual is injured by a violation of the
automatic stay based on a good faith belief, then that
individual's recovery is limited to actual damages.
Section 412(2) provides that the automatic stay does not
apply to four categories of small business chapter 11 debtors
who have previously sought bankruptcy relief. The effect of
this provision is to restrict repetitive filings by these
debtors. The automatic stay does not apply when:
(1) the small business debtor is simultaneously a
debtor in another bankruptcy case pending at the time
of the filing of the second case;
(2) the small business debtor's prior case was
dismissed for any reason by an order that became final
within two years preceding the filing of the second
case;
(3) the second case was filed within two years
following the confirmation of the prior case; or
(4) an entity that acquired substantially all of the
assets or business of a small business debtor described
in the prior subparagraphs has itself filed for
bankruptcy relief.
Two exceptions pertain. First, Section 412(2) provides that it
does not apply to an involuntary petition filed by a creditor
who is not an insider of the debtor. Second, it permits a
debtor, after notice and a hearing, to demonstrate by a
preponderance of the evidence that the filing of the subsequent
case was necessitated by circumstances beyond its control and
unforeseeable at the time the prior case was filed, and that it
is more likely than not that it will confirm a plan of
reorganization (but not a liquidating plan) within a reasonable
time.

Section 413. Expanded grounds for dismissal or conversion and
appointment of trustee

The Bankruptcy Code currently lists ten grounds that a
bankruptcy court may consider in determining whether to convert
a chapter 11 case to one under chapter 7 for liquidation, or to
dismiss the case.⁹⁶ This section revises these
grounds and mandates that the court convert or dismiss a
chapter 11 case or appoint a chapter 11 trustee, whichever is
in the best interests of creditors and the estate, if the
movant establishes cause. An exception to this mandate applies
if (1) the debtor or other party in interest objects and
establishes by a preponderance of the evidence that it is more
likely than not that a plan will be timely confirmed, and (2)
the cause for dismissal is an act or omission for which there
exists a reasonable justification and such act or omission will
be cured within a reasonable time period not to exceed 30 days,
unless the movant consents to a longer period, or compelling
circumstances beyond the debtor's control justify such
extension.
---------------------------------------------------------------------------
\96\ See 11 U.S.C. Sec. 1112(b). The ten grounds enumerated in this
provision, however, are not exclusive.
---------------------------------------------------------------------------
Cause warranting either mandatory conversion or dismissal
of a chapter 11 case under section 413 includes the following:
(1) substantial or continuing loss to or diminution
of the estate;
(2) gross mismanagement of the estate;
(3) failure to maintain appropriate insurance that
poses a material risk to the estate or the public;
(4) unauthorized use of cash collateral that is
harmful to one or more creditors;
(5) failure to comply with a court order;
(6) failure to satisfy any filing or reporting
requirement under the Bankruptcy Code or applicable
rule;
(7) failure to attend the section 341 meeting of
creditors;
(8) failure to timely provide information or to
attend meetings reasonablyrequested by the United
States Trustee;
(9) failure to pay postpetition taxes or file tax
returns when due;
(10) failure to file a disclosure statement or to
confirm a plan within the time fixed under the
Bankruptcy Code or by court order;
(11) failure to pay any requisite fees or charges;
(12) revocation of a confirmation order;
(13) inability to effectuate substantial consummation
of a confirmed plan;
(14) material default by the debtor with respect to a
confirmed plan; and
(15) termination of a plan by reason of the
occurrence of a condition specified in the plan.
Section 413 provides that the court may grant relief based on
certain of the above stated grounds only on its own motion or
on motion of the United States trustee or bankruptcy
administrator.
The bankruptcy court must hold a hearing on a motion
seeking either conversion or dismissal of the case within 30
days of the filing of such motion. In addition, the bankruptcy
court is required to decide this motion within 15 days
following the commencement of the hearing, unless the moving
party expressly consents to a continuance or compelling
circumstances prevent the court from meeting such time limits.
Section 413(b) creates additional grounds for the
appointment of a chapter 11 trustee. If grounds exist for
either conversion or dismissal of the chapter 11 case, the
bankruptcy court has the authority to appoint a chapter 11
trustee if this is in the best interests of creditors and the
bankruptcy estate.

Section 414. Study of the operation of title 11 of the United States
Code with respect to small businesses

This section directs the Administrator of the Small
Business Administration, in consultation with the Attorney
General, the Director of the Executive Office for United States
Trustees, and the Director of the Administrative Office of the
United States Courts, to conduct a study for the purpose of
determining certain matters. These include the internal and
external factors that cause small businesses, especially sole
proprietorships, to seek bankruptcy relief and factors that
cause small businesses to successfully complete their chapter
11 cases. The study must also examine how the bankruptcy laws
may be made more effective and efficient in assisting small
business to remain viable.

Section 415. Payment of Interest

This section amends the automatic stay termination
provision that applies to single asset real estate debtors.
Specifically, it allows a debtor in its sole discretion to make
the requisite interest payments out of rents or other proceeds
generated by the real property. Such payments must be an amount
equal to the interest at the then-applicable nondefault
contract rate based on the value of the creditor's interest in
the property.

Title V. Municipal Bankruptcy Provisions

Section 501. Petition and proceedings related to petition

This section clarifies that a court must enter the order
for relief for chapter 9 cases.

Section 502. Applicability of other sections to chapter 9

This section makes certain specified provisions in title V
of the Bankruptcy Code applicable to chapter 9 cases.

Title VI. Streamlining the Bankruptcy System

Section 601. Creditor participation at first meeting of creditors

This section permits pro se creditors to appear and
participate at the section 341 meeting of creditors in chapter
7 and 13 cases, and with respect to activities related thereto.
Currently, some districts require corporate creditors and
others to be represented by counsel in legal proceedings, such
as the section 341 meeting of creditors. This amendment allows
creditors to save the cost of obtaining legal representation to
participate in the section 341 meeting and like activities.

Section 602. Audit procedures

This section requires the Attorney General to establish
procedures for auditing the accuracy and completeness of
information supplied by individual debtors in connection with
their bankruptcy cases under chapter 7 and chapter 13 of the
Bankruptcy Code. The audit must be performed pursuant to
generally accepted auditing standards by independent certified
public accountants or independent licensed public accountants.
One in every 250 cases in a district must be selected randomly
for audit. In addition, section 602 requires audits in cases
where the schedules reflect greater than average variances from
the statistical norm for the district. The percentage of cases
in which a material misstatement of income or expenditures,
together with other information, that is obtained as a result
of these audits by district must be made available to the
public not less than annually.
Should an audit disclose a material misstatement with
regard to a debtor's income, expenses or assets, a statement
must be filed with the court specifying the facts constituting
the material misstatement. Notice thereof must also be provided
to creditors. Where appropriate, thematter could be referred to
the United States Attorney for possible criminal prosecution.
In addition, section 602 amends section 521 of the
Bankruptcy Code to make it a duty of the debtor to supply
certain information to a auditor. Further, it amends section
727 of the Bankruptcy Code to add, as grounds for revocation of
a debtor's discharge, a chapter 7 debtor's failure to
satisfactorily explain a material misstatement discovered as
the result of an audit described in section 602 and the failure
to make available all necessary documents or property belonging
to the debtor that are requested in connection with such audit.

Section 603. Giving creditors fair notice in chapter 7 and 13 cases

To ensure that a creditor receives proper notice, section
603(a)(1) requires debtors to identify in any notices to a
creditor the account number for any debt held by such creditor
against the debtor. In addition, the debtor must use the
address specified by the creditor. It also strikes the
Bankruptcy Code providing that failure to include certain
specified information in a notice does not invalidate the legal
effect of such notice.
If a creditor in an individual chapter 7 or 13 case has
specified an address for notice, section 603(a)(2) requires the
court and the debtor to use such address starting five days
after receiving the address. Section 603(a)(2) also permits an
entity to file a noticing address with the court to be used
generally in chapter 7 and chapter 13 cases.
Section 603(a)(2) specifies that notice that does not
comply with these requirements is not effective until it has
been brought to the creditor's attention. If the creditor has
designated an entity to be responsible for receiving notices
concerning bankruptcy cases and has established reasonable
procedures so that these notices will be delivered to such
entity, a notice will not be deemed to have been received by
the creditor until it has been received by such entity. Section
603(a)(2) prohibits the imposition of any sanctions for
violation of the automatic stay under section 362 of the
Bankruptcy Code ⁹⁷ or for the failure to comply with
the Bankruptcy Code's turnover provisions in sections 542 and
543, if a creditor has not received proper notice.
---------------------------------------------------------------------------
\97\ Under present law, an individual injured as a result of any
willful violation of the automatic stay is entitled to actual damages,
including costs and attorney's fees, and may recover punitive damages
in appropriate circumstances. 11 U.S.C. Sec. 362(h).
---------------------------------------------------------------------------
Section 603(b) amends section 521 of the Bankruptcy Code
(which sets forth the debtor's duties) to add further
requirements. The debtor must file a schedule of current
monthly income and current expenditures prepared in compliance
with section 707(b)(2) of the Bankruptcy Code, as amended by
section 102. It also requires the attorney for the debtor or
the bankruptcy petitioner to file a certificate indicating that
the requisite notices under section 342(b) of the Bankruptcy
Code, as amended, were provided to the debtor. If the debtor
lacks counsel or did not use the services of a bankruptcy
petition preparer, then the debtor must sign a certificate
stating that he or she obtained and read such notice.
Under section 603(b), the debtor must also file copies of
any Federal tax returns (including any schedules and
attachments) for the three year period preceding the order for
relief and copies of all payment advices or other evidence of
payment from any employer within 60 days of the bankruptcy
filing. As amended by section 603(b), section 521 of the
Bankruptcy Code additionally requires the debtor to file copies
of all tax returns (including any schedules and attachments) at
the time filed with the taxing authority with respect to any
period during the pendency of the debtor's chapter 7 or chapter
13 case.
Section 603(b) also requires the court to make the debtor's
petition, schedules, statement of financial affairs, or chapter
13 plan (if applicable), together with any amendments to such
documents, available to a creditor upon request and at a
reasonable cost within five days of such request. In addition,
the debtor must file a statement disclosing any reasonably
anticipated increase in the debtor's income or expenditures in
the succeeding 12-month period.
For a chapter 13 case, section 603(b) requires the debtor
to file a statement of current monthly income and expenditures
in accordance with section 707(b)(2) of the Bankruptcy Code, as
amended. This requirement also pertains to the postconfirmation
period as well until the case is closed. This statement must
disclose the amount and sources of the debtor's income, the
identity of any persons responsible with the debtor for the
support of the debtor's dependents, the identity of any persons
who contributed, and the amount contributed to the debtor's
household.
With respect to the privacy issue presented by the
availability of a debtor's tax returns to third parties,
section 603 mandates that Director of the Administrative Office
for United States Courts establish procedures for safeguarding
the confidentiality of these documents. The procedures must
include reasonable restrictions on creditor access to them that
include verification of the creditor's identity and that limit
the use of such information to the case. In addition, the
Director must, within one year from the date of enactment of
the bill, prepare and submit to the Congress a report that
assesses the effectiveness of these procedures in providing
information to creditors and that includes, if appropriate,
recommendations for legislation to further protect the
confidentiality of such tax information and to impose penalties
for improper use.
Section 603(b) also requires the debtor to provide proof of
identity on request of the United States trustee or case
trustee. Such proof includes a driver's licence, passport, or
other document that contains a photograph of the debtor.
Section 603(b)(4) also specifies that the notice of a
chapter 13 confirmation hearing must include the most recent
statement filed by the debtor pursuant to section
521(a)(1)(B)(ii) or (f)(4), as amended.

Section 604. Dismissal for failure to timely file schedules or provide
required information

Should an individual chapter 7 or 13 debtor fail to provide
any of the information required by section 521 of the
Bankruptcy Code, as amended, within 45 days after the petition
filing date, this section requires the debtor's bankruptcy case
to be automatically dismissed, effective on the 46th day. No
court order is necessary to effectuate this dismissal, unless a
party in interest so requests. This 45-day time period may be
extended on request of the debtor made before its expiration if
the court finds justification for extending this period. In no
event, however, may it be extended more than an additional 45
days.

Section 605. Adequate time to prepare for hearing on confirmation of
the plan

This section requires the chapter 13 confirmation hearing
to be held not earlier than 20 days following the first date
set for the meeting of creditors and not later than 45 days
from this date.

Section 606. Chapter 13 plans to have a five-year duration in certain
cases

Under present law, the duration of a chapter 13 plan is
three years, unless the court, for cause, extends it to a
maximum of five years.⁹⁸ To ensure that creditors
receive the maximum amount of repayment in a chapter 13 case,
this section extends the permissible duration of a chapter 13
plan up to five years, under certain circumstances. If the
total current monthly income of the debtor and the debtor's
spouse, when multiplied by 12, is not less than the highest
national family median income last reported by the Census
Bureau for a family of equal or lesser size (or, for a
household of one person, not less than the national median
household income for one earner),⁹⁹ then the length
of the debtor's plan may be as long as five years. If the
income of the debtor and the debtor's spouse fall below this
threshold, then the length of the plan may be three years, but
not longer than five years.
---------------------------------------------------------------------------
\98\ 11 U.S.C. Sec. 1322(d).
\99\ Section 606 provides that the national median family income
for a family of more than four individuals shall be the national median
family income last reported by the Census Bureau for a family of four
individuals plus $583 for each additional member of the debtor's
family.
---------------------------------------------------------------------------
Section 606(b)(2) mandates that the applicable commitment
period for confirmation of a chapter 13 plan to be not less
than five years if the current monthly income of the debtor and
the debtor's spouse exceeds the thresholds stated above.
Likewise, section 606(b)(3) mandates the same requirement with
regard to chapter 13 plans modified postconfirmation.

Section 607. Sense of the Congress regarding expansion of rule 9011 of
the Federal Rules of Bankruptcy Procedure

To reaffirm the need for accuracy, completeness and
truthfulness of documents filed by debtors and their counsel
(both signed and unsigned), section 607 states that it is the
sense of the Congress that all such documents may be filed only
after the debtor or the debtor's attorney has made reasonable
inquiry to verify that the information they contain is well
grounded in fact and warranted by existing law or a good faith
argument for the extension, modification, or reversal of
existing law. This requirement applies to signed as well as
unsigned documents. Federal Rule of Bankruptcy Procedure 9011
presently only applies to signed documents.

Section 608. Elimination of certain fees payable in chapter 11
bankruptcy cases

Section 1930(6) of title 28 of the United States Code
requires a chapter 11 debtor to pay a quarterly fee to the
United States Trustee based on the amount of the debtor's
disbursements made during the quarter. This requirement applies
until the case is converted or dismissed and applies even after
confirmation until the case is closed.¹⁰⁰
---------------------------------------------------------------------------
\100\ Pub. L. 104-91, Sec. 101 (1996), as amended, Pub. L. No. 104-
99, title II, Sec. 211 (1996).
---------------------------------------------------------------------------
This section limits this requirement's applicability to
certain chapter 11 debtors. Specifically, debtors with
disbursements of less than $300,000 would be required to pay
this fee only until the case is converted or confirmation is
obtained, whichever occurs first. For debtors having
disbursements of $300,000 or more, the requirement to pay these
quarterly fees would remain the same as under current law.

Section 609. Study of bankruptcy impact of credit extended to dependent
students

This section directs the Comptroller General of the United
States to conduct a study regarding the impact that the
extension of credit to dependents (defined under the Internal
Revenue Code of 1986) who are enrolled in postsecondary
educational institutions has on the bankruptcy case filing
rate.

Section 610. Prompt relief from stay in individual cases

Under current law, Section 362(e) of the Bankruptcy Code
provides that within 30 days of a request for relief from the
automatic stay, such stay is terminated unless the bankruptcy
court orders the stay continued after notice and hearing. The
hearing, as contemplated under section 362(e), can be
preliminary or deemed final. If the hearing is preliminary, the
final hearing must be concluded not later than 30 days from the
conclusion of the preliminary hearing. This 30-day period can
be extended by the court with consent of the parties or if the
court finds that such extension is warranted based on
compelling circumstances.
For chapter 7, 11, or 13 cases filed by individuals, this
section creates an exception tosection 362(e). Specifically,
this section requires the automatic stay to terminate within 60 days
following a request for relief from the stay, unless the bankruptcy
court renders a final decision prior to the expiration of such 60-day
time period, such 60-day time period is extended pursuant to agreement
of all parties in interest, or a specific extension of time is required
for good cause as described in findings made by the court.

Section 611. Stopping abusive conversions from chapter 13

Section 506 of the Bankruptcy Code provides that a creditor
secured by a lien on property of the estate has an allowed
secured claim to the extent of the value of the creditor's
interest in the property and an unsecured claim to the extent
that the value of the creditor's interest is less than the
amount of the claim. A chapter 13 debtor may apply for a
determination from the bankruptcy court that fixes the value of
a secured creditor's interest in property of the estate. Under
present law, if the chapter 13 case is subsequently converted
to another chapter under the Bankruptcy Code, such valuations
apply in the converted case, with allowance, of course, for any
payments made on such secured claims.¹⁰¹
---------------------------------------------------------------------------
\101\ 11 U.S.C. Sec. 348(f)(1)(B).
---------------------------------------------------------------------------
This section carves out an exception for a chapter 13 case
converted to chapter 7. It specifies that a secured creditor in
any bankruptcy case converted from chapter 13 continues to be
secured unless its claim was paid in full as of the date of
conversion, notwithstanding any valuation determination made
during the pendency of the chapter 13 case.

Section 612. Bankruptcy appeals

Currently, appeals from decisions rendered by the
bankruptcy court are either heard by the district court or a
bankruptcy appellate panel. In addition to the time and cost
factors attendant to the present appellate system, decisions
rendered by a district court as an appellate court are not
binding and lack stare decisis value.
To address these problems, section 612 permits appeals from
final orders and judgments entered by a bankruptcy court
decisions to be heard directly by the circuit court of appeals
if the appellant so elects at the time of filing the notice of
appeal.¹⁰² Any other party may so elect not later
than ten days after service of the notice of appeal. Absent
such election, the bankruptcy appellate panel would hear the
appeal. Direct appeal is also permitted for specified
interlocutory orders.
---------------------------------------------------------------------------
\102\ The National Bankruptcy Review Commission made a similar
recommendation. See National Bankruptcy Review Commission Report, at
752-67 (1997).
---------------------------------------------------------------------------

Section 613. GAO study

Section 613 of the bill directs the Comptroller General of
the United States to conduct a study of the feasibility,
efficacy and cost of requiring pertinent information about
debtors to be supplied to the Office of Child Support
Enforcement. The purpose of this requirement would be to
determine whether a debtor has outstanding child support
obligations.

Title VII. Bankruptcy Data

Section 701. Improved bankruptcy statistics

Section 701 requires the clerk for each district to compile
various statistics regarding chapter 7, 11, and 13 cases in a
form prescribed by the Director of the Administrative Office of
the United States Courts and to make these data available to
the public. In addition, the Director is required to report
annually to the Congress on the information so collected and to
prepare an analysis of it.
The statistics required to be compiled must be itemized by
chapter of the Bankruptcy Code and presented in the aggregate.
The specific categories of information that must be gathered
include the following:
(1) the total assets and liabilities as scheduled by
the debtor;
(2) the debtor's current monthly income, average
income, and average expenses;
(3) the aggregate amount of debt discharged during
the reporting period (determined based on the
difference between the total amount of debt scheduled
by the debtor and the total amount of debt scheduled by
the debtor in categories that are predominantly
nondischargeable);
(4) the average time between the filing of the
bankruptcy case and the closing of the case;
(5) specified information regarding reaffirmation
agreements;
(6) for chapter 13 cases, information on the number
of (a) orders determining the value of secured property
in an amount less than the amount of the secured claim,
(b) cases dismissed for failure to make payments under
the plan, (c) cases refiled after dismissal of a prior
case by the same debtor, (d) cases in which the plan
was completed, (e) the number of cases in which the
debtor had previously sought bankruptcy relief within
the six years preceding the filing of the present case;
(7) the number of cases in which creditors were fined
for misconduct and the amount of any punitive damages
awarded by the court for creditor misconduct; and
(8) the number of cases in which sanctions under
Federal Rule of Bankruptcy Procedure 9011 were imposed
against a debtor's counsel and the damages awarded in
connection therewith.

Section 702. Uniform rules for the collection of bankruptcy data

To implement the data gathering provisions of section 701,
this section requires the Attorney General to issue rules
requiring the establishment of uniform forms for final reports
filed by bankruptcy trustees and monthly operating reports
filed by chapter 11 debtors in possession. It also specifies
what information these reports should contain and that they be
made publicly available for physical inspection (at one or more
central filing locations) and by electronic access through the
Internet or other appropriate media.

Section 703. Sense of the Congress regarding the availability of
bankruptcy data

This section expresses the sense of the Congress that it is
a national policy of the United States that all data collected
by the bankruptcy clerks in electronic form (to the extent such
data relates to public records, as defined in section 107 of
the Bankruptcy Code) should be made available to the public in
a usable electronic form in bulk, subject to appropriate
privacy concerns and safeguards as determined by the Judicial
Conference of the United States. It also states that a single
bankruptcy data system should be established that uses a single
set of data definitions and forms to collect such data and that
data for any particular bankruptcy case be aggregated in such
electronic record.

Title VIII. Bankruptcy Tax Provisions

Section 801. Treatment of certain liens

This section makes several amendments to section 724 of the
Bankruptcy Code to provide greater protection for holders of ad
valorem tax liens on real or personal property of the estate.
Although their subordination is still possible under section
724(b), the purposes are limited to pay for chapter 7
administrative expenses and priority claims for postpetition
wages, salaries, and commissions, as well as claims for
contributions to an employee plan entitled to priority under
section 507(a)(4) of the Bankruptcy Code. Thus, subordination
for the purpose of paying chapter 11 administrative expenses is
not permitted.
Before subordinating a tax lien on real or personal
property, the trustee, must exhaust all other unencumbered
estate assets and, pursuant to section 506(c) of the Bankruptcy
Code, recover from property securing an allowed secured claim
the reasonable and necessary costs and expenses of preserving
or disposing of such property.
In addition, this section prevents a bankruptcy court from
determining the amount or legality of an ad valorem tax on real
or personal property if the applicable period for contesting or
redetermining the amount of the claim under nonbankruptcy law
has expired. This amendment addresses those instances where
debtors or trustees use section 505 of the Bankruptcy Code as a
means to have bankruptcy courts set aside these types of taxes
to the detriment of the local communities that depend on them
for revenue.

Section 802. Effective notice to government

To ensure that government units receive effective notice,
section 802(a) requires the debtor to identify in the notice
the specific department, agency, or instrumentality to which
the debtor is indebted and to supply to such entity specified
identifying information (e.g., taxpayer identification number,
the number of the loan, account or contract, or real estate
parcel number, if applicable). The debtor must also describe
the basis of the claim. If the debtor's liability to a
governmental unit arises from a debt or obligation owed or
incurred by another entity, the debtor must identify such other
entity. In addition, section 802(a) requires the bankruptcy
clerk to maintain a current list, updated quarterly, of
addresses designated by government units as ``safe harbor''
addresses for service of notices in cases pending in the
district. This list is to be made available to debtors.
Section 802(b) requires the Advisory Committee on
Bankruptcy Rules of the Judicial Conference of the United
States to adopt rules that enhance the provision of notice to
Federal, State, and local governmental units that have
regulatory authority over a debtor or who may be creditors in a
bankruptcy case. The rules must be reasonably calculated to
ensure that notice will reach the governmental unit by
requiring that the debtor provide specified information.
Should the debtor fail to provide notice to governmental
entities pursuant to the requirements of section 802(c), such
notice is deemed to be ineffective unless the debtor
demonstrates by clear and convincing evidence that timely
notice was given in a manner reasonably calculated to satisfy
the requirements of section 802(c). In addition, it must be
established that either the notice was sent to the safe harbor
address listed in the register maintained by the clerk for the
district where the bankruptcy case is pending or, if no safe
harbor address was specified by the governmental unit, an
officer of such unit who has responsibility for the matter and
claim had actual knowledge of the case in sufficient time to
act.

Section 803. Notice of request for a determination of taxes

This section amends section 505(b) of the Bankruptcy Code
to require that notice of a request for a determination of
taxes substantially comply with the taxing authority's notice
procedures.¹⁰³
---------------------------------------------------------------------------
\103\ The National Bankruptcy Review Commission made a similar
recommendation. See Report of the National Bankruptcy Review
Commission, at 951 (1997).
---------------------------------------------------------------------------

Section 804. Rate of interest on tax claims

This section enacts a new provision in the Bankruptcy Code
specifying the rate of interest for tax claims. For secured and
unsecured ad valorem tax claims, other unsecured tax claims for
which interest must be paid under Section 726(a)(5) of the
Bankruptcy Code, secured tax claims, and administrative tax
claims pursuant to section 503(b)(1) of the Bankruptcy Code,
the rate is determined under applicable nonbankruptcy law.
For all other tax claims, this section mandates that the
minimum interest rate shall be the Federal short-term rate
rounded to the nearest full percent, as determined under
section 1274(d) of the Internal Revenue Code of 1986, plus
three percentage points. The rate for Federal income tax claims
is subject to any adjustment required under section 6621(d) of
the Internal Revenue Code. As to taxes paid under a confirmed
plan of reorganization, the rate is determined as of the
calendar month in which the plan is confirmed.

Section 805. Tolling of priority of tax claim time periods

This section suspends the applicable time periods
pertaining to the priority status of tax claims determined.
Under section 507(a) of the Bankruptcy Code. Specifically, it
provides that the three-year period in section 507(a)(8)(A)(i)
is extended for the period during which a stay of proceedings
was in effect plus six months. This section also amends the
240-day provisions of section 507(a)(8)(A)(ii) to take into
account the pendency of an installment agreement and a stay of
proceedings against collection. Specifically, it tolls this
period for 30 days plus the time that an installment agreement
was pending during the240-day period, up to one year. It also
tolls the period for six months if a stay of proceedings against
collections was in effect in a prior bankruptcy case during such 240-
day period.

Section 806. Priority property taxes incurred

This section amends the Bankruptcy Code's priority
provisions with respect to property taxes. Under section
507(a)(8)(B) of the Bankruptcy Code, these taxes are determined
based on date of assessment. At the time a bankruptcy case is
filed, however, a property tax may not have been assessed. This
amendment addresses this problem by revising section
507(a)(8)(B) to make the determination based on when a priority
tax claim is incurred.

Section 807. Chapter 13 discharge of fraudulent and other taxes

Debtors who seek bankruptcy relief under chapter 7 of the
Bankruptcy Code are not able to discharge certain types of tax
claims as specified in section 523(a)(1) of the Bankruptcy
Code. Under current law, however, these same tax claims are
dischargeable in a chapter 13 case.¹⁰⁴ This section
modifies chapter 13's discharge provisions to make these debts
nondischargeable.
---------------------------------------------------------------------------
\104\ 11 U.S.C. Sec. 1328(a).
---------------------------------------------------------------------------

Section 808. Chapter 11 discharge of fraudulent taxes

Where the chapter 11 debtor is a corporation, this section
amends chapter 11's discharge provisions to prohibit the
discharge of any debt for a tax or customs duty resulting from
a fraudulent tax return filed by the debtor. It also prevents
the discharge of any unpaid tax or customs duty resulting from
a corporate chapter 11 debtor's willful attempt to evade or
defeat such obligation.

Section 809. Stay of tax proceedings

Upon the filing of a bankruptcy case, a broad stay of most
creditor collection actions immediately and automatically goes
into effect.¹⁰⁵ This section modifies the scope of
the automatic stay to provide that it only prevents the
commencement or continuation of tax proceedings for tax
liabilities incurred for a tax period ending before the date on
which the order for relief is entered. This section also carves
out a specific exception from the automatic stay for appeals of
tax determinations by courts or administrative tribunals. Under
this provision, the automatic stay does not apply to an appeal
of a decision in either a court or administrative tribunal that
determines a tax liability of a debtor, regardless of whether
such determination was made pre- or postpetition.
---------------------------------------------------------------------------
\105\ See 11 U.S.C. Sec. 362(a).
---------------------------------------------------------------------------

Section 810. Periodic payment of taxes in chapter 11 cases

Section 1129(a)(9)(C) of the Bankruptcy Code requires, as a
condition of confirmation, that a chapter 11 plan must provide
for payment of priority tax claims over a period that does not
exceed six years from the date of assessment of such claims.
This section amends this provision to require that these claims
must be paid in cash by regular installment payments, not
longer than three months apart, that begin on the plan's
effective date. This provision specifically prohibits balloon
payments. It also requires all payments to be made within five
years of the petition date or the last date payments are to be
made to other creditors under the chapter 11 plan.
For secured claims that would be entitled to priority under
section 507(a)(8) of the Bankruptcy Code if they were unsecured
claims, the holder of such claim must receive cash payments in
accordance with section 1129(a)(9)(C) of the Bankruptcy Code,
as amended by this provision.

Section 811. Avoidance of statutory tax liens prohibited

This section creates an exception to section 545(2)'s
avoidance provisions for statutory liens. Specifically, it
provides that a statutory lien on property of the debtor that
is unperfected or unenforceable against a bona fide purchaser
at the time the case is filed may be avoided unless the
purchaser qualifies under section 6323 of the Internal Revenue
Code ¹⁰⁶ or similar provision under State or local
law.
---------------------------------------------------------------------------
\106\ Section 6323 of the Internal Revenue Code defines
``purchaser'' as a person who, for adequate consideration, acquires an
interest (other than a lien or security interest) in property, which is
valid under local law against subsequent purchasers without notice.
---------------------------------------------------------------------------

Section 812. Payment of taxes in the conduct of business

This section provides four additional protections to ensure
the payment of tax obligations in bankruptcy cases. Section
812(a) requires bankruptcy trustees and chapter 11 debtors in
possession to pay tax obligations when they are due in the
course of the debtors' business,¹⁰⁷ with only one
limited exception. ¹⁰⁸ This provision does not apply
if such payment is excused under a provision of the Bankruptcy
Code. In addition, it permits a chapter 7 trustee to defer this
payment if the tax was not incurred by the trustee or if the
court has determined that there are insufficient funds in the
estate to pay administrative expenses that have the same
priority in distribution under section 726 as the unpaid tax
obligation.
---------------------------------------------------------------------------
\107\ Section 960 of Title 28 of the United States Code presently
requires bankruptcy trustees and debtors in possession to pay tax
obligations, but does not state how or when such payments must be made.
\108\ The exception applies to property of the estate, subject to a
secured property tax lien, that is abandoned.
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Section 812(b) amends section 503(b)(1)(B)(i) of the
Bankruptcy Code to clarify thatsecured and unsecured tax
obligations incurred postpetition by a bankruptcy estate, including
property taxes, are entitled to administrative expense priority. The
present provisions of the Bankruptcy Code do not so
specify.¹⁰⁹
---------------------------------------------------------------------------
\109\ See 11 U.S.C. Sec. 503(b)(1)(B). The National Bankruptcy
Review Commission recommended that postpetition ad valorem real estate
taxes be entitled to administrative expense status. See Report of the
National Bankruptcy Review Commission, at 956 (1997).
---------------------------------------------------------------------------
Section 812(c) amends section 503(b)(1) of the Bankruptcy
Code to eliminate the need for a governmental unit to file a
request for payment of an administrative expense relating to a
tax liability, as specified in section 503(b)(1)(B) or a tax
penalty, as specified in section 503(b)(1)(C). Under current
law, holders of administrative expense claims must submit a
request for payment of such claims.
Section 812(d) amends section 506(b) of the Bankruptcy Code
(which determines the entitlement of secured claimants to
interest, fees, and costs pursuant to the underlying agreement)
to extend this entitlement to state tax claimants. This
provision also amends section 506(c) of the Bankruptcy Code
(which allows a trustee to recover from property securing an
allowed secured claim certain costs) to include provision for
payment of ad valorem property taxes relating to such property.

Section 813 Tardily filed priority tax claims

To receive a payment in an asset chapter 7 case, a creditor
must file a proof of claim.¹¹⁰ Once the case is
fully administered, the chapter 7 trustee prepares a final
report and account,¹¹¹ which then is noticed to all
creditors and other parties in interest. Thereafter, the
chapter 7 trustee can commence making distribution to creditors
who have filed proofs of claim. Under current law, creditors
holding priority claims in asset chapter 7 cases must file
their proofs of claim before the date on which the trustee
commences making distribution to creditors in the estate.
Certain types of tax claims are entitled to priority
status.¹¹²
---------------------------------------------------------------------------
\110\ See 11 U.S.C. Sec. 502.
\111\ See 11 U.S.C. Sec. 704(9).
\112\ See, e.g., 11 U.S.C. Sec. 507(a).
---------------------------------------------------------------------------
This section permits a priority tax claim to be filed
either before the trustee commences final distribution under
section 726 or ten days following the mailing to creditors of
the summary of the trustee's final report, whichever is
earlier.

Section 814. Income tax returns prepared by tax authorities

Section 523(a)(1)(B) of the Bankruptcy Code prohibits the
discharge of certain types of tax claims. This section extends
these nondischargeability provisions to include obligations
based on equivalent reports or notices. It also specifies that
a tax return, for purposes of section 523(a)(1)(B) must satisfy
the requirements of applicable nonbankruptcy law and that it
must include a return prepared pursuant to section 6020(a) of
the Internal Revenue Code of 1986 or similar State or local
law. A return, under this provision, also includes a written
stipulation to a judgment entered by a nonbankruptcy tribunal,
but it does not include a tax return prepared under section
6020(b) of the Internal Revenue Code or similar State or local
law.

Section 815. The discharge of the estate's liability for unpaid taxes

Under certain conditions, section 505(b) of the Bankruptcy
Code provides for the discharge of tax liability for a
bankruptcy trustee, debtor, and successor of the debtor after
the expiration of certain time periods following a request made
to a government unit for a determination of such liability.
This section clarifies that this protection extends to the
bankruptcy estate.

Section 816. Requirement to file tax returns to confirm chapter 13
plans

As a condition of confirming a chapter 13 plan, section
816(a) requires a chapter 13 debtor to file all Federal, State,
and local tax returns for the three-year period preceding the
filing of the case on or before the first meeting of
creditors.¹¹³ If the debtor fails to meet this
deadline, the trustee may continue the meeting for a reasonable
period of time to give the debtor additional time to comply
with this requirement, subject to certain limitations specified
in section 816(b). A chapter 13 debtor may apply for an
extension of these time periods upon a showing by clear and
convincing evidence that the failure to file the returns was
due to circumstances beyond his or her control.
---------------------------------------------------------------------------
\113\ For purposes of this provision, a ``return'' includes one
prepared under section 6020(a) or (b) of the Internal Revenue Code or
similar state or local law. In addition, it also includes a judgment
entered by a nonbankruptcy tribunal.
---------------------------------------------------------------------------
Pursuant to section 816(c), if the chapter 13 debtor does
not file the requisite tax returns, the court on request of a
party in interest or the United States trustee must dismiss the
case or convert it to one under chapter 7, whichever is in the
best interests of creditors.
Section 816(d) amends section 502(b)(9) to create an
additional exception to this provision's disallowance of
tardily filed claims. Specifically, section 816(d) provides
that in a chapter 13 case, a governmental unit's tax claim with
respect to a return filed by the debtor pursuant to section
1308, as codified by section 816(b), is timely filed if it is
filed on or before 60 days after such return is filed.
Section 816(e) expresses a sense of the Congress that the
Advisory Committee on Bankruptcy Rules of the Judicial
Conference of the United States should, within a reasonable
period of time after enactment of the bill, propose rules
setting forth procedures by which a governmental unit may
object to confirmation of a chapter 13 debtor's plan under
certain specified circumstances and with respect to the
necessity to file an objection to certain tax claims relating
to returns filed pursuant to section 1308, as codified by
section 816(b).

Section 817. Standards for tax disclosure

A key component of the plan confirmation process in chapter
11 cases is the disclosure statement. The disclosure statement
is a document that must be sent to creditors and other parties
in interest who are affected by a chapter 11
plan.¹¹⁴ The purpose of the disclosure statement is
to provide adequate information about the plan so that those
who are affected by it can make an informed judgment about the
plan. ¹¹⁵
---------------------------------------------------------------------------
\114\ See 11 U.S.C. Sec. 1125(b).
\115\ See 11 U.S.C. Sec. 1125(a).
---------------------------------------------------------------------------
This section mandates that the disclosure statement include
a full discussion of the potential material Federal, State, and
local tax consequences of the plan to the debtor, any successor
of the debtor, and a hypothetical investor domiciled in the
state where the debtor resides or has its principal place of
business that is typical of creditors and interest holders in
the case.¹¹⁶
---------------------------------------------------------------------------
\116\ The National Bankruptcy Review Commission made a similar
recommendation. See Report of the National Bankruptcy Review
Commission, at 960 (1997).
---------------------------------------------------------------------------

Section 818. Set off of tax refunds

The automatic stay prevents the commencement and
continuation of various efforts by creditors to collect
prepetition obligations against either the debtor or the
debtor's property.¹¹⁷ This section creates an
exception to allow a governmental unit to set off an income tax
refund relating to a prepetition tax period against a
prepetition income tax liability for a prepetition tax
period.¹¹⁸ This exception does not apply if, prior
to such setoff, an action to determine the amount or legality
of the underlying tax liability under section 505(a) was
commenced. If the setoff is not permitted because of a pending
action to determine the amount or legality of the underlying
tax liability is pending, the governmental unit may hold the
refund pending the resolution of such action.
---------------------------------------------------------------------------
\117\ See 11 U.S.C. Sec. 362(a).
\118\ The National Bankruptcy Review Commission made a similar
recommendation. See Report of the National Bankruptcy Review
Commission, at 818-22 (1997).
---------------------------------------------------------------------------

Title IX--Ancillary and Other Cross-Border Cases

Title IX adds a new chapter to the Bankruptcy Code for
transnational bankruptcy cases. This incorporates the Model Law
on Cross-Border Insolvency to encourage cooperation between the
United States and foreign countries with respect to
transnational insolvency cases. Title IX is intended to provide
greater legal certainty for trade and investment as well as to
provide for the fair and efficient administration of cross-
border insolvencies, which protects the interests of creditors
and other interested parties, including the debtor. In
addition, it serves to protect and maximize the value of
debtor's assets.

Section 1501. Purpose and Scope of Application

The chapter introduces into the Bankruptcy Code the Model
Law on Cross-Border Insolvency (``Model Law''), which was
promulgated by the United Nations Commission on International
Trade Law (``UNCITRAL'') at its Thirtieth Session, May 12-30,
1997.¹¹⁹
---------------------------------------------------------------------------
\119\ The text of the Model Law and the Report of UNCITRAL on its
adoption are found at U.N. G.A., 52d Sess., Supp. No. 17 (A/52/17)
[``Report'']. That Report and the Guide to Enactment of the UNCITRAL
Model Law on Cross-Border Insolvency, U.N. Gen. Ass., UNCITRAL 30th
Sess. U.N. Doc. A/CN.9/442 (1997) [``Guide''], which was discussed in
the negotiations leading to the Model Law and published by UNCITRAL as
an aid to enacting countries, should be consulted for guidance as to
the meaning and purpose of its provisions. The development of the
provisions in the negotiations at UNCITRAL, in which the United States
was an active participant, is recounted in the interim reports of the
Working Group that are cited in the Report.
---------------------------------------------------------------------------
Cases brought under this chapter are intended to be
ancillary to cases brought in a debtor's home country, unless a
full United States bankruptcy case is brought under another
chapter. Even if a full case is brought, the court may decide
under section 305 of the Bankruptcy Code to stay or dismiss the
United States case under the other chapter and limit the United
States'' role to an ancillary case under this
chapter.¹²⁰ If the full case is not dismissed, it
will be subject to the provisions of this chapter governing
cooperation, communication and coordination with the foreign
courts and representatives.
---------------------------------------------------------------------------
\120\ See section 1529 and commentary.
---------------------------------------------------------------------------
In any case, an order granting recognition is required as a
prerequisite to the use of sections 301 and 303 by a foreign
representative. Section 1501 combines the Preamble to the Model
Law (subsection 1) with its article 1 (subsections 2 and
3).¹²¹
---------------------------------------------------------------------------
\121\ Guide at 16-19.
---------------------------------------------------------------------------
It largely follows the language of the Model Law and fills
in blanks with appropriate United States references. However,
it adds in subsection 3 an exclusion of certain natural persons
who may be considered ordinary consumers. Although the consumer
exclusion is not in the text of the Model Law, the discussions
at UNCITRAL recognized that some such exclusion would be
necessary in countries like the United States where there are
special provisions for consumer debtors in the insolvency
laws.¹²²
---------------------------------------------------------------------------
\122\ See id. at 18 para. 60; 19 para. 66.
---------------------------------------------------------------------------
The reference to section 109(e) essentially defines
``consumer debtors'' for purposes of the exclusion by
incorporating the debt limitations of that section, but not its
requirement of regular income. The exclusion adds a requirement
that the debtor or debtor couple be citizens or long-term legal
residents of the United States. This ensures that residents of
other countries will not be able to manipulate this exclusion
to avoid recognition of foreign proceedings in their home
countries or elsewhere.
The first exclusion in subsection c constitutes for the
United States the exclusion provided in article 1, subsection
2, of the Model Law.¹²³ The reference to section
109(b) interpolates to the entities governed by different
insolvency regimes under United States law which are therefore
currently excluded from liquidation proceedings under Title 11.
---------------------------------------------------------------------------
\123\ Id. at 17.
---------------------------------------------------------------------------

Section 1502. Definitions

``Debtor'' is given a special definition for this chapter.
That definition does not come from the Model Law but is
necessary to eliminate the need to refer repeatedly to ``the
same debtor as in the foreign proceeding.'' With certain
exceptions, the term ``person'' used in the Model Law has been
replaced with ``entity,'' which is defined broadly in section
101(15) to include natural persons and various legal entities,
thus matching the intended breadth of the term ``person'' in
the Model Law. The exceptions include contexts in which a
natural person is intended and those in which the Model Law
language already refers to both persons and entities other than
persons. The definition of ``trustee'' for this chapter ensures
that debtors in possession and debtors; as well as trustees,
are included in the term.¹²⁴
---------------------------------------------------------------------------
\124\ See section 1505.
---------------------------------------------------------------------------
The definition of ``within the territorial jurisdiction of
the United States'' in subsection (7) is not taken from the
Model Law. It has been added because the United States, like
some other countries, asserts insolvency jurisdiction over
property outside its territorial limits under appropriate
circumstances. Thus a limiting phrase is useful where the Model
Law and this chapter intend to refer only to property within
the territory of the enacting state.
Two key definitions of ``foreign proceeding'' and ``foreign
representative,'' are found in subsections 101(24)-(25), which
have been amended consistent with Model Law article
2.¹²⁵
---------------------------------------------------------------------------
\125\ Guide at 19-21 paras. 67-68.
---------------------------------------------------------------------------
The definitions of ``establishment,'' ``foreign court,''
``foreign main proceeding,'' and ``foreign non-main
proceeding'' have been taken from Model Law article 2, with
only minor language variations necessary to comport with United
States terminology. Additionally, defined terms have been
placed in alphabetical order.¹²⁶
---------------------------------------------------------------------------
\126\ See Guide at 19, (Model Law) 21 para. 75 (concerning
establishment) 21 para. 74 (concerning foreign court) 21 paras. 72, 73
and 75 (concerning foreign main and non-main proceedings).
---------------------------------------------------------------------------
In order to at least be recognized as a foreign non-main
proceeding, the debtor must at least have an establishment in
that foreign country.¹²⁷
---------------------------------------------------------------------------
\127\ See id. at 21 para. 75.
---------------------------------------------------------------------------

Section 1503. International obligations of the United States

This section is taken exactly from the Model Law with only
minor adaptations of terminology.¹²⁸ Although this
section makes an international obligation prevail, the courts
will attempt to read the Model Law and the international
obligation so as not to con-

flict, especially if the international obligation addresses a
subject matter less directly related than the Model Law to a
case before the court.
---------------------------------------------------------------------------
\128\ See id. at 22 Art. 3.
---------------------------------------------------------------------------

Section 1504. Commencement of ancillary case

This section paraphrases current section 304(a), which is
repealed. Article 4 of the Model Law is designed for
designation of the competent court which will exercise
jurisdiction under the Model Law. In United States law,
subsection 1334(a) of title 28, gives exclusive jurisdiction to
the district courts in a ``case'' under this
title.¹²⁹
---------------------------------------------------------------------------
\129\ See id. at 23 (Article 4).
---------------------------------------------------------------------------
Therefore, since the competent court has been determined in
title 28, this section instead provides that a petition for
recognition opens a ``case,'' an approach that also invokes a
number of other useful procedural provisions. In addition, a
new subsection (P) of section 157 of title 28 makes cases under
this chapter part of the core jurisdiction of bankruptcy courts
when referred to them by the district courts, thus completing
the designation of the competent court. Finally, the particular
bankruptcy court that will rule on the petition is determined
pursuant to section 1410 of title 28 governing venue and
transfer.
The title ``ancillary'' in this section and in the title of
this chapter emphasizes the United States policy in favor of a
general rule that countries other than the home country of the
debtor, where a main proceeding would be brought, should
usually act through ancillary proceedings in aid of the main
proceedings, in preference to a system of full bankruptcies
(often called ``secondary'' proceedings) in each state where
assets are found. Under the Model Law, notwithstanding the
recognition of a foreign main proceeding full bankruptcy cases
are permitted in each country (see sections 1528 and 1529). In
the United States, the court will have the power to suspend or
dismiss such cases where appropriate under section 305.
Additional assistance under the successor provision to
current section 304 is set forth in section 1507.

Section 1505. Authorization to act in a foreign country

The language in this section varies from the wording of
article 5 of the Model Law as necessary to comport with United
States law and terminology. The slight alteration to the
language in the last sentence is meant to emphasize that the
identification of the entity entitled to act is under United
States law, while the scope of actions that may be taken by
[that entity] under foreign law is limited by the foreign
law.¹³⁰
---------------------------------------------------------------------------
\130\ Id. at 24.
---------------------------------------------------------------------------
The related amendments to chapters 7 and 11 make acting
pursuant to authorization under this section an additional
power of a trustee or debtor in possession.
While the Model Law automatically authorizes an
administrator to act abroad, this section requires all trustees
and debtors to obtain court approval before acting abroad. That
requirement is a change from the language of the Model Law, but
one that is purely internal to United States law.¹³¹
---------------------------------------------------------------------------
\131\ See id. at 24 (Article 5).
---------------------------------------------------------------------------
Its main purpose is to ensure that the court has knowledge
and control of possibly expensive activities, but it will have
the collateral benefit of providing further assurance to
foreign courts that the United States debtor or representative
is under judicial authority and supervision. This requirement
means that the first-day orders in reorganization cases should
include authorization to act under this section where
appropriate.
This section also contemplates the designation of an
examiner or other natural person to act for the estate in one
or more foreign countries where appropriate. One instance might
be a case in which the designated person had a special
expertise relevant to that assignment. Another might be where
the foreign court would be more comfortable with a designated
person than with an entity like a debtor in possession. Either
are to be recognized under the Model Law.¹³²
---------------------------------------------------------------------------
\132\ See id. at 23-24 and para. 82.
---------------------------------------------------------------------------

Section 1506. Public policy exception

This provision follows the Model Law article 5 exactly, is
standard in UNCITRAL texts and has been narrowly interpreted on
a consistent basis in courts around the world. The word
``manifestly'' in international usage restricts the public
policy exception to the most fundamental policies of the United
States.¹³³
---------------------------------------------------------------------------
\133\ See id. at 25.
---------------------------------------------------------------------------

Section 1507. Additional assistance

Subsection 1 follows the language of Model Law article
7.¹³⁴
---------------------------------------------------------------------------
\134\ Id. at 26.
---------------------------------------------------------------------------
Subsection 2 makes the authority for additional relief
subject to [the conditions for relief in] existing United
States law under section 304, which is repealed. This section
is intended to permit the further development of international
cooperation begun under section 304, but is not to be the basis
for denying or limiting relief otherwise available under this
chapter. The additional assistance is made conditional upon the
court's consideration of the factors set forth in the current
subsection 304(c) in a context of a reasonable balancing of
interests following current case law. The references to
``estate'' in the current subsection have been changed to refer
to the debtor's property, because many foreign systems do not
create an estate in insolvency proceedings of the sort
recognized under this chapter. Although the case law construing
section 304 clearly makescomity the central consideration, its
physical placement as one of six factors in subsection (c) of section
304 is misleading. Therefore, in subsection 2 of this section, comity
is raised to the introductory language to make it clear that it is the
central concept to be addressed.\135\
---------------------------------------------------------------------------
\135\ Id. at 26.
---------------------------------------------------------------------------

Section 1508. Interpretation

This section follows conceptually Model Law article 8 and
is a standard one in recent UNCITRAL treaties and model laws.
Language changes were made to express the concepts more clearly
in United States vernacular.\136\
---------------------------------------------------------------------------
\136\ Id. at 26 paras. 91.
---------------------------------------------------------------------------
Interpretation of this chapter on a uniform basis will be
aided by reference to the Guide and the Reports cited therein,
which explain the reasons for the terms used and often cite
their origins as well. Uniform interpretation will also be
aided by reference to CLOUT, the UNCITRAL Case Law On Uniform
Texts, which is a service of UNCITRAL. CLOUT receives reports
from national reporters all over the world concerning court
decisions interpreting treaties, model laws, and other texts
promulgated by UNCITRAL. Not only are these sources persuasive,
but they are important to the crucial goal of uniformity of
interpretation. To the extent that the United States courts
rely on these sources, their decisions will more likely be
regarded as persuasive elsewhere.

Section 1509. Right of direct access

This section implements the purpose of article 9 of the
Model Law, enabling a foreign representative to commence a case
under this chapter by filing a petition directly with the court
without preliminary formalities that may delay or prevent
relief. It varies the language to fit United States procedural
requirements and it imposes recognition of the foreign
proceeding as a condition to further rights and duties of the
foreign representative. Only if recognition is granted; the
foreign representative will have full capacity under U.S. law
(subsection (b)(1)), may request such relief in a state or
federal court other than the bankruptcy court (subsection
(b)(2)) and may be granted comity or cooperation by such a non-
bankruptcy court (subsection (b)(3) and (c)). Subsections
(b)(2), (b)(3) and (c) make it clear that chapter 15 is
intended to be the exclusive door to ancillary assistance to
foreign proceedings. The goal is to concentrate control of
these questions in one court. That goal is important in a
federal system like the United States with many different
courts, state and federal, that may have pending actions
involving the debtor or the debtor's property. This section,
therefore, completes for the United States the work of article
4 of the Model Law (``competent court'') as well as article
9.\137\
---------------------------------------------------------------------------
\137\ See id. at 23, (Article 4, paras. 79-83) 27 (Article 9, para.
93).
---------------------------------------------------------------------------
Although a petition under current section 304 is the proper
method for achieving deference by a United States court to a
foreign insolvency under present law, some cases in state and
federal courts under current law have granted comity suspension
or dismissal of cases involving foreign proceedings without
requiring a section 304 petition or even referring to the
requirements of that section. Even if the result is correct in
a particular case, the procedure is undesirable, because there
is room for abuse of comity. Parties would be free to avoid the
requirements of this chapter and the expert scrutiny of the
bankruptcy court by applying directly to a state or federal
court unfamiliar with the statutory requirements. Such an
application could be made after denial of a petition under this
chapter. This section concentrates the recognition and
deference process in one United States court, ensures against
abuse, and empowers a court that will be fully informed of the
current status of all foreign proceedings involving the
debtor.\138\
---------------------------------------------------------------------------
\138\ See id. at 27 (Article 9), 34-35 (Article 15 and paras. 116-
119, 35), 39-40 (Article 18, paras. 133-134); see also subsection
1515(3) and Section 1518.
---------------------------------------------------------------------------
Subsection (d) has been added to ensure that a foreign
representative cannot seek relief in courts in the United
States after being denied recognition by the court under this
chapter.
Subsection (e) makes operations in the United States by a
foreign representative subject to applicable United States law,
just as 28 U.S.C. 959 does for a domestic trustee in
bankruptcy.\139\
---------------------------------------------------------------------------
\139\ Id. at 27, para. 93.
---------------------------------------------------------------------------
Subsection (f) provides a limited exception to the prior
recognition requirement so that collection of a claim which is
property of the debtor, for example an account receivable, by a
foreign representative may proceed without commencement of a
case or recognition under this chapter.

Section 1510. Limited jurisdiction

Section 1510, article 10 of the Model Law, is modeled on
section 306 of the Code. Although the language referring to
conditional relief in section 306 is not included, the court
has the power under section 1522 to attach appropriate
conditions to any relief it may grant. Nevertheless, the
authority in section 1522 is not intended to permit the
imposition of jurisdiction over the foreign representative
beyond the boundaries of the case under this chapter and any
related actions the foreign representative may take, such as
commencing a case under another chapter of this title.

Section 1511. Commencement of case under section 301 or 303

This section follows the intent of article 11 of the Model
Law, but adds language that conforms to United States law or
that is otherwise necessary in the United States given its many
bankruptcy court districts and the importance of full
information-sharing and coordination among them.\140\ Article
11 does not distinguish between voluntary and involuntary
proceedings, but seems to have implicitly assumed an
involuntary proceeding.\141\
---------------------------------------------------------------------------
\140\ See id. at 28 (Article 11).
\141\ Id. at 28 paras. 97-99.
---------------------------------------------------------------------------
Subsection 1(a)(2) goes farther and permits a voluntary
filing, with its much simpler requirements, if the foreign
proceeding is a main proceeding.

Section 1512. Participation of a foreign representative in a case under
this title

This section follows article 12 of the Model Law with a
slight alteration to tie into United States procedural
terminology.\142\ The effect of this section is to make the
recognized foreign representative a party in interest in any
pending or later commenced United States bankruptcy case.\143\
---------------------------------------------------------------------------
\142\ Id. at 29 (Article 12).
\143\ Id. at 29 paras. 10-102.
---------------------------------------------------------------------------
Throughout this chapter, the word ``case'' has been
substituted for the word ``proceeding'' in the Model Law when
referring to cases under the United States Bankruptcy Code, to
conform to United States usage.

Section 1513. Access of foreign creditors to a case under this title

This section mandates nondiscriminatory or ``national''
treatment for foreign creditors, except as provided in
subsection (b) and section 1514. It follows the intent of Model
Law article 13, but the language has been altered to conform
with the Bankruptcy Code.\144\
---------------------------------------------------------------------------
\144\ Id. at 30 para. 103.
---------------------------------------------------------------------------
The law as to priority for foreign claims that fit within a
class given priority treatment under section 507 (for example,
foreign employees or spouses) is unsettled. This section
permitsthe continued development of case law on that subject
and its general principle of national treatment should be an important
factor to be considered. At a minimum, under this section, foreign
claims must receive the treatment given to general unsecured claims
without priority, unless they are in a class of claims in which
domestic creditors would also be subordinated.\145\
---------------------------------------------------------------------------
\145\ See id. at 30 para. 104.
---------------------------------------------------------------------------
The Model Law allows for an exception to nondiscrimination
as to foreign revenue and other public law claims.\146\ Such
claims (such as tax and social security claims) have been
denied enforcement in the United States traditionally, inside
and outside of bankruptcy. The Bankruptcy Code is silent on
this point, so the rule is purely a matter of traditional case
law. It is not clear if this policy should be maintained or
modified, so this section leaves it to developing case law. It
also allows the Department of Treasury to negotiate reciprocal
arrangements with our tax treaty partners in this regard,
although it does not mandate any restriction of the evolution
of case law pending such negotiations.
---------------------------------------------------------------------------
\146\ See Id. at 31 para. 105.
---------------------------------------------------------------------------

Section 1514. Notification of foreign creditors concerning a case under
title 11

This section ensures that foreign creditors receive proper
notice of cases in the United States.\147\ As ``foreign
creditor'' is not a defined term; foreign addresses are used as
the distinguishing factor. The Federal Rules of Bankruptcy
Procedure should be amended to conform to the requirements of
this section, including a special form for notice to such
creditors. In particular, the rules must provide for additional
time for such creditors to file proofs of claim where
appropriate and must provide for the court to make specific
orders in that regard in proper circumstances. Of course, if a
foreign creditor has made an appropriate request for notice, it
will receive notices in every instance where notices would be
sent to other creditors who have made such requests. The notice
must specify that secured claims must be asserted, because in
many countries such claims are not affected by an insolvency
proceeding and need not be filed.\148\
---------------------------------------------------------------------------
\147\ See Model Law Article 14 and Guide at 31-32 paras. 106-109.
\148\ Guide at 33 para 111.
---------------------------------------------------------------------------
Subsection (d) replaces the reference to ``a reasonable
time period'' in Model Law article 14(3)(a).\149\ It makes
clear that the Federal Rules of Bankruptcy Procedure, local
rules, and court orders must make appropriate adjustments in
time periods and bar dates so that foreign creditors have a
reasonable time within which to receive notice or take an
action.
---------------------------------------------------------------------------
\149\ Id. at 31 (Article 14(3)(a)).
---------------------------------------------------------------------------

Section 1515. Application for recognition of a foreign proceeding

This section follows article 15 of the Model Law with minor
changes.\150\ The rules will require amendment to provide forms
for some or all of the documents mentioned in this section, to
make necessary additions to rules 1000 and 2002 of the Federal
Rules of Bankruptcy Procedure to facilitate appropriate notices
of the hearing on the petition for recognition, and to require
filing of lists of creditors and other interested persons who
should receive notices. Throughout the Model Law, the question
of notice procedure is left to the law of the enacting
state.\151\
---------------------------------------------------------------------------
\150\ Id. at 33.
\151\ See id. at 36 para. 121.
---------------------------------------------------------------------------

Section 1516. Presumptions concerning recognition

This section follows article 16 of the Model Law with minor
changes.\152\
---------------------------------------------------------------------------
\152\ Id. at 36.
---------------------------------------------------------------------------
Although sections 1515 and 1516 are designed to make
recognition as simple and expedient as possible, the court may
hear proof on any element stated. The ultimate burden as to
each element is on the foreign representative, although the
court is entitled to shift the burden to the extent indicated
in section 1516. The word ``proof'' in subsection 3 has been
changed to ``evidence'' to make it clearer using United States
terminology that the ultimate burden is on the foreign
representative.\153\
---------------------------------------------------------------------------
\153\ Id. at 36 (Article 16(3)).
---------------------------------------------------------------------------
``Registered office'' is the term used in the Model Law to
refer to the place of incorporation or the equivalent for an
entity that is not a natural person.\154\
---------------------------------------------------------------------------
\154\ Id. at 36 (Article 16(3)).
---------------------------------------------------------------------------
The presumption that the place of the registered office is
also the center of the debtor's main interest is included for
speed and convenience of proof where there is no serious
controversy.

Section 1517. Order recognizing a foreign proceeding

This section closely follows article 17 of the Model Law,
with a few exceptions.\155\ The decision to grant recognition
is not dependent upon any findings about the nature of the
foreign proceedings of the sort previously mandated by section
304(c). The requirements of this section, which incorporates
the definitions in section 1502 and subsections 101(23) and
(24), are all that must be fulfilled to attain recognition.
---------------------------------------------------------------------------
\155\ Id. at 37.
---------------------------------------------------------------------------
The drafters of the Model Law understood that only a main
proceeding or a non-main proceeding meeting the standards of
section 1502 (that is, one brought where the debtor has an
establishment) were entitled to recognition under this section. The
Model Law has been slightly modified to make this point clear by
referring to the section 1502 definition of main and non-main
proceedings, as well as to the general definition of a foreign
proceeding in section 101(23). Naturally, a petition under section 1515
must show that proceeding is a main or a qualifying non-main proceeding
in order to win recognition under this section.
Consistent with the position of various civil law
representatives in the drafting of the Model Law, recognition
creates a status with the effects set forth in section 1520, so
those effects are not viewed as orders to be modified, as are
orders granting relief under sections 1519 and 1521. Subsection
4 states the grounds for modifying or terminating recognition.
On the other hand, the effects of recognition are subject to
modification under section 362(d), made applicable by section
1520(2), which permits lifting the stay of section 1520 for
cause.
Paragraph 1(d) of section 17 of the Model Law has been
omitted as an unnecessary requirement for United States
purposes, because a petition submitted to the wrong court will
be dismissed or transferred under other provisions of United
States law.¹⁵⁶
---------------------------------------------------------------------------
\156\ Id. at 37 (Article 17(1)(d)).
---------------------------------------------------------------------------
The reference to section 350 refers to the routine closing
of a case that has been completed and will invoke requirements
including a final report from the foreign representative in
such form as the rules or a court order may
provide.¹⁵⁷
---------------------------------------------------------------------------
\157\ Id. at 37 (Article 17(1)(d)).
---------------------------------------------------------------------------

Section 1518. Subsequent information

This section follows the Model Law, except to eliminate the
word ``same'' which is rendered unnecessary by the definition
of ``debtor'' in section 1502 and to provide for a formal
document to be filed with the court.¹⁵⁸
---------------------------------------------------------------------------
\158\ Id. at 39-40 paras. 133-134.
---------------------------------------------------------------------------
Judges in several jurisdictions, including the United
States, have reported the need for a requirement of complete
and candid reports to the court of all proceedings, worldwide,
involving the debtor. This provision will ensure that such
information is provided to the court on a timely basis. Any
failure to comply with this section will be subject to the
sanctions available to the court for violations of the statute.
The section leaves to the Rules the form of the required notice
and related questions of notice to parties in interest, the
time for filing, and the like.

Section 1519. Relief that may be granted upon petition for recognition
of a foreign proceeding

This section generally follows article 19 of the Model
Law.¹⁵⁹ The bankruptcy court will have jurisdiction
to grant emergency relief under Rule 7065 pending a hearing on
the petition for recognition. This section does not expand or
reduce the scope of section 105 as determined by cases under
section 105 nor does it modify the sweep of sections 555 to
560.
---------------------------------------------------------------------------
\159\ Id. at 40.
---------------------------------------------------------------------------

Section 1520. Effects of recognition of a foreign main proceeding

In general, this section sets forth all the relief that is
available as a matter of right based upon recognition
hereunder, although additional assistance may be provided under
section 1507. This chapter has no effect on any relief
currently available under section 105 of the Bankruptcy Code.
The stay created by article 20 of the Model Law is imported
to chapter 15 from elsewhere in the Bankruptcy Code. Subsection
(a)(1) combines subsection 1(a) and (b) of article 20 of the
Model Law, because section 362 imposes the restrictions
required by those two subsections and additional restrictions
as well.¹⁶⁰
---------------------------------------------------------------------------
\160\ Id. at 42 (Article 20 1(a)(b)).
---------------------------------------------------------------------------
Subsection (a)(2) and (4) apply the Bankruptcy Code
sections that impose the restrictions called for by subsection
1(c) of the Model Law. In both cases, the provisions are
broader and more complete than those contemplated by the Model
Law, but include all the restraints the Model Law provisions
would impose.¹⁶¹
---------------------------------------------------------------------------
\161\ Id. at 42, 45.
---------------------------------------------------------------------------
As the foreign proceeding may or may not create an
``estate'' similar to that created in cases under this title,
the restraints are applicable to actions against the debtor
under section 362(a) and with respect to the property of the
debtor under the remaining sections. The only property covered
by this section is property within the territorial jurisdiction
of the United States as defined in section 1502. To achieve
effects on property of the debtor which is not within the
territorial jurisdiction of the United States, the foreign
representative would have to commence a case under another
chapter of this title.
By applying section 362, subsection (a) makes applicable
the United States exceptions and limitations to the restraints
imposed on creditors, debtors, and others in a case under this
title, as stated in article 20(2) of the Model
Law.¹⁶²
---------------------------------------------------------------------------
\162\ Id. at 42 (Article 20(2)); 44, paras. 148, 150.
---------------------------------------------------------------------------
These exceptions and limitations include those set forth in
subsections 362(b), (c), and (d). As one result, the court has
the power to terminate the stay pursuant to section 362(d), for
cause.¹⁶³
---------------------------------------------------------------------------
\163\ Id. at 42 (Article 20(3)); 44, 45 paras. 151, 152.
---------------------------------------------------------------------------
Subsection (a)(2), by its reference to sections 363 and 552
adds to the powers of a foreign representative of a foreign
main proceeding an automatic right to operate the debtor's
business and exercise the power of a trustee under sections 363
and 542, unless the court orders otherwise. A foreign representative of
a foreign main proceeding may need to continue a business operation to
maintain value and granting that authority automatically will eliminate
the risk of delay. If the court is uncomfortable about this authority
in a particular situation it can ``order otherwise'' as part of the
order granting recognition.
Two special exceptions to the automatic stay are embodied
in subsections (b) and (c). To preserve a claim in certain
foreign countries, it may be necessary to commence an action.
Subsection (b) permits the commencement of such an action, but
would not allow for its further prosecution. Subsection (c)
provides that there is no stay of the commencement of a full
United States bankruptcy case. This essentially provides an
escape hatch through which any entity, including the foreign
representative, can flee into a full case. The full case,
however, will remain subject to subchapters IV and V on
cooperation and coordination of proceedings. Section 108 of the
Bankruptcy Code provides the tolling protection intended by
Model Law article 20(3), so no exception is necessary as to
claims that might be extinguished under United States
law.¹⁶⁴
---------------------------------------------------------------------------
\164\ Id. at 42 (Article 20(3)); 44, 45 paras. 151, 152.
---------------------------------------------------------------------------
Subsection 3 permits suits in other countries to the extent
such suits are required to preserve the existence of a claim.

Section 1521. Relief that may be granted upon recognition of a foreign
proceeding

This section follows article 21 of the Model Law, with
detailed changes to fit United States law.¹⁶⁵ The
exceptions in subsection (a)(7) relate to avoiding powers. The
foreign representative's status as to such powers is governed
by section 1523 below. The avoiding power in section 549 and
the exceptions to that power are covered by section 1520(1)(b).
---------------------------------------------------------------------------
\165\ Id. at 45-46 (Article 21).
---------------------------------------------------------------------------
The word ``adequately'' in the Model Law, articles 21(2)and
22(1), has been changed to ``sufficiently'' in subsection
1521(b) and 1522(a) to avoid confusion with a very specialized
legal term in United States bankruptcy, ``adequate
protection.''¹⁶⁶
---------------------------------------------------------------------------
\166\ Id. at 46 (Article 21(2), 47 (Article 22(1)).
---------------------------------------------------------------------------
Subsection (c) is designed to limit relief to assets having
some direct connection with a non-main proceeding, for example
where they were part of an operating division in the
jurisdiction of the non-main proceeding when they were
fraudulently conveyed and then brought to the United
States.¹⁶⁷
---------------------------------------------------------------------------
\167\ See id. at 46, 47, paras. 158, 160.
---------------------------------------------------------------------------
This section does not expand or reduce the scope of relief
currently available in ancillary cases under sections 105 and
304 of the Bankruptcy Code nor does it modify the sweep of
sections 555 through 560.

Section 1522. Protection of creditors and other interested persons

This section follows article 22 of the Model Law with
change for United States usage and references to relevant
Bankruptcy Code sections.¹⁶⁸ It gives the bankruptcy
court broad latitude to mold relief to circumstances, including
appropriate responses if it is shown that the foreign
proceeding is seriously and unjustifiably injuring United
States creditors. For a response to a showing that the
conditions necessary to recognition did not actually exist or
have ceased to exist, see section 1517. Concerning the change
of ``adequately'' in the Model Law to ``sufficiently'' in this
section, see section 1521. At the end, subsection (d) is new
and simply makes clear that an examiner appointed in a case
under chapter 15 shall be subject to certain duties and bonding
requirements based on those imposed on trustees and examiners
under other chapters of this title.
---------------------------------------------------------------------------
\168\ Id. April 26, 1999 at 47..
---------------------------------------------------------------------------

Section 1523. Actions to avoid acts detrimental to creditors

This section follows article 23 of the Model Law, with
wording to fit it within procedure under this
title.¹⁶⁹ It confers standing on a recognized
foreign representative to assert an avoiding action but only in
a pending case under another chapter of this title. The Model
Law would grant such standing in a recognized foreign
proceeding if no full case were pending. This limitation
reflects concerns raised by the United States delegation during
the UNCITRAL debates that simply granting standing to bring
avoidance actions neglected to address very difficult choice of
law and forum issues. This limited grant of standing in section
1523 does not create or establish any legal right of avoidance
nor does it create or imply any legal rules with respect to the
choice of applicable law as to the avoidance of any transfer or
obligation.¹⁷⁰
---------------------------------------------------------------------------
\169\ Id. at 48, 49.
\170\ See id. at 49, para. 166.
---------------------------------------------------------------------------
The courts will determine the nature and extent of any such
action and what national law may be applicable to such action.

Section 1564. Intervention by a foreign representative

This section is worded the same as the Model Law, except
for a few clarifying words.¹⁷¹ This section gives
the foreign representative the right to intervene in United
States cases, state or federal, where the debtor is a party.
Recognition being an act under federal bankruptcy law, it must
take effect in state as well as federal courts. This section
does not require substituting the foreign representative for
the debtor, although that result may be appropriate in some
circumstances.
---------------------------------------------------------------------------
\171\ Id. at 49.
---------------------------------------------------------------------------

Section 1525. Cooperation and direct communication between the court
and foreign courts or foreign representatives

The wording of this section is almost exactly that of the
Model Law.¹⁷² The right of courts to communicate
with other courts in worldwide insolvency cases is of central
importance. This section authorizes courts to do so. This right
must be exercised, however, with due regard to the rights of
the parties. Guidelines for such communications should be
promulgated.
---------------------------------------------------------------------------
\172\ Id. at 50.
---------------------------------------------------------------------------

Section 1526. Cooperation and direct communication between the trustee
and foreign courts or foreign representatives

This section follows the Model Law almost
exactly.¹⁷³ The language in Model Law article 26
concerning the trustee's function was eliminated as unnecessary
because it is always implied under United States law. The
section authorizes the trustee, including a debtor in
possession, to cooperate with other proceedings.
---------------------------------------------------------------------------
\173\ Id. at 51.
---------------------------------------------------------------------------
Subsection (3) is not taken from the Model Law but is added
so that any examiner appointed under this chapter will be
designated by the United States Trustee and will be bonded.

Section 1527. Forms of cooperation

This section follows the Model Law exactly. Guide at 51-53.
United States bankruptcy courts have already engaged in most of
the forms of cooperation mentioned here, but they now have
explicit statutory authorization for acts like the approval of
protocols of the sort used in cases.¹⁷⁴
---------------------------------------------------------------------------
\174\ See e.g. Inre Maxwell Communication Corp., 93 F.2d 1036 12d
Cir. 1966).
---------------------------------------------------------------------------

Section 1528. Commencement of a case under title 11 after recognition
of a foreign main proceeding

This section follows the Model Law, with specifics of
United States law replacing the general clause at the end to
cover assets normally included within the jurisdiction of the
United States courts in bankruptcy cases, except where assets
are subject to the jurisdiction of another recognized
proceeding.\175\
---------------------------------------------------------------------------
\175\ Guide at 54, 55.
---------------------------------------------------------------------------
In a full bankruptcy case, the United States bankruptcy
court generally has jurisdiction over assets outside the United
States. Here that jurisdiction is limited where those assets
are controlled by another recognized proceeding.
The court may use section 305 of this title to dismiss,
stay, or limit a case as necessary to promote cooperation and
coordination in a cross-border case. In addition, although the
jurisdictional limitation applies only to United States
bankruptcy cases commenced after recognition of a foreign
proceeding, the court has ample authority under section 629 of
the bill and section 305 of the Bankruptcy Code to exercise its
discretion to dismiss, stay, or limit a United States case that
was filed after a petition for recognition of a foreign main
proceeding has been filed but before it has been approved, if
recognition is ultimately granted.

Section 1529. Coordination of a case under title 11 and a foreign
proceeding

This section follows the Model Law almost exactly, but
subsection (d) adds a reference to section 305 to make it clear
that the bankruptcy court may continue to use that section, as
under present law, to dismiss or suspend a United States case
as part of coordination and cooperation with foreign
proceedings.\176\
---------------------------------------------------------------------------
\176\ Id. at 55, 56.
---------------------------------------------------------------------------
This provision is consistent with United States policy to
act ancillary to a foreign main proceeding whenever possible.

Section 1530. Coordination of more than one foreign proceeding

This section exactly follows article 30 of the Model
Law.\177\ It ensures that a foreign main proceeding will be
given primacy in the United States, consistent with the overall
approach of the United States favoring assistance to foreign
main proceedings.
---------------------------------------------------------------------------
\177\ Id. at 57.
---------------------------------------------------------------------------

Section 1531. Presumption of insolvency based on recognition of a
foreign main proceeding

This section follows the Model Law exactly, inserting a
reference to the standard for an involuntary case under this
title.\178\ Where an insolvency proceeding has begun in the
home country of the debtor, and in the absence of contrary
evidence, the foreign representative should not have to make a
new showing that the debtor is in the sort of financial
distress requiring a collective judicial remedy. The word
``proof'' here means ``presumption.'' The presumption does not
arise for any purpose outside this section.
---------------------------------------------------------------------------
\178\ Id. at 58.
---------------------------------------------------------------------------

Section 1532. Rule of payment in concurrent proceeding

This section follows the Model Law exactly and is very
similar to prior section 508(a), which is repealed. The Model
Law language is somewhat clearer and broader than the
equivalent language of prior section 508(a).\179\
---------------------------------------------------------------------------
\179\ Id. at 59.
---------------------------------------------------------------------------
This section provides that the bankruptcy court in any
district in which there has been a reference under subsection
157(a) will have core jurisdiction over cases commenced under
chapter 15, and ancillary cross-border cases.
Although the United States will continue to assert
worldwide jurisdiction over property of a domestic or foreign
debtor in a full bankruptcy case under chapters 7 and 13 of
this title, subject to deference to foreign proceedings under
chapter 15 and section 305, the situation is different in a
case commenced under chapter 15. There, the United States is
acting solely in an ancillary position, so jurisdiction over
property is limited to that stated in chapter 15.
The third provision complements the automatic inclusion of
chapter 15 in the U.S. Trustee's language of prior section
508(a).\180\
---------------------------------------------------------------------------
\180\ Id. at 59.
---------------------------------------------------------------------------

Amendments to other chapters in title 11, United States Code

The first amendment provides that the bankruptcy court in
any district in which there has been a reference under
subsection 157(a) will have core jurisdiction over cases
commenced under chapter 15, ancillary cross-border cases.
Although the United States will continue to assert
worldwide jurisdiction over property of a domestic or foreign
debtor in a full bankruptcy case under chapter 7 and 13 of this
title, subject to deference to foreign proceedings under
chapter 15 and section 305, the situation is different in a
case commenced under chapter 15. There the United States is
acting solely in an ancillary position, so jurisdiction over
property is limited to that stated in chapter 15.
The third provision complements the automatic inclusion of
chapter 15 in the United States trustee's standing under
section 307 and provides authority for the United States
trustee to act as necessary under section 626(3).

Title X. Financial Contract Provisions \181\
---------------------------------------------------------------------------

\181\ As title X is substantively very similar to H.R. 4393, the
Financial Contract Netting Improvement Act of 1998, the Committee has
relied on the report accompanying that bill. H.R. Rep. No. 105-688, Pt.
1 (1998).
---------------------------------------------------------------------------

Section 1001. Treatment of certain agreements by conservators or
receivers of insured depository institutions

Subsections (a) through (f) of section 1001 amend the
Federal Deposit Insurance Act's definitions of ``qualified
financial contract,'' ``securities contract,'' ``commodity
contract,'' ``forward contract,'' ``repurchase agreement'' and
``swap agreement'' to make them consistent with the definitions
in the Bankruptcy Code, as amended by title X of H.R. 833.
Subsection (a) amends the definition of ``qualified
financial contract'' to include a reference to a resolution or
order.
Subsection (b) amends the definition of ``securities
contract'' to encompass options on securities and margin loans.
The inclusion of ``margin loans'' in the definition is intended
to encompass only those loans commonly known in the securities
industry as ``margin loans'' and does not include other loans
utilizing securities as collateral, however documented. This
provision also specifies that purchase, sale and repurchase
obligations under a participation in a commercial mortgage loan
do not constitute ``securities contracts.'' While a contract
for the purchase or sale or a participation may constitute a
``securities contract,'' the purchase, sale or repurchase
obligation embedded in a participation agreement does not make
that agreement a ``securities contract.''
Subsection (c) amends the definition of ``commodity
contract'' to conform it with section 761(4) of the Bankruptcy
Code, as amended by title X of the bill. Likewise, subsection
(d) amends the definition of ``forward contract'' to conform it
with section 101(25) of the Bankruptcy Code, as amended by
title X of the bill.
Subsection (e) amends the definition of ``repurchase
agreement'' to codify the substance of the Federal Deposit
Insurance Corporation's 1995 regulation defining repurchase
agreement to include those on qualified foreign government
securities. \182\ For purposes of this provision, the term
``qualified foreign government securities'' is defined to
include securities that are direct obligations of, or fully
guaranteed by, central governments of members of the
Organization for Economic Cooperation and Development (OECD).
Subsection (e) reflects developments in the repurchase
agreement markets which increasingly use foreign government
securities as the underlying assets. Any risk presented by this
modification is addressed by limiting it to those obligating or
guaranteed by OECD member states.
---------------------------------------------------------------------------
\182\ See 12 C.F.R. 360.5.
---------------------------------------------------------------------------
Subsection (e), like subsection (b) for ``securities
contracts,'' specifies that repurchase obligations under a
participation in an commercial mortgage loan do not make the
participation agreement a ``repurchase agreement.'' Such
repurchase obligations embedded in participations in commercial
loans (such as recourse obligations) do not constitute a
``repurchase agreement.'' Nevertheless, a repurchase agreement
involving the transfer of participations in commercial mortgage
loans with a simultaneous agreement to repurchase the
participation on demand or at a date certain one year or less
after such transfer could constitute a ``repurchase
agreement.''
Subsection (f) amends the definition of ``swap agreement''
to include an interest rate swap, option, future, or forward
agreement, including a rate floor, rate cap, rate collar,
cross-currency rate swap, and basis swap; a spot, same day-
tomorrow, tomorrow-next forward or other foreign exchange
agreement; a currency swap, option, future, or forward
agreement; an equity index or equity swap, option, future, or
forward agreement; a debt index or debt swap, option, future,
or forward agreement; a credit swap, option, future, or forward
agreement; a commodity swap, option, future, or forward
agreement or any other similar agreement. This amendment would
achieve contractual netting across economically similar over-
the-counter products that can be terminated and closed out on a
mark-to-market basis.
The definition of ``swap agreement'' does not include
transactions that are, in substance, commercial, consumer or
industrial loans. Traditional commercial and lending
arrangements, or other non-financial market transactions, such
as commercial, residential or consumer loans, cannot be treaded
as ``swaps'' under either the Federal Deposit Insurance Act or
the Bankruptcy Code because the parties purport to document or
label the transactions as ``swap agreements.'' In addition,
these definitions apply only for purposes of the Federal
Deposit Insurance Act and the Bankruptcy Code. These
definitions, and the characterization of a certain transaction
as a ``swap agreement'' are not intended to effect the
characterization, definition, or treatment of any instruments
under any other statute, regulation, or rule including, but not
limited to, the statutes, regulations or rules enumerated in
subsection (f).
Subsection (g) amends the Federal Deposit Insurance Act by
adding a definition of ``transfer,'' which is a key term used
in the Act, to ensure that it is broadly construed to encompass
dispositions of property or interests in property. The
definition mirrors that in section 101(54) of the Bankruptcy
Code.
Subsection (h) makes clarifying technical changes to
conform the receivership and conservatorship provisions of the
Federal Deposit Insurance Act. This subsection also clarifies
that the Act expressly protects rights under security
agreements, arrangements or other credit enhancement related to
one or more qualified financial contracts (QFCs). An example of
a security arrangement is a right of set off, and examples of
other credit enhancements are letters of credit, guarantees,
reimbursement obligations and other similar agreements.
Subsection (i) clarifies that no provision of Federal or
State law relating to the avoidance or preferential or
fraudulent transfer (including the anti-preference provision of
the National Bank Act) can be invoked to avoid a transfer made
in connection with any QFC of an insured depository institution
in conservatorship or receivership, absent actual fraudulent
intent on the part of the transferee.

Section 1002. Authority of the corporation with respect to failed and
failing institutions

Section 1002 provides that no provision of law, including
FDICIA, shall be construed to limit the power of the FDIC to
transfer or to repudiate any QFC in accordance with its powers
under the FDIA. As discussed below, there has been some
uncertainty regarding whether or not FDICIA limits the
authority of the FDIC to transfer or to repudiate QFCs of an
insolvent financial institution. Section 1002, as well as other
provisions in the Act, clarify that FDICIA does not limit the
transfer powers of the FDIC with respect to QFC.
In addition, Section 1002 denies enforcement to
``walkaway'' clauses in QFCs. A walkaway clause is defined as a
provision that, after calculation of a value of a party's
position or an amount due to or from one of the parties upon
termination, liquidation or acceleration of the QFC, either
does not create a payment obligation of a party or extinguishes
a payment obligation of a party in whole or in part solely
because of such party's status as a non-defaulting party.

Section 1003. Amendments relating to transfers of qualified financial
contracts

Subsection (a) amends the FDIA to expand the transfer
authority of the FDIC to permit transfer of QFCs to ``financial
institutions'' as defined in FDICIA or in regulations. This
provision will allow the FDIC to transfer QFCs to a non-
depository financial institution, provided the institution is
not subject to bankruptcy or insolvency proceedings. The new
FDIA provisions specify that when the FDIC transfers QFCs that
are subject to the rules of a particular clearing organization,
the transfer will not require the clearing organization to
accept the transferee as a member of the organization. This
provision gives the FDIC flexibility in resolving QFCs subject
to the rules of a clearing organization, while preserving the
ability of such organizations to enforce appropriate risk
reducing membership requirements.
The new FDIA provision also permits transfers to an
eligible financial institution that is a non-U.S. person, or
the branch or agency of a non-U.S. person if, following the
transfer, the contractual rights of the parties would be
enforceable substantially to the same extent as under the FDIA.
Subsection (b) amends the notification requirements
following a transfer of the QFCs of a failed depository
institution to require the FDIC to notify any party to a
transferred QFC of such transfer by 5:00 p.m. (Eastern Time) on
the business day following the date of the appointment of the
FDIC acting as a receiver or following the date of such
transfer by the FDIC acting as a conservator. This amendment is
consistent with the policy statement on QFCs issued by the FDIC
on December 12, 1989.
Subsection (c) amends the FDIA to clarify the relationship
between the FDIA and FDICIA. There has been some uncertainty
whether FDICIA permits counterparties to terminate or liquidate
a QFC before the expiration of the time period provided by the
FDIA during which the FDIC mayrepudiate or transfer a QFC in a
conservatorship or receivership. Subsection (c) provides that a party
may not terminate a QFC based solely on the appointment of the FDIC as
receiver until 5:00 p.m. (Eastern Time) on the business day following
the appointment of the receiver or after the person has received notice
of a transfer under FDIA section 11(d)(9), or based solely on the
appointment of the FDIC as conservator, notwithstanding the provisions
of FDICIA. This provides the FDIC with an opportunity to undertake an
orderly of the insured depository institution.
The amendment also prohibits the enforcement of rights of
termination or liquidation that are based solely on the
``financial condition'' of the depository institution in
receivership or conservatorship. For example, termination based
on a cross-default provision in a QFC that is triggered upon a
default under another contract could be stayed if such other
default was caused by an acceleration of amounts due under that
other contract, and such acceleration was based solely on the
appointment of a conservator or receiver for that depository
institution. Similarly, a provision in a QFC permitting
termination of the QFC based solely on a downgraded credit
rating of a party will not be enforceable in an FDIC
receivership or conservatorship because the provision is based
solely on the financial condition of the depository institution
in default. Nevertheless, any payment, delivery or other
performance-based default, or breach of a representation or
covenant putting in question the enforceability of the
agreement, will not be deemed to be based solely on financial
condition for purposes of this provision. The amendment is not
intended to prevent counterparties from taking all actions
permitted and recovering all damages authorized upon
repudiation of any QFC by a conservator or receiver.
The amendment allows the FDIC to meet its obligation to
provide notice to parties to transferred QFCs by taking steps
reasonably calculated to provide notice to such parties by the
required time. This is consistent with the existing policy
statement on QFCs issued by the FDIC on December 12, 1989.
Finally, the amendment permits the FDIC to transfer QFCs of
a failed depository institution to a bridge bank or a
depository institution organized by the FDIC for which a
conservator is appointed either (i) immediately upon the
organization of such institution or (ii) at the time of a
purchase and assumption transaction between the FDIC and the
institution. This provision clarifies that such institutions
are not to be considered financial institutions that are
ineligible to receive such transfers under FDIA section
11(e)(9). This is consistent with the existing policy statement
on QFCs issued by the FDIC on December 12, 1989.

Section 1004. Amendments relating to disaffirmance or repudiation of
qualified financial contracts

Section 1004 limits the disaffirmance and repudiation
authority of the FDIC with respect to QFCs so that such
authority is consistent with the FDIC's transfer authority
under FDIA section 11(e)(9). This ensures that no
disaffirmance, repudiation or transfer authority of the FDIC
may be exercised to ``cherry-pick'' or otherwise treat
independently all the QFCs between a depository institution in
default and a person or any affiliate of such person. The FDIC
has announced that its policy is not to repudiate or disaffirm
QFCs selectively. This unified treatment is fundamental to the
reduction of systemic risk.

Section 1005. Clarifying amendment relating to master agreements

Section 1005 states that a master agreement for one or more
securities contracts, commodity contracts, forward contracts,
repurchase agreements or swap agreements will be treated as a
single QFC under the FDIA. This provision ensures that cross-
product netting pursuant to a master agreement will be
enforceable under the FDIA. Cross-product netting permits a
wide variety of financial transactions between two parties to
be netted, thereby maximizing the present and potential future
risk-reducing benefits of the netting arrangement between the
parties.
Express recognition of the enforceability of such cross-
product master agreements furthers the policy of increasing
legal certainty and reducing systemic risks in the case of an
insolvency of a large financial participant. Similar Bankruptcy
Code clarifications to recognize cross-product netting both
under a master agreement and in the absence of a master
agreement are described below.

Section 1006. Federal Deposit Insurance Corporation Improvement Act of
1991

The FDICIA provides that a netting arrangement will be
enforced pursuant to its terms, notwithstanding the failure of
a party to the agreement. However, the current netting
provisions of FDICIA limit this protection to ``financial
institutions,'' which include depository institutions.
Subsection (a)(1) amends the FDICIA definition of covered
institutions to include (i) uninsured national and State member
banks, irrespective of their eligibility for deposit insurance
and (ii) foreign banks (including the foreign bank and its
branches or agencies as a combined group or only the foreign
bank parent of a branch or agency). The Federal Reserve Board
already has by regulation included certain foreign banks in the
definition of a ``financial institution'' for purposes of
FDICIA and the latter change will statutorily extend the
protections of FDICIA to ensure that U.S. financial
organizations participating in netting agreements with foreign
banks are covered by the Act, thereby enhancing the safety and
soundness of these arrangements.
Subsection (a)(2) amends FDICIA to provide that, for
purposes of FDICIA, two or more clearing organizations that
enter into a netting contract are considered ``members'' of
each other. This assures the enforceability of netting
arrangements involving two or more clearing organizations and a
member common to all such organizations, thus reducing systemic
risk in the event of the failure of such a member. Under the
current FDICIA provisions, the enforceability of such
arrangements depends on a case-by-case determination that
clearing organizations could be regarded as members of each
other for purposes of FDICIA.
Subsection (a)(3) amends the FDICIA definition of netting
contract and the general rules applicable to netting contracts.
The current FDICIA provisions require that the netting
agreement must be governed by the law of the United States or a
State to receive the protections of FDICIA. Many of these
agreements, particularly netting arrangements covering
positions taken in foreign exchange dealings, however, are
governed by the laws of a foreign country. This subsection
broadens the definition of ``netting contract'' to include
those agreements governed by foreign law, and preserves the
FDICIA requirement that a netting contract is not invalid
under, or precluded by, Federal law.
Subsections (b) and (c) establish two exceptions to
FDICIA's protection of the enforceability of the provisions of
netting contracts between financial institutions and among
clearing organization members. First, the termination
provisions of netting contracts will not be enforceable based
solely on (i) the appointment of a conser-

vator for an insolvent depository institution under the FDIA or
(ii) the appointment of a receiver for such institution under
the FDIA, if such receiver transfers or repudiates QFCs in
accordance with the FDIA and gives notice of a transfer by 5:00
p.m. on the business day following the appointment of a
receiver. This change is made to confirm the FDIC's flexibility
to transfer or repudiate the QFCs of an insolvent depository
institution in accordance with the terms of the FDIA. This
modification also provides important legal certainty regarding
the treatment of QFCs under the FDIA, because the current
relationship between the FDIA and FDICIA is unclear.
The second exception provides that FDICIA does not override
a stay order under SIPA with respect to foreclosure on
securities (but not cash) collateral of a debtor.
Subsections (b) and (c) also clarify that a security
agreement or other credit enhancement related to a netting
contract is enforceable to the same extent as the underlying
netting contract.
Subsection (d) adds a new section 407 to FDICIA. This new
section provides that, notwithstanding any other law, QFCs with
uninsured national banks or uninsured Federal branches or
agencies that are placed in receivership or conservatorship
will be treated in the same manner as if the contract were with
an insured national bank or insured Federal branch for which a
receiver or conservator was appointed. This provision will
ensure that parties to QFCs with uninsured national banks or
uninsured Federal branches or agencies will have the same
rights and obligations as parties entering into the same
agreements with insured depository institutions. The new
section also specifically limits the powers of a receiver or
conservator for an uninsured national bank or uninsured Federal
branch or agency to those contained in 12 U.S.C. 1821(e) (8),
(9), and (11), which address QFCs. While the amendment would
apply the same rules to uninsured national banks and Federal
branches and agencies that apply to insured institutions, the
provision would not change the rules that apply to insured
institutions. Nothing in this section would amend the
International Banking Act, the Federal Deposit Insurance Act,
the National Bank Act, or other statutory provisions with
respect to receivership of insured national banks or Federal
branches. It is noted that new section 407 may need to be
amended if legislation is enacted to permit the creation of so-
called ``wholesale financial institutions.''

Section 1007. Bankruptcy Code amendments

Subsection (a)(1) amends the Bankruptcy Code definitions of
``repurchase agreement'' and ``swap agreement'' to conform with
the amendments to the FDIA contained in sections 1001. In
connection with the definition of ``repurchase agreement,'' the
term, ``qualified foreign government securities'' is defined to
include securities that are direct obligations of, or fully
guaranteed by, central governments of members of the
Organization for Economic Cooperation and Development (OECD).
This language reflects developments in the repurchase agreement
markets, which increasingly use foreign government securities
as the underlying asset. Any risk presented by this
modification is addressed by limiting it to those obligating or
guaranteed by OECD member states.
Subsection (a)(1) specifies that repurchase obligations
under a participation in a commercial mortgage loan do not make
the participation agreement a ``repurchase agreement.'' Such
repurchase obligations embedded in participations in commercial
loans (such as recourse obligations) do not constitute a
``repurchase agreement.'' A repurchase agreement involving the
transfer of participations in commercial mortgage loans with a
simultaneous agreement to repurchase the participation on
demand or at a date certain one year or less after such
transfer, however, could constitute a ``repurchase agreement.''
The amendments to the definition of ``repurchase
agreement'' are not intended to affect the interpretation of
the definition of ``securities contract.'' The definition of
``swap agreement,'' in conjunction with the addition of ``spot
foreign exchange transactions'' that was added to the
definition in 1994, will achieve contractual netting across
economically similar over-the-counter products that can be
terminated and closed out on a mark-to-market basis.
The definition of ``swap agreement'' originally was
intended to provide sufficient flexibility to avoid the need to
amend the definition as the nature and use of swap transactions
matured. For that reason, the phrase ``or any other similar
agreement'' was included in the definition. The phrase ``other
similar agreement'' encompasses any agreement that is, or in
the future becomes, regularly entered into in the swap market
that is a forward, swap or option on one or more rates,
currencies, commodities, equity or debt securities or
instruments, economic indices or measures of economic risk or
value. Traditional commercial and lending arrangements, or
other non-financial market transactions, such as commercial,
residential or consumer loans, however, cannot be treated as
``swaps'' under either the FDIA or the Bankruptcy Code because
the parties purport to document or label the transactions as
``swap agreements.''
Subsection (a)(1)(C) specifies that this definition of swap
agreement applies only for purposes of the Bankruptcy Code and
is inapplicable to the other statutes, rules and regulations
enumerated in that section. The definition also includes any
security agreement or arrangement, or other credit enhancement,
related to a swap agreement. This ensures that any such
agreement, arrangement or enhancement is itself deemed to be a
swap agreement, and therefore eligible for treatment as such
for purposes of termination, liquidation, acceleration, offset
and netting under the Bankruptcy Code and the FDIA. Similar
changes are made in the definition of ``forward contract,
``commodity contract'' and ``repurchase agreement.'' An example
of a security arrangement is a right of set off; examples of
other credit enhancements are letters of credit, guarantees,
reimbursement obligations and other similar agreements.
Subsections (a)(2) and (a)(3) amend the Bankruptcy Code
definitions of ``securities contract'' and ``forward
contract,'' respectively, to conform them to the definition in
the FDIA, and also to include any security agreements or
arrangements or other credit enhancements related to one or
more such contracts.
Subsection (a)(2), like the amendments to the FDIA amends
the definition of ``securities contract'' to encompass options
on securities and margin loans. The inclusion of ``margin
loans'' in the definition is intended to encompass only those
loans commonly known in the securities industry as ``margin
loans'' and does not include other loans utilizing securities
as collateral, however, documented.
Subsection (a)(2) also specifies that purchase, sale and
repurchase obligations under a participation in a commercial
mortgage loan do not constitute ``securities contracts.'' While
a contract for the purchase or sale or a participation may
constitute a ``securities contract,'' the purchase, sale or
repurchase obligation embedded in a participation agreement
does not make that agreement a ``securities contract.''
Subsection (b) amends the Bankruptcy Code definitions of
``financial institution'' and ``forward contract merchant.''
The definition for ``financial institution'' includes Federal
Reserve Banks and the receivers or conservators of insolvent
depository institutions. Subsection (b) also adds a new
definition of ``financial participant'' to limit the potential
impact of insolvencies upon other major market participants.
This definition will allow such market participants to close-
out and net agreements with insolvent entities under sections
362(b)(6), 546, 548, 555, and 556 even if the creditor could
not qualify as, for example, a commodity broker. The new
subsection preserves the limitations of the right to close-out
and net such contracts, in most cases, to entities who qualify
under the Bankruptcy Code's counterparty limitations. Where the
counterparty, however, has transactions with a total gross
dollar value of at least $1 billion in notional principal
amount outstanding on any day during the previous 15-month
period, or has gross mark-to-market positions of at least $100
million (aggregated across counterparties) in one or more
agreements or transactions on any day during the previous 15-
month period, the new subsection and corresponding amendments
would permit it to exercise netting rights irrespective of its
inability otherwise to satisfy those counterparty limitations.
This change will help prevent systemic impacts upon the markets
from a single failure.
Subsection (c) adds to the Bankruptcy Code new definitions
for the terms ``master netting agreement'' and ``master netting
agreement participant.'' The definition of ``master netting
agreement'' is designed to protect the termination and close-
out netting provisions of cross-product master agreements
between parties. Such an agreement may be used (i) to document
a wide variety of securities contracts, commodity contracts,
forward contracts, repurchase agreements and swap agreements,
or (ii) as an umbrella agreement for separate master agreements
between the same parties, each of which is used to document a
discrete type of transaction. The definition includes security
agreements or arrangements or other credit enhancements related
to one or more such agreements and clarifies that a master
netting agreement will be treated as such even if it documents
transactions that are not within the enumerated categories of
qualifying transactions (but the provisions of the Bankruptcy
Code relating to master netting agreements and the other
categories of transactions will not apply to such other
transactions).
A ``master netting agreement participant'' is any entity
that is a party to an outstanding master netting agreement with
a debtor before the filing of a bankruptcy petition.
Subsection (d) amends section 362(b) of the Bankruptcy Code
to protect enforcement, free from the automatic stay, of setoff
or netting provisions in swap agreements and in master netting
agreements and security agreements or arrangements related to
one or more swap agreements or master netting agreements. This
provision parallels the other provisions of the Bankruptcy Code
that protect netting provisions of securities contracts,
commodity contracts, forward contracts, and repurchase
agreements. Because the relevant definitions include related
security agreements, the reference to ``setoff'' in this
provisions, as well as in section 362(b) (6) and (7) of the
Bankruptcy Code, are intended to refer also to rights to
foreclose on, and to set off against, obligations to return
collateral security swap agreements, master netting
arrangements, repurchase agreements, securities contracts,
commodity contracts, or forward contracts. Collateral may be
pledged to cover the cost of replacing the defaulted
transactions in the relevant market, as well as other costs and
expenses incurred or estimated to be incurred for the purpose
of hedging or reducing the risks arising out of such
termination. Enforcement of these agreements and arrangements
is consistent with the policy goal of minimizing systemic risk.
Subsection (d) also clarifies that the provisions
protecting setoff and foreclosure in relation to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, and master netting agreements free
from the automatic stay apply to collateral pledged by the
debtor that is under the control of the creditor but that
cannot technically be ``held by'' the creditor, such as
receivables and book-entry securities, and to collateral that
has been repledged by the creditor.
Subsection (e) amends section 546 of the Bankruptcy Code to
provide that transfers made under or in connection with a
master netting agreement may not be avoided by a trustee except
where such transfer is made with actual intent to hinder, delay
or defraud. This section also clarifies the limitations on a
trustee's power to avoid transfers made under swap agreements.
In addition subsection (e) makes a technical correction to
section 546 of the Bankruptcy Code to redesignate the second
``(g)'' subsection as ``(h)''.
Subsection (f) amends section 548(d) of the Bankruptcy Code
to provide that transfers made under or in connection with a
master netting agreement may not be avoided by a trustee except
where such transfer is made with actual intent to hinder, delay
or defraud. This amendment provides the same protections for
transfers made under, or in connection with, master netting
agreements as currently is provided for margin payments and
settlement payments received by commodity brokers, forward
contract merchants, stockbrokers, financial institutions,
securities clearing agencies, repo participants, and swap
participants under paragraphs (B), (C) and (D) of section
548(d).
Subsections (g), (h), (i) and (j) clarify that the
provisions of the Bankruptcy Code that protect (i) rights of
liquidation under securities contracts, commodity contracts,
forward contracts and repurchase agreements also protect rights
of termination or acceleration under such contracts, and (ii)
rights to terminate under swap agreements also protect rights
of liquidation and acceleration.
Subsection (k) adds a new section 561 to the Bankruptcy
Code to protect the contractual right of a master netting
agreement participant to enforce any rights of termination,
liquidation, acceleration, offset or netting under a master
netting agreement. Such rights include rights arising (i) from
the rules of a securities exchange or clearing organization,
(ii) under common law, law merchant or (iii) by reason of
normal business practice. This is con-

sistent with the current treatment of rights under swap
agreements under section 560 of the Bankruptcy Code.
For the purposes of Bankruptcy Code sections 555, 556, 559,
560 and 561, it is intended that the normal business practice
in the event of a default of a party based on bankruptcy or
insolvency is to terminate, liquidate or accelerate securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements and master netting agreements with
the bankruptcy or insolvent party. The protection of netting
and offset rights in sections 560 and 561 is in addition to the
protections afforded in section 362(b)(6), (b)(7) and (b)(17).
For example, cross-product netting will be protected from the
automatic stay under section 561 even in the absence of a
master netting agreement.
Sections 561(b) (2) and (3) limit the exercise of
contractual rights to net or to offset obligations where one
leg of the obligations sought to be netted relates to commodity
contracts. Under subsection (b)(2), netting or offset is not
permitted if the obligations are not mutual. This means, for
example, that proprietary obligations cannot be netted or
offset against obligations held for, or on behalf of, some
other party. Even if the obligations are mutual, under
subsection (b)(3) netting or offset is not permitted in a
commodity broker bankruptcy if the party seeking to net or to
offset has no positive net equity in the commodity account at
the debtor. Subsections (b)(2) and (b)(3) limit the depletion
of assets available for distribution to customers of commodity
brokers. This is consistent with the principle of subchapter IV
of chapter 7 of the Bankruptcy Code, which gives priority to
customer claims in the bankruptcy of a commodity broker.
Under title X of H.R. 833, the termination, liquidation or
acceleration rights of a master netting agreement participant
are subject to limitations contained in other provisions of the
Bankruptcy Code relating to securities contracts and repurchase
agreements. In particular, if a securities contract or
repurchase agreement is documented under a master netting
agreement, a party's termination, liquidation and acceleration
rights would be subject to the provisions of the Bankruptcy
Code relating to orders authorized under the provisions of SIPA
or any statute administered by the SEC. In addition, the
netting rights of a party to a master netting agreement would
be subject to any contractual terms between the parties
limiting or waiving netting or set off rights. Similarly, a
waiver by a bank or a counterparty of netting or set off rights
in connection with QFCs would be enforceable under the FDIA.
Subsection (l) clarifies that, with respect to municipal
bankruptcies, all the provisions of the Bankruptcy Code
relating to securities contracts, commodity contracts, forward
contracts, repurchase agreements, swap agreements and master
netting agreements (which by their terms are intended to apply
in all cases under the Bankruptcy Code) apply to a chapter 9
case.
Subsection (m) clarifies that the provisions of the
Bankruptcy Code related to securities contracts, commodity
contracts, forward contracts, repurchase agreements, swap
agreements and master netting agreements apply in a section 304
proceeding ancillary to a foreign insolvency proceeding.
Subsections (n) and (o) amend those provisions in the
Bankruptcy Code concerning the liquidation of commodity brokers
¹⁸³ and stockbrokers.¹⁸⁴ These provisions
of the Bankruptcy Code are designed to protect customers and
customer property of an insolvent stockbroker or commodity
broker. Subsections (n) and (o) clarify the rights of parties
to commodity contracts, securities contracts, forward
contracts, swap agreements, repurchase agreements and master
netting agreements with an insolvent commodity broker or
stockbroker. They ensure that noncustomers will not defeat the
priority scheme of subchapter III or IV by gaining access to
assets held in segregated customer accounts. The amendment also
clarifies that the exercise of termination and netting rights
will not otherwise affect customer property or distributions by
the trustee of the insolvent commodity broker or stockbroker
after the exercise of such rights.
---------------------------------------------------------------------------
\183\ Subchapter IV of chapter 7 of the Bankruptcy Code and
regulations of the CFTC detail specific rules for the liquidation of
commodity brokers.
\184\ Subchapter III of chapter 7 of the Bankruptcy Code details
specific rules for the liquidation of stockbrokers.
---------------------------------------------------------------------------
Subsection (p) amends section 553 of the Bankruptcy Code to
clarify that the acquisition by a creditor of set off rights in
connection with swap agreements, repurchase agreements,
securities contracts, forward contracts, commodity contracts
and master netting agreements may not be avoided as a
preference. This subsection also adds setoff provisions of the
kinds described in sections 555, 556, 559, 560, and 561 of the
Bankruptcy Code to the types of setoffs excepted from section
553(b).
Subsection (q) makes a series of conforming amendments to
sections 362(b)(6), 546(e), 548(d)(2)(B), 555, and 556 to
include references to ``financial participant''.
Subsection (r) makes technical and conforming amendments to
the Bankruptcy Code's table of sections, as amended by title X.

Section 1008. Recordkeeping requirements

Section 1008 amends section 11(e)(8) of the Federal Deposit
Insurance Act to explicitly authorize the FDIC, in consultation
with appropriate Federal banking agencies, to prescribe
regulations on recordkeeping with respect to QFCs. Adequate
recordkeeping for such transactions is essential to effective
risk management and to the reduction of systemic risk permitted
by the orderly resolution of depository institutions utilizing
QFCs.

Section 1009. Exemptions from contemporaneous execution requirement

Section 1009 amends FDIA section 13(e)(2) to provide that
an agreement for the collateralization of governmental
deposits, bankruptcy estate funds, Federal Reserve Bank or
Federal Home Loan Bank extensions of credit or one or more QFCs
shall not be deemed invalid solely because such agreement was
not entered into contemporaneously with the acquisition of the
collateral or because of pledges, delivery or substitution of
the collateral made in accordance with such agreement. The
amendment codifies portions of policy statements issued by the
FDIC regarding the application of section 13(e), which codifies
the ``D'Oench Duhme'' doctrine.
With respect to QFCs, this codification recognizes that
QFCs often are subject to collateral and other security
arrangements that may require posting and return of collateral
on an ongoing basis based on the mark-to-market values of the
collateralized transactions. The codification of only portions
of the existing FDIC policy statements on these and related
issues should not give rise to any negative implication
regarding the continued validity of these policy statements.

Section 1010. Damage measure

Section 11 adds a new section 562 to the Bankruptcy Code to
provide that damages under any swap agreement, securities
contract, forward contract, commodity contract, repurchase
agreement or master netting agreement will be calculated as of
the earlier of (i) the date of rejection of such agreement by a
trustee or (ii) the date of liquidation, termination or
acceleration of such contract or agreement. New section 562
provides important legal certainty and makes the Bankruptcy
Code consistent with the current provisions related to the
timing of the calculation of damages under QFCs in the FDIA.
Section 1010 also clarifies the treatment of damage claims
arising from rejection.

Section 1011. SIPC stay

Section 1011 amends the Securities Investment Protection
Act (SIPA) to provide that an order or decree issued pursuant
to SIPA shall not operate as a stay of any right of
liquidation, termination, acceleration, offset or netting under
one or more securities contracts, commodity contracts, forward
contracts, repurchase agreements, swap agreements or matter
netting agreements (as defined in the Bankruptcy Code and
including rights of foreclosure on collateral), except that
such order or decree may stay any right to foreclose on
securities (but not cash) collateral pledged by the debtor or
sold by the debtor under a repurchase agreement. A creditor
stayed in exercising rights against securities collateral would
be entitled to post-insolvency interest to the extent of the
collateral.

Section 1012. Asset-backed securitizations

Section 1012 amends section 541 of the Bankruptcy Code to
provide that certain assets transferred to an eligible entity
in connection with an asset-backed securitization generally
will not be included within the bankruptcy estate. This
provision recognizes that a valid transfer of such assets to
the eligible entity, which is defined as an issuer or an entity
engaged exclusively in such securitization transactions,
generally eliminates the debtor's legal or equitable interests
in those assets. Accordingly, subject to the avoidance powers
in section 548(a), the transfer will be treated as a sale of
those assets not subject to avoidance. A significant exception
to this provision is that if the trustee avoids the transfer
from the debtor under section 548(a), then those assets will be
included within the bankruptcy estate.

Section 1013. Federal Reserve collateral requirements

Section 16 of the Federal Reserve Act (FRA) specifies the
types of assets the Federal Reserve may use to back the
currency. These assets include U.S. Treasury and agency
securities that the Federal Reserve holds in its portfolio and,
among other things, discount window loans extended under the
provisions of section 13 of the FRA. Over the years, sections
were added to the FRA that permit lending under provisions
other than section 13 and against a broader range of collateral
than allowed under that section.
This amendment broadens the range of discount window loans
eligible to back currency to include not only those extended
under section 13 but also those extended under section 10A of
the FRA relating to emergency advances to groups of member
banks, section 10B relating to emergency advances to individual
member banks, and section 13A relating to the discount of
agricultural paper.

Section 1014. Effective date; application of amendments

Subsection (a) provides that the amendments under this
title take effect on the date of H.R. 833's enactment.
Subsection (b) provides that the amendments made by this title
shall not apply with respect to cases commenced, or to
conservator/receiver appointments made, before the date of
enactment.

Title XI. Technical Corrections

Section 1101. Definitions

Section 1101 amends the definitions contained in section
101 of title 11 of the United States Code. Paragraphs (1), (2),
(4), (7), and (8) of section 1101 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 (3) of section 1101 makes the
necessary conforming amendment to cross references to the newly
redesignated definitions and simplifies these references to
avoid future reference errors.
Paragraph (5) of section 1101 concerns single asset real
estate debtors. A single asset real estate chapter 11 case
presents special concerns. As the name implies, the principal
asset in this type of case consists of some form of real
estate, such as undeveloped land. Typically, the form of
ownership of a single asset real estate debtor is a corporation
or limited partnership. For tax planning purposes, the limited
partnership is formed to acquire the underlying asset. The
largest creditor in a single asset real estate case is usually
the secured lender who advanced the funds to the debtor to
acquire the real property. Often, a single asset real estate
debtor resorts to filing for bankruptcy relief for the sole
purpose of staying an impending foreclosure proceeding or sale
commenced by the secured lender. Foreclosure actions are filed
when the debtor lacks sufficient cash flow to service the debt
and maintain the property. Taxing authorities may also have
liens against the property.
Based on the nature of its principal asset, a single asset
real estate debtor often has few, if any, unsecured creditors.
If unsecured creditors exist, they may have only nominal claims
against the single asset real estate debtor. Depending on the
nature and ownership of any business operating on the debtor's
real property, the debtor may have few, if any, employees.
Accordingly, there may be little interest on behalf of
unsecured creditors in a single asset real estate case to serve
on a creditors' committee.
In 1994, the Bankruptcy Code was amended to accord special
treatment for a single asset real estate debtor. It defined
this type of debtor as a bankruptcy estate comprised of a
single piece of real property or project, other than
residential real property with fewer than four residential
units. The property or project must generate substantially all
of the debtor's gross income. A debtor that conducts
substantial business on the property beyond that relating to
its operation is excluded from this definition. In addition,
the definition fixed a monetary cap. To qualify as a single
asset real estate debtor, the debtor could not have
noncontingent, liquidated secured debts in excess of $4
million.¹⁸⁵
---------------------------------------------------------------------------
\185\ See 11 U.S.C. Sec. 101(51B).
---------------------------------------------------------------------------
Subparagraph (5)(A) amends the definition of ``single asset
real estate'' to exclude family farmers from this definition.
Paragraph (5)(B) amends section 101(51B) (renumbered section
101(57)) of the Bankruptcy Code to eliminate the $4 million
debt limitation on single asset 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. As a result of this
amendment, creditors in more cases will be able to obtain the
expedited relief from the automatic stay which is made
available under section 362(d)(3) of the Bankruptcy Code.
Paragraph (6) of section 1101, together with section 1118
respond to a 1997 Ninth Circuit case,¹⁸⁶ in which
two purchase money lenders (without knowledge that the debtor
had recently filed an undisclosed chapter 11 case that was
later converted to chapter 7), funded the debtor's acquisition
of an apartment complex and recorded their purchase-money deed
of trust immediately following recordation of the deed to the
debtors. Specifically, it amends the definition of ``transfer''
to include the ``creation of a lien.'' This amendment gives
expression to a widely held understanding since the enactment
of the Bankruptcy Reform Act of 1978,¹⁸⁷ that is, a
transfer includes the creation of a lien.
---------------------------------------------------------------------------
\186\ In re McConville, 110 F.3d 47 (9th Cir. 1997). The bankruptcy
trustee sought to avoid the lien created by the lenders' deed of trust
by asserting that the deed was an unauthorized, postpetition transfer
under section 549(a) of the Bankruptcy Code. The lenders claimed that
the voluntary transfer to them was a transfer of real property to good
faith purchasers for value, which was thereby excepted it, under
section 549(c) of the Bankruptcy Code, from avoidance. The bankruptcy
court held that the postpetition recordation of the lenders' deed of
trust was without authorization under the Bankruptcy Code or by the
court and was therefore avoidable under section 549(a), and that the
lenders did not quality under the section 549(c) exception as good
faith purchasers of real property for value. The District Court
subsequently affirmed the bankruptcy court's ruling granting the
trustee the authority to avoid the lenders' lien. In re McConville,
D.C. No. CV 94 03308 FMS (N.D. Cal. 1994). On appeal, the lower court's
decision in McConville was initially affirmed. The Ninth Circuit,
however, subsequently issued an amended opinion, also affirming the
lower court, and finally issued an opinion withdrawing its prior
opinion and deciding the case on other grounds. It held that by
obtaining secured credit from the lenders, after filing but before the
appointment of a trustee, the debtors violated their fiduciary
responsibility to their creditors.
\187\ Pub. L. 95 598, 92 Stat. 2549 (1978).
---------------------------------------------------------------------------

Section 1102. Adjustment of dollar amounts

Section 1102 corrects an omission in section 104(b) of
title11 of the United States Code, as added by Public Law 103-
394, by including references to section 522(f)(3) 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, farmanimals, and crops
which the debtor may exempt from the property of the estate and thereby
protect from creditors' liens. Section 522(f)(3) now sets the total
permissible value of such property at $5,000.

Section 1103. Extension of time

Section 1103 of the bill makes a technical amendment to
correct a reference error described in amendment notes
contained in the United States Code. As specified in the
amendment note relating to subsection (c)(2) of section 108 of
title 11 of the United States Code, the amendment made by
section 257(b)(2)(B) of Public Law 99-554 could not be executed
as stated.

Section 1104. Technical amendments

Section 1104 makes technical amendments to sections
109(b)(2) (to strike an statutory cross reference), 541(b)(2)
(to add ``or'' to the end of this provision), and 522(b)(1) (to
replace ``product'' with ``products'').

Section 1105. Penalty for persons who negligently or fraudulently
prepare bankruptcy petitions

Section 1105 makes a technical correction to change from
the singular possessive to the plural possessive the reference
to the fees payable to attorneys.

Section 1106. Limitation on compensation of professional persons

Section 328(a) of the Bankruptcy Code provides that a
trustee or a creditors' and equity security holders' committee
may, with court approval, obtain the services of 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. Section 1106 amends section 328(a) to include
compensation ``on a fixed or percentage fee basis'' in addition
to the other specified forms of reimbursement.

Section 1107. Special tax provisions

Section 1107 makes a technical correction in section
346(g)(1)(C) of title 11 of the United States Code to delete
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 1108. Effect of conversion

Section 1108 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 1109. Amendment to table of sections

Section 1109 of the bill makes a technical amendment to
conform the wording of an item in the table of sections to the
wording of the section heading represented by that item.

Section 1110. Allowance of administrative expenses

Section 1110 amends section 503(b)(4) of the Bankruptcy
Code to limit 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' committee would not be
recoverable, but expenses incurred for such professional
services by the committees themselves would be.

Section 1111. Priorities

Section 1111 of the bill makes technical amendments to
section 507(a) of title 11 of the United States Code. The
amendment made by section 1111(1) corrects an error in the
punctuation at the end of section 507(a)(3). The amendment made
by section 1111(2) corrects an omission in paragraph (7) of
section 507(a) and conforms this paragraph with section
507(a)'s other paragraphs that provide priority only to
unsecured claims.

Section 1112. Exemptions

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

Section 1113. Exceptions to discharge

Section 1113 of the bill amends section 523 of the
Bankruptcy Code, relating to the discharge of debts, to correct
the inadvertent omission of a cross-reference to paragraph (15)
in paragraph (3)(A), to correct a technical error in the
placement of paragraph (15), which was added to section 523 by
section 304(e)(1) of the Bankruptcy Reform Act of 1994, and to
require that the debt must be owed to a spouse, former spouse,
or child of the debtor. The effect of this amendment is to
fulfill Congress's original intention to exclude from discharge
certain family obligations if the debtor has the ability to pay
them and the benefit of a discharge to the debtor does not
outweigh the detriment to the spouse, former spouse, or child.
This section also amends section 523(a)(9), which makes
nondischargeable any debt resulting from death or personal
injury arising from the debtor's unlawful operation of a motor
vehicle while intoxicated, to add ``watercraft, or aircraft''
after ``motor vehicle.'' Neither additional term should be
defined or included as a ``motor vehicle'' in section 523(a)(9)
and each is intended to comprise unpowered as well as motor-
powered craft. Congress previously made the policy judgment
that the equities of persons injured by drunk drivers outweigh
the responsible debtor's interest in a fresh start, and here
clarifies that the policy applies not only on land but also on
the water and in the air. Viewed from a practical standpoint,
this provision closes a loophole that gives intoxicated
watercraft and aircraft operators preferred treatment over
intoxicated motor vehicle drivers and denies victims of alcohol
and drug related boat and plane accidents the same rights
accorded to automobile accident victims under current law.
Finally, this section amends section 523(a)(17), added by
the Omnibus Consolidated Rescissions and Appropriations Act of
1996,¹⁸⁸ to narrow its application in accordance
with its original intent. Paragraph (17), enacted in the
context of prison litigation reform, excepts from discharge the
filing fees or related costs or expenses assessed by a court in
a civil case or appeal. Because of a drafting error, however,
this section might be construed to apply to filing fees, costs
or expenses incurred by any debtor, not solely by those who are
prisoners. This amendment eliminates the ambiguity and makes
other conforming changes.
---------------------------------------------------------------------------
\188\ Pub. L. No. 104-134, sec. 804(b).
---------------------------------------------------------------------------

Section 1114. Effect of discharge

Section 1114 of the bill makes technical amendments to
correct errors in section 524(a)(3) of title 11 of the United
States Code, caused by section 257(o)(2) of Public Law 99-554
and section 501(d)(14)(A) of Public Law 103-394.¹⁸⁹
---------------------------------------------------------------------------
\189\ For a description of these errors, see the appropriate
footnote and amendment notes in the United States Code.
---------------------------------------------------------------------------

Section 1115. Protection against discriminatory treatment

Section 1115 of the bill amends section 525(c) of the
Bankruptcy Code to make a technical amendment to conform a
reference to its antecedent reference. The omission of
``student'' before ``grant'' in the second place it appears
insection 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. Section 1115 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 1116. Property of the estate

Production payments are royalties tied to the production of
a certain volume or value of oil or gas, determined without
regard to production costs. They typically would be paid by an
oil or gas operator to the owner of the underlying property on
which the oil or gas is found. Under section 541(b)(4)(B)(ii)
of the Bankruptcy Code, added by the Bankruptcy Reform Act of
1994, production payments are generally excluded from the
debtor's estate, provided they could be included only by virtue
of section 542 of the Bankruptcy Code, which relates generally
to the obligation of those holding property which belongs in
the estate to turn it over to the trustee. Section 1116 adds to
this proviso a reference to section 365 of the Bankruptcy Code,
which authorizes the trustee to assume or reject an executory
contract or unexpired lease. It thereby clarifies the original
Congressional intent to generally exclude production payments
from the debtor's estate.

Section 1117. Preferences

Section 547 of the Bankruptcy Code authorizes trustees to
avoid preferential payments made to creditors by a debtor
within 90 days of filing, whether the creditor is an insider or
an outsider. Because of the concern that corporate insiders
(such as officers and directors) who are creditors of their own
corporation have an unfair advantage over outside creditors,
section 547 also authorizes trustees to avoid preferential
payments made to insider creditors between 90 days and one year
before filing. Several recent cases, including
DePrizio,¹⁹⁰ allowed the trustee to ``reach-back''
and avoid a transfer to a noninsider creditor which fell within
the 90-day to one year time frame if an insider benefitted from
the transfer in some way. This had the effect of discouraging
lenders from obtaining loan guarantees, lest transfers to the
lender be vulnerable to recapture by reason of the debtor's
insider relationship with the loan guarantor.
---------------------------------------------------------------------------
\190\ In re V.N. DePrizio Constr. Co., 874 F.2d 1186 (7th Cir.
1989); see, e.g., Ray v. City Bank & Trust Co. (In re C&L Cartage Co.),
899 F.2d 1490 (6th Cir. 1990); Manufacturers Hanover Leasing Cor. v.
Lowrey (In re Robinson Bros. Drilling), 892 F.2d 850 (10th Cir. 1989).
---------------------------------------------------------------------------
Section 202 of the Bankruptcy Reform Act of 1994 addressed
the DePrizio problem by inserting a new section 550(c) into the
Bankruptcy Code to prevent avoidance or recovery from a
noninsider creditor during the 90-day to one year period even
though the transfer to the noninsider benefitted an insider
creditor. The 1994 amendments, however, failed to make a
corresponding amendment to section 547, which deals with the
avoidance of preferential transfers. As a result, a trustee
could still utilize section 547 to avoid a preferential lien
given to a noninsider bank, more than 90 days but less than one
year before bankruptcy, if the transfer benefitted an insider
guarantor of the debtor's debt.
Accordingly, section 1117 makes a perfecting amendment to
section 547 to provide that if the trustee avoids a transfer
given by the debtor to a noninsider for the benefit of an
insider creditor between 90 days and one year before filing,
that avoidance is valid only with respect to the insider
creditor. Thus both the previous amendment to section 550 and
the perfecting amendment to section 547 protect the noninsider
from the avoiding powers of the trustee exercised with respect
to transfers made during the 90-day to one year pre-filing
period.

Section 1118. Postpetition transactions

Section 1118 amends section 549(c) to clarify its
application to an interest in real property. This amendment
should be construed in conjunction with section 1101 of the
bill.

Section 1119. Disposition of property of the estate

Section 1119 of the bill amends section 726(b) of title 11
of the United States Code to strike an erroneous reference to a
nonexistent section.¹⁹¹
---------------------------------------------------------------------------
\191\ For a description of the error, see the appropriate footnote
and amendment notes in the United States Code.
---------------------------------------------------------------------------

Section 1120. General provisions

Section 1120 of the bill 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 1121. 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.
Section 1121 of the bill renumbers section 1104(b) as section
1104(b)(1) and adds 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, if the court orders such an
appointment or in the event of a trustee or examiner's death,
resignation, removal or failure to qualify.

Sections 1122 and 1123. Abandonment of railroad line; contents of plan

Sections 1122 and 1123 of the bill amend sections
1170(e)(1) and 1172(c)(1) of title 11 of the United States Code
to reflect the facts that section 11347 of title 49 of the
United States Code was repealed by section 102(a) of Public Law
104-88 and that provisions comparable to section 11347 appear
in section 11326(a) of title 49 of the United States Code.

Section 1124. Discharge under chapter 12

Section 29 of the bill amends section 1228 of the
Bankruptcy Code, dealing with discharge under chapter 12, to
correct erroneous references.

Section 1125. Bankruptcy cases and proceedings

Section 1125 of the bill amends section 1334(d) of title 28
of the United States Code to correct erroneous
references.¹⁹²
---------------------------------------------------------------------------
\192\ For a description of the errors, see the appropriate footnote
and amendment notes in the United States Code.
---------------------------------------------------------------------------

Section 1126. 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 1127. Transfers made by nonprofit charitable corporations.

Section 1127 amends section 363(d) of the Bankruptcy Code
to restrict the right of a trustee to use, sell, or lease
property by a nonprofit corporation or trust. First, the use,
sell or lease must be in accordance with applicable
nonbankruptcy law and to the extent it is not inconsistent with
any relief granted under certain specified provisions of
section 362 of the Bankruptcy Code concerning the applicability
of the automatic stay. Second, section 1127 imposes similar
restrictions with regard to chapter 11's plan confirmation
requirements. Third, it amends section 541 of the Bankruptcy
Code to provide that any property of a bankruptcy estate where
the debtor is a nonprofit corporation (as described in certain
provisions of the Internal Revenue Code) may not be transferred
to an entity that is not a corporation, but only under the same
conditions that would apply if the debtor was not in
bankruptcy.
The amendments made by this section apply to cases pending
on the date of H.R. 833's enactment. An limited exception
pertains with confirmation of a chapter 11 plan.

Section 1128. Prohibition on certain actions for failure to incur
finance charges

Section 1128 amends section 127 of the Truth in Lending Act
to prohibit a creditor to terminate an open-end consumer credit
plan prior to its expiration date solely because the consumer
has not incurred finance charges on the account. This
restriction does not prevent a creditor from terminating an
account for inactivity for three or more consecutive months.

Section 1129. Protection of valid purchase money security interests

Section 1129 of the bill extends the applicable perfection
period for a security interest in property of the debtor in
section 547(c)(3)(B) of the Bankruptcy Code from 20 to 30 days.

Section 1130. Trustees

Section 1130(a) sets up a series of procedural protections
for chapter 7 and chapter 13 trustees (appointed respectively
under section 586(a)(1) and (b)) concerning decisions relating
to their appointment and future case assignments. It allows a
trustee to obtain judicial review of final agency decisions by
commencing an action in the United States district court after
such trustee exhausts all available administrative remedies. It
provides that the agency's decision shall be affirmed by the
district court unless it is unreasonable and without cause.
Section 1130(b) requires a chapter 13 to obtain judicial
review of certain final agency action relating to expenditures
by such chapter 13 trustee. The decision of the agency shall be
affirmed by the district court if is unreasonable and without
cause based on the administrative record before the agency.

XII. General Effective Date: Application of Amendments

Section 1201. Effective date; application of amendments

Section 1201 provides that the bill shall take effect 180
days after the date of its enactment. Except as otherwise
provided in the bill, the amendments made by H.R. 833 shall not
apply to cases commenced under the Bankruptcy Code before the
bill's effective date.

Agency Views

Department of Justice,
Office of Legislative Affairs,
Washington, DC, April 19, 1999.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: We understand that the Judiciary
Committee will mark up H.R. 833, the Bankruptcy Reform Act of
1999, during the week of April 19, 1999. This letter
supplements and incorporates by reference the views of the
Justice Department on H.R. 833 set forth in our letter of March
24, 1999, to the Chairman of the Subcommittee on Commercial and
Administrative Law. A copy of that letter is enclosed for your
convenience. We would be pleased to meet with you to discuss
our concerns in more detail.

Section 102. Dismissal or conversion

The Department continues to oppose this provision for the
reasons stated in our earlier letter, but notes certain changes
in the wording of proposed section 707(b)(2)(A)(ii) which cause
additional concerns. Specifically, the new reference to ``the
debtor's applicable monthly expenses for the categories
specifically listed as Other Necessary Expenses issued by the
Internal Revenue Service'' appears to limit what the debtor can
claim to certain categories and no others. This limitation is
too restrictive.
In addition, a new statement has been added that
``[n]otwithstanding the foregoing, the debtor's monthly
expenses shall not include any payments for debts.'' The
purpose of this statement is unclear. This provision would, for
example, appear to preclude a debtor from factoring in any
payments on nondischargeable debt. We recommend that this
sentence be deleted.

Section 117. Trustee liability

Section 117 of H.R. 833 is new, and was incorporated as
part of the Amendment in Nature of a Substitute approved by the
Subcommittee. This section establishes a uniform standard of
trustee personal liability. We strongly oppose Section 117 as
currently drafted, because it could seriously undermine the
ability of innocent victims of a trustee's negligent conduct to
obtain redress. It also contradicts the requirements of 28
U.S.C. Sec. 959 (``trustees and receivers suable'') for
trustees and receivers conducting business operations.
Subsection (a) would amend section 322 of the Bankruptcy
Code (title 11, U.S.C.) to provide that a trustee is not liable
personally or on such trustee's bond except to the extent that
the trustee acted with gross negligence. This standard is
designed to insulate a trustee from any liability arising from
the trustee's negligence and could leave victims, whether
creditors or innocent third parties, without recourse. Although
a trustee's bond is conditioned upon a trustee's ``faithful
performance,'' 11 U.S.C. Sec. 322(a), this provision could
permit the surety on the bond to avoid payment on a negligence
claim, because the principal on the claim, the trustee, would
not be personally liable.
The risk of harm to innocent third parties is especially
great when a trustee operates a business. Currently, 28 U.S.C.
Sec. 959 requires all trustees engaged in business to comply
with the requirements of the laws of the state in which the
property is situated. Granting immunity for acts of negligence
eviscerates the requirements of 959, and could create a safe
haven from having to comply with applicable law in carrying on
a business. The consequences of this change would be
particularly severe in cases where trustees operate a hazardous
enterprise such as a chemical weapons business or waste
recycling business. If trustees elect to seek short-term
profits for estate creditors through operation of an insolvent
and hazardous business prior to liquidation, it is critical
that innocent parties that may bear any costs of such profit-
making activity be protected.
Trustees may currently protect themselves from negligence
claims by purchasing insurance. Yet because the insurance
protects the trustee personally asopposed to the estate,
reimbursement of the premiums from estate funds has traditionally been
disallowed. This provision would eliminate the trustee's incentive to
carry any insurance.
To protect both the estate and innocent third parties, the
Department would not object, in lieu of this provision, to
amendments requiring trustees to obtain adequate insurance and
permitting them to obtain reimbursement of their premiums as an
``actual, necessary expense'' of the estates, See 11 U.S.C.
Sec. 330(a)(1)(B). If this provision remains, however, we
strongly recommend that any immunity provided by Section 117(a)
be made inapplicable to a trustee ``that is carrying on
business,'' in order to conform to the requirements of 28
U.S.C. Sec. 959. Moreover, nothing in this provision should
compromise a court's ability to consider the trustee's
negligent acts in awarding compensation to the trustee, or in
considering whether the trustee should be removed from the case
under 11 U.S.C. Sec. 324. This is particularly important since
section 209 of the bill, which we oppose, would create an
entitlement for the trustee to recover maximum compensation.
Subsection (b) would amend section 323 the Bankruptcy Code
to further immunize trustees from the consequences of their
acts by stating that a trustee may not be sued, either
personally or in a representative capacity, ``for acts taken in
furtherance of the trustee's duties or authority in a case in
which the debtor is subsequently determined to be ineligible
for relief.'' This provision could be interpreted to insulate a
trustee from acts of gross negligence based on the mere
fortuity that a bankruptcy case is later dismissed. We also
oppose this provision because it fails to protect innocent
third parties as discussed above.
Subsection (b) would also amend the Bankruptcy Code to
immunize a trustee from liability ``for the dissemination of
statistics and other information regarding a case or cases,
unless the trustee has actual knowledge that the information is
false.'' Congress has recognized the need for data as well as
the establishment of adequate safeguards. Sections 701-703 of
this bill evidence a congressional mandate for uniform data
collection standards, including final reports in chapter 7, 11
and 13 cases. Acting pursuant to this mandate, the United
States Trustees and the bankruptcy clerks will be developing
and compiling uniform standards and statistical information.
Since the data maintained by the trustees will be collected by
the United States Trustees and clerks for purposes of meeting
these requirements, this amendment appears unnecessary and may
be redundant of other provisions.
Nevertheless, we would not oppose this provision if it were
amended to address the following concerns:
No dissemination should violate protected privacy
interests of an individual.
The trustee should not be permitted to disseminate
statistics for the personal benefit or gain of the
trustee or of any organization in which the trustee is
a member.
The trustee should not be permitted to discriminate
in the way statistics or information are disseminated.
Nothing in this provision should abrogate the
trustee's fiduciary duty under 11 U.S.C. Sec. 704 to
provide information to parties in interest in a case
or, upon request, to furnish statistics and information
to the United States trustee or clerk of court.
Finally, subsection (b) further amends 11 U.S.C. Sec. 323
to provide that a trustee ``may not be sued in a personal
capacity without leave of the bankruptcy court in which the
case is pending.'' We oppose this provision as written, because
it is inconsistent with section 959 of title 28, United States
Code, which specifically provides that leave of court is not
required for actions against trustees for acts arising from
their operation of a business. Victims should not be forced to
conduct litigation in forums that are distant from where the
trustee has chosen to conduct business in a negligent, grossly
negligent or intentionally wrongful manner.
With regard to non-operating cases, this provision appears
to codify what is commonly known as the ``Barton doctrine.''
Under that doctrine, a trustee who does not operate a business
cannot be sued in a forum other than where the underlying
bankruptcy case is pending, absent leave of court. See DeLorean
Motor Co. v. Weitzman, 991 F.2d 1236 (6th Cir. 1993). If this
provision is intended to insulate the trustee from personal
liability actions, we oppose it for the reasons noted above,
but if it is intended solely as a venue issue, we would not
oppose codification of the ``Barton doctrine'' provided it
applies only to non-operating cases and is inserted as an
amendment to section 1409 of title 28, United States Code,
instead of the Bankruptcy Code.

Section 132. Amendment to section 1325 of title 11, United States Code

Section 132 modifies what is commonly called the
``disposable income'' objection to confirmation of a chapter 13
plan. Under current law, a trustee or unsecured creditor may
object to confirmation of a plan unless the plan provides that
all of the debtor's disposable income for a three-year period
is applied to payments under the plan. We oppose section 132
because it seriously weakens the effectiveness of chapter 13.
This section would require the use of the ``means test''
found in section 102 of the bill to determine a debtor's
disposable income, instead of a personalized review of a
debtor's necessary expenses. We oppose the application of the
means test in chapter 13 for the same reasons that we oppose
the means test in section 102. The rigid application of
formulaic expenses could significantly reduce the ability of a
debtor to successfully complete a chapter 13 plan because the
plan is not based upon a debtor's actual expenses. We believe
that the current ``disposable income'' test as applied by the
courts is effective in protecting both the debtor and
creditors.
In addition, section 132 eliminates payments received by
the debtor for child support and other related payments from
the determination of current monthly income. This could lead to
double counting, insofar as income attributable to support is
not recognized but support-related expenses are still deducted.
Under the present disposable income test, such income and
associated expenses are taken into account by the courts.

Section 126. Residency requirement for State exemptions

Section 126 specifies that, if a debtor has not been
domiciled in a state for the entire 730-day period prior to
filing, the debtor can claim exemptions under the laws of the
state where the debtor was domiciled in the 180-day period
prior to the 730-day period. We support the effort to address
this problem, but have serious concerns about whether this
provision will be effective. Much of this will depend on how
states limit their exemptions or permit individuals to claim
exemptions. Without a full understanding of how state exemption
laws are applied, unintended gaps will still arise under this
proposal as debtors attempt to claim exemptions under the laws
of another state in which they no longer reside or have
property. It is unlikely, for example, that a Missouri debtor
could claim the Texas homestead for the debtor's new Missouri
residence--two years after the debtor has moved himself and his
property from Texas--thus leaving the debtor with no homestead
exemption to claim.

Section 150. Monetary limitation on certain exempt property

Section 150 would limit the amount of the exemption a
debtor can claim in homestead property to $250,000. Presently,
a few states allow a debtor to claim an unlimited exemption in
homestead property, which has led to highly visible cases of
abuse by debtors who are clearly able to repay their debts but
instead avoid repayment by using the unlimited exemptions in
these states. The Department strongly supports the move to cap
exemptions but urges the Committee to consider a lower ceiling
such as $100,000.

Section 402 and 407. Small business chapter 11 cases

The Department commented in its earlier letter that the
definition of a small business debtor set out in section 402 of
the bill could lead to unnecessary litigation over whether a
debtor is subject to the small business provisions that are
being proposed. The delay resulting from such litigation could
jeopardize a small business's ability to reorganize and defeat
the purpose of these provisions--which is to provide a fair but
expeditious way to shepherd small business cases through the
system. We appreciate the change in section 402 to resolve the
definition problem and support it.
The substitute bill, however, appears to have moved the
language in section 402 that we objected to earlier and
inserted it in section 407 as an amendment to 11 U.S.C.
Sec. 1121(e). As presently drafted, a small business debtor is
required to file a plan within 90 days unless the court makes a
determination within the 90 days that the creditors committee
``is sufficiently active and representative to provide
effective oversight of the debtor.'' While we appreciate the
intent to provide the debtor with more time to file a plan in
certain circumstances, this provision seems to compromise the
point of having a 90-day deadline. It will require extra
hearings during a particularly crucial period when the debtor
should not be distracted by collateral issues from working on
the reorganization. We would be pleased to work with the
Committee on appropriate changes.
We look forward to working with the Committee as it
considers these and other issues raised by H.R. 833. The Office
of the Management and Budget advises that there is no objection
to the submission of this letter from the standpoint of the
Administration's program.
Sincerely,
Dennis K. Burke,
Acting Assistant Attorney General.
------

U.S. Department of Justice,
Office of Legislative Affairs,
Washington, DC, March 24, 1999.
Hon. George W. Gekas
Chairman, Subcommittee on Commercial and Administrative Law, Committee
on the Judiciary, House of Representatives, Washington, DC.
Dear Mr. Chairman: We understand that the House Judiciary
Subcommittee on Commercial and Administrative Law is scheduled
to mark up H.R. 833, the Bankruptcy Reform Act of 1999, on
March 24, 1999. This letter provides the position of the
Administration on consumer bankruptcy reform, and outlines the
Justice Department's views on H.R. 833 as a whole. While we
understand that this letter comes too late for your
consideration before the markup of H.R. 833 by the
Subcommittee, we hope you will take our comments into
consideration prior to the markup by the full Committee. We
would be pleased to meet with you to discuss these issues in
more detail.

General Administration Perspectives

The President supports responsible bankruptcy reform that
is balanced, would reduce abuses of the bankruptcy system, and
would require debtors and creditors alike to act responsibly.
The President remains hopeful that bipartisan consultation and
compromise will result in legislation that he can
enthusiastically sign this year.
Last year the Administration expressed its strong
opposition to the House-passed version of H.R. 3150. We
encouraged passage of the Senate bill ``as an important step
toward balanced bankruptcy reform,'' but noted that the
Administration would support its enactment ``only if the
essential reforms incorporated by the Senate managers'
amendment [were] preserved and strengthened and the unbalanced
and arbitrary elements of the current House bill [were]
omitted.'' Although we thought that the Senate bill could be
further improved, we believed that the extraordinary bipartisan
support for the Senate bill was an endorsement of balance and
moderation.
During this year's debate, the Administration will continue
to encourage Congress to find an appropriate balance. Among the
issues that must be addressed are:
Access to Chapter 7: Any ``means test'' imposed should deny
access to Chapter 7 only to those who genuinely have the
capacity to repay a portion of their debts successfully under a
Chapter 13 repayment plan. Thus, debtors affected by a means
test must be given a meaningful opportunity to have their
specific circumstances considered by bankruptcy courts with
discretion to determine whether they genuinely have the
capacity to repay a portion of their debts. In addition, the
time periods and thresholds used in any means test should be
set to ensure that only those with a strong likelihood of
success are affected.
Nondischargeable Debts: It is generally inappropriate to
make post-bankruptcy credit card debt a new category of
nondischargeable debt. The Bankruptcy Code makes debts
nondischargeable only where there is an overriding public
purpose, such as in the cases of educational loans, tax
obligations, or debts incurred by fraud. We remain skeptical
that the current protections against fraud and debt run-up
prior to bankruptcy are ineffective and that the additional
debts made nondischargeable by this bill meet the standard of
an overrding public purpose. If categories of nondischargeable
debt are to be created, they should be narrowly tailored and
limited to situations where the debtor is clearly abusing the
system, such as when the debtor: (1) incurred the debt to pay
nondischargeable debt with an intent to avoid the debt in
bankruptcy; or (2) incurred the debt on the eve of bankruptcy
for goods and services that are not reasonably acquired to
support the debtor's household.
Coercive Creditor Practices: Particularly if we are to
provide new opportunities for creditors to challenge debtors'
use of the bankruptcy system under the 707(b) abuse test, it is
imperative that we adequately limit prevalent abusive creditor
practices such as coercive reaffirmations and violations of the
automatic stay. While last year's Senate bill initially took
laudable steps in this direction, the Conference Report rolled
back existing consumer protections by denying consumers an
effective means for remedying the harm from such practices and
eliminating the current authorization for penalties for
intentional violations of debtor rights.
Consumer Information and Protection: The challenge posed by
the unprecedented level of bankruptcy filings requires us to
ask greater responsibility of debtors and creditors both.Credit
card companies must give consumers more and better information so that
they can understand and better manage their debts.
Homestead Exemptions: At the same time that we are creating
a system that will deny certain moderate-income Americans
access to the traditional ``fresh start,'' we should also close
the loopholes that allow the wealthy to shield hundreds of
thousands of dollars of wealth from their creditors.

Justice Department Comments

Title I: Consumer Bankruptcy Provisions

SUBTITLE A: NEEDS BASED BANKRUPTCY

Section 102. Dismissal or conversion

Section 102 of H.R. 833 amends section 707(b) of the
Bankruptcy Code (the ``Code'). Under this amendment, a chapter
7 case filed by an individual with primarily consumer debts may
be dismissed for abuse upon the motion of any party in
interest, with certain limitations. Abuse is presumed when the
debtor is able to repay at least 25 percent of non-priority
unsecured debts or $5000 over 60 months, applying IRS expense
guidelines. The debtor may rebut the presumption of abuse by
demonstrating extraordinary circumstances that require
additional expenses or an adjustment of current monthly income.
In deciding whether a case is abusive, the court must also
consider whether the case was filed in bad faith or whether the
``totality of the circumstances'' demonstrates abuse.
The Department supports strengthening the provisions of
section 707 of the Code to ensure that debtors with an ability
to repay their debts do not obtain a chapter 7 discharge.
However, the proposed amendments raise a number of concerns,
and for these reasons, we oppose section 102.
First, we are concerned that the ``thresholds'' are too
low, and will have the effect of denying some debtors Chapter 7
relief who in fact have no significant ability to repay their
debts. In addition, we believe that these thresholds
unnecessarily saddle the bankruptcy system with extra costs,
such as reviewing the income and expenses of low income debtors
who are not able to repay their debts. We believe that changes
should be made to minimize the costs to the bankruptcy system.
And, as a technical matter, this section does not make clear
whether the ability-to-repay standards apply only to an
individual debtor, or also to joint debtors.
Second, the use of the Internal Revenue Service (IRS)
Standards for allowable expenses is inappropriate because those
standards were not intended for these purposes. The IRS
standards were meant to provide guidelines for determining
appropriate expenses. Last year during its consideration of the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, Congress criticized the inflexible application
of those guidelines and directed the IRS to also consider the
taxpayer's facts and circumstances. The Joint Committee on
Taxation explained the attitude of Congress regarding the
guidelines in the following terms:

The IRS is * * * required to consider the facts and
circumstances of a particular taxpayer's case in
determining whether the national and local schedules
are adequate for that particular taxpayer. If the facts
indicate that use of scheduled allowances would be
inadequate under the circumstances, the taxpayer is not
limited by the national or local allowances.

See General Explanation of Tax Legislation Enacted in 1998 at
107 (1998) (emphasis added).
Bankruptcy courts should be given as much discretion in
applying the IRS guidelines. In particular, the ``extraordinary
circumstances'' standard in section 102 of H.R. 833 is much
stricter than the standard of ``inadequate under the
circumstances'' which the IRS now applies for collecting tax
debt, which is a higher public priority than debt that can be
discharged in bankruptcy.
Third, the multiple hurdles for rebutting the presumption
of abuse--``only'' if the debtor can demonstrate
``extraordinary circumstances'' that make additional expenses
or adjustments of income ``necessary'' and reasonable--are
conflicting and so strict as to effectively preclude the debtor
from proving the existence of reasonable expenses that are not
included within the IRS standards. We believe that the words
``only,'' ``extraordinary'' and ``necessary'' should be deleted
from proposed section 707(b)(2)(B). The debtor still would be
required to prove to the court that additional expenses are
both warranted and reasonable.
Fourth, the procedures set forth in Section 102 would
impose a substantial burden on the courts and the trustees. As
a general matter, chapter 7 cases flow through the bankruptcy
system fairly quickly. Any delays that are built in (including
the trustees'' statement, the extension of time to file
paperwork, etc.) will slow that process accordingly. More
specifically,section 102(b)(2) of the H.R. 833 would amend 11
U.S.C. 704 to expand the duties of a chapter 7 trustee to require the
trustee to file a statement with the court 10 days before the meeting
required under section 341 of the Code as to whether the debtor's case
should be presumed to be an abuse under the means-test formulation. The
court must then notice the statement to all creditors within 5 days. If
the debtor makes more than the highest national median family income
for a family of equal or lesser size, the trustee must file a motion to
dismiss within 30 days or file a statement explaining why a motion
would not be appropriate.
Since the section 341 meeting occurs within 20-40 days of
filing, Fed. R. Bankr. P. 2003(a), the trustee's statement must
be filed within 10 to 30 days after filing depending on when
the 341 meeting is held. This means the trustee must make the
determination before she even questions the debtor at the 341
meeting or before the documents are even filed. This is
impractical, and is at odds with Section 604 of the bill, which
appears to give debtors a 45-day grace period to file the
requisite documents (under current law, 11 U.S.C. 707(a)(3)
debtors have only 15 days to file the documents required by 11
U.S.C. 521(1)). It is not clear how the trustee can perform
this assessment with any degree of due diligence in the time
required. These problems threaten to significantly clog the
formal bankruptcy processes. We stand ready to work with the
Committee to craft proposals that minimize the costs to the
bankruptcy system.
Fifth, we do not think it appropriate for Section 102 to
impose a higher duty on debtor's counsel than that set forth in
Rule 9011. We believe that the standards in Rule 9011 are
appropriate and we are concerned that the formulation set forth
in Section 102 adds unnecessary complexity and confusion to the
Bankruptcy Code.
Sixth, we do not believe it is appropriate to remove the
risk of sanctions from all creditors who bring unjustified Rule
707(b) motions just because those creditors' claims may be less
than $1000. If the goal is to encourage small business
creditors to bring appropriate Rule 707(b) motions, then the
legislation should be drafted more narrowly to address those
entities, while excluding large creditors with many small
claims. Otherwise the bill will serve to protect large
creditors with sub-$1000 claims who, due to their size and
efficiencies of scale, do not merit this protection and who
could use such protection to coerce debtors to reaffirm debts.
Seventh, section 102 also amends section 704 to require the
trustee to file a statement with the court 10 days before the
meeting of creditors, stating whether the debtor's case should
be presumed abusive based upon ability to repay, and file a
motion to dismiss within 30 days of filing the statement. It is
impractical to require the trustee to file such a statement
before the meeting of creditors, especially when section 604 of
this bill gives debtors up to 45 days to complete their
schedules, and liberal amendments to schedules are permitted.
The necessity of such a statement is also doubtful insofar as
section 102 requires the debtor to file a statement containing
the necessary ability to repay calculations.

Section 103. Notice of alternatives

Section 103 of H.R. 833 would, in part, amend section 342
of the Code to ensure that consumer debtors receive information
about debt counseling services and their options before filing
bankruptcy. The form of the notice would be prescribed by the
United States Trustee for the district and would contain a
brief description of the bankruptcy chapters, the benefits and
costs of each chapter and services available from a credit
counseling service approved by the United States Trustee for
that district. We support the concept of consumer education
that underlies section 103.

Section 104. Debtor financial management test program

Section 104 of H.R. 833 would require the Executive Office
for United States Trustees, in consultation with experts, to
develop a financial management training curriculum for debtor
education in three pilot districts for a one year period. The
materials would also be made available to individual debtors on
request. The courts in the pilot districts would be authorized
to make attendance at the debtor education program a condition
of discharge. The Director of the Executive Office would also
be required to evaluate the effectiveness of the pilots and
existing debtor education programs and to submit a report of
his findings to Congress.
Provided that adequate resources are appropriated for the
test program, the Department supports this as the best way to
refine effective debtor education programs before they are
extended nationwide. However, H.R. 833 creates confusion as to
whether debtor education is to be a test or a permanent
program. Section 302(b) and (c) of H.R. 833 condition the
debtor's discharge upon completion of ``an instructional course
concerning personal financial management described in section
111.'' This language suggests a permanent program. Moreover,
section 111 does not address such courses. We believe these
provisions may have been carried over inadvertently from an
earlier draft, and suggest they be deleted.

SUBTITLE B: CONSUMER BANKRUPTCY PROTECTIONS

Sections 105 to 108. Disclosures (Debt relief agencies)

Sections 105 to 108 of H.R. 833 deal with debt relief
agencies. Section 105 defines covered debt relief agencies.
Section 106 would require such agencies to provide the person
they are assisting in filing bankruptcy with written notice of
the requirements that all bankruptcy schedules must be
accurate, that the information is subject to audit, and that
the failure to provide accurate information may result in
dismissal of the bankruptcy case, sanctions or criminal
prosecution. Debt relief agencies would be required to provide
a separate notice advising the assisted person that the debt
relief agency is required, inter alia, to enter a written
contract. Finally, debt relief agencies would be required to
inform assisted individuals on matters such as ``how to
determine what property is exempt and how to value exempt
property at replacement value.''
The Department opposes section 106 as currently drafted,
because it would undercut the consumer protections currently
contained in section 110 of the Code and state law. These
provisions impose penalties on persons who negligently or
fraudulently prepare bankruptcy petitions. Because debt relief
agencies would be defined to include petition-preparers and
other non-attorneys, the advice required to be given by a
counseling agency could constitute the unauthorized practice of
law. To avoid this problem, section 106 of H.R. 833 should be
amended to exclude non-attorneys from the provisions of new
section 526(c), and to add to the form notice outlined in
section 526(b) a statement that the debt relief counseling
agency employee cannot provide legal advice if he or she is not
an attorney.
Section 107 of H.R. 833 would provide the assisted person
certain substantive rights when using a debt relief agency,
including the right to a written contract that fully discloses
all services and all charges. We do not oppose this concept,
but believe that the standard of liability in the provisions
should be changed. Section 107(b)(2) provides that a debt
relief agency shall not ``make any statement * * * which is
untrue and misleading or which upon the exercise of reasonable
care, should be known by the debt relief agency to be
untruthful or misleading.'' (emphasis added). The underlined
disjunctive ``or'' would impose strict liability upon a debt
relief agency by imposing liability if the statement is untrue
and misleading, even if the agency had no reason to know of the
untruthful or misleading nature of the statement. The
Department suggests replacing the underlined ``or'' with
``and'' to establish a more appropriate standard of liability.
Finally, section 108 of H.R. 833 would provide penalties
and other remedies on debt relief agencies for failing to
comply with the requirements of section 106 and 107, or for
providing bankruptcy assistance in a case which is dismissed or
converted for a failure to file bankruptcy papers. Section 108
should be clarified to allow a debtor, as well as the trustee,
to bring an action for a violation, and to clarify that the
remedies are in addition to any remedies provided in section
110 of the Code.

Section 110. Discouraging abus[ive] reaffirmation practices

Section 110 addresses a problem of great significance:
unscrupulous creditor practices designed to coerce debtors into
reaffirming debts, particularly unsecured debts, even when
doing so clearly is not in the best interests of the debtor.
Currently, section 524(c) of the Code imposes a number of
limitations on reaffirmation agreements, but the extant
evidence suggests that abusive reaffirmation practices
continue. The National Bankruptcy Review Commission recommended
even stricter rules regarding reaffirmation of secured debt,
and the complete elimination of reaffirmations of unsecured
debt.
Section 110 attempts to address this problem by requiring
that creditors who seek reaffirmation of wholly unsecured
consumer debt provide a disclosure that the debtor is entitled
to a hearing. The debtor also can waive his right to a hearing
if represented by counsel.
We believe that a far more effective approach would (1)
require disclosure of the component amounts of any debt to be
reaffirmed; (2) require court review for reaffirmations of
relatively small amounts where the creditor claims a purchase
money security interest; (3) prohibit the addition of costs and
attorneys fees on at least these smaller claims. We would be
happy to work with the Committee to develop stronger, more
effective rules to discourage abusive reaffirmation practices.

Section 111. Promoting alternative dispute resolution

Section 111 would create an incentive for the parties to
use alternative dispute resolution prior to the filing of a
petition. We wholeheartedly support efforts to encourage the
use of alternative dispute resolution in this context, but
believe Section 111 is too restrictive because it applies only
in limited circumstances. Under this section, alternative
dispute resolution would be encouraged by imposing a penalty in
cases where a creditor unreasonably refused to negotiate an
alternative repayment schedule proposed by an approved credit
counseling agency. The penalty applies only if the debtor's
offer was made at least 60 days prior to the filing of the
petition; and the offer provided a specified percentage payment
(60% over aspecified time). A more effective approach would be
to encourage parties to use any appropriate neutral, and give them
leeway to determine when it is appropriate to settle and for what
amount. We would be happy to work with the Committee to draft a more
effective rule.

Sections 116 to 117. Effect of discharge; automatic stay

Section 116 addresses several issues. First, it states that
the willful failure of a creditor to credit payments received
under a confirmed plan shall constitute a violation of a
discharge injunction under subsection 524(a)(2) of the Code. We
support this provision but suggest two modifications. First,
the court should be given discretionary, rather than mandatory,
authority to grant sanctions, so as to allow the court to
consider situations where the creditor had a good faith basis
to believe the debt was not discharged. Second, we suggest the
provision be amended to require the debtor first to exhaust
efforts to obtain administrative relief where applicable.
Next, section 116 bars debtors who are injured by the
failure of a creditor to comply with the law regarding
reaffirmation agreements or the crediting of plan payments from
bringing a class action suit. In addition, the provision would
limit recovery to actual damages or $1000, whichever is
greater, plus costs and attorneys' fees. Recent litigation has
demonstrated that these kinds of violations do in fact occur,
at times, on a class-wide basis in circumstances where
individual damages may be too small to encourage a debtor to
bring a claim. Moreover, we believe that treble damages would
be a more effective incentive to debtors to bring these claims.
Accordingly, we strongly oppose this provision.
Section 117 bars class actions for violations of the
automatic stay, and limits debtor recovery to actual damages
and reasonable costs, including attorneys fees. Once again, we
strongly oppose the limitation on class actions, and support a
treble damages provision as a more effective incentive to
obtain compliance with the provisions of the automatic stay
rules.

Section 119. Discouraging bad faith repeat filings

In cases of refiling within a year, section 119 would
provide a 30-day limit on the application of the automatic stay
of section 362 of the Code. This section would not apply if,
prior to termination and upon request of a party-in-interest,
the court provides notice and a hearing to affected parties
regarding the potential extension of the stay. Serial filings
are a serious problem in many jurisdictions and, accordingly,
we endorse the adoption of firm measures to address this issue.
Repeat filings--whether to obtain multiple discharges or to
hold creditors at bay temporarily--should not be encouraged or
abided. This provision would provide a welcome limitation to
abuse of the automatic stay provision of the Code by serial
filers who have no hope or intention of ever being granted a
discharge in bankruptcy.

Section 123. Giving secured creditors fair treatment in chapter 13

Section 123 would amend section 1325(a)(5)(B)(i) of the
Bankruptcy Code to protect the lien of a secured creditor from
release by a chapter 13 plan if the debtor fails to complete
the plan. This provision would resolve an issue on which the
bankruptcy courts are split. The issue arises when the debtor
confirms a chapter 13 plan that reduces a creditor's lien to
the current value of the collateral (so-called ``lien
stripping'') and then, after completing the payments due on the
secured portion of the claim, but before the plan is completed,
the debtor seeks to discharge the lien. Some courts hold that
the collateral does not vest in the debtor until the entire
plan is completed. See, e.g., In re Pruitt, 203 B.R. 134
(Bankr. N.D. Ind. 1996); In re Schieirl, 186 B.R. 498 (Bankr.
D. Minn. 1995). Other courts have held that, upon payment of
the secured portion of the creditor's claim, the collateral is
released. See, e.g., In re Lee, 156 B.R. 628 (Bankr. D. Minn.),
aff'd, 162 B.R. 217 (D. Minn. 1993); In re Nicewonger, 192 B.R.
886 (Bankr. N.D. Ohio 1996).
We support the limitations on lien discharge contained in
section 123. A key advantage that chapter 13 offers debtors
over chapter 7 is that a larger universe of property is subject
to lien ``strip down.'' Furthermore, in a chapter 13 plan, the
debtor can redeem collateral with payment over time from future
income. These advantages are often the debtor's chief reason
for undertaking a chapter 13 plan. But because debtors may
allocate their plan payments preferentially to pay secured
indebtedness sooner than unsecured debt, the result can be a
disincentive for debtors to finish their plans after paying
enough to redeem the collateral. Debtors should not be
permitted to obtain the benefits of chapter 13 without bearing
its burdens.

Section 124. Restraining abusive purchases on secured credit

Section 124 amends Section 506 of the Code in individual
cases by barring the stripping of liens for personal property
acquired by the debtor within 5 years of filing the bankruptcy
petition. Currently, the debtor's power to strip liens to the
value of the collateral in plans under chapters 11, 12 and 13
is not limited by the time lapsed since purchase.
Expanding the ``look back'' to 5 years changes its
character, and creates a significant limitation on the
attractiveness of reorganizations for debtors, especially under
chapter 13. A key advantage of chapter 13 for debtors is the
expanded ability it affords to retain property subject to
liens. Not only can debtors reduce the payments down to the
value of the collateral, but they can also pay the liens off
over time from the plan payments. Many courts allow debtors to
``front load'' the payments for their secured debt; in such
cases, debtors who retire their secured debts under their plans
may have no incentive to finish their plans, and may default
without making substantial payments to their unsecured
creditors. (The latter result is addressed by section 123,
which precludes a strip down where the debtor fails to complete
the plan; we support this provision.) This provision therefore
may reduce substantially the number of debtors who voluntarily
file chapter 13. This change benefits lenders who take personal
property, such as cars, as collateral. The lack of strip down
means that debtors must devote a greater percentage of their
limited assets to secured creditors.
Although this modification may generally benefit the
federal government, we believe a more balanced approach would
be to return to the 180 day look back that was considered in
the last year's legislative proposals.

Section 126. Exemptions

Section 126 would amend section 522(b)(2)(A) of the Code
to permit the use of state exemptions only if the debtor has
been domiciled in the respective state for at least two years
before filing. As written, this amendment could deny a debtor
who has not resided in a state for at least two years, but is
otherwise a resident of that state, the use of any state's
exemption because many states prohibit the use of federal
exemption law under so- called ``opt out'' laws. To prevent
this situation from resulting in the debtor being unable to
claim any homestead, the opt-out language of section 522 should
also be modified. Alternatively, this provision could be
amended to permit the use of a state's exemption law where the
debtor's domicile has been located for the last two years, or
for a longer portion of the last two years than in any other
place.
Moreover, we urge that the homestead exemption be limited
uniformly to $100,000 for the reasons set forth in the General
Administration Perspectives section of this letter.

Section 129. Discharge under chapter 13

Section 129 governs the scope of discharge in Chapter 13
cases. Section 129 would limit the dischargeability of certain
kinds of debt under section 523 of the code. We support this
limitation. However, section 129 omits section 523(a)(3)(A) of
the Code from its list of non-dischargeable debt, while it
includes section 523(a)(3)(B). We see no basis for this
bifurcation and suggest that entire section 523(a)(3) be
included. Both subsections deal with a debtor's failure to
schedule known debts. Subsection A deals with the unnotified
creditor's ability to file a proof of claim. Subsection B deals
with the unnotified creditor's ability to object to discharge
on various grounds. As a matter of due process, the claims of
such creditors who had no opportunity to participate in the
bankruptcy should not be discharged.

Section 135. Limitations on luxury goods

Section 135 would amend Section 523(a)(2)(C) of the Code
to change the non-dischargeability rules for certain so-called
luxury goods. First, it defines ``luxury goods or services'' so
as to exclude those ``reasonably necessary for the support or
maintenance of the debtor or a dependent of the debtor.'' We
prefer the formulation ``reasonably required.'' Moreover, by
including the word ``necessary'' the burden inappropriately
shifts to the debtor to demonstrate that he or she ``needed''
the items expended. Second, it would establish a cap on
dischargeable luxury goods or services of $250, or cash
advances of $250, incurred within 90 days of filing the
petition. We oppose the limitation. This would be a substantial
change from the current law, which sets forth limits of $1075
during the preceding 60 day period. Moreover, it is important
to bear in mind that cash advances are not always obtained for
frivolous expenses; debtors sometimes use cash advances to buy
absolute necessities such as groceries.

Sections 141 to 147. Domestic support obligation

Sections 141 defines domestic support obligations, and
Section 142 establishes domestic support obligation as the
first priority. We generally support this recognition of the
critical societal importance of ensuring that domestic support
obligations are not unduly reduced as a result of a debtor's
bankruptcy. Without payments from domestic support obligations,
the recipients of those payments may become destitute; it is
therefore appropriate to give them a high priority. However, if
an appropriate mechanism for funding the administrative costs
of bankruptcy is not provided, too many debtors will go
unrepresented. We would like to work with the Committee
toensure that there are no unintended consequences of this priority for
domestic support obligations.
Sections 143 to 147 establish other special rules in the
domestic support obligation context. Sections 143 and 144
establish special rules regarding confirmation and discharge,
and exceptions to the automatic stay, in cases involving
domestic support obligations. Section 145 makes certain
domestic support obligations non-dischargeable. We support
these provisions for the reasons stated above.

Section 149. Nondischargeable debts

Section 149 amends Section 523(a) of the Code in two ways.
First, it would make non-dischargeable any debt that was
incurred to pay an otherwise non-dischargeable debt with the
intent to discharge the newly acquired debt. We support this
change.
Second, Section 149 would also make non-dischargeable all
debts incurred to pay non-dischargeable debts, without regard
to intent, if incurred within 90 days of the petition.
Proponents of this provision argue that one can presume that
the debtor had the intent to avoid the debt in bankruptcy if
they paid the nondischargeable debt with a dischargeable debt
within 90 days of bankruptcy. Unfortunately, that is not a fair
assumption. In the final months before filing a bankruptcy
petition, a debtor may be struggling to retain a house or a car
or feed a family. Accordingly, he or she may put debts on their
credit card in a last attempt to meet their obligations. A
review of the debtor's intent (for example, by looking at
whether the debtor had yet consulted with bankruptcy counsel or
whether the debtor had previously filed for bankruptcy and
therefore was familiar with the rules) could uncover whether
the payment in fact was abusive or not. By failing to weigh the
intent of the debtor, this rule is overbroad and we strongly
oppose its inclusion.

Title II: Discouraging Bankruptcy Abuse

Section 201. Reenactment of Chapter 12

Section 201 reenacts Chapter 12 of the Code, pertaining to
family farmers. We support this provision.

Section 202. Meetings of creditors and equity security holders

Section 202 would amend section 341 of the Code to allow a
court to direct the United States Trustee to dispense with the
meeting of creditors in a case with a so-called ``pre-packaged
plan'', i.e., a reorganization plan worked out with creditors
in advance of the filing of a Chapter 11 petition. We oppose
this provision, which would significantly hinder the ability of
creditors and the United States Trustee to examine a debtor's
affairs under oath. Dispensing with the meeting could also
increase the possibility of fraud and collusion by a debtor and
its major creditors. We suggest this provision be deleted.

Section 203. Protection of retirement savings in bankruptcy

Section 203 exempts from the bankruptcy estate a qualified
retirement fund, pursuant to certain standards set forth in
this section. The effect of the amendments would be to enhance
debtors'' ability to prevent their interests in retirement
accounts and funds, including Individual Retirement Accounts,
from being used to satisfy their debts. The Administration has
made encouraging adequate retirement savings a singular
priority. We recognize that a fresh start is not meaningful if
it requires the debtor to accept an impoverished retirement.
However, a debtor should not be able to shield abundant
resources from creditors, including federal, state and local
governments, in the form of retirement savings. We look forward
to working with the Committee to find the appropriate balance
of these considerations.

Section 205. Executory contracts and unexpired leases

This section requires a debtor to assume an unexpired
lease of non-residential real property within 180 days after
filing the petition or the lease is deemed rejected. We support
this provision.

Section 206. Creditor and equity security holders committees

Section 206 would amend section 1102 of the Code to allow
a court to order changes in the membership of creditor and
equity security holder committees. We strongly oppose this
provision. Under section 1102 of the Code, United States
Trustees are responsible for creating committees and appointing
their members, while courts are called upon to resolve
controversies arising from the committees. Section 206 would
upset this balance and improperly involve the court in the
administration of cases. This could create an appearance of
favoritism if a court were called upon to resolve a controversy
involving a committee it had constituted. The proposal could
also result in increased cost and delay because early
litigation over committee membership would inevitably decrease
the ability of committees to participate at the early, critical
stages of cases.
Nevertheless, the Department recognizes the desirability
of revising section 1102 to ensure that effective and
representative committees are appointed. Accordingly, we would
suggest that this section be amended to require that any
request to create oralter the membership of a committee be
first directed to the United States Trustee and to permit the court,
upon a request of a party in interest after an adverse decision by the
United States Trustee, to make the requisite findings and order the
United States Trustee to alter a committee. Such an amendment should
also reaffirm the United States Trustee's authority to alter a
committee. We would be happy to work with the Committee to draft
language to accomplish this objective.

Section 209. Amendment to section 330(a)

Section 209 would provide that in determining the amount
of reasonable compensation to be awarded to a trustee, the
court shall treat such compensation as a commission based on
the results achieved. We oppose this provision, which would
create a singular incentive that could lead to abuses, or the
perception of abuses, on the part of the trustee. We prefer the
current multifactor analysis set forth in section 330(a)(3) of
the Code.

Section 211. Preferences

Section 211 would amend section 547(c) of the Code, which
deals with preferential transfers of property to creditors
after the filing of a bankruptcy petition. Section 207 would
eliminate the ability of a trustee to avoid such a transfer in
a case filed by a debtor whose debts are not primarily consumer
debts, where all the property that constitutes or is affected
by the transfer is worth less than $5,000.
We oppose this provision. Although this provision is
apparently designed to protect the interests of smaller
creditors, this section, without appropriate supervision, could
lead to abuse and manipulation by debtors wishing to pay
preferred creditors. For example, nothing in the provision
would prohibit a debtor from breaking a larger payment into
several smaller ones that each total less than $5,000. If such
preferential payments are not avoidable, the result could be a
substantial diminution of the property available to pay
priority claims.

Section 215 (listed in table of contents as section 216). Defaults
based on nonmonetary obligations

Section 215 amends Section 365 of the Bankruptcy Code to
allow the debtor to reinstate a lease of real property under
which the debtor is in default if the default is not curable by
paying money. In addition, the debtor is allowed the same power
for an executory contract with the additional requirement that
the court find that the ``equities'' excuse the debtor's usual
obligation to cure. We oppose this provision for the reasons
outlined below, and suggest that it be deleted.
Currently, Section 365 of the Code allows a debtor to
resume performance of (or ``assume'') an executory contract or
an unexpired lease, notwithstanding a default that would
normally cost the debtor that right. To do so, the debtor must
cure the default, compensate for the monetary loss, and assure
adequately its future performance. Waiving the debtor's
obligation to cure if the default is not curable by money
ignores that many defaults going to the essence of the
agreement are not curable by money. The non-debtor party should
not be forced to perform where deprived of the full benefit of
the bargain.
If section 215 is intended to address the problem that
minor contractual breaches could otherwise be an obstacle to
the debtor's power to assume, then this fear is misplaced. The
common law has long distinguished between defaults that are
minor (entitling only damages) and major (voiding the
agreement). This proposal replaces, in the case of executory
contracts, this familiar concept with the wholly novel notion
of ``equities.'' This gives no guidance to the judge or parties
as to what factors should be weighed, and will therefore
generate confusion and litigation.

Title III: General Business Bankruptcy Provisions

Section 302. Miscellaneous improvements

Section 302 bars any debtor from filing a petition unless
they have sought the assistance of credit counseling during the
90-day period prior to the filing of the petition. This
provision does not apply in certain circumstances, such as
filings due to exigent circumstances. Section 302 also requires
debtors to attend educational courses prior to discharge in
Chapter 7 and 13 cases. Section 302 requires the clerk of the
court to maintain a list of credit counseling services and
educational courses that have been approved by the U.S.
Trustee.
We support the concept of credit counseling but question
whether the utility of making it mandatory in chapter 13 where
individuals will already be seeking to repay their creditors
through a debt repayment plan. We also have concern about the
requirement for United States Trustees to approve credit
counseling agencies because it is a large, unstructured and
unregulated segment of the financial services industry. The
list of approved agencies will serve as a Federal guide for
would-be debtors, and we expect it will attract applicants of
varying degrees of character and quality. It is important that
the United States Trustees have sufficient tools and discretion
to address the problems that will undoubtedly emerge. With
oneexception discussed below, the provision appears adequate, but
sufficient resources must also be made available. We might also
suggest, as an alternative, that a pilot program be created first in
several districts to test the usefulness of credit counseling and its
impact on filings.
One issue appears to have been overlooked and should be
addressed. There is no automatic dismissal to enforce this
provision if a debtor fails to file a certificate from a
counselor pre- or post-petition. Assuming the petition gets
filed without a certificate, a party would then have to move to
dismiss the case under 707(a), 1112(b), 1208(c), or 1307(c)
based on the debtor's ineligibility.
Section 302(b)-(c) provides that a chapter 7 and a chapter
13 discharge are conditioned upon the debtor's completion of a
post-filing instructional course. As noted above in comments to
section 104, H.R. 833 appears to contain provisions for a pilot
program, but this provision seems to assume a permanent
program. There is a need to clarify this provision. A pilot
program is preferable.

Section 303. Extensions

Section 303 of H.R. 833 would amend section 302(d)(3) of
the Bankruptcy Judges, United States Trustees, and Family
Farmer Bankruptcy Act of 1986 to eliminate the deadline for
including the judicial districts in the States of Alabama and
North Carolina within the United States Trustee system. The
Department strongly opposes the amendment because it would
retain two separate systems of bankruptcy administration within
the country and may be vulnerable to Constitutional attack
under the Uniformity Clause.
When Congress made the United States Trustee Program
(USTP) a nationwide program in 1986, the date the program was
to commence varied in different judicial districts. Six federal
judicial districts in the States of North Carolina and Alabama
remain outside the program, and the date for the inclusion of
these districts has been postponed until October 1, 2002--
sixteen years after the United States Trustee Program's
nationwide expansion. Pub. L. No. 101-650, 317(a), (c), 104
Stat. 5115, 5116 (1992). In these six districts, ``Bankruptcy
Administrators'' and court clerks employed by the judicial
branch perform many of the functions that are performed by
United States Trustees in USTP districts.
This arrangement may not comply with Article I's mandate
to ``establish * * * uniform Laws on the subject of
Bankruptcies throughout the United States.'' U.S. Const. Art
I., Sec. 8., cl. 4. Supreme Court precedent on what
``uniformity'' means in this context is ambiguous. The leading
case on the issue is Hanover National Bank v. Moyses, 186 U.S.
181 (1902), where the court rejected a challenge to the
Bankruptcy Act of 1898, which recognized state exemptions
instead of establishing a system of uniform federal exemptions.
The opinion suggests that Congress can account for differences
in state law in the bankruptcy laws without violating the
requirement of uniformity. More recently, in Railway Labor
Executives' Ass'n v. Gibbons, 455 U.S. 457 (1982), the Supreme
Court struck down, as violative of Article I's uniformity
requirement, a statute requiring employees of the bankrupt Rock
Island and Pacific Railroad Co. estate to receive certain
benefits if not rehired by other carriers. According to the
Court, ``to survive scrutiny under the Bankruptcy Clause, a law
must at least apply uniformly to a defined class of
creditors.'' Gibbons, 455 U.S. at 473.
Given the lack of clarity on Article I's uniformity
requirement and the doubts raised about the justification for
maintaining both the USTP and Bankruptcy Administrator
programs, additional challenges to the constitutionality of
this dual system seem likely. See, e.g., St. Angelo v. Victoria
Farms, Inc. 38 F.3d 1525, 1532 (1994); Joelson v. United
States, 179 B.R. 857, 864 (N.D. Ohio 1995). In any event,
maintaining a special system of bankruptcy administration for
just six of the nation's 94 judicial districts is imprudent. No
articulated policy justified maintaining the Bankruptcy
Administrator program, and its continued existence not only
threatens to inspire additional constitutional challenge, but
is also contrary to the fair, effective and uniform
administration of the bankruptcy laws.
Finally, we note that section 303 is not referenced in the
table of contents set out in section 1 of H.R. 833.

Title IV: Small Business Bankruptcy Provisions

Sections 401 and 403. Flexible rules for disclosure statement and plan;
standard form disclosure statements and plans

Section 401 would add a new section 1125(f) to the Code to
allow the court to relax the plan confirmation procedures in
small business bankruptcies. Specifically, for a small business
case, the court would be empowered to: (i) waive the disclosure
statement; (ii) use a form disclosure statement; (iii) allow
plan solicitation based on a ``conditionally approved''
disclosure statement; or (iv) combine the confirmation and
disclosure statement hearing. Section 403 would require the
Judicial Conference to adopt ``standard form'' disclosure
statements and plans of reorganization that balance the need
for ``reasonably complete information'' with ``economy and
simplicity.''
These provisions would remove procedural barriers to early
confirmation and, to the extent they encourage quicker
confirmations, are advantageous to debtors and creditors alike.
Care will be need-

ed lest the execution of these provisions lead to confirmations
without adequate disclosure to creditors and other affected
parties. We believe, however, that this risk is manageable.
Accordingly, we support this provision.

Section 402. Definition of small business debtor

Section 402(a) defines the terms ``small business debtor''
and ``small business case.'' The definition of small business
case is apparently missing some words, but it appears that the
definition excepts cases where a creditors' committee is formed
and the court determines that it is ``sufficiently active and
representative to provide effective oversight of the debtor.''
This apparent exception defeats the purpose of the small
business provisions to minimize the time a case remains in
bankruptcy because it could lead to litigation over the
exception. See section 407. The exception should be eliminated
so that there is certainty at the commencement of the case
whether it involves a small business or debtor.
Section 402(b), concerning penalties for violation of the
discharge injunction, is unrelated to small business cases and
is identical to section 116. It should be eliminated as
duplicative.

Section 404. Uniform national reporting requirements

Section 404 would add a new section 308 to the Code
requiring a small business debtor to file periodic reports
explaining: (i) its profitability; (ii) projected income and
expenses; (iii) how prior projections compare with actuality;
(iv) compliance with bankruptcy requirements; (v) whether taxes
returns are timely filed; (vi) what taxes and other
administrative claims are in default and when remedied; and
(vii) ``other matters'' needed in the creditors' and the
public's interest.
We support these disclosure requirements and the need for
consistent financial reporting standards. By helping to
identify faltering cases, financial reports prevent undue delay
in the administration of chapter 11 cases. We further urge
extending this section to all chapter 11 debtors, not just
small business debtors.

Section 405. Uniform reporting rules and forms

Section 405 would require the Judicial Conference of the
United States to propose for adoption amended Federal Rules of
Bankruptcy Procedure and Official Bankruptcy Forms to be used
by small business debtors to comply with the provisions added
by Section 404 of the bill. We support this provision, with one
exception: it should be amended to indicate that the Attorney
General will promulgate the report forms. This is consistent
with section 702 under which the Attorney General is to propose
these forms and to collect data based on the information
reported. It is essential that these two functions be merged
under the same authority.

Section 408. Plan confirmation deadline

Section 408 of H.R. 833 requires that small business
chapter 11 cases be confirmed within 150 days of filing. This
time period may be enlarged only if the debtor demonstrates by
a preponderance of the evidence that it is more likely than not
that the court will confirm a plan within a reasonable time.
The Department encourages the prompt disposition of cases,
but the 150-days cutoff may be too short. Currently only 4% of
chapter 11 confirmations occur within 150 days of filing.
Although substantial improvements in processing times have
occurred during the last decade, the majority of confirmations
still occur more than one year after filing. Additionally, over
60% of dismissals and conversions to chapter 7 occur more than
150 days after filing. Although section 408 would allow
enlargement of this time period, our statistics show that only
about 30% of chapter 11 cases result in confirmation.
Furthermore, based solely on when a case is filed, there is no
age at which a chapter 11 cases has a 50% or better chance of
being confirmed. Thus, while we support the purpose of this
provision, we do not think it is necessary.

Section 410. Duties of the United States Trustee

Section 410 would amend 28 U.S.C. Sec. 586 to expand the
United States Trustee's oversight of small business debtors. It
would oblige the United States Trustee to interview the debtor
before the first meeting of creditors, visit the debtor's
premises, monitor the debtor's actions and, where grounds are
found to do so, move to convert the case to a Chapter 7 or to
dismiss the case altogether.
We support this provision, which would clarify and codify
the United States Trustee's obligation to move hopeless cases
out of chapter 11. This section reflects the current practice
of the United States Trustees, except for the duty to visit the
debtor's premises. We estimate that site visits would cost an
additional $10 million over 5 years.

Section 411. Scheduling conferences

Section 411 would amend section 105(d) of the Code to
require the courts to hold status conferences ``as necessary.''
This provision would apply to all chapter 11 cases. In
addition, it would allow the courts to vary from the Code and
the Bankruptcy Rules if ``necessary to further the expeditious
and economical resolution of the case.'' To the extent it
empowers the court to override requirements of the Code and
Bankruptcy Rules, or to intrude into areas currently entrusted
to the United States Trustee, it goes too far. While bankruptcy
procedures should be somewhat flexible, we believe that it is
important that bankruptcy judges not be permitted to vary,
essentially at will, from statutory and rule requirements,
potentially depriving creditors and other parties in interest
of key procedural protections. We believe that the standard
incorporated in section 411 does not adequately preserve these
procedural protections, and we therefore oppose the provision.

Section 412. Serial filer provisions

Section 412 would amend section 362 of the Bankruptcy Code
to disable the automatic stay for a small business filing
where: (i) the debtor is already in bankruptcy; (ii) had a case
dismissed or a plan confirmed within two years prior to filing;
or (iii) acquired the assets of a debtor in a proceeding
covered by (i) or (ii), unless the debtor shows that its filing
resulted from causes unforeseeable during the prior case and
that a non-liquidating plan may be confirmed within a
reasonable time.
Serial filings are a serious problem in many jurisdictions
and we endorse the adoption of firm measures to address this
issue. Repeat filings--whether to obtain multiple discharges or
to hold creditors at bay temporarily--should not be permitted.
Accordingly, we support section 412 of the bill. However, we
believe that applying this restriction only to small business
debtors is too limited and that this provision instead should
apply to all debtors in chapter 11.

Section 413. Expanded grounds for dismissal or conversion and
appointment of trustee

Section 413 would amend section 1112 of the Code to require
the conversion to chapter 7 or dismissal of any chapter 11 case
where ``cause'' is shown. This requirement would not apply if
the debtor could show that a plan may be confirmed within a
reasonable time and, where the ``cause'' is a default, that the
default is justified and will be cured promptly. ``Cause''
would be defined to include a variety of situations, including
gross mismanagement; misuse of cash collateral; a violation of
a court order; default of a filing or reporting requirement;
the nonpayment of taxes or nonfiling of a return; and not
filing timely a disclosure statement or plan or confirming a
plan.
We support this provision. It is one of several in the bill
designed to move cases that cannot be confirmed out of chapter
11. Defining ``cause'' using more objective standards would
foster uniformity and enhance efficiency. Shifting the burden
to the debtor to justify defaults and prove satisfactory
progress when cause is shown appropriately conditions the
debtor's enjoyment of the benefits of bankruptcy on responsible
actions.

Section 415. Payment of interest

Section 415 would amend section 362(d)(3) of the Bankruptcy
Code to limit the automatic stay in a single asset real estate
(SARE) case, where the debtor fails to file a plan or commence
interest payments within 90 days of filing, to: (i) allow the
payment to commence 30 days after the court determines that the
debtor is a SARE; (ii) allow the debtor to make the interests
payments from post-petition rents of the SARE; and (iii)
specify the non-default contract rate as the interest rate.
We oppose this change. Under current section 362(d)(3) of
the Code, creditors of a SARE debtor may have the automatic
stay lifted if the debtor has not filed a ``feasible''
reorganization plan within 90 days of filing or has not
commenced monthly payments to secured creditors. Giving the
debtor 30 days to comply after the court rules that the debtor
is subject to section 362(d)(3) is unwise. The exception to the
automatic stay in section 362(d)(3) takes its force from the 90
days time limit. That force is substantially diminished by
relaxing that limit for debtors who claim, or who can find a
pretext for claiming, that it does not apply. It is also
unnecessary; the court currently can extend the 90 days for
``cause.''
Giving the debtor the ``sole discretion'' to override
section 363(c)(2) and make interest payments out of post-
petition rents is also ill-advised. First, the amendment does
not require that the creditor receiving the rents be the same
as the creditor whose rights are voided. Second, even if the
creditor receiving the rents is being paid its own collateral,
the amendment serves to limit that creditor's rights.
Currently, this section works largely as a predicate to allow
the secured creditor and the debtor to negotiate a consensual
payment schedule. Giving the debtor the discretion to override
the secured creditor's interests stands the purpose of the
section on its head.
Finally, allowing the debtor to pay at the contract rate
is inconsistent with paying a ``stripped down'' value in the
case of an undersecured creditor. If the payment's principal is
afunction of market value, the interest rate should be
calculated the same way. We oppose this change as well.

Title VI: Streamlining the Bankruptcy System

Section 601. Creditor representation at first meeting of creditors

Section 601 would amend section 341 of the Code to allow
non-attorney consumer creditor representatives to attend and
participate in chapter 7 and chapter 13 creditors' meetings
notwithstanding federal, state or local non-bankruptcy law to
the contrary. The Department supports this provision because it
promotes the participation of creditors in the bankruptcy
process. We strongly encourage further amendment to delete the
phrase ``holding a consumer debt'' from the section to ensure
the ability of all creditors, including non-lawyer
representatives of governmental creditors, to participate in
creditor meetings.

Section 602. Audit procedures

Section 602 would amend 28 U.S.C. Sec. 586 to require the
Attorney General to establish procedures for auditing of a
debtor's petition, schedules, statement of financial affairs
and other similar information in all consumer chapter 7 and 13
cases. At least one out of every 250 of the consumer cases in
each judicial district would be randomly chosen for audit, in
addition to those cases where the debtor's income and expenses
exceed the mean variance in the judicial district.
The Department supports the concept of debtor audits. The
bankruptcy system is dependent upon the full and voluntary
disclosure by debtors of accurate information regarding their
assets, liabilities and financial affairs. A systematic program
of random audits would serve to deter those who might otherwise
be tempted to conceal assets and information from their
creditors. We also believe assigning this responsibility to the
Department makes sense given the central role of United States
Trustees in ensuring the integrity of the bankruptcy system.
The Department, however, opposes section 602 in its current
form because of its feasibility and cost. The proposal requires
independent Certified Public Accountants (CPAs) to conduct
``audits'' in accordance with ``generally accepted auditing
standards,'' a term of art within the accounting profession. It
is questionable whether an audit conducted by an independent
CPA and in accordance with these principles is feasible or
desirable in most consumer cases given that a debtor's
financial records are often nonexistent or in disarray.
Assuming that the practical problems associated with
conducting an audit can be resolved, the provision as drafted
would be costly. The Department has estimated that implementing
the audit program contemplated by this section could cost from
$18.6 million to more than $59 million over five years. This
cost is in large part a function of the number audited and the
use of independent CPAs. The cost of the audits could easily
consume a significant portion of the total sum appropriated to
fund the entire United States Trustee program in Fiscal Year
1998. Moreover, the bill provides no funding mechanism to cover
these costs.
The use of an audit report is left similarly vague. Copies
of the audit reports are to be filed with the Court, but it is
uncertain if this would be merely for the purpose of providing
a public repository for the report accessible to all parties in
interest, or if it is intended that the Court would, sua
sponte, initiate action based on the auditors'' findings.
We recommend that the following changes be made to Section
602:
Require the Attorney General to establish a system to
audit consumer debtor cases on either a random or
targeted basis, but without a minimal prescribed
percentage;
Eliminate the mandatory use of independent CPAs and
generally accepted auditing standards;
Eliminate the requirement of filing the audit reports
with the court;
Provide a civil sanction to ensure debtor's
compliance with the audit and defer a section 727
discharge until the U.S. Trustee reports a satisfactory
audit instead of placing the burden on the U.S. Trustee
to file a complaint to bar the debtor's discharge in
the case of noncompliance; and
Provide a source to fund the audits other than
assessments upon the affected debtors.
Given the size of the audit program and its cost, the
Department also urges the committee to consider a pilot program
for audits that would allow the costs and benefits of various
approaches to be considered. In addition, consideration should
be given to limiting random audits to chapter 7 debtors.

Section 603. Giving creditors fair notice in chapter 7 and 13 cases

Section 603 would amend the notice provisions of section
342 of the Bankruptcy Code to require, in an individual
bankruptcy case, that notices to creditors include any account
number and be sent to the address that a creditor has
specified. It also would require that a matrix of addresses
prescribed by creditors for notices in a district be
established. Further, unless actual notice is sent to the
specified addresses and received by a responsible person or
department at the creditor, notice would be ineffective, the
creditor could not be sanctioned for violating the automatic
stay and turnover of property could not be enforced.
While this section has some technical difficulties, we
strongly support the intent of this section to ensure that
debtors know how to give effective notice and that the
creditors, in fact, receive such notice. Indeed, we urge that
this provision for fair notice apply to all bankruptcy
chapters--there is no reason to limit this provision only to
chapter 7 and 13. We would be happy to work with the Committee
to correct any technical problems.

Section 604. Dismissal for failure to timely file schedules or required
information

Section 604 provides that in voluntary cases under chapters
7 or 13, a case shall automatically be dismissed if the debtor
fails to file all required information within 45 after filing
the petition. The Department does not oppose this provision, so
long as dismissal is without prejudice, and we suggest an
appropriate clarification.

Section 605. Adequate time to prepare for hearing on confirmation of
the plan

Section 605 of H.R. 833, inter alia, would give a chapter
13 debtor up to 90 days after the order for relief to file a
chapter 13 plan. Under current law, a debtor must file a plan
within 15 days from entry of the order of relief. Fed. R.
Bankr. P. 3015(b). The Department opposes this enlargement of
time as contrary to the principles of expeditious case
administration. Due to other provisions in H.R. 833 requiring
the debtor to file certain information and documents with the
petition, both the chapter 13 debtor and debtor's counsel
should be well prepared to propose a plan within the current
15-day window.

Section 608. Elimination of certain fees payable in chapter 11
bankruptcy cases

Section 608 of H.R. 833 would amend section 1930(a)(6) of
title 28, United States Code, to exempt all debtors whose
quarterly disbursements are less than $300,000 from paying
post- confirmation quarterly fees. The Department opposes this
provision because it would eliminate one of the most effective
tools to encourage the prompt administration and closing of
chapter 11 cases. This section would also result in a revenue
loss to the United States Trustee Program of at least $9
million annually and would require a new source of funding to
replace that loss, since the Program is a fully fee funded
agency.

Section 609. Prompt relief from stay in individual cases

Section 609 provides that, in any individual case under
chapters 7, 11 or 13, the automatic stay shall terminate 60
days after requested by a party unless the court makes a final
decision, the parties agree to an extension, or the court finds
good cause supporting an extension. We support this provision.

Section 610. Stopping abusive conversions from chapter 13

Section 610 would amend section 348(f)(1) of the Code to
reverse the bifurcation of a secured creditor's claim into
secured and unsecured portions accomplished through a chapter
13 plan, if the case is converted to chapter 7. This provision
thus would limit the debtor's ability to release the lien in a
chapter 7 case under section 722 of the Code.
For the same reasons that we support section 123, we also
support this change. This provision addresses a different
aspect of the same problem dealt with in section 123 above.
Both provisions concern a debtor who confirms a chapter 13 plan
that reduces a creditor's lien to the value of the collateral.
Unlike section 123, however, section 610 deals with the
situation where, after paying part of the secured portion of
the claim, the debtor converts his unfinished 13 plan into
chapter 7 liquidation. In the chapter 7 case, the debtor then
redeems the collateral by tendering the balance due on the
``stripped down'' lien after taking credit for the payments
made under the chapter 13 plan. Unless this option is barred,
debtors will have an incentive to take the benefits conferred
by chapter 13, and then convert to a chapter 7 without
finishing their chapter 13 plans.

Title VII: Bankruptcy Data

Section 702. Uniform rules for the collection of bankruptcy data

Section 702 requires the Attorney General to issue rules
prescribing uniform reporting forms for final and periodic
reports. The Department supports this provision, but notes two
problems. Section 702 conflicts with section 405, which
requires the Judicial Conference to create an official form for
periodic reports in small business chapter 11 cases. Section
405 should be amended to reflect the role of the Attorney
General in promulgating the form of these reports. We also
question the provision in this section requiring the Attorney
General to maintain final reports in one or more central
locations. Currently, all final reports are filed with the
courts, and section 702 provides for electronic access through
the Internet. We would be happy to work with the committee to
recommend appropriate changes to these provisions.

Title VIII: Bankruptcy Tax Provisions

Section 801. Treatment of certain liens

Section 801 deals with subordination of tax liens under
section 724(b) of the Code, and is identical to section 2 of S.
1149, the Investment in Education Act, a bill passed by the
Senate on October 30, 1997. Under the proposed changes, ad
valorem property taxes would generally be protected from
subordination. Reversing current law, expenses of a failed
chapter 11 proceeding would not be given preferential treatment
over tax liens, with a limited exception. Exhaustion of
unencumbered assets would be required before tax liens could be
subordinated, and expenses of preserving or disposing of
secured property must be recovered from the property (reducing
the expenses to which a tax lien would be subordinated).
We support this provision. The public fisc should not be
required to subsidize failed chapter 11 cases by having tax
liens subordinated in order to pay administrative expenses of
insolvent reorganization proceedings. Moreover, in chapter 7
cases, other unencumbered assets should be used to satisfy
administrative expenses and any expenses properly allocable to
secured claims should be recovered from the property.

Section 802. Effective notice to government

Section 802 would amend section 342 of the Code to improve
notice to the entities most frequently participating in the
bankruptcy process--governmental units. It would require
identification of the agency through which the debtor is
indebted; disclosure of identifying information concerning the
claim (such as taxpayer identification numbers and real estate
parcel designations); and creation of a matrix of addresses of
governmental units. In addition, it would give incentives to
debtors to use the designated addresses.
We support these provisions. They are in accord with
Recommendation 4.2.1 of the National Bankruptcy Review
Commission, which urged redress of the current deficiencies in
notifying governmental units. This provision would ensure
reasonable identification of both the affected government
agency and the debtor obligated on the debt. It would also
create a mechanism for giving debtors accurate addresses to
which notices should be sent. Finally, it would promote
compliance with the mechanism by providing exceptions to bar
dates and discharge-ability when a debtor fails to comply with
the prescribed mechanism. We suggest, however, that the
reference point in subsection (c) be corrected from notice of
the bankruptcy ``case'' to notice of ``the matter or proceeding
in respect to which the notice was provided.''

Section 803. Notice of request for a determination of taxes

Section 803 would amend section 505(b) of the Code to
provide that a request for prompt audit of a tax return should
be sent to the office designated by the taxing authority. Thus,
for example, a notice sent to the Secretary of the Treasury in
Washington, rather than to the Special Procedures unit of the
IRS District Director where the bankruptcy is pending, would
not suffice. We support this proposal.

Section 804. Rate of interest on tax claims

Section 804 would enact as Section 511 of the Code a new
provision relating to the interest rate on, or determining the
present value of, a tax claim. Under current law, the court
must generally determine the ``market rate'' under such
circumstances. Section 511 would provide that if the holder of
an unsecured prepetition tax claim is entitled to interest on
such claim, the minimum rate of interest will be the Federal
short-term rate rounded to the nearest full percent, determined
under section 1274(d) of the Internal Revenue Code for the
calendar month in which the plan is confirmed, plus three
percentage points. The section 6621(a)(2) rate is also based on
the Federal short-term rate, plus three percentage points, but
is fixed on a quarterly basis at the rate for the first month
of a quarter rather than redetermined monthly. In the case of
secured tax claims and administrative tax claims, the
applicable nonbankruptcy rate would apply with respect to
federal taxes, i.e., the section 6621(a)(2) rate.
We would prefer that the legislation simply fix the
interest rate for all deferred tax payments at the applicable
nonbankruptcy interest rate. On the other hand, the rate for
unsecured taxes under section 804 of H.R. 833 is merely a
minimum rate and does not preclude a taxing authority from
insisting on a higher rate. Thus, we would not oppose this
provision.

Section 805. Tolling of priority of tax claims time periods

Section 805 would suspend the time periods under the Code
pertaining to the priority and discharge of tax claims during
the pendency of a prior bankruptcy for the period in which the
government was prohibited from collecting the claim, plus six
months. We support this proposal, but suggest several
modifications, outlined below. The filing of successive
bankruptcies should not disadvantage governmental units by
reducing their opportunity to collect a tax, and should not
result in a more expansive discharge of tax claims for debtors.
Adding six months to the suspension period mirrors section
6503(h) of the Internal Revenue Code (26 U.S.C.), and is
appropriate given the disruption to collection efforts caused
by the filing of a bankruptcy petition. The additional time is
needed to get collection efforts back on track.
As noted above, we would suggest several modifications to
this provision. First, the time periods applicable to
employment and excise taxes should be suspended during the
pendency of a prior bankruptcy case. Second, this section
should be modified to suspend time periods in which collection
was stayed under the terms of a confirmed plan under chapters
11, 12 or 13, plus six months. Third, the Internal Revenue
Service Restructuring and Reform Act of 1998 gave taxpayers new
rights to appeal collection actions that, when invoked, have
the effect of staying collection. Thus, the time periods should
also be suspended while the IRS is prohibited from collecting
as a result of an appeal of a collection action taken under
applicable nonbankruptcy law.

Section 807. Chapter 13 discharge of fraudulent and other taxes

Section 807 would generally conform the discharge of tax
claims in chapter 13 cases to the discharge of such claims
available in chapter 7 cases. We support this provision. Under
current law, priority tax claims for which a proof of claim is
filed must be paid in full pursuant to the plan, and if a proof
of claim is not filed, such taxes may be discharged. Taxes
attributable to fraud or unfiled returns can be discharged upon
completion of all payments under the plan, but many
jurisdictions permit plans providing for ``zero payment'' of
taxes, or plans distributing payments covering only small
percentages of such claims. Permitting taxes attributable to
fraud, or for which returns have never been filed, to be
discharged on the basis of a tax evader's commitment to make
payments to his or her creditors for three or five years makes
bankruptcy a tax haven. In our view, a debtor should be
entitled to the same discharge in chapters 7 and 13, as
proposed in section 507. Taxes attributable to fraud should not
be discharged in a chapter 13 proceeding, and chapter 13 plans
should not be confirmed unless prepetition tax returns are
filed.

Section 808. Chapter 11 discharge of fraudulent taxes

Section 808 would deny a discharge to a chapter 11
corporate debtor for taxes that arose because of fraudulent tax
returns or an attempt to evade taxes. We support this proposal.
Corporations that engage in tax fraud or otherwise attempt to
evade taxes should not be entitled to a discharge vis-a-vis
those taxes.

Section 809. Stay of tax proceedings

Section 809 would limit the automatic stay applicable to
Tax Court proceedings to proceedings regarding a tax liability
for a tax period ending before the order for relief, and would
clarify that the automatic stay does not apply to an appeal of
a decision determining a tax liability of the debtor. We
support these proposals. No purpose is served in staying the
commencement or continuation of a Tax Court proceeding for
taxes incurred postpetition. Moreover, a court of appeals case
regarding the liability of a taxpayer for a tax should be
allowed to continue to a decision.

Section 810. periodic payment of taxes in chapter 11 cases

Section 810 would amend section 1129(a)(9)(c) of the Code
to provide that deferred payments of tax claims under a chapter
11 plan must be made in installments with the result that
balloon payments would be proscribed. In lieu of the current
five-year payment period measured from the date of assessment,
such payments would end on the earlier of five years after the
petition date or on the last date on which payments are to be
made to unsecured creditors under the plan. In addition,
secured tax claims would be treated as priority claims for
deferred tax purposes, where such claims would have had
priority absent their secured status. We support this
provision.

Section 811. The avoidance of statutory tax liens prohibited

Section 811 would resolve litigation over the interaction
of section 545(2) of the Code, and the protection accorded
certain purchasers of property under 26 U.S.C. Sec. 6323 even
after a notice of tax lien has been filed. We support the
proposal. Thepurpose of the special treatment for such
purchasers is to facilitate the flow of these goods in commerce.
Debtors would receive a windfall if section 545(2) of the Code applied
to tax liens.

Section 814. Income tax returns prepared by tax authorities

Section 814 would confirm the exception from discharge for
taxes relating to unfiled tax returns when substitute tax
returns are prepared by taxing authorities. For tax purposes, a
tax return prepared by the IRS is not considered a tax return,
unless it is signed by the taxpayer. The proposal would confirm
that a substitute return prepared by the IRS is not a return
for discharge purposes, unless it is signed by the taxpayer.
This section further provides, however, that a written
stipulation to a judgment entered in a nonbankruptcy court
would be treated in the same manner and have the same effect as
a signed tax return. We are uneasy at the prospect of having
different definitions of ``tax returns'' for Internal Revenue
Code and Bankruptcy Code purposes. Furthermore, stipulation to
a judgment represents a level of cooperation much different in
degree and kind than the signing under penalty of perjury of a
return prepared by a taxing authority. Thus, we do not support
the provision equating a stipulated judgment with a signed
return. It would also be helpful to clarify that the term
``equivalent report or notice'' applies only to the extent that
state or local tax law provides for the filing of an equivalent
report or notice, and has no application for federal income tax
reporting purposes.

Section 815. The discharge of the estate's liability for unpaid taxes

Section 815 would absolve the debtor's estate of liability
for administrative taxes after a request for a prompt audit is
made in accordance with section 505(b) of the Code. Several
courts have held that while a trustee, the debtor, and a
successor to the debtor are discharged from liability for
administrative period taxes after a prompt audit request is
made, the estate remains liable for any taxes uncovered by a
taxing authority in a subsequent audit. We oppose the proposal
to extinguish the liability of the estate. Section 505(b)
already protects the trustee, the debtor and the debtor's
successors from liability, and extinguishing the liability of
the estate for taxes that it should have reported on its return
will result in an unjust windfall for other creditors.

Section 816. Requirement to file tax returns to confirm chapter 13
plans

Section 816 would require chapter 13 debtors to file tax
returns due for three years prior to the petition date. Tax
authorities are placed at a severe disadvantage in preparing
and filing timely proofs of claim when a chapter 13 debtor has
ignored his or her tax return filing obligations. Outside of
bankruptcy, the IRS will typically ask a delinquent debtor to
file tax returns for the prior six tax years. We submit that
the Code should similarly require the filing of delinquent tax
returns for six years rather than for three years, and we
therefore urge that this provision be modified accordingly.

Section 818. Setoff of tax refunds

Section 818 would create an exception to the automatic stay
allowing taxing authorities to set off prepetition tax refunds
against prepetition tax claims. We support this proposal.
Even when consumer bankruptcy filings were a mere 300,000
cases a year, the cost to the government of filing lift stay
motions for relief from the automatic stay in order to effect a
setoff of tax refunds would have been significant. With
consumer filings now surpassing 1.3 million cases a year, the
cost of filing such lift stay motions would be prohibitive.
Given the number of cases in which refund offset arises, the
solution is to permit taxing authorities to use the
administrative processes that apply outside of bankruptcy
rather than dealing with the issue on a case-by-case basis
using a litigation model.
In addition to the comments outlined above, the Department
urges addition of a new provision in this title: Tax Year that
Straddles the Petition Date. H.R. 833 should be amended to
include an additional tax-related proposal to clarify the
bankruptcy treatment of a tax year that straddles the petition
date. The position of the Government is that an income tax is
incurred on the last day of the tax year inasmuch as a
taxpayer's liability for tax cannot be calculated until all
income has been accrued or collected, and all deductions have
been accrued or paid. Moreover, until the debtor reports its
income tax liability, a taxing authority is not in any position
to prepare and file a proof of claim. Nonetheless, several
courts have held that a tax year straddling the petition date
should be treated as partially a prepetition year and partially
a postpetition year. In re O'Neill Shoe Co., 64 F.3d 1146 (8th
Cir. 1995); In re Pacific-Atlantic Trading Co., 64 F.3d 1292
(9th Cir. 1995); and In re Hillsborough Holding Corp., 115 F.3d
1391 (11th Cir. 1997). Under these decisions, the prepetition
portion of the year is treated as a priority tax, while the
balance is treated as an administrative tax. These decisions
create the opportunity for considerable mischief, particularly
if the time for filing a proof of claim will run prior to the
due date of the return in question. Furthermore, to the extent
that straddle years are treated as prepetition tax years,
debtors can stretch out the payment period for the related tax
liability for fiveyears under chapter 11, instead of paying the
tax in full in cash on the effective date of the plan.
We submit that the Code should be amended to clarify that
an income tax liability is incurred on the last day of the tax
year for purposes of determining whether a tax is entitled to
administrative expense or priority treatment. Clarification is
needed because bankruptcy petitions are rarely filed
immediately after the last day of the tax year, so that this
issue can potentially arise in virtually any case.

Title IX: Ancillary and Other Cross-Border Cases

Section 901. Amendment to add chapter 15 to title 11

Section 901 adds a new chapter to the Code to be codified
as Chapter 15. This chapter would address insolvencies which
cut across international borders. We generally support these
provisions, with the following exceptions.
Proposed section 1507 allows the court to provide the
representative of a foreign insolvency ``additional
assistance'' based upon standards that are vague and
duplicative of section 304 of the Code. This approach is
inconsistent with the purpose of the cross-border chapter;
namely, to create new and better treatment for international
bankruptcies.
We also oppose proposed sections 1519 and 1521 to the
extent they grant the court open-ended authority to enjoin
anything needed to protect assets and creditors. As written,
the sections are overbroad.

Title XI: Technical Corrections

Section 1130. Trustees

Section 1130 of H.R. 833 would amend section 586 of title
28, United States Code, to establish procedures for judicial
review of decisions by a United States Trustee to either
terminate or suspend from a panel of trustees or as a standing
trustee, and decisions to deny an expense request by standing
trustees.
As an initial matter, the Department supports clarifying
and improving the judicial review already available trustees
who are aggrieved by the actions of the United States Trustee
Program. Historically, a decision to terminate or suspend a
trustee from the panel of trustees was not subject to judicial
review. E.g., Joelson v. United States, 86 F.3d 1413 (6th Cir.
1996). In response to concerns about a lack of judicial review,
the Department promulgated an administrative rule giving
private trustees the ability to seek judicial review under the
Administrative Procedure Act (``APA''), 5 U.S.C. Sec. 552 et
seq. of any action by the Department to suspend or remove a
trustee from future case assignments. 28 C.F.R. Sec. 58.6. The
Department believes that standing trustee budget disputes are
already subject to judicial review under the APA. In addition,
the United States Trustee Program has implemented procedures
for mediating standing trustee budget disputes.
Notwithstanding its position that review is available under
the APA, the Department engaged in negotiations with the
affected parties and Congressional staff and after much effort,
a compromise was reached. Unfortunately, due to what appears to
be a typographical error, Section 1130 does not reflect the
compromise. Section 1130(b) sets forth the standard of review
for standing trustee expense requests. This standard, unlike
the proposed standard for review of trustee termination and
suspension, is whether the decision is ``unreasonable or
without cause.'' The standard of review should be revised to
``unreasonable and without cause'' in keeping with the
compromise. Provided that this correction is made, the
Department will strongly support section 1130.
Finally, as noted in our comments above, many of the
provisions set forth in this bill would impose substantial
burdens on the United States Trustee Program. Currently, the
Trustees program is fully self-funded through fees. However, to
implement the requirements of this bill, the Trustees would be
required to expend tens of millions of dollars that will
diminish their ability to fulfill their other responsibilities,
and this, in turn, will diminish the efficiency of the
bankruptcy system. We therefore request that a special
appropriation be authorized for each provision that imposes a
new burden on the United States Trustee Program.
We look forward to working with the Committee as it
considers these and other issues raised by H.R. 833. The Office
of Management and Budget advises that it has no objection to
the submission of this letter from the standpoint of the
Administration's program.
Sincerely,
Dennis K. Burke,
Acting Assistant Attorney General.

Changes in Existing Law Made by the Bill, as Reported

In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):

TITLE 11, UNITED STATES CODE

TITLE 11--BANKRUPTCY

Chap. Sec.

General Provisions.............................................101
* * * * * * *
Ancillary and Other Cross-Border Cases........................1501

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--
(i) in a fiduciary or agency capacity
without sole discretionary power to
vote such securities; or
(ii) solely to secure a debt, if such
entity has not in fact exercised such
power to vote;
(B) corporation 20 percent or more of whose
outstanding voting securities are directly or
indirectly owned, controlled, or held with
power to vote, by the debtor, or by an 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--
(i) in a fiduciary or agency capacity
without sole discretionary power to
vote such securities; or
(ii) solely to secure a debt, if such
entity has not in fact exercised such
power to vote;
(C) person whose business is operated under a
lease or operating agreement by a debtor, or
person substantially all of whose property is
operated under an operating agreement with the
debtor; or
(D) entity that operates the business or
substantially all of the property of the debtor
under a lease or operating agreement[;].
(3) The term ``assisted person'' means any person
whose debts consist primarily of consumer debts and
whose non-exempt assets are less than $150,000.
(4) The term ``attorney'' means attorney,
professional law association, corporation, or
partnership, authorized under applicable law to
practice law[;].
(5) The term ``bankruptcy assistance'' means any
goods or services sold or otherwise provided to an
assisted person with the express or implied purpose of
providing information, advice, counsel, document
preparation or filing, or attendance at a creditors'
meeting or appearing in a proceeding on behalf of
another or providing legal representation with respect
to a proceeding under this title.
[(5)] (6) The term ``claim'' means--
(A) right to payment, whether or not such
right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured; or
(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)] (7) 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)] (8) 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)] (9) The term ``consumer debt'' means debt
incurred by an individual primarily for a personal,
family, or household purpose[;].
[(9)] (10) The term ``corporation''--
(A) includes--
(i) association having a power or
privilege that a private corporation,
but not an individual or a partnership,
possesses;
(ii) partnership association
organized under a law that makes only
the capital subscribed responsible for
the debts of such association;
(iii) joint-stock company;
(iv) unincorporated company or
association; or
(v) business trust; but
(B) does not include limited partnership[;].
[(10)] (11) The term ``creditor'' means--
(A) entity that has a claim against the
debtor that arose at the time of or before the
order for relief concerning the debtor;
(B) entity that has a claim against the
estate of a kind specified in section 348(d),
502(f), 502(g), 502(h) or 502(i) of this title;
or
(C) entity that has a community claim[;].
(12) The term ``current monthly income'' means the
average monthly income from all sources derived which
the debtor, or in a joint case, the debtor and the
debtor's spouse, receive without regard to whether it
is taxable income, in the 180 days preceding the date
of determination, and includes any amount paid by
anyone other than the debtor or, in a joint case, the
debtor and the debtor's spouse, on a regular basis to
the household expenses of the debtor or the debtor's
dependents and, in a joint case, the debtor's spouse if
not otherwise a dependent, but excludes payments to
victims of war crimes or crimes against humanity;
[(11)] (13) The term ``custodian'' means--
(A) receiver or trustee of any of the
property of the debtor, appointed in a case or
proceeding not under this title;
(B) assignee under a general assignment for
the benefit of the debtor's creditors; or
(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)] (14) The term ``debt'' means liability on a
claim[;].
[(12A) ``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;]
(15) The term ``debt relief agency'' means any person
who provides any bankruptcy assistance to an assisted
person in return for the payment of money or other
valuable consideration, or who is a bankruptcy petition
preparer pursuant to section 110 of this title, but
does not include any person that is any of the
following or an officer, director, employee or agent
thereof--
(A) any nonprofit organization which is
exempt from taxation under section 501(c)(3) of
the Internal Revenue Code of 1986;
(B) any creditor of the person to the extent
the creditor is assisting the person to
restructure any debt owed by the person to the
creditor; or
(C) any depository institution (as defined in
section 3 of the Federal Deposit Insurance Act)
or any Federal credit union or State credit
union (as those terms are defined in section
101 of the Federal Credit Union Act), or any
affiliate or subsidiary of such a depository
institution or credit union.
[(13)] (16) The term ``debtor'' means person or
municipality concerning which a case under this title
has been commenced[;].
[(13A)] (17) The term ``debtor's principal
residence'' means a residential structure including
incidental property when the structure contains 1 to 4
units, whether or not that structure is attached to
real property, and includes, without limitation, an
individual condominium or cooperative unit or mobile or
manufactured home or trailer.
[(14) ``disinterested person'' means person that--
[(A) is not a creditor, an equity security
holder, or an insider;
[(B) is not and was not an investment banker
for any outstanding security of the debtor;
[(C) has not been, within three years before
the date of the filing of the petition, an
investment banker for a security of the debtor,
or an attorney for such an investment banker in
connection with the offer, sale, or issuance of
a security of the debtor;
[(D) is not and was not, within two years
before the date of the filing of the petition,
a director, officer, or employee of the debtor
or of an investment banker specified in
subparagraph (B) or (C) of this paragraph; and
[(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;]
[(14)] (18) The term ``disinterested person'' means a
person that--
(A) is not a creditor, an equity security
holder, or an insider;
(B) is not and was not, within 2 years before
the date of the filing of the petition, a
director, officer, or employee of the debtor;
and
(C) does not have an interest materially
adverse to the interest of the estate or of any
class of creditors or equity security holders,
by reason of any direct or indirect
relationship to, connection with, or interest
in, the debtor, or for any other reason.
[(14A)] (19) The term ``domestic support obligation''
means a debt that accrues before or after the entry of
an order for relief under this title that is--
(A) owed to or recoverable by--
(i) a spouse, former spouse, or child
of the debtor or that child's legal
guardian; or
(ii) a governmental unit;
(B) in the nature of alimony, maintenance, or
support (including assistance provided by a
governmental unit) of such spouse, former
spouse, or child, without regard to whether
such debt is expressly so designated;
(C) established or subject to establishment
before or after entry of an order for relief
under this title, by reason of applicable
provisions of--
(i) a separation agreement, divorce
decree, or property settlement
agreement;
(ii) an order of a court of record;
or
(iii) a determination made in
accordance with applicable
nonbankruptcy law by a governmental
unit; and
(D) not assigned to a nongovernmental entity,
unless that obligation is assigned voluntarily
by the spouse, former spouse, child, or parent
solely for the purpose of collecting the debt.
[(15)] (20) The term ``entity'' includes person,
estate, trust, governmental unit, and United States
trustee[;].
[(16)] (21) 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)] (22) The term ``equity security holder'' means
holder of an equity security of the debtor[;].
[(17A) ``estimated administrative expenses and
reasonable attorneys' fees'' means 10 percent of
projected payments under a chapter 13 plan;]
[(18)] (23) The term ``family farmer'' means--
(A) individual or individual and spouse
engaged in a farming operation whose aggregate
debts do not exceed $1,500,000 and not less
than 80 percent of whose aggregate
noncontingent, liquidated debts (excluding a
debt for the principal residence of such
individual or such individual and spouse unless
such debt arises out of a farming operation),
on the date the case is filed, arise out of a
farming operation owned or operated by such
individual or such individual and spouse, and
such individual or such individual and spouse
receive from such farming operation more than
50 percent of such individual's or such
individual and spouse's gross income for the
taxable year preceding the taxable year in
which the case concerning such individual or
such individual and spouse was filed; or
(B) corporation or partnership in which more
than 50 percent of the outstanding stock or
equity is held by one family, or by one family
and the relatives of the members of such
family, and such family or such relatives
conduct the farming operation, and
(i) more than 80 percent of the value
of its assets consists of assets
related to the farming operation;
(ii) its aggregate debts do not
exceed $1,500,000 and not less than 80
percent of its aggregate noncontingent,
liquidated debts (excluding a debt for
one dwelling which is owned by such
corporation or partnership and which a
shareholder or partner maintains as a
principal residence, unless such debt
arises out of a farming operation), on
the date the case is filed, arise out
of the farming operation owned or
operated by such corporation or such
partnership; and
(iii) if such corporation issues
stock, such stock is not publicly
traded[;].
[(19)] (24) 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)] (25) 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)] (26) 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)] (27) The term ``farmout agreement'' means a
written agreement in which--
(A) the owner of a right to drill, produce,
or operate liquid or gaseous hydrocarbons on
property agrees or has agreed to transfer or
assign all or a part of such right to another
entity; and
(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)] (28) The term ``Federal depository
institutions regulatory agency'' means--
(A) with respect to an insured depository
institution (as defined in section 3(c)(2) of
the Federal Deposit Insurance Act) for which no
conservator or receiver has been appointed, the
appropriate Federal banking agency (as defined
in section 3(q) of such Act);
(B) with respect to an insured credit union
(including an insured credit union for which
the National Credit Union Administration has
been appointed conservator or liquidating
agent), the National Credit Union
Administration;
(C) with respect to any insured depository
institution for which the Resolution Trust
Corporation has been appointed conservator or
receiver, the Resolution Trust Corporation; and
(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) ``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]
(29) The term ``financial institution'' means--
(A) a Federal reserve bank, or an entity
(domestic or foreign) that is a commercial or
savings bank, industrial savings bank, savings
and loan association, trust company, or
receiver or conservator for such entity and,
when any such Federal reserve bank, receiver,
conservator or entity is acting as agent or
custodian for a customer in connection with a
securities contract, as defined in section 741
of this title, such customer; or
(B) in connection with a securities contract,
as defined in section 741 of this title, an
investment company registered under the
Investment Company Act of 1940.
(30) The term ``financial participant'' means an
entity that, at the time it enters into a securities
contract, commodity contract or forward contract, or at
the time of the filing of the petition, has 1 or more
agreements or transactions that is described in section
561(a)(2) with the debtor or any other entity (other
than an affiliate) of a total gross dollar value of at
least $1,000,000,000 in notional or actual principal
amount outstanding on any day during the previous 15-
month period, or has gross mark-to-market positions of
at least $100,000,000 (aggregated across
counterparties) in 1 or more such agreement or
transaction with the debtor or any other entity (other
than an affiliate) on any day during the previous 15-
month period.
[(23) ``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) ``foreign representative'' means duly selected
trustee, administrator, or other representative of an
estate in a foreign proceeding;]
(31) The term ``foreign proceeding'' means a
collective judicial or administrative proceeding in a
foreign country, including an interim proceeding, under
a law relating to insolvency or adjustment of debt in
which proceeding the assets and affairs of the debtor
are subject to control or supervision by a foreign
court, for the purpose of reorganization or
liquidation;
(32) The term ``foreign representative'' means a
person or body, including a person or body appointed on
an interim basis, authorized in a foreign proceeding to
administer the reorganization or the liquidation of the
debtor's assets or affairs or to act as a
representative of the foreign proceeding.
[(25)] (33) The term ``forward contract'' [means a
contract] means--
(A) 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;], or any
other similar agreement;
(B) any combination of agreements or
transactions referred to in subparagraphs (A)
and (C);
(C) any option to enter into an agreement or
transaction referred to in subparagraph (A) or
(B);
(D) a master agreement that provides for an
agreement or transaction referred to in
subparagraph (A), (B), or (C), together with
all supplements to any such master agreement,
without regard to whether such master agreement
provides for an agreement or transaction that
is not a forward contract under this paragraph,
except that such master agreement shall be
considered to be a forward contract under this
paragraph only with respect to each agreement
or transaction under such master agreement that
is referred to in subparagraph (A), (B) or (C);
or
(E) a security agreement or arrangement, or
other credit enhancement related to any
agreement or transaction referred to in
subparagraph (A), (B), (C), or (D), but not to
exceed the actual value of such contract,
option, agreement, or transaction on the date
of the filing of the petition.
[(26) ``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;]
(34) The term ``forward contract merchant'' means a
Federal reserve bank, or an entity whose business
consists in whole or in part of entering into forward
contracts as or with merchants or in a commodity, as
defined or in section 761 of this title, or any similar
good, article, service, right, or interest which is
presently or in the future becomes the subject of
dealing or in the forward contract trade.
[(27)] (35) The term ``governmental 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[;].
(36) The term ``household goods'' includes tangible
personal property normally found in or around a
residence, but does not include motorized vehicles used
for transportation purposes.
(37) The term ``incidental property'' means property
incidental to such residence including, without
limitation, property commonly conveyed with a principal
residence where the real estate is located, window
treatments, carpets, appliances and equipment located
in the residence, and easements, appurtenances,
fixtures, rents, royalties, mineral rights, oil and gas
rights, escrow funds and insurance proceeds.
[(28)] (38) 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)] (39) The term ``indenture trustee'' means
trustee under an indenture[;].
[(30)] (40) 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)] (41) The term ``insider'' includes--
(A) if the debtor is an individual--
(i) relative of the debtor or of a
general partner of the debtor;
(ii) partnership in which the debtor
is a general partner;
(iii) general partner of the debtor;
or
(iv) corporation of which the debtor
is a director, officer, or person in
control;
(B) if the debtor is a corporation--
(i) director of the debtor;
(ii) officer of the debtor;
(iii) person in control of the
debtor;
(iv) partnership in which the debtor
is a general partner;
(v) general partner of the debtor; or
(vi) relative of a general partner,
director, officer, or person in control
of the debtor;
(C) if the debtor is a partnership--
(i) general partner in the debtor;
(ii) relative of a general partner
in, general partner of, or person in
control of the debtor;
(iii) partnership in which the debtor
is a general partner;
(iv) general partner of the debtor;
or
(v) person in control of the debtor;
(D) if the debtor is a municipality, elected
official of the debtor or relative of an
elected official of the debtor;
(E) affiliate, or insider of an affiliate as
if such affiliate were the debtor; and
(F) managing agent of the debtor[;].
[(32)] (42) The term ``insolvent'' means--
(A) with reference to an entity other than a
partnership and a municipality, financial
condition such that the sum of such entity's
debts is greater than all of such entity's
property, at a fair valuation, exclusive of--
(i) property transferred, concealed,
or removed with intent to hinder,
delay, or defraud such entity's
creditors; and
(ii) property that may be exempted
from property of the estate under
section 522 of this title;
(B) with reference to a partnership,
financial condition such that the sum of such
partnership's debts is greater than the
aggregate of, at a fair valuation--
(i) all of such partnership's
property, exclusive of property of the
kind specified in subparagraph (A)(i)
of this paragraph; and
(ii) the sum of the excess of the
value of each general partner's
nonpartnership property, exclusive of
property of the kind specified in
subparagraph (A) of this paragraph,
over such partner's nonpartnership
debts; and
(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)] (43) The term ``institution-affiliated
party''--
(A) with respect to an insured depository
institution (as defined in section 3(c)(2) of
the Federal Deposit Insurance Act), has the
meaning given it in section 3(u) of the Federal
Deposit Insurance Act; and
(B) with respect to an insured credit union,
has the meaning given it in section 206(r) of
the Federal Credit Union Act[;].
[(34)] (44) The term ``insured credit union'' has the
meaning given it in section 101(7) of the Federal
Credit Union Act[;].
[(35)] (45) 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)] (46) The term ``intellectual property''
means--
(A) trade secret;
(B) invention, process, design, or plant
protected under title 35;
(C) patent application;
(D) plant variety;
(E) work of authorship protected under title
17; or
(F) mask work protected under chapter 9 of
title 17;
to the extent protected by applicable nonbankruptcy
law[; and].
[(36)] (47) The term ``judicial lien'' means lien
obtained by judgment, levy, sequestration, or other
legal or equitable process or proceeding[;].
[(37)] (48) The term ``lien'' means charge against or
interest in property to secure payment of a debt or
performance of an obligation[;].
[(38)] (49) 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].
(50) The term ``master netting agreement'' means an
agreement providing for the exercise of rights,
including rights of netting, setoff, liquidation,
termination, acceleration, or closeout, under or in
connection with 1 or more contracts that are described
in any 1 or more of paragraphs (1) through (5) of
section 561(a), or any security agreement or
arrangement or other credit enhancement related to 1 or
more of the foregoing. If a master netting agreement
contains provisions relating to agreements or
transactions that are not contracts described in
paragraphs (1) through (5) of section 561(a), the
master netting agreement shall be deemed to be a master
netting agreement only with respect to those agreements
or transactions that are described in any 1 or more of
the paragraphs (1) through (5) of section 561(a).
(51) The term ``master netting agreement
participant'' means an entity that, at any time before
the filing of the petition, is a party to an
outstanding master netting agreement with the debtor.
[(39)] (52) The term ``mask work'' has the meaning
given it in section 901(a)(2) of title 17.
[(40)] (53) The term ``municipality'' means political
subdivision or public agency or instrumentality of a
State[;].
[(41)] (54) 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--
(i) as a result of the operation of a
loan guarantee agreement; or
(ii) as receiver or liquidating agent
of a person;
(B) is a guarantor of a pension benefit
payable by or on behalf of the debtor or an
affiliate of the debtor; or
(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) an 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)] (55) 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)] (56) 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 the liquid or gaseous hydrocarbon
produced from such property, and determined
without regard to production costs[;].
[(43)] (57) The term ``purchaser'' means transferee
of a voluntary transfer, and includes immediate or
mediate transferee of such a transferee[;].
[(44)] (58) 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)] (59) 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)] (60) The term ``repo participant'' means an
entity that, [on any day during the period beginning 90
days before the date of] at any time before the filing
of the petition, has an outstanding repurchase
agreement with the debtor[;].
[(47) ``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;]
(61) The term ``repurchase agreement'' (which
definition also applies to a reverse repurchase
agreement)--
(A) means--
(i) an agreement, including related
terms, which provides for the transfer
of 1 or more certificates of deposit,
mortgage-related securities (as defined
in the Securities Exchange Act of
1934), mortgage loans, interests in
mortgage-related securities or mortgage
loans, eligible bankers' acceptances,
qualified foreign government
securities; or securities that are
direct obligations of, or that are
fully guaranteed by, the United States
or any agency of the United States
against the transfer of funds by the
transferee of such certificates of
deposit, eligible bankers' acceptances,
securities, loans, or interests; with a
simultaneous agreement by such
transferee to transfer to the
transferor thereof certificates of
deposit,eligible bankers' acceptance,
securities, loans, or interests of the kind described above, at a date
certain not later than 1 year after such transfer or on demand, against
the transfer of funds;
(ii) any combination of agreements or
transactions referred to in clauses (i)
and (iii);
(iii) an option to enter into an
agreement or transaction referred to in
clause (i) or (ii);
(iv) a master agreement that provides
for an agreement or transaction
referred to in clause (i), (ii), or
(iii), together with all supplements to
any such master agreement, without
regard to whether such master agreement
provides for an agreement or
transaction that is not a repurchase
agreement under this paragraph, except
that such master agreement shall be
considered to be a repurchase agreement
under this paragraph only with respect
to each agreement or transaction under
the master agreement that is referred
to in clause (i), (ii), or (iii); or
(v) a security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in clause (i), (ii), (iii),
or (iv), but not to exceed the actual
value of such contract on the date of
the filing of the petition; and
(B) does not include a repurchase obligation
under a participation in a commercial mortgage
loan;
and, for purposes of this paragraph, the term
``qualified foreign government security'' means a
security that is a direct obligation of, or that is
fully guaranteed by, the central government of a member
of the Organization for Economic Cooperation and
Development.
[(48)] (62) 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 exempt from such registration under such
section pursuant to an order of the Securities and
Exchange Commission 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[;].
(63) The term ``securities self regulatory
organization'' means either a securities association
registered with the Securities and Exchange Commission
pursuant to section 15A of the Securities Exchange Act
of 1934 or a national securities exchange registered
with the Securities and Exchange Commission pursuant to
section 6 of the Securities Exchange Act of 1934.
[(49)] (64) The term ``security''--
(A) includes--
(i) note;
(ii) stock;
(iii) treasury stock;
(iv) bond;
(v) debenture;
(vi) collateral trust certificate;
(vii) pre-organization certificate or
subscription;
(viii) transferable share;
(ix) voting-trust certificate;
(x) certificate of deposit;
(xi) certificate of deposit for
security;
(xii) investment contract or
certificate of interest or
participation in a profit-sharing
agreement or in an oil, gas, or mineral
royalty or lease, if such contract or
interest is required to be the subject
of a registration statement filed with
the Securities and Exchange Commission
under the provisions of the Securities
Act of 1933, or is exempt under section
3(b) of such Act from the requirement
to file such a statement;
(xiii) interest of a limited partner
in a limited partnership;
(xiv) other claim or interest
commonly known as ``security''; and
(xv) certificate of interest or
participation in, temporary or interim
certificate for, receipt for, or
warrant or right to subscribe to or
purchase or sell, a security; but
(B) does not include--
(i) currency, check, draft, bill of
exchange, or bank letter of credit;
(ii) leverage transaction, as defined
in section 761 of this title;
(iii) commodity futures contract or
forward contract;
(iv) option, warrant, or right to
subscribe to or purchase or sell a
commodity futures contract;
(v) option to purchase or sell a
commodity;
(vi) contract or certificate of a
kind specified in subparagraph (A)(xii)
of this paragraph that is not required
to be the subject of a registration
statement filed with the Securities and
Exchange Commission and is not exempt
under section 3(b) of the Securities
Act of 1933 from the requirement to
file such a statement; or
(vii) debt or evidence of
indebtedness for goods sold and
delivered or services rendered[;].
[(50)] (65) The term ``security agreement'' means
agreement that creates or provides for a security
interest[;].
[(51)] (66) The term ``security interest'' means lien
created by an agreement[;].
[(51A)] (67) 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)] (68) 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 of a debtor who 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) ``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;]
(69) The term ``small business'' case means a case
filed under chapter 11 of this title in which the
debtor is a small business debtor.
(70) The term ``small business debtor'' means a
person (including affiliates of such person that are
also debtors under this title) that has aggregate
noncontingent, liquidated secured and unsecured debts
as of the date of the petition or the order for relief
in an amount not more than $4,000,000 (excluding debts
owed to 1 or more affiliates or insiders), except that
if a group of affiliated debtors has aggregate
noncontingent liquidated secured and unsecured debts
greater than $4,000,000 (excluding debt owed to 1 or
more affiliates or insiders), then no member of such
group is a small business debtor.
[(52)] (71) 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)] (72) 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)] (73) 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) ``swap agreement'' means--
[(A) an agreement (including terms and
conditions incorporated by reference therein)
which is a rate swap agreement, basis swap,
forward rate agreement, commodity swap,
interest rate option, forward foreign exchange
agreement, spot foreign exchange agreement,
rate cap agreement, rate floor agreement, rate
collar agreement, currency swap agreement,
cross-currency rate swap agreement, currency
option, any other similar agreement (including
any option to enter into any of the foregoing);
[(B) any combination of the foregoing; or
[(C) a master agreement for any of the
foregoing together with all supplements[;].
(74) The term ``swap agreement''
(A) means--
(i) any agreement, including the
terms and conditions incorporated by
reference in such agreement, which is
an interest rate swap, option, future,
or forward agreement, including a rate
floor, rate cap, rate collar, cross-
currency rate swap, and basis swap; a
spot, same day-tomorrow, tomorrow-next,
forward, or other foreign exchange or
precious metals agreement; a currency
swap, option, future, or forward
agreement; an equity index or an equity
swap, option, future, or forward
agreement; a debt index or a debt swap,
option, future, or forward agreement; a
credit spread or a credit swap, option,
future, or forward agreement; or a
commodity index or a commodity swap,
option, future, or forward agreement;
(ii) any agreement or transaction
similar to any other agreement or
transaction referred to in this
paragraph that--
(I) is presently, or in the
future becomes, regularly
entered into in the swap market
(including terms and conditions
incorporated by reference
therein); and
(II) is a forward, swap,
future, or option on 1 or more
rates, currencies commodities,
equity securities, or other
equity instruments, debt
securities or other debt
instruments, or on an economic
index or measure of economic
risk or value;
(iii) any combination of agreements
or transactions referred to in this
paragraph;
(iv) any option to enter into an
agreement or transaction referred to in
this paragraph;
(v) a master agreement that provides
for an agreement or transaction
referred to in clause (i), (ii), (iii),
or (iv), together with all supplements
to any such master agreement, and
without regard to whether the master
agreement contains an agreement or
transaction that is not a swap
agreement under this paragraph, except
that the master agreement shall be
considered to be a swap agreement under
this paragraph only with respect to
each agreement or transaction under the
master agreement that is referred to in
clause (i), (ii), (iii), or (iv); or
(B) any security agreement or arrangement or
other credit enhancement related to any
agreements or transactions referred to in
subparagraph (A); and
(C) is applicable for purposes of this title
only and shall not be construed or applied so
as to challenge or affect the characterization,
definition, or treatment of any swap agreement
under any other statute, regulation, or rule,
including the Securities Act of 1933, the
Securities Exchange Act of 1934, the Public
Utility Holding Company Act of1935, the Trust
Indenture Act of 1939, the Investment Company Act of 1940, the
Investment Advisers Act of 1940, the Securities Investor Protection Act
of 1970, the Commodity Exchange Act, and the regulations prescribed by
the Securities and Exchange Commission or the Commodity Futures Trading
Commission.
[(53C)] (75) 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[;].
[(56A)] (76) 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[;].
[(53D)] (77) 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) ``transfer'' means every mode, direct or
indirect, absolute or conditional, voluntary or
involuntary, of disposing of or parting with property
or with an interest in property, including retention of
title as a security interest and foreclosure of the
debtor's equity of redemption;]
[(54)] (78) 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)] (79) 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[;].

* * * * * * *

Sec. 103. Applicability of chapters

(a) Except as provided in section 1161 of this title,
chapters 1, 3, and 5 of this title apply in a case under
chapter 7, 11, 12, or 13 of this title, and this chapter,
sections 307, 304, 555 through 557, 559, and 560 apply in a
case under chapter 15.

* * * * * * *

(j) Chapter 15 applies only in a case under such chapter,
except that--
(1) sections 1505, 1513, and 1514 apply in all cases
under this title; and
(2) section 1509 applies whether or not a case under
this title is pending.

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 101(3), 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--
(A) * * *

* * * * * * *

(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. 105. Power of court

(a) * * *

* * * * * * *

(d) The court, on its own motion or on the request of a party
in interest[, may]--
[(1) hold a status conference regarding any case or
proceeding under this title after notice to the parties
in interest; and]
(1) shall hold such status conferences as are
necessary to further the expeditious and economical
resolution of the case; and
(2) [unless inconsistent with another provision of
this title or with applicable Federal Rules of
Bankruptcy Procedure] may, issue an order at any such
conference prescribing such limitations and conditions
as the court deems appropriate to ensure that the case
is handled expeditiously and economically, including an
order that--
(A) * * *

* * * * * * *

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) * * *
(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)(1) Subject to paragraphs (2) and (3) and notwithstanding
any other provision of this section, an individual may not be a
debtor under this title unless that individual has, during the
90-day period preceding the date of filing of the petition of
that individual, received credit counseling, including, at a
minimum, participation in an individual or group briefing that
outlined the opportunities for available credit counseling and
assisted that individual in performing an initial budget
analysis, through a credit counseling program (offered through
an approved credit counseling service described in section
111(a)).
(2)(A) Paragraph (1) shall not apply with respect to a debtor
who resides in a district for which the United States trustee
or bankruptcy administrator of the bankruptcy court of that
district determines that the approved credit counseling
services for that district are not reasonably able to provide
adequate services to the additional individuals who would
otherwise seek credit counseling from those programs by reason
of the requirements of paragraph (1).
(B) Each United States trustee or bankruptcy administrator
that makes a determination described in subparagraph (A) shall
review that determination not later than one year after the
date of that determination, and not less frequently than every
year thereafter.
(3)(A) Subject to subparagraph (B), the requirements of
paragraph (1) shall not apply with respect to a debtor who
submits to the court a certification that--
(i) describes exigent circumstances that merit a
waiver of the requirements of paragraph (1);
(ii) states that the debtor requested credit
counseling services from an approved credit counseling
service, but was unable to obtain the services referred
to in paragraph (1) during the 5-day period beginning
on the date on which the debtor made that request or
that the exigent circumstances require filing before
such 5-day period expires; and
(iii) is satisfactory to the court.
(B) With respect to a debtor, an exemption under subparagraph
(A) shall cease to apply to that debtor on the date on which
the debtor meets the requirements of paragraph (1), but in no
case may the exemption apply to that debtor after the date that
is 30 days after the debtor files a petition.

* * * * * * *

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

(a) * * *

* * * * * * *

(j)(1) * * *

* * * * * * *

(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

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 a list of instructional courses
concerning personal financial management that have been
approved by--
(1) the United States trustee; or
(2) the bankruptcy administrator for the district.

* * * * * * *

CHAPTER 3--CASE ADMINISTRATION

SUBCHAPTER I--COMMENCEMENT OF A CASE

Sec.
301. Voluntary cases.
* * * * * * *
308. Debtor reporting requirements.

* * * * * * *

SUBCHAPTER I--COMMENCEMENT OF A CASE

Sec. 301. Voluntary cases

(a) A voluntary case under a chapter of this title is
commenced by the filing with the bankruptcy court of a petition
under such chapter by an entity that may be a debtor under such
chapter. [The commencement of a voluntary case under a chapter
of this title constitutes an order for relief under such
chapter.]
(b) The commencement of a voluntary case under a chapter of
this title constitutes an order for relief under such chapter.

* * * * * * *

[Sec. 304. Cases ancillary to foreign proceedings

[(a) A case ancillary to a foreign proceeding is commenced by
the filing with the bankruptcy court of a petition under this
section by a foreign representative.
[(b) Subject to the provisions of subsection (c) of this
section, if a party in interest does not timely controvert the
petition, or after trial, the court may--
[(1) enjoin the commencement or continuation of--
[(A) any action against--
[(i) a debtor with respect to
property involved in such foreign
proceeding; or
[(ii) such property; or
[(B) the enforcement of any judgment against
the debtor with respect to such property, or
any act or the commencement or continuation of
any judicial proceeding to create or enforce a
lien against the property of such estate;
[(2) order turnover of the property of such estate,
or the proceeds of such property, to such foreign
representative; or
[(3) order other appropriate relief.
[(c) In determining whether to grant relief under subsection
(b) of this section, the court shall be guided by what will
best assure an economical and expeditious administration of
such estate, consistent with--
[(1) just treatment of all holders of claims against
or interests in such estate;
[(2) protection of claim holders in the United States
against prejudice and inconvenience in the processing
of claims in such foreign proceeding;
[(3) prevention of preferential or fraudulent
dispositions of property of such estate;
[(4) distribution of proceeds of such estate
substantially in accordance with the order prescribed
by this title;
[(5) comity; and
[(6) if appropriate, the provision of an opportunity
for a fresh start for the individual that such foreign
proceeding concerns.]

Sec. 304. Cases ancillary to foreign proceedings

(a) For purposes of this section--
(1) the term ``domestic insurance company'' means a
domestic insurance company, as such term is used in
section 109(b)(2);
(2) the term ``foreign insurance company'' means a
foreign insurance company, as such term is used in
section 109(b)(3);
(3) the term ``United States claimant'' means a
beneficiary of any deposit referred to in subsection
(b) or any multibeneficiary trust referred to in
subsection (b);
(4) the term ``United States creditor'' means, with
respect to a foreign insurance company--
(A) a United States claimant; or
(B) any business entity that operates in the
United States and that is a creditor; and
(5) the term ``United States policyholder'' means a
holder of an insurance policy issued in the United
States.
(b) The court may not grant relief under chapter 15 of this
title with respect to any deposit, escrow, trust fund, or other
security required or permitted under any applicable State
insurance law or regulation for the benefit of claim holders in
the United States.
(c) Any provisions of this title relating to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, or master netting agreements shall
apply in acase ancillary to a foreign proceeding under this
section or any other section of this title, so that enforcement of
contractual provisions of such contracts and agreements in accordance
with their terms will not be stayed or otherwise limited by operation
of any provision of this title or by order of a court in any case under
this title, and to limit avoidance powers to the same extent as in a
proceeding under chapter 7 or 11 of this title (such enforcement not to
be limited based on the presence or absence of assets of the debtor in
the United States).

* * * * * * *

Sec. 305. Abstention

(a) The court, after notice and a hearing, may dismiss a case
under this title, or may suspend all proceedings in a case
under this title, at any time if--
[(2)(A) there is pending a foreign proceeding; and
[(B) the factors specified in section 304(c) of this
title warrant such dismissal or suspension.]
(2)(A) a petition under section 1515 of this title
for recognition of a foreign proceeding has been
granted; and
(B) the purposes of chapter 15 of this title would be
best served by such dismissal or suspension.

* * * * * * *

Sec. 308. Debtor reporting requirements

A small business debtor shall file periodic financial and
other reports containing information including--
(1) the debtor's profitability, that is,
approximately how much money the debtor has been
earning or losing during current and recent fiscal
periods;
(2) reasonable approximations of the debtor's
projected cash receipts and cash disbursements over a
reasonable period;
(3) comparisons of actual cash receipts and
disbursements with projections in prior reports; and
(4) whether the debtor is--
(A) in compliance in all material respects
with postpetition requirements imposed by this
title and the Federal Rules of Bankruptcy
Procedure; and
(B) timely filing tax returns and paying
taxes and other administrative claims when due,
and, if not, what the failures are and how, at
what cost, and when the debtor intends to
remedy such failures; and
(5) such other matters as are in the best interests
of the debtor and creditors, and in the public interest
in fair and efficient procedures under chapter 11 of
this title.

* * * * * * *

SUBCHAPTER II--OFFICERS

* * * * * * *

Sec. 322. Qualification of trustee

(a) Except as provided in subsection (b)(1), a person
selected under section 701, 702, 703, 1104, 1163, 1202, or 1302
of this title to serve as trustee in a case under this title
qualifies if before five days after such selection, and before
beginning official duties, such person has filed with the court
a bond in favor of the United States conditioned on the
faithful performance of such official duties. The trustee in a
case under this title is not liable personally or on such
trustee's bond for acts taken within the scope of the trustee's
duties or authority as delineated by other sections of this
title or by order of the court, except to the extent that the
trustee acted with gross negligence. Gross negligence shall be
defined as reckless indifference or deliberate disregard of the
trustee's fiduciary duty.

* * * * * * *

(c) A trustee is not liable personally or on such trustee's
bond in favor of the United States for any penalty or
forfeiture incurred by the debtor for any acts within the scope
of the trustee's authority defined in subsection (a).

* * * * * * *

Sec. 323. Role and capacity of trustee

(a) The trustee in a case under this title is the
representative of the estate.
(b) The trustee in a case under this title has capacity to
sue and be sued in the trustee's official capacity as
representative of the estate.
(c) The trustee in a case under this title may not be sued,
either personally, in a representative capacity, or against the
trustee's bond in favor of the United States--
(1) for acts taken in furtherance of the trustee's
duties or authority in a case in which the debtor is
subsequently determined to be ineligible for relief
under the chapter in which the trustee was appointed;
or
(2) for the dissemination of statistics and other
information regarding a case or cases, unless the
trustee has actual knowledge that the information is
false.
(d) The trustee in a case under this title may not be sued in
a personal capacity without leave of the bankruptcy court in
which the case is pending.

* * * * * * *

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 lightof developments not
capable of being anticipated at the time of the fixing of such terms
and conditions.

* * * * * * *

Sec. 330. Compensation of officers

(a)(1) * * *

* * * * * * *

(3)(A) In determining the amount of reasonable compensation
to be awarded to an examiner, chapter 11 trustee, or
professional person, the court shall consider the nature, the
extent, and the value of such services, taking into account all
relevant factors, including--
[(A)] (i) the time spent on such services;
[(B)] (ii) the rates charged for such services;
[(C)] (iii) whether the services were necessary to
the administration of, or beneficial at the time at
which the service was rendered toward the completion
of, a case under this title;
[(D)] (iv) whether the services were performed within
a reasonable amount of time commensurate with the
complexity, importance, and nature of the problem,
issue, or task addressed; and
[(E)] (v) whether the compensation is reasonable
based on the customary compensation charged by
comparably skilled practitioners in cases other than
cases under this title.
(B) In determining the amount of reasonable
compensation to be awarded a trustee, the court shall
treat such compensation as a commission based on the
results achieved.

* * * * * * *

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 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 and activities related
thereto 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.

* * * * * * *

(e) Notwithstanding subsections (a) and (b), the court, on
the request of a party in interest and after notice and a
hearing, for cause may order that the United States trustee not
convene a meeting of creditors or equity security holders if
the debtor has filed a plan as to which the debtor solicited
acceptances prior to the commencement of the case.

* * * * * * *

Sec. 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, the clerk
shall give to such individual written notice containing--
(1) a brief description of--
(A) chapters 7, 11, 12, and 13 and the
general purpose, benefits, and costs of
proceeding under each of those chapters; and
(B) the types of services available from
credit counseling agencies; and
(2) statements specifying that--
(A) a person who knowingly and fraudulently
conceals assets or makes a false oath or
statement under penalty of perjury in
connection with a bankruptcy case shall be
subject to fine, imprisonment, or both; and
(B) all information supplied by a debtor in
connection with a bankruptcy case is subject to
examination by the Attorney General.
(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]. 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 which is the current account
number of the debtor with respect to any debt held by the
creditor against the debtor, the debtor shall include such
account number in any notice to the creditor required to be
given under this title. 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, `notice' shall include, but shall not be limited to,
any correspondence from the debtor to the creditor after the
commencement of the case, any statement of the debtor's
intention under section 521(a)(2) of this title, notice of the
commencement of any proceeding in the case to which the
creditor is a party, and any notice of the hearing under
section 1324 of this title.
(d) At any time, a creditor in a case of an individual debtor
under chapter 7 or 13 may file with the court and serve on the
debtor a notice of the address to be used to notify the
creditor in thatcase. After 5 days following receipt of such
notice, any notice the court or the debtor is required to give the
creditor shall be given at that address.
(e) An entity may file with the court a notice stating its
address for notice in cases under chapters 7 and 13. After 30
days following the filing of such notice, any notice in any
case filed under chapter 7 or 13 given by the court shall be to
that address unless specific notice is given under subsection
(d) with respect to a particular case.
(f) Notice given to a creditor other than as provided in this
section shall not be effective notice until it has been brought
to the attention of the creditor. 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 such department
or person, notice will not be brought to the attention of the
creditor until received by such person or department. No
sanction under section 362(h) of this title or any other
sanction which a court may impose on account of violations of
the stay under section 362(a) of this title or failure to
comply with section 542 or 543 of this title may be imposed on
any action of the creditor unless the action takes place after
the creditor has received notice of the commencement of the
case effective under this section.
(g) If a debtor lists a governmental unit as a creditor in a
list or schedule, any notice required to be given by the debtor
under this title, any rule, any applicable law, or any order of
the court, shall identify the department, agency, or
instrumentality through which the debtor is indebted. The
debtor shall identify (with information such as a taxpayer
identification number, loan, account or contract number, or
real estate parcel number, where applicable), and describe the
underlying basis for the governmental unit's claim. If the
debtor's liability to a governmental unit arises from a debt or
obligation owed or incurred by another individual, entity, or
organization, or under a different name, the debtor shall
identify such individual, entity, organization, or name.
(h) The clerk shall keep and update quarterly, in the form
and manner as the Director of the Administrative Office of the
United States Courts prescribes, and make available to debtors,
a register in which a governmental unit may designate a safe
harbor mailing address for service of notice in cases pending
in the district. A governmental unit may file a statement with
the clerk designating a safe harbor address to which notices
are to be sent, unless such governmental unit files a notice of
change of address.
(i) A notice that does not comply with subsections (d) and
(e) shall not be effective unless the debtor demonstrates, by
clear and convincing evidence, that timely notice was given in
a manner reasonably calculated to satisfy the requirements of
this section was given, and that--
(1) either the notice was timely sent to the safe
harbor address provided in the register maintained by
the clerk of the district in which the case was pending
for such purposes; or
(2) no safe harbor address was provided in such list
for the governmental unit and that an officer of the
governmental unit who is responsible for the matter or
claim had actual knowledge of the case in sufficient
time to act.

* * * * * * *

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--
(i) the claim of any creditor holding
security as of the date of the petition shall
continue to be secured by that security unless
the full amount of such claim determined under
applicable nonbankruptcy law has been paid in
full as of the date of conversion,
notwithstanding any valuation or determination
of the amount of an allowed secured claim made
for the purposes of the chapter 13 proceeding;
and
(ii) unless a prebankruptcy default has been
fully cured pursuant to the plan at the time of
conversion, in any proceeding under this title
or otherwise, the default shall have the effect
given under applicable nonbankruptcy law.
(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, theproperty 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) Except as provided in subsection (b) of this section, a
petition filed under section 301, 302, or 303 of this title, or
an application filed under section 5(a)(3) of the Securities
Investor Protection Act of 1970, operates as a stay, applicable
to all entities, of--
(1) * * *

* * * * * * *

(8) the commencement or continuation of a proceeding
before the United States Tax Court concerning the
debtor[.], in respect of a tax liability for a taxable
period ending before the order for relief.
(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) * * *
(2) under subsection (a) of this section--
(A) of the commencement or continuation of an
action or proceeding for--
(i) the establishment of paternity;
or
(ii) the establishment or
modification of an order for alimony,
maintenance, or support; [or]
(B) of the collection of alimony,
maintenance, or support from property that is
not property of the estate;
(C) under subsection (a) of--
(i) the withholding of income for
payment of a domestic support
obligation pursuant to a judicial or
administrative order or statute for
such obligation that first becomes
payable after the date on which the
petition is filed; or
(ii) the withholding of income for
payment of a domestic support
obligation owed directly to the spouse,
former spouse or child of the debtor or
the parent of such child, pursuant to a
judicial or administrative order or
statute for such obligation that
becomes payable before the date on
which the petition is filed unless the
court finds, after notice and hearing,
that such withholding would render the
plan infeasible;
(D) the commencement or continuation of a
proceeding concerning a child custody or
visitation;
(E) the commencement or continuation of a
proceeding alleging domestic violence; or
(F) the commencement or continuation of a
proceeding seeking a dissolution of marriage,
except to the extent the proceeding concerns
property of the estate;

* * * * * * *

(6) under subsection (a) of this section, of the
setoff by a commodity broker, forward contract
merchant, stockbroker, [financial institutions,]
financial institution, financial participant or
securities clearing agency of any mutual debt and claim
under or in connection with commodity contracts, as
defined in section 761 of this title, forward
contracts, or securities contracts, as defined in
section 741 of this title, that constitutes the setoff
of a claim against the debtor for a margin payment, as
defined in section 101, 741, or 761 of this title, or
settlement payment, as defined in section 101 or 741 of
this title, arising out of commodity contracts, forward
contracts, or securities contracts against cash,
securities, or other property held by, pledged to, and
under the control of, or due from such commodity
broker, forward contract merchant, stockbroker,
[financial institutions,] financial institution,
financial participant or securities clearing agency to
margin, guarantee, secure, or settle commodity
contracts, forward contracts, or securities contracts;
(7) under subsection (a) of this section, of the
setoff by a repo participant, of any mutual debt and
claim under or in connection with repurchase agreements
that constitutes the setoff of a claim against the
debtor for a margin payment, as defined in section 741
or 761 of this title, or settlement payment, as defined
in section 741 of this title, arising out of repurchase
agreements against cash, securities, or other property
held by, pledged to, and under the control of, or due
from such repo participant to margin, guarantee, secure
or settle repurchase agreements;

* * * * * * *

(9) under subsection (a), of--
(A) an audit by a governmental unit to
determine tax liability;
(B) the issuance to the debtor by a
governmental unit of a notice of tax
deficiency;
(C) a demand for tax returns; [or]
(D) the making of an assessment for any tax
and issuance of a notice and demand for payment
of such an assessment (but any tax lien that
would otherwise attach to property of the
estate by reason of such an assessment shall
not take effect unless such tax is a debt of
the debtor that will not be discharged in the
case and such property or its proceeds are
transferred out of the estate to, or otherwise
revested in, the debtor)[.]; or
(E) the appeal of a decision by a court or
administrative tribunal which determines a tax
liability of the debtor without regard to
whether such determination was made prepetition
or postpetition.
[(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 oragainst 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]
(17) under subsection (a), of the setoff by a swap
participant of a mutual debt and claim under or in
connection with 1 or more swap agreements that
constitutes the setoff of a claim against the debtor
for any payment or other transfer of property due from
the debtor under or in connection with any swap
agreement against any payment due to the debtor from
the swap participant under or in connection with any
swap agreement or against cash, securities, or other
property held by, pledged to, and under the control of,
or due from such swap participant to margin guarantee,
secure, or settle a swap agreement;
(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[.];
(19) under subsection (a), of any act to enforce any
lien against or security interest in real property
following the entry of an order under section 362(d)(4)
of this title as to that property in any prior
bankruptcy case for a period of 2 years after entry of
such an order. The debtor in a subsequent case,
however, may move the court for relief from such order
based upon changed circumstances or for other good
cause shown (consistent with the standards for good
faith in subsection (c)), after notice and a hearing;
(20) under subsection (a), of any act to enforce any
lien against or security interest in real property--
(A) if the debtor is ineligible under section
109(g) of this title to be a debtor in a
bankruptcy case; or
(B) if the bankruptcy case was filed in
violation of a bankruptcy court order in a
prior bankruptcy case prohibiting the debtor
from being a debtor in another bankruptcy case;
(21) under subsection (a), of the commencement or
continuation of an investigation or action by a
securities self regulatory organization to enforce such
organization's regulatory power; of the enforcement of
an order or decision, other than for monetary
sanctions, obtained in an action by the securities self
regulatory organization to enforce such organization's
regulatory power; or of any act taken by the securities
self regulatory organization to delist, delete, or
refuse to permit quotation of any stock that does not
meet applicable regulatory requirements;
(22) under subsection (a) of any transfer that is not
avoidable under section 544 of this title and that is
not avoidable under section 549 of this title;
(23) under subsection (a)(3), of the continuation of
any eviction, unlawful detainer action, or similar
proceeding by a lessor against a debtor involving
residential real property in which the debtor resides
as a tenant under a rental agreement and the debtor has
not paid rent to the lessor pursuant to the terms of
the lease agreement or applicable State law after the
commencement and during the course of the case;
(24) under subsection (a)(3), of the commencement or
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 that has
terminated pursuant to the lease agreement or
applicable State law;
(25) under subsection (a)(3), of any eviction,
unlawful detainer action, or similar proceeding, if the
debtor has previously filed within the last year and
failed to pay post-petition rent during the course of
that case;
(26) under subsection (a)(3), of eviction actions
based on endangerment to property or person or the use
of illegal drugs;
(27) 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));
(28) under subsection (a) with respect to--
(A) 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)(16) of the Social Security Act
(42 U.S.C. 666(a)(16)) 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));
(B) the interception of tax refunds, as
specified in sections 464 and 466(a)(3) of the
Social Security Act (42 U.S.C. 664 and
666(a)(3)); or
(C) the enforcement of medical obligations as
specified under title IV of the Social Security
Act (42 U.S.C. 601 et seq.);
(29) under subsection (a), of withholding of income
from a debtor's wages and collection of amounts
withheld, pursuant to the debtor's agreement
authorizing that withholding and collection for the
benefit of a pension, profit-sharing, stock bonus, or
other plan established under section 401, 403, 408,
408A, 414, 457, or 501(a) of the Internal Revenue Code
of 1986 that is sponsored by the employer of the
debtor, or an affiliate, successor, or predecessor of
such employer--
(A) to the extent that the amounts withheld
and collected are used solely for payments
relating to a loan from a plan that satisfies
the requirements of section 408(b)(1) of the
Employee Retirement Income Security Act of 1974
or is subject to section 72(p) of the Internal
Revenue Code of 1986; or
(B) in the case of a loan from a thrift
savings plan described in subchapter III of
title 5, that satisfies the requirements of
section 8433(g) of such title;
(30) under subsection (a), until a prepetition
default is cured fully in a case under chapter 13 of
this title by actual payment of all arrears as required
by the plan, of the postponement, continuation or other
similar delay of a prepetition foreclosure proceeding
or sale in accordance with applicable nonbankruptcy
law, but nothing herein shall imply that
suchpostponement, continuation or other similar delay is a violation of
the stay under subsection (a);
(31) under subsection (a) of the setoff of an income
tax refund, by a governmental unit, in respect of a
taxable period which ended before the order for relief
against an income tax liability for a taxable period
which also ended before the order for relief, unless--
(A) prior to such setoff, an action to
determine the amount or legality of such tax
liability under section 505(a) was commenced;
or
(B) where the setoff of an income tax refund
is not permitted because of a pending action to
determine the amount or legality of a tax
liability, the governmental unit may hold the
refund pending the resolution of the action; or
(32) under subsection (a), of the setoff by a master
netting agreement participant of a mutual debt and
claim under or in connection with 1 or more master
netting agreements or any contract or agreement subject
to such agreements that constitutes the setoff of a
claim against the debtor for any payment or other
transfer of property due from the debtor under or in
connection with such agreements or any contract or
agreement subject to such agreements against any
payment due to the debtor from such master netting
agreement participant under or in connection with such
agreements or any contract or agreement subject to such
agreements or against cash, securities, or other
property held by, pledged or and under the control of,
or due from such master netting agreement participant
to margin, guarantee, secure, or settle such agreements
or any contract or agreement subject to such
agreements, to the extent such participant is eligible
to exercise such offset rights under paragraph (6),
(7), or (17) for each individual contract covered by
the master netting agreement in issue.
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. Paragraph (29) does not apply to any
amount owed to a plan referred to in that paragraph that is
incurred under a loan made during the 1-year period preceding
the filing of a petition. Nothing in paragraph (29) may be
construed to provide that any loan made under a governmental
plan under section 414(d), or a contract or account under
section 403(b), of the Internal Revenue Code of 1986
constitutes a claim or a debt under this title.
(c) Except as provided in subsections (d), [(e), and (f)]
(e), (f), and (h) of this section--
(1) the stay of an act 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 of any other act under subsection (a) of
this section continues until the earliest of--
(A) the time the case is closed;
(B) the time the case is dismissed; or
(C) 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[.];
(3) If a single or joint case is filed by or against
an individual debtor under chapter 7, 11, or 13 (other
than a case refiled under a chapter other than chapter
7 after dismisssal under section 707(b) of this title),
and if a single or joint case of the debtor was pending
within the previous 1-year period but was dismissed,
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 will
terminate with respect to the debtor on the 30th day
after the filing of the later case. Upon motion by a
party in interest for continuation of the automatic
stay and upon notice and a hearing, the court may
extend the stay in particular cases as to any or all
creditors (subject to such conditions or limitations as
the court may then impose) after notice and a hearing
completed before the expiration of the 30-day period
only if the party in interest demonstrates that the
filing of the later case is in good faith as to the
creditors to be stayed. A case is presumptively filed
not in good faith (but such presumption may be rebutted
by clear and convincing evidence to the contrary)--
(A) as to all creditors if--
(i) more than 1 previous case under
any of chapters 7, 11, or 13 in which
the individual was a debtor was pending
within such 1-year period;
(ii) a previous case under any of
chapters 7, 11, or 13 in which the
individual was a debtor was dismissed
within such 1-year period, after the
debtor failed to file or amend the
petition or other documents as required
by this title or the court without
substantial excuse (but mere
inadvertence or negligence shall not be
substantial excuse unless the dismissal
was caused by the negligence of the
debtor's attorney), failed to provide
adequate protection as ordered by the
court, or failed to perform the terms
of a plan confirmed by the court; or
(iii) there has not been a
substantial change in the financial or
personal affairs of the debtor since
the dismissal of the next most previous
case under any of chapter 7, 11, or 13
of this title, or there is not any
other reason to conclude that the later
case will be concluded, if a case under
chapter 7 of this title, with a
discharge, and if a chapter 11 or 13
case, a confirmed plan which will be
fully performed;
(B) as to any creditor that commenced an
action under subsection (d) in a previous case
in which the individual was a debtor if, as of
the date of dismissal of such case, that action
was still pending or had been resolved by
terminating, conditioning, or limiting the stay
as to actions of such creditor.
(4) If a single or joint case is filed by or against
an individual debtor under this title (other than a
case refiled under a chapter other than chapter 7 after
a dismissal under section 707(b) of this title), and if
2 or more single or joint cases of the debtor were
pending within the previous year but were dismissed,
the stay under subsection (a) will not go into effect
upon the filing of the later case. On request of a
party in interest, thecourt shall promptly enter an
order confirming that no stay is in effect. If a party in interest
requests within 30 days of the filing of the later case, the court may
order the stay to take effect in the case as to any or all creditors
(subject to such conditions or limitations as the court may impose),
after notice and hearing, only if the party in interest demonstrates
that the filing of the later case is in good faith as to the creditors
to be stayed. A stay imposed pursuant to the preceding sentence will be
effective on the date of entry of the order allowing the stay to go
into effect. A case is presumptively not filed in good faith (but such
presumption may be rebutted by clear and convincing evidence to the
contrary)--
(A) as to all creditors if--
(i) 2 or more previous cases under
this title in which the individual was
a debtor were pending within the 1-year
period;
(ii) a previous case under this title
in which the individual was a debtor
was dismissed within the time period
stated in this paragraph after the
debtor failed to file or amend the
petition or other documents as required
by this title or the court without
substantial excuse (but mere
inadvertence or negligence shall not be
substantial excuse unless the dismissal
was caused by the negligence of the
debtor's attorney), failed to provide
adequate protection as ordered by the
court, or failed to perform the terms
of a plan confirmed by the court; or
(iii) there has not been a
substantial change in the financial or
personal affairs of the debtor since
the dismissal of the next most previous
case under this title, or there is not
any other reason to conclude that the
later case will be concluded, if a case
under chapter 7, with a discharge, and
if a case under chapter 11 or 13, with
a confirmed plan that will be fully
performed; or
(B) as to any creditor that commenced an
action under subsection (d) in a previous case
in which the individual was a debtor if, as of
the date of dismissal of such case, such action
was still pending or had been resolved by
terminating, conditioning, or limiting the stay
as to action of such creditor.
(d) On request of a party in interest and after notice and a
hearing, the court shall grant relief from the stay provided
under subsection (a) of this section, such as by terminating,
annulling, modifying, or conditioning such stay--
(1) * * *
(2) with respect to a stay of an act against property
under subsection (a) of this section, if--
(A) the debtor does not have an equity in
such property; and
(B) such property is not necessary to an
effective reorganization; [or]
(3) with respect to a stay of an act against single
asset real estate under subsection (a), by a creditor
whose claim is secured by an interest in such real
estate, unless, not later than the date that is 90 days
after the entry of the order for relief (or such later
date as the court may determine for cause by order
entered within that 90-day period) or 30 days after the
court determines that the debtor is subject to this
paragraph, whichever is later--
(A) the debtor has filed a plan of
reorganization that has a reasonable
possibility of being confirmed within a
reasonable time; or
[(B) the debtor has commenced monthly
payments to each creditor whose claim is
secured by such real estate (other than a claim
secured by a judgment lien or by an unmatured
statutory lien), which payments are in an
amount equal to interest at a current fair
market rate on the value of the creditor's
interest in the real estate.]
(B) the debtor has commenced monthly payments
(which payments may, in the debtor's sole
discretion, notwithstanding section 363(c)(2)
of this title, be made from rents or other
income generated before or after the
commencement of the case by or from the
property) to each creditor whose claim is
secured by such real estate (other than a claim
secured by a judgment lien or by an unmatured
statutory lien), which payments are in an
amount equal to interest at the then-applicable
nondefault contract rate of interest on the
value of the creditor's interest in the real
estate; or
(4) with respect to a stay of an act against real
property under subsection (a), by a creditor whose
claim is secured by an interest in such real estate, if
the court finds that the filing of the bankruptcy
petition was part of a scheme to delay, hinder, and
defraud creditors that involved either--
(A) transfer of all or part ownership of, or
other interest in, the real property without
the consent of the secured creditor or court
approval; or
(B) multiple bankruptcy filings affecting the
real property.
If recorded in compliance with applicable State laws
governing notices of interests or liens in real
property, an order entered pursuant to this subsection
shall be binding in any other case under this title
purporting to affect the real property filed not later
than 2 years after that recording, except that a debtor
in a subsequent case may move for relief from such
order based upon changed circumstances or for good
cause shown, after notice and a hearing. Any Federal,
State, or local governmental unit which accepts notices
of interests or liens in real property shall accept any
certified copy of an order described in this subsection
for indexing and recording.
(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
thissection. 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 by for good
cause as described in findings made by the
court.

* * * * * * *

(h) In an individual case pursuant to chapter 7, 11, or 13
the stay provided by subsection (a) is terminated with respect
to personal property of the estate or of the debtor securing in
whole or in part a claim, or subject to an unexpired lease, and
such personal property shall no longer be property of the
estate if the debtor fails within the applicable time set by
section 521(a)(2) of this title--
(1) to file timely any statement of intention
required under section 521(a)(2) of this title with
respect to that property or to indicate therein that
the debtor will either surrender the property or retain
it and, if retaining it, either redeem the property
pursuant to section 722 of this title, reaffirm the
debt it secures pursuant to section 524(c) of this
title, or assume the unexpired lease pursuant to
section 365(p) of this title if the trustee does not do
so, as applicable; or
(2) to take timely the action specified in that
statement of intention, as it may be amended before
expiration of the period for taking action, unless the
statement of intention specifies reaffirmation and the
creditor refuses to reaffirm on the original contract
terms;
unless the court determines on the motion of the trustee filed
before the expiration of the applicable time set by section
521(a)(2), and after notice and a hearing, that such property
is of consequential value or benefit to the estate, orders
appropriate adequate protection of the creditor's interest, and
orders the debtor to deliver any collateral in the debtor's
possession to the trustee. If the court does not so determine
an order, the stay shall terminate upon the conclusion of the
proceeding on the motion.
[(h) An] (i)(1) Except as provided in paragraph (2), 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.
(2) If such violation is based on an action taken by an
entity in the good-faith belief that subsection (h) applies to
the debtor, then recovery under paragraph (1) against such
entity shall be limited to actual damages.
(j) If one case commenced under chapter 7, 11, or 13 of this
title is dismissed due to the creation of a debt repayment plan
administered by a credit counseling agency approved pursuant to
section 111 of this title, then for purposes of section
362(c)(3) of this title the subsequent case commenced under any
such chapter shall not be presumed to be filed not in good
faith.
(k)(1) Except as provided in paragraph (2) of this
subsection, the provisions of subsection (a) of this section
shall not apply in a case in which the debtor--
(A) is a debtor in a case under this title pending at
the time the petition is filed;
(B) was a debtor in a case under this title which was
dismissed for any reason by an order that became final
in the 2-year period ending on the date of the order
for relief entered with respect to the petition;
(C) was a debtor in a case under this title in which
a chapter 11, 12, or 13 plan was confirmed in the 2-
year period ending on the date of the order for relief
entered with respect to the petition; or
(D) is an entity that has succeeded to substantially
all of the assets or business of a debtor described in
subparagraph (A), (B), or (C).
(2) This subsection shall not apply--
(A) to a case initiated by an involuntary petition
filed by a creditor that is not an insider or affiliate
of the debtor; or
(B) after such time as the debtor, after notice and a
hearing, demonstrates by a preponderance of the
evidence, that the filing of such petition resulted
from circumstances beyond the control of the debtor and
not foreseeable at the time the earlier case was filed;
and that it is more likely than not that the court will
confirm a plan, other than a liquidating plan, within a
reasonable time.
(l) The exercise of rights not subject to the stay arising
under subsection (a) pursuant to paragraph (6), (7), or (17),
or (19) of subsection (b) shall not be stayed by any order of a
court or administrative agency in any proceeding under this
title.

Sec. 363. Use, sale, or lease of property

(a) * * *

* * * * * * *

(d) The trustee may use, sell, or lease property under
subsection (b) or (c) of this section [only to the extent not
inconsistent with any relief granted under section 362(c),
362(d), 362(e), or 362(f) of this title.] only--
(1) in accordance with applicable nonbankruptcy law
that governs the transfer of property by a corporation
or trust that is not a moneyed, business, or commercial
corporation or trust; and
(2) to the extent not inconsistent with any relief
granted under subsection (c), (d), (e), or (f) of
section 362 of this title.

* * * * * * *

Sec. 365. Executory contracts and unexpired leases

(a) * * *
(b)(1) If there has been a default in an executory contract
or unexpired lease of the debtor, the trustee may not assume
such contract or lease unless, at the time of assumption of
such contract or lease, the trustee--
(A) cures, or provides adequate assurance that the
trustee will promptly cure, such default[;] other than
a default that is a breach of a provision relating to--
(i) the satisfaction of any provision (other
than a penalty rate or penalty provision)
relating to a default arising from any failure
to perform nonmonetary obligations under an
unexpired lease of real property (excluding
executory contracts that transfer a right or
interest under a filed or issued patent,
copyright, trademark, trade dress, or trade
secret), if it is impossible for the trustee to
cure such default by performing nonmonetary
acts at and after the time of assumption; or
(ii) the satisfaction of any provision (other
than a penalty rate or penalty provision)
relating to a default arising from any failure
to perform nonmonetary obligations under an
executory contract, if it is impossible for the
trustee to cure such default by performing
nonmonetary acts at and after the time of
assumption and if the court determines, based
on the equities of the case, that this
subparagraph should not apply with respect to
such default;

* * * * * * *

(2) Paragraph (1) of this subsection does not apply to a
default that is a breach of a provision relating to--
(A) * * *

* * * * * * *

[(D) the satisfaction of any penalty rate or
provision relating to a default arising from any
failure by the debtor to perform nonmonetary
obligations under the executory contract or unexpired
lease.]
(D) the satisfaction of any penalty rate or penalty
provision relating to a default arising from a failure
to perform nonmonetary obligations under an executory
contract (excluding executory contracts that transfer a
right or interest under a filed or issued patent,
copyright, trademark, trade dress, or trade secret) or
under an unexpired lease of real or personal property.

* * * * * * *

[(c) The trustee may not assume or assign any executory
contract or unexpired lease of the debtor, whether or not such
contract or lease prohibits or restricts assignment of rights
or delegation of duties, if--
[(1)(A) applicable law excuses a party, other than
the debtor, to such contract or lease from accepting
performance from or rendering performance to an entity
other than the debtor or the debtor in possession,
whether or not such contract or lease prohibits or
restricts assignment of rights or delegation of duties;
and
[(B) such party does not consent to such assumption
or assignment; or
[(2) such contract is a contract to make a loan, or
extend other debt financing or financial
accommodations, to or for the benefit of the debtor, or
to issue a security of the debtor;
[(3) such lease is of nonresidential real property
and has been terminated under applicable nonbankruptcy
law prior to the order for relief; or
[(4) such lease is of nonresidential real property
under which the debtor is the lessee of an aircraft
terminal or aircraft gate at an airport at which the
debtor is the lessee under one or more additional
nonresidential leases of an aircraft terminal or
aircraft gate and the trustee, in connection with such
assumption or assignment, does not assume all such
leases or does not assume and assign all of such leases
to the same person, except that the trustee may assume
or assign less than all of such leases with the airport
operator's written consent.]
(c)(1) The trustee may not assume or assign an executory
contract or unexpired lease of the debtor, whether or not the
contract or lease prohibits or restricts assignment of rights
or delegation of duties, if--
(A)(i) applicable law excuses a party to the contract
or lease from accepting performance from or rendering
performance to an assignee of the contract or lease,
whether or not the contract or lease prohibits or
restricts assignment of rights or delegation of duties;
and
(ii) the party does not consent to the assumption or
assignment; or
(B) the contract is a contract to make a loan, or
extend other debt financing or financial
accommodations, to or for the benefit of the debtor, or
to issue a security of the debtor.
(2) Notwithstanding paragraph (1)(A) and applicable
nonbankruptcy law, in a case under chapter 11 of this title, a
trustee in a case in which a debtor is a corporation, or a
debtor in possession, may assume an executory contract or
unexpired lease of the debtor, whether or not the contract or
lease prohibits or restricts assignment of rights or delegation
of duties.
(3) The trustee may not assume or assign an unexpired lease
of the debtor of nonresidential real property, whether or not
the contract or lease prohibits or restricts assignment of
rights or delegation of duties, if the lease has been
terminated under applicable nonbankruptcy law before the order
for relief.
(d)(1) * * *

* * * * * * *

[(4) Notwithstanding paragraphs (1) and (2), in a case under
any chapter of this title, if the trustee does not assume or
reject an unexpired lease of nonresidential real property under
which the debtor is the lessee within 60 days after the date of
the order for relief, or within such additional time as the
court, for cause, within such 60-day period, fixes, then such
lease is deemed rejected, andthe trustee shall immediately
surrender such nonresidential real property to the lessor.]
(4)(A) Subject to subparagraph (B), in any case under any
chapter of this title, an unexpired lease of nonresidential
real property under which the debtor is the lessee shall be
deemed rejected, and the trustee shall immediately surrender
such property to the lessor, if the trustee does not assume or
reject the unexpired lease by the earlier of--
(i) the date that is 180 days after the date of the
order for relief; or
(ii) the date of the entry of an order confirming a
plan.
(B)(i) The court may extend the period determined under
subparagraph (A) for 120 days upon motion of the trustee or the
lessor for cause.
(ii) If the court grants an extension under clause (i), the
court may grant a subsequent extension only upon prior written
consent of the lessor.
[(5) Notwithstanding paragraphs (1) and (4) of this
subsection, in a case under any chapter of this title, if the
trustee does not assume or reject an unexpired lease of
nonresidential real property under which the debtor is an
affected air carrier that is the lessee of an aircraft terminal
or aircraft gate before the occurrence of a termination event,
then (unless the court orders the trustee to assume such
unexpired leases within 5 days after the termination event), at
the option of the airport operator, such lease is deemed
rejected 5 days after the occurrence of a termination event and
the trustee shall immediately surrender possession of the
premises to the airport operator; except that the lease shall
not be deemed to be rejected unless the airport operator first
waives the right to damages related to the rejection. In the
event that the lease is deemed to be rejected under this
paragraph, the airport operator shall provide the affected air
carrier adequate opportunity after the surrender of the
premises to remove the fixtures and equipment installed by the
affected air carrier.
[(6) For the purpose of paragraph (5) of this subsection and
paragraph (f)(1) of this section, the occurrence of a
termination event means, with respect to a debtor which is an
affected air carrier that is the lessee of an aircraft terminal
or aircraft gate--
[(A) the entry under section 301 or 302 of this title
of an order for relief under chapter 7 of this title;
[(B) the conversion of a case under any chapter of
this title to a case under chapter 7 of this title; or
[(C) the granting of relief from the stay provided
under section 362(a) of this title with respect to
aircraft, aircraft engines, propellers, appliances, or
spare parts, as defined in section 40102(a) of title
49, except for property of the debtor found by the
court not to be necessary to an effective
reorganization.
[(7) Any order entered by the court pursuant to paragraph (4)
extending the period within which the trustee of an affected
air carrier must assume or reject an unexpired lease of
nonresidential real property shall be without prejudice to--
[(A) the right of the trustee to seek further
extensions within such additional time period granted
by the court pursuant to paragraph (4); and
[(B) the right of any lessor or any other party in
interest to request, at any time, a shortening or
termination of the period within which the trustee must
assume or reject an unexpired lease of nonresidential
real property.
[(8) The burden of proof for establishing cause for an
extension by an affected air carrier under paragraph (4) or the
maintenance of a previously granted extension under paragraph
(7)(A) and (B) shall at all times remain with the trustee.
[(9) For purposes of determining cause under paragraph (7)
with respect to an unexpired lease of nonresidential real
property between the debtor that is an affected air carrier and
an airport operator under which such debtor is the lessee of an
airport terminal or an airport gate, the court shall consider,
among other relevant factors, whether substantial harm will
result to the airport operator or airline passengers as a
result of the extension or the maintenance of a previously
granted extension. In making the determination of substantial
harm, the court shall consider, among other relevant factors,
the level of actual use of the terminals or gates which are the
subject of the lease, the public interest in actual use of such
terminals or gates, the existence of competing demands for the
use of such terminals or gates, the effect of the court's
extension or termination of the period of time to assume or
reject the lease on such debtor's ability to successfully
reorganize under chapter 11 of this title, and whether the
trustee of the affected air carrier is capable of continuing to
comply with its obligations under section 365(d)(3) of this
title.]
[(10)] (5) The trustee shall timely perform all of the
obligations of the debtor, except those specified in section
365(b)(2), first arising from or after 60 days after the order
for relief in a case under chapter 11 of this title under an
unexpired lease of personal property (other than personal
property leased to an individual primarily for personal,
family, or household purposes), until such lease is assumed or
rejected notwithstanding section 503(b)(1) of this title,
unless the court, after notice and a hearing and based on the
equities of the case, orders otherwise with respect to the
obligations or timely performance thereof. This subsection
shall not be deemed to affect the trustee's obligations under
the provisions of subsection (b) or (f). Acceptance of any such
performance does not constitute waiver or relinquishment of the
lessor's rights under such lease or under this title.
[(e)(1) Notwithstanding a provision in an executory contract
or unexpired lease, or in applicable law, an executory contract
or unexpired lease of the debtor may not be terminated or
modified, and any right or obligation under such contract or
lease may not be terminated or modified, at any time after the
commencement of the case solely because of a provision in such
contract or lease that is conditioned on--
[(A) the insolvency or financial condition of the
debtor at any time before the closing of the case;
[(B) the commencement of a case under this title; or
[(C) the appointment of or taking possession by a
trustee in a case under this title or a custodian
before such commencement.]
(e)(1) Notwithstanding a provision in an executory contract
or unexpired lease, or in applicable law, an executory contract
or unexpired lease of the debtor may not be terminated or
modified, and any right or obligation under such contract or
lease may not be terminated or modified, at any time after the
commencement of the case solely because of a provision in such
contract or lease that is conditioned on--
(A) the insolvency or financial condition of the
debtor at any time before the closing of the case;
(B) the commencement of a case under this title; or
(C) the appointment of or taking possession by a
trustee in a case under this title or a custodian
before such commencement.

* * * * * * *

(f)(1) Except as provided in subsection (c) of this section,
notwithstanding a provision in an executory contract or
unexpired lease of the debtor, or in applicable law, that
prohibits, restricts, or conditions the assignment of such
contract or lease, the trustee may assign such contract or
lease under paragraph (2) of this subsection[; except that the
trustee may not assign an unexpired lease of nonresidential
real property under which the debtor is an affected air carrier
that is the lessee of an aircraft terminal or aircraft gate if
there has occurred a termination event].

* * * * * * *

(p)(1) If a lease of personal property is rejected or not
timely assumed by the trustee under subsection (d), the leased
property is no longer property of the estate and the stay under
section 362(a) of this title is automatically terminated.
(2) In the case of an individual under chapter 7, the debtor
may notify the creditor in writing that the debtor desires to
assume the lease. Upon being so notified, the creditor may, at
its option, notify the debtor that it is willing to have the
lease assumed by the debtor and may, at its option, condition
such assumption on cure of any outstanding default on terms set
by the contract. If within 30 days of the notice from the
creditor the debtor notifies the lessor in writing that the
lease is assumed, the liability under the lease will be assumed
by the debtor and not by the estate. The stay under section 362
of this title and the injunction under section 524(a) of this
title shall not be violated by notification of the debtor and
negotiation of cure under this subsection. Nothing in this
paragraph shall require a debtor to assume a lease, or a
creditor to permit assumption.
(3) In a case under chapter 11 of this title in which the
debtor is an individual and in a case under chapter 13 of this
title, if the debtor is the lessee with respect to personal
property and the lease is not assumed in the plan confirmed by
the court, the lease is deemed rejected as of the conclusion of
the hearing on confirmation. If the lease is rejected, the stay
under section 362 of this title and any stay under section 1301
is automatically terminated with respect to the property
subject to the lease.

* * * * * * *

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

SUBCHAPTER I--CREDITORS AND CLAIMS

Sec.
501. Filing of proofs of claims or interests.
* * * * * * *
511. Rate of interest on tax claims.

SUBCHAPTER II--DEBTOR'S DUTIES AND BENEFITS

521. Debtor's duties.
* * * * * * *
526. Debt relief agency enforcement.

SUBCHAPTER III--THE ESTATE

541. Property of the estate.
* * * * * * *
[555. Contractual right to liquidate a securities contract.]
[556. Contractual right to liquidate a commodity contract or forward
contract.]
555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract.
* * * * * * *
[559. Contractual right to liquidate a repurchase agreement.]
[560. Contractual right to terminate a swap agreement.]
559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
560. Contractual right to liquidate, terminate, or accelerate a swap
agreement.
561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across contracts.
562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity contracts, repurchase
agreements, or master netting agreements.

SUBCHAPTER I--CREDITORS AND CLAIMS

* * * * * * *

Sec. 502. Allowance of claims or interests

(a) * * *
(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) * * *

* * * * * * *

(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[.], and except that in a case under chapter 13
of this title, a claim of a governmental unit for a tax
in respect of a return filed under section1308 of this
title shall be timely if it is filed on or before 60 days after such
return or returns were filed as required.

* * * * * * *

(g)(1) A claim arising from the rejection, under section 365
of this title or under a plan under chapter 9, 11, 12, or 13 of
this title, of an executory contract or unexpired lease of the
debtor that has not been assumed shall be determined, and shall
be allowed under subsection (a), (b), or (c) of this section or
disallowed under subsection (d) or (e) of this section, the
same as if such claim had arisen before the date of the filing
of the petition.
(2) A claim for damages calculated in accordance with section
561 of this title shall be allowed under subsection (a), (b),
or (c), or disallowed under subsection (d) or (e), as if such
claim had arisen before the date of the filing of the petition.

* * * * * * *

(k)(1) The court, on the motion of the debtor and after a
hearing, may reduce a claim filed under this section based
wholly on unsecured consumer debts by not more than 20 percent,
if the debtor can prove by clear and convincing evidence that
the claim was filed by a creditor who unreasonably refused to
negotiate a reasonable alternative repayment schedule proposed
by an approved credit counseling agency acting on behalf of the
debtor, and if--
(A) such offer was made within the period beginning
60 days before the filing of the petition;
(B) such offer provided for payment of at least 60
percent of the amount of the debt over a period not to
exceed the repayment period of the loan, or a
reasonable extension thereof; and
(C) no part of the debt under the alternative
repayment schedule is nondischargeable, is entitled to
priority under section 507 of this title, or would be
paid a greater percentage in a chapter 13 proceeding
than offered by the debtor.
(2) The debtor shall have the burden of proving that the
proposed alternative repayment schedule was made in the 60-day
period specified in subparagraph (A) and that the creditor
unreasonably refused to consider the debtor's proposal.

* * * * * * *

Sec. 503. Allowance of administrative expenses

(a) * * *
(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;] (A) the actual, necessary
costs and expenses of preserving the estate, including
wages, salaries, or commissions for services rendered
after the commencement of the case, and wages and
benefits attributable to any period of time after
commencement of the case as a result of the debtor's
violation of Federal law, without regard to when the
original unlawful act occurred or to whether any
services were rendered;
(B) any tax--
(i) incurred by the estate, whether secured
or unsecured, including property taxes for
which liability is in rem only, in personam or
both, except a tax of a kind specified in
section 507(a)(8) of this title; or

* * * * * * *

(5) reasonable compensation for services rendered by
an indenture trustee in making a substantial
contribution in a case under chapter 9 or 11 of this
title, 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]
(6) the fees and mileage payable under chapter 119 of
title 28[.]; and
(7) with respect to a nonresidential real property
lease previously assumed under section 365, and
subsequently rejected, a sum equal to all monetary
obligations due, excluding those arising from or
relating to a failure to operate or penalty provisions,
for the period of one year following the later of the
rejection date or date of actual turnover of the
premises, without reduction or setoff for any reason
whatsoever except for sums actually received or to be
received from a nondebtor; and the claim for remaining
sums due for the balance of the term of the lease shall
be a claim under section 502(b)(6).

* * * * * * *

(D) notwithstanding the requirements of subsection
(a) of this section, a governmental unit shall not be
required to file a request for the payment of a claim
described in subparagraph (B) or (C);

* * * * * * *

(4) reasonable compensation for professional services
rendered by an attorney or an accountant of an entity
whose expense is allowable 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. 504. Sharing of compensation

(a) * * *

* * * * * * *

(c) This section shall not apply with respect to sharing, or
agreeing to share, compensation with a bona fide public service
attorney referral program that operates in accordance with non-
Federal law regulating attorney referral services and with
rules of professional responsibility applicable to attorney
acceptance of referrals.

Sec. 505. Determination of tax liability

(a)(1) * * *
(2) The court may not so determine--
(A) the amount or legality of a tax, fine, penalty,
or addition to tax if such amount or legality was
contested before and adjudicated by a judicial or
administrative tribunal of competent jurisdiction
before the commencement of the case under this title;
[or]
(B) any right of the estate to a tax refund, before
the earlier of--
(i) 120 days after the trustee properly
requests such refund from the governmental unit
from which such refund is claimed; or
(ii) a determination by such governmental
unit of such request[.]; or
(C) the amount or legality of any amount arising in
connection with an ad valorem tax on real or personal
property of the estate, if the applicable period for
contesting or redetermining that amount under any law
(other than a bankruptcy law) has expired.
(b) A trustee may request a determination of any unpaid
liability of the estate for any tax incurred during the
administration of the case by submitting a tax return for such
tax and a request for such a determination to the governmental
unit charged with responsibility for collection or
determination of such tax. [Unless] If the request is made
substantially in the manner designated by the governmental unit
and unless such return is fraudulent, or contains a material
misrepresentation, the estate, the trustee, the debtor, and any
successor to the debtor are discharged from any liability for
such tax--
(1) * * *

* * * * * * *

Sec. 506. Determination of secured status

(a) An allowed claim of a creditor secured by a lien on
property in which the estate has an interest, or that is
subject to setoff under section 553 of this title, is a secured
claim to the extent of the value of such creditor's interest in
the estate's interest in such property, or to the extent of the
amount subject to setoff, as the case may be, and is an
unsecured claim to the extent that the value of such creditor's
interest or the amount so subject to setoff is less than the
amount of such allowed claim. Such value shall be determined in
light of the purpose of the valuation and of the proposed
disposition or use of such property, and in conjunction with
any hearing on such disposition or use or on a plan affecting
such creditor's interest. In the case of an individual debtor
under chapters 7 and 13, such value with respect to personal
property securing an allowed claim shall be determined based on
the replacement value of such property as of the date of filing
the petition without deduction for costs of sale or marketing.
With respect to property acquired for personal, family, or
household purpose, replacement value shall mean the price a
retail merchant would charge for property of that kind
considering the age and condition of the property at the time
value is determined.
(b) To the extent that an allowed secured claim is secured by
property the value of which, after any recovery under
subsection (c) of this section, is greater than the amount of
such claim, there shall be allowed to the holder of such claim,
interest on such claim, and any reasonable fees, costs, or
charges provided for under the agreement or State statute under
which such claim arose.
(c) The trustee may recover from property securing an allowed
secured claim the reasonable, necessary costs and expenses of
preserving, or disposing of, such property to the extent of any
benefit to the holder of such claim, including the payment of
all ad valorem property taxes in respect of the property.

* * * * * * *

(e) In an individual case under chapter 7, 11, 12, or 13--
(1) 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 within 5 years of the filing of the petition,
except for the purpose of applying paragraph (3) of
this subsection;
(2) if such allowed claim attributable to the
purchase price is secured only by the personal property
so acquired, the value of the personal property and the
amount of the allowed secured claim shall be the sum of
the unpaid principal balance of the purchase price and
accrued and unpaid interest and charges at the contract
rate;
(3) if such allowed claim attributable to the
purchase price is secured by the personal property so
acquired and other property, the value of the security
may be determined under subsection (a), but the value
of the security and the amount of the allowed secured
claim shall be not less than the unpaid principal
balance of the purchase price of the personal property
acquired and unpaid interest and charges at the
contract rate; and
(4) in any subsequent case under this title that is
filed by or against the debtor in the 2-year period
beginning on the date the petition is filed in the
original case, the value of the personal property and
the amount of the allowed secured claim shall be deemed
to be not less than the amount provided under
paragraphs (2) and (3) less any payments actually
received.

Sec. 507. Priorities

(a) The following expenses and claims have priority in the
following order:
(1) First, allowed claims for domestic support
obligations to be paid in the following order on the
condition that funds received under this paragraph by a
governmental unit in a case under this title be
applied:
(A) Claims that, as of the date of entry of
the order for relief, are owed directly to a
spouse, former spouse, or child of the debtor,
or the parent of such child, without regard to
whether the claim is filed by the spouse,
former spouse,child, or parent, or is filed by
a governmental unit on behalf of that person.
(B) Claims that, as of the date of entry of
the order for relief, are assigned by a spouse,
former spouse, child of the debtor, or the
parent of that child to a governmental unit or
are owed directly to a governmental unit under
applicable nonbankruptcy law.
[(1)] (2) [First] Second, administrative expenses
allowed under section 503(b) of this title, and any
fees and charges assessed against the estate under
chapter 123 of title 28.
[(2)] (3) [Second] Third, unsecured claims allowed
under section 502(f) of this title.
[(3)] (4) [Third] Fourth, 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[;].
[(4)] (5) [Fourth] Fifth, allowed unsecured claims
for contributions to an employee benefit plan--
(A) arising from services rendered within 180
days before the date of the filing of the
petition or the date of the cessation of the
debtor's business, whichever occurs first; but
only
(B) for each such plan, to the extent of--
(i) the number of employees covered
by each such plan multiplied by $4,000;
less
(ii) the aggregate amount paid to
such employees under paragraph (3) of
this subsection, plus the aggregate
amount paid by the estate on behalf of
such employees to any other employee
benefit plan.
[(5)] (6) [Fifth] Sixth, allowed unsecured claims of
persons--
(A) engaged in the production or raising of
grain, as defined in section 557(b) of this
title, against a debtor who owns or operates a
grain storage facility, as defined in section
557(b) of this title, for grain or the proceeds
of grain, or
(B) engaged as a United States fisherman
against a debtor who has acquired fish or fish
produce from a fisherman through a sale or
conversion, and who is engaged in operating a
fish produce storage or processing facility--
but only to the extent of $4,000 for each such
individual.
[(6)] (7) [Sixth] Seventh, allowed unsecured claims
of individuals, to the extent of $1,800 for each such
individual, arising from the deposit, before the
commencement of the case, of money in connection with
the purchase, lease, or rental of property, or the
purchase of services, for the personal, family, or
household use of such individuals, that were not
delivered or provided.
[(7) Seventh, allowed 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--
[(A) is assigned to another entity,
voluntarily, by operation of law, or otherwise;
or
[(B) includes a liability designated as
alimony, maintenance, or support, unless such
liability is actually in the nature of alimony,
maintenance or support.]
(8) Eighth, allowed unsecured claims of governmental
units, only to the extent that such claims are for--
(A) a tax on or measured by income or gross
receipts--
(i) for a taxable year ending on or
before the date of the filing of the
petition for which a return, if
required, is last due, including
extensions, after three years before
the date of the filing of the petition,
plus any time, plus 6 months, during
which the stay of proceedings was in
effect in a prior case under this
title;
[(ii) assessed within 240 days, plus
any time plus 30 days during which an
offer in compromise with respect to
such tax that was made within 240 days
after such assessment was pending,
before the date of the filing of the
petition; or]
(ii) assessed within 240 days before
the date of the filing of the petition,
exclusive of--
(I) any time plus 30 days
during which an offer in
compromise with respect of such
tax, was pending or in effect
during such 240-day period;
(II) any time plus 30 days
during which an installment
agreement with respect of such
tax was pending or in effect
during such 240-day period, up
to 1 year; and
(III) any time plus 6 months
during which a stay of
proceedings against collections
was in effect in a prior case
under this title during such
240-day period.

* * * * * * *

(B) a property tax [assessed] incurred before
the commencement of the case and last payable
without penalty after one year before the date
of the filing of the petition;

* * * * * * *

(10) Tenth, allowed claims for death or personal
injuries resulting from the operation of a motor
vehicle or vessel if such operation was unlawful
because the debtor was intoxicated from using alcohol,
a drug or another substance.

* * * * * * *

Sec. 508. Effect of distribution other than under this title

[(a) If a creditor receives, in a foreign proceeding, payment
of, or a transfer of property on account of, a claim that is
allowed under this title, such creditor may not receive any
payment under this title on account of such claim until each of
the other holders of claims on account of which such holders
are entitled to share equally with such creditor under this
title has received payment under this title equal in value to
the consideration received by such creditor in such foreign
proceeding.
[(b)] If a creditor of a partnership debtor receives, from a
general partner that is not a debtor in a case under chapter 7
of this title, payment of, or a transfer of property on account
of, a claim that is allowed under this title and that is not
secured by a lien on property of such partner, such creditor
may not receive any payment under this title on account of such
claim until each of the other holders of claims on account of
which such holders are entitled to share equally with such
creditor under this title has received payment under this title
equal in value to the consideration received by such creditor
from such general partner.

* * * * * * *

Sec. 511. Rate of interest on tax claims

If any provision of this title requires the payment of
interest on a tax claim or requires the payment of interest to
enable a creditor to receive the present value of the allowed
amount of a tax claim, the rate of interest shall be as
follows:
(1) In the case of ad valorem tax claims, whether
secured or unsecured, other unsecured tax claims where
interest is required to be paid under section 726(a)(5)
of this title, secured tax claims, and administrative
tax claims paid under section 503(b)(1) of this title,
the rate shall be determined under applicable
nonbankruptcy law.
(2) In the case of all other tax claims, the minimum
rate of interest shall be the Federal short-term rate
rounded to the nearest full percent, determined under
section 1274(d) of the Internal Revenue Code of 1986,
plus 3 percentage points.
(A) In the case of claims for Federal income
taxes, such rate shall be subject to any
adjustment that may be required under section
6621(d) of the Internal Revenue Code of 1986.
(B) In the case of taxes paid under a
confirmed plan or reorganization, such rate
shall be determined as of the calendar month in
which the plan is confirmed.

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 monthly
income and current expenditures
prepared in accordance with section
707(b)(2);
(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) of this
title indicating that such
attorney or bankruptcy petition
preparer delivered to the
debtor any notice required by
section 342(b) of this title;
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; and
(vi) 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 date set for the meeting
of creditors under section 341(a) of this
title, or within such additional time as the
court, for cause, within such [forty-five day]
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) of this title;
(3) if a trustee is serving in the case or an auditor
appointed pursuant to section 586 of title 28, United
States Code, cooperate with the trustee as necessary to
enable the trustee to perform the trustee's duties
under this title;
(4) if a trustee is serving in the case or an auditor
appointed pursuant to section 586 of title 28, United
States Code, surrender to the trustee all property of
the estate and any recorded information, including
books, documents, records, and papers, relating to
property of the estate, whether or not immunity is
granted under section 344 of this title[, and];
(5) appear at the hearing required under section
524(d) of this title[.]; and
(6) in an individual case under chapter 7 of this
title, not retain possession of personal property as to
which a creditor has an allowed claim for the purchase
price secured in whole or in part by an interest in
that personal property unless, in the case of an
individual debtor, the debtor takes 1 of the following
actions within 45 days after the first meeting of
creditors under section 341(a)--
(A) enters into an agreement with the
creditor pursuant to section 524(c) of this
title with respect to the claim secured by such
property; or
(B) redeems such property from the security
interest pursuant to section 722 of this title.
If the debtor fails to so act within the 45-day period,
the stay under section 362(a) of this title is
terminated with respect to the personal property of the
estate or of the debtor which is affected, such
property shall no longer be property of the estate, and
the creditor may take whatever action as to such
property as is permitted by applicable nonbankruptcy
law, unless the court determines on the motion of the
trustee brought before the expiration of such 45-day
period, and after notice and a hearing, that such
property is of consequential value or benefit to the
estate, orders appropriate adequate protection of the
creditor's interest, and orders the debtor to deliver
any collateral in the debtor's possession to the
trustee.
(b)(1) Notwithstanding section 707(a) of this title, and
subject to paragraph (2), if an individual debtor in a
voluntary case under chapter 7 or 13 fails to file all of the
information required under subsection (a)(1) within 45 days
after the filing of the petition commencing the case, the case
shall be automatically dismissed effective on the 46th day
after the filing of the petition.
(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 such request.
(3) Upon request of the debtor made within 45 days after the
filing of the petition commencing a case described in paragraph
(1), the court may allow the debtor an additional period not to
exceed 45 days to file the information required under
subsection (a)(1) if the court finds justification for
extending the period for the filing.
(c) If the debtor fails timely to take the action specified
in subsection (a)(6) of this section, or in paragraphs (1) and
(2) of section 362(h) of this title, with respect to property
which a lessor or bailor owns and has leased, rented, or bailed
to the debtor or as to which a creditor holds a security
interest not otherwise voidable under section 522(f), 544, 545,
547, 548, or 549 of this title, nothing in this title shall
prevent or limit the operation of a provision in the underlying
lease or agreement which has the effect of placing the debtor
in default under such lease or agreement by reason of the
occurrence, pendency, or existence of a proceeding under this
title or the insolvency of the debtor. Nothing in this
subsection shall be deemed to justify limiting such a provision
in any other circumstance.
(d) 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);
and
(2) a copy of the debt repayment plan, if any,
developed under section 109(h) through the credit
counseling service referred to in paragraph (1).
(e)(1) At any time, a creditor, in the case of an individual
under chapter 7 or 13, may file with the court notice that the
creditor requests the petition, schedules, and a statement of
affairs filed by the debtor in the case and the court shall
make those documents available to the creditor who requests
those documents at a reasonable cost within 5 business days
after such request.
(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 such
plan available to the creditor who requests such plan at a
reasonable cost and not later than 5 days after such request.
(f) 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 current monthly income and expenditures in the
preceding tax year and current monthly income less
expenditures for the month preceding the statement
prepared in accordance with section 707(b)(2) that
shows how the amounts are calculated--
(A) beginning on the date that is the later
of 90 days after the close of the debtor's tax
year or 1 year after the order for relief,
unless a plan has been confirmed; and
(B) thereafter, on or before the date that is
45 days before each anniversary of the
confirmation of the plan until the case is
closed.
(g)(1) A statement referred to in subsection (f)(4) shall
disclose--
(A) the amount and sources of income of the debtor;
(B) the identity of any 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 (h).
(h)(1) Not later than 30 days after the date of enactment of
the Consumer Bankruptcy Reform Act of 1999, 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
reasonable restrictions on creditor access to tax information
that is required to be provided under this section to verify
creditor identity and to restrict use of the information except
with respect to the case.
(3) Not later than 1 year after the date of enactment of the
Consumer Bankruptcy Reform Act of 1999, 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) to provide timely and sufficient
information to creditors concerning the case; and
(B) if appropriate, includes proposed legislation--
(i) to further protect the confidentiality of
tax information or to make it better available
to creditors; and
(ii) to provide penalties for the improper
use by any person of the tax information
required to be provided under this section.
(i) If requested by the United States trustee or a trustee
serving in the case, the debtor provide a document that
establishes the identity of the debtor, including a driver's
license, passport, or other document that contains a photograph
of the debtor and such other personal identifying information
relating to the debtor that establishes the identity of the
debtor.

Sec. 522. Exemptions

(a) * * *
(b)(1) Notwithstanding section 541 of this title, an
individual debtor may exempt from property of the estate the
property listed in either paragraph [(1)] (2) or, in the
alternative, paragraph [(2)] (3) of this subsection. In joint
cases filed under section 302 of this title and individual
cases filed under section 301 or 303 of this title by or
against debtors who are husband and wife, and whose estates are
ordered to be jointly administered under Rule 1015(b) of the
Federal Rules of Bankruptcy Procedure, one debtor may not elect
to exempt property listed in paragraph [(1)] (2) and the other
debtor elect to exempt property listed in paragraph [(2)] (3)
of this subsection. If the parties cannot agree on the
alternative to be elected, they shall be deemed to elect
paragraph [(1)] (2), where such election is permitted under the
law of the jurisdiction where the case is filed. [Such property
is--
[(1) property that is specified under subsection (d)
of this section, unless the State law that is
applicable to the debtor under paragraph (2)(A) of this
subsection specifically does not so authorize; or, in
the alternative,]
(2) Property listed in this paragraph is property that is
specified under subsection (d), unless the State law that is
applicable to the debtor under paragraph (3)(A) specifically
does not so authorize.
[(2)(A)] (3) Property listed in this paragraph is--
(A) subject to subsections (o) and (p), 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] 730 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] or if the debtor's domicile has not been located
at a single State for such 730-day period, the place in
which the debtor's domicile was located for 180 days
immediately preceding the 730-day period or for a
longer portion of such 180-day period than in any other
place; [and]
(B) any interest in property in which the debtor had,
immediately before the commencement of the case, an
interest as a tenant by the entirety or joint tenant to
the extent that such interest as a tenant by the
entirety or joint tenant is exempt from process under
applicable nonbankruptcy law[.];
(C) except as provided in paragraph (n), funds placed
in an education individual retirement account (as
defined in section 530(b)(1) of the Internal Revenue
Code of 1986) not less than 365 days before the date of
entry of the order of relief but only to the extent
such funds--
(i) are not pledged or promised to any entity
in connection with any extension of credit; and
(ii) are not excess contributions (as
described in section 4973(e) of the Internal
Revenue Code of 1986); and
(D) retirement funds to the extent that those funds
are in a fund or account that is exempt from taxation
under section 401, 403, 408, 408A, 414, 457, or 501(a)
of the Internal Revenue Code of 1986.
(4) For purposes of paragraph (3)(D) and subsection (d)(12),
the following shall apply:
(A) If the retirement funds are in a retirement fund
that has received a favorable determination pursuant to
section 7805 of the Internal Revenue Code of 1986, and
that determination is in effect as of the date of the
commencement of the case under section 301, 302, or 303
of this title, those funds shall be presumed to be
exempt from the estate.
(B) If the retirement funds are in a retirement fund
that has not received a favorable determination
pursuant to such section 7805, those funds are exempt
from the estate if the debtor demonstrates that--
(i) no prior determination to the contrary
has been made by a court or the Internal
Revenue Service; and
(ii) the retirement fund is in substantial
compliance with the applicable requirements of
the Internal Revenue Code of 1986.
(C) A direct transfer of retirement funds from 1 fund
or account that is exempt from taxation under section
401, 403, 408, 408A, 414, 457, or 501(a) of the
Internal Revenue Code of 1986, pursuant to section
401(a)(31) of the Internal Revenue Code of 1986, or
otherwise, shall not cease to qualify for exemption
under paragraph (3)(D) or subsection (d)(12) by reason
of that direct transfer.
(D)(i) Any distribution that qualifies as an eligible
rollover distribution within the meaning of section
402(c) of the Internal Revenue Code of 1986 or that is
described in clause (ii) shall not cease to qualify for
exemption under paragraph (3)(D) or subsection (d)(12)
by reason of that distribution.
(ii) A distribution described in this clause is an
amount that--
(I) has been distributed from a fund or
account that is exempt from taxation under
section 401, 403, 408, 408A, 414, 457, or
501(a) of the Internal Revenue Code of 1986;
and
(II) to the extent allowed by law, is
deposited in such a fund or account not later
than 60 days after the distribution of that
amount.
(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;]
(1) a debt of a kind specified in paragraph (1) or
(5) of section 523(a) (in which case, notwithstanding
any provision of applicable nonbankruptcy law to the
contrary, such property shall be liable for a debt of a
kind specified in section 523(a)(5);

* * * * * * *

(d) The following property may be exempted under subsection
[(b)(1)] (b)(2) of this section:
(1) * * *

* * * * * * *

(12) Retirement funds to the extent that those funds
are in a fund or account that is exempt from taxation
under section 401, 403, 408, 408A, 414, 457, or 501(a)
of the Internal Revenue Code of 1986.

* * * * * * *

(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 alimony, maintenance, or support,
unless such liability is actually in
the nature of alimony, maintenance or
support.; or] of a kind that is
specified in section 523(a)(5); or
(B)(i) a nonpossessory, nonpurchase-money security
interest in any--
[(i)] (I) household furnishings, household
goods, wearing apparel, appliances, books,
animals, crops, musical instruments, or jewelry
that are held primarily for the personal,
family, or household use of the debtor or a
dependent of the debtor;
[(ii)] (II) implements, professional books,
or tools, of the trade of the debtor or the
trade of a dependent of the debtor; or
[(iii)] (III) professionally prescribed
health aids for the debtor or a dependent of
the debtor.
(ii) ``household goods'' shall mean for the purposes
of this subparagraph (B) clothing; furniture;
appliances; one radio; one television; one VCR; linens;
china; crockery; kitchenware; educational materials and
educational equipment primarily for the use of minor
dependent children of the debtor, but only one personal
computer and only if used primarily for the education
or entertainment of such minor children; medical
equipment and supplies; furniture exclusively for the
use of minor children, elderly or disabled dependents
of the debtor; and personal effects (including wedding
rings and the toys and hobby equipment of minor
dependent children) of the debtor and his or her
dependents: Provided, That the following are not
included within the scope of the term ``household
goods'':
(I) works of art (unless by or of the debtor
or his or her dependents);
(II) electronic entertainment equipment
(except one television, one radio, and one VCR
and any electronic entertainment equipment
which is a toy or hobby equipment of minor
dependent children which had an original
purchase price of $100 or less);
(III) items acquired as antiques;
(IV) jewelry (except wedding rings); and
(V) a computer (except as otherwise provided
for in this section), motor vehicle (including
a tractor or lawn tractor), boat, or a
motorized recreational device, conveyance,
vehicle, watercraft, or aircraft.

* * * * * * *

(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) * * *
(2) the debtor could have avoided such transfer under
subsection [(f)(2)] (f)(1)(B) of this section.

* * * * * * *

(n) For purposes of subsection (b)(3)(C), funds placed in an
education individual retirement account shall not be exempt
under this subsection--
(1) unless the designated beneficiary of such account
was a dependent child of the debtor for the taxable
year for which the funds were placed in such account;
and
(2) to the extent such funds exceed--
(A) $50,000 in the aggregate in all such
accounts having the same designated
beneficiary; or
(B) $100,000 in the aggregate in all such
accounts attributable to all such dependent
children of the debtor.
(o) For purposes of subsection (b)(3)(A) and notwithstanding
subsection (a), the value of an interest in--
(1) real or personal property that the debtor or a
dependent of the debtor uses as a residence;
(2) a cooperative that owns property that the debtor
or a dependent of the debtor uses as a residence; or
(3) a burial plot for the debtor or a dependent of
the debtor;
shall be reduced to the extent such value is attributable to
any portion of any property that the debtor disposed of in the
730-day period ending of the date of the filing of the
petition, with the intent to hinder, delay, or defraud a
creditor and that the debtor could not exempt, or that portion
that the debtor could not exempt, under subsection (b) if on
such date the debtor had held the property so disposed of.
(p)(1) Except as provided in paragraphs (2) and (3), as a
result of electing under subsection (b)(3)(A) to exempt
property under State or local law, a debtor may not exempt any
interest that exceeds $250,000 in value, in the aggregate, 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)(3)(A) by a family farmer
for the principal residence of that farmer.
(3) Paragraph (1) shall not apply to debtors if applicable
State law expressly provides by a statute enacted after the
effective date of this paragraph that such paragraph shall not
apply to debtors.

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--
(A) * * *
(B) with respect to which a return, or
equivalent report or notice, if required--
(i) was not filed or given; [or]
(ii) was filed or given after the
date on which such return, report, or
notice was last due, under applicable
law or under any extension, and after
two years before the date of the filing
of the petition; or
(iii) for purposes of this
subsection, a return--
(I) must satisfy the
requirements of applicable
nonbankruptcy law, and includes
a return prepared pursuant to
section 6020(a) of the Internal
Revenue Code of 1986, or
similar State or local law, or
a written stipulation to a
judgment entered by a
nonbankruptcy tribunal, but
does not include a return made
pursuant to section 6020(b) of
the Internal Revenue Code of
1986, or similar State or local
law; and
(II) must have been filed in
a manner permitted by
applicable nonbankruptcy law;
or

* * * * * * *

(2) for money, property, services, or an extension,
renewal, or refinancing of credit, to the extent
obtained by--
(A) * * *

* * * * * * *

[(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
debtor 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;]
(C)(i) for purposes of subparagraph (A),
consumer debts owed to a single creditor and
aggregating more than $250 for ``luxury goods
or services'' incurred by an individual debtor
on or within90 days before the order for relief
under this title, or cash advances aggregating more than $250 that are
extensions of consumer credit under an open end credit plan obtained by
an individual debtor on or within 90 days before the order for relief
under this title, are presumed to be nondischargeable; and
(ii) for purposes of this subparagraph--
(I) the term ``luxury goods or
services'' does not include goods or
services reasonably necessary for the
support or maintenance of the debtor or
a dependent of the debtor; and
(II) the term ``an extension of
consumer credit under an open end
credit plan'' has the same meaning such
term has for purposes of 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 creditor 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 creditor 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
dischargeability 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 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--
[(A) such debt is assigned to another entity,
voluntarily, by operation of law, or otherwise
(other than debts assigned pursuant to section
408(a)(3) of the Social Security Act, or any
such debt which has been assigned to the
Federal Government or to a State or any
political subdivision of such State); or
[(B) such debt includes a liability
designated as alimony, maintenance, or support,
unless such liability is actually in the nature
of alimony, maintenance, or support;]
(5) for a domestic support obligation;

* * * * * * *

(9) for death or personal injury caused by the
debtor's no, 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;

* * * * * * *

(14A) incurred to pay a debt that is nondischargeable
by reason of section 727, 1141, 1228(a), 1228(b), or
1328(c), or any other provision of this subsection, if
the debtor incurred the debt to pay such a
nondischargeable debt with the intent to discharge in
bankruptcy the newly-created debt, except that all
debts incurred to pay nondischargeable debts, without
regard to intent, are nondischargeable if incurred
within 90 days of the filing of the petition;
(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, or a determination made in
accordance with State or territorial law by a
governmental unit [unless--
[(A) the debtor does not have the ability to
pay such debt from income or property of the
debtor not reasonably necessary to be expended
for the maintenance or support of the debtor or
a dependent of the debtor and, if the debtor is
engaged in a business, for the payment of
expenditures necessary for the continuation,
preservation, and operation of such business;
or
[(B) discharging such debt would result in a
benefit to the debtor that outweighs the
detrimental consequences to a spouse, former
spouse, or child of the debtor];
(16) for a fee or assessment that becomes due and
payable after the order for relief to a membership
association with respect to the debtor's interest in a
[dwelling] unit that has condominium [ownership or]
ownership, in a share of a cooperative [housing]
corporation, [but only if such fee or assessment is
payable for a period during which--
[(A) the debtor physically occupied a
dwelling unit in the condominium or cooperative
project; or
[(B) the debtor rented the dwelling unit to a
tenant and received payments from the tenant
for such period,] or a lot in a homeowners
association, for as long as the debtor or the
trustee has a legal, equitable, or possessory
ownership interest in such unit, such
corporation, or such lot, and until such time
as the debtor or trustee has surrendered any
legal, equitable or possessory interest in such
unit, such corporation, or such lot,
but nothing in this paragraph shall except from
discharge the debt of a debtor for a membership
association fee or assessment for a period arising
before entry of the order for relief in a pending or
subsequent bankruptcy case;
(17) for a fee imposed by [a] 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]
(18) owed under State law to a State or municipality
that is--
(A) in the nature of support, and
(B) enforceable under part D of title IV of
the Social Security Act (42 U.S.C. 601 et
seq.)[.]; or
(19) owed to a pension, profit-sharing, stock bonus,
or other plan established under section 401, 403, 408,
408A, 414, 457, or 501(c) of the Internal Revenue Code
of 1986, pursuant to--
(A) a loan permitted under section 408(b)(1)
of the Employee Retirement Income Security Act
of 1974) or subject to section 72(p) of the
Internal Revenue Code of 1986; or
(B) a loan from the thrift savings plan
described in subchapter III of title 5, that
satisfies the requirements of section 8433(g)
of such title.
Paragraph (19) does not apply to any amount owed to a plan
referred to in that paragraph that is incurred under a loan
made during the 1-year period preceding the filing of a
petition. Nothing in paragraph (19) may be construed to provide
that any loan made under a governmental plan under section
414(d), or a contract or account under section 403(b), of the
Internal Revenue Code of 1986 constitutes a claim or a debt
under this title.

* * * * * * *

(c)(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)] or (6) 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.

* * * * * * *

(e) Any institution-affiliated party of [a] 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 discharge in a case under this title--
(1) * * *

* * * * * * *

(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 sections 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.

* * * * * * *

(c) An agreement between a holder of a claim and the debtor,
the consideration for which, in whole or in part, is based on a
debt that is dischargeable in a case under this title is
enforceable only to any extent enforceable under applicable
nonbankruptcy law, whether or not discharge of such debt is
waived, only if--
(1) * * *
(2)(A) such agreement contains a clear and
conspicuous statement which advises the debtor that the
agreement may be rescinded at any time prior to
discharge or within sixty days after such agreement is
filed with the court, whichever occurs later, by giving
notice of rescission to the holder of such claim; [and]
(B) such agreement contains a clear and conspicuous
statement which advises the debtor that such agreement
is not required under this title, under nonbankruptcy
law, or under any agreement not in accordance with the
provisions of this subsection; and
(C) if the consideration for such agreement is based
on a wholly unsecured consumer debt (except for debts
owed to creditors defined in section 461(b)(1)(A)(iv)
of title 12, United States Code), such agreement
contains a clear and conspicuous statement which
advises the debtor--
(i) that the debtor is entitled to a hearing
before the court at which the debtor shall
appear in person and at which the court will
decide whether the agreement is an undue
hardship, not in the debtor's best interest,
and not the result of a threat by the creditor
to take any action that cannot be legally taken
or that is not intended to be taken; and
(ii) that if the debtor is represented by
counsel, the debtor may waive the debtor's
right to such a hearing by signing a statement
waiving the hearing, stating that the debtor is
represented by counsel, and identifying such
counsel;

* * * * * * *

(6)(A) in a case concerning an individual who was not
represented by an attorney during the course of
negotiating an agreement under this subsection, the
court approves such agreement as--
(i) not imposing an undue hardship on the
debtor or a dependent of the debtor; [and]
(ii) in the best interest of the debtor[.];
and
(iii) not entered into by the debtor as the
result of a threat by the creditor to take any
action that cannot be legally taken or that is
not intended to be taken.
(d) In a case concerning an individual, when the court has
determined whether to grant or not to grant a discharge under
section 727, 1141, 1228, or 1328 of this title, the court may
hold a hearing at which the debtor shall appear in person. At
any such hearing, the court shall inform the debtor that a
discharge has been granted or the reason why a discharge has
not been granted. If a discharge has been granted and if the
debtor desires to make an agreement of the kind specified in
subsection (c) [of this section], and was not represented by an
attorney during the course of negotiating such agreement or if
the consideration for such agreement is based on a wholly
unsecured consumer debt (except for debts owed to creditors
defined in section 461(b)(1)(A)(iv) of title 12,
United States Code) and the debtor has not waived the debtor's
right to a hearing on the agreement in accordance with
subsection (c)(2)(C) of this section, then the court shall hold
a hearing at which the debtor shall appear in person and at
such hearing the court shall--
(1) * * *

* * * * * * *

(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 any injunction under subsection (a)(2) which has
arisen at the time of the failure.
(j)(1) An individual who is injured by the willful 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--
(A) the greater of--
(i) the amount of actual damages; or
(ii) $1,000; and
(B) costs and attorneys' fees.
(2) An action to recover for a violation specified in
paragraph (1) may not be brought as a class action.

Sec. 525. Protection against discriminatory treatment

(a) * * *

* * * * * * *

(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.

Sec. 526. Debt relief agency enforcement

(a) A debt relief agency shall not--
(1) fail to perform any service which the debt relief
agency has told the assisted person or prospective
assisted person the agency would provide that person in
connection with the preparation for or activities
during a proceeding under this title;
(2) make any statement, or counsel or advise any
assisted person to make any statement in any document
filed in a proceeding under this title, which is untrue
and misleading or which upon the exercise of reasonable
care, should be known by the debt relief agency to be
untrue or misleading;
(3) misrepresent to any assisted person or
prospective assisted person, directly or indirectly,
affirmatively or by material omission, what services
the debt relief agency can reasonably expect to provide
that person, or the benefits an assisted person may
obtain or the difficulties the person may experience if
the person seeks relief in a proceeding pursuant to
this title; or
(4) advise an assisted person or prospective assisted
person to incur more debt in contemplation of that
person filing a proceeding under this title or in order
to pay an attorney or bankruptcy petition preparer fee
or charge for services performed as part of preparing
for or representing a debtor in a proceeding under this
title.''.
(b) Assisted Person Waivers Invalid.--Any waiver by any
assisted person of any protection or right provided by or under
this section shall not be enforceable against the debtor by any
Federal or State court or any other person, but may be enforced
against a debt relief agency.
(c) Noncompliance.--
(1) Any contract between a debt relief agency and an
assisted person for bankruptcy assistance which does
not comply with the material requirements of this
section shall be treated as void and may not be
enforced by any Federal or State court or by any other
person.
(2) Any debt relief agency shall be liable to an
assisted person in the amount of any fees or charges in
connection with providing bankruptcy assistance to such
person which the debt relief agency has received, for
actual damages, and for reasonable attorneys' fees and
costs if the debt relief agency is found, after notice
and hearing, to have--
(A) intentionally or negligently failed to
comply with any provision of this section with
respect to a bankruptcy case or related
proceeding of the assisted person;
(B) provided bankruptcy assistance to an
assisted person in a case or related proceeding
which is dismissed or converted because of the
debt relief agency's intentional or negligent
failure to file bankruptcy papers, including
papers specified in section 521 of this title;
or
(C) intentionally or negligently disregarded
the material requirements of this title or the
Federal Rules of Bankruptcy Procedure
applicable to such debt relief agency.
(3) In addition to such other remedies as are
provided under State law, whenever the chief law
enforcement officer of a State, or an official or
agency designated by a State, has reason to believe
that any person has violated or is violating this
section, the State--
(A) may bring an action to enjoin such
violation;
(B) may bring an action on behalf of its
residents to recover the actual damages of
assisted persons arising fromsuch violation,
including any liability under paragraph (2); and
(C) in the case of any successful action
under subparagraph (A) or (B), shall be awarded
the costs of the action and reasonable attorney
fees as determined by the court.
(4) The United States District Court for any district
located in the State shall have concurrent jurisdiction
of any action under subparagraph (A) or (B) of
paragraph (3).
(5) Notwithstanding any other provision of Federal
law and in addition to any other remedy provided under
Federal or State law, if the court, on its own motion
or on the motion of the United States trustee or the
debtor, finds that a person intentionally violated this
section, or engaged in a clear and consistent pattern
or practice of violating this section, the court may--
(A) enjoin the violation of such section; or
(B) impose an appropriate civil penalty
against such person.
(c) Relation to State Law.--This section shall not annul,
alter, affect or exempt any person subject to those sections
from complying with any law of any State except to the extent
that such law is inconsistent with those sections, and then
only to the extent of the inconsistency.

SUBCHAPTER III--THE ESTATE

Sec. 541. Property of the estate

(a) * * *
(b) Property of the estate does not include--
(1) * * *

* * * * * * *

(4) any interest of the debtor in liquid or gaseous
hydrocarbons to the extent that--
(A)(i) the debtor has transferred or has
agreed to transfer such interest pursuant to a
farmout agreement or any written agreement
directly related to a farmout agreement; and
(ii) but for the operation of this paragraph,
the estate could include the interest referred
to in clause (i) only by virtue of section 365
or 544(a)(3) of this title; or
(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 for the operation of this paragraph,
the estate could include the interest referred
to in clause (i) only by virtue of section 365
or 542 of this title; [or]
(5) any eligible asset (or proceeds thereof), to the
extent that such eligible asset was transferred by the
debtor, before the date of commencement of the case, to
an eligible entity in connection with an asset-backed
securitization, except to the extent such asset (or
proceeds or value thereof) may be recovered by the
trustee under section 550 by virtue of avoidance under
section 548(a);
[(5)] (6) any interest in cash or cash equivalents
that constitute proceeds of a sale by the debtor of a
money order that is made--
(A) * * *

* * * * * * *

unless the money order issuer had not taken action,
prior to the filing of the petition, to require
compliance with the prohibition[.]; or
(7) any amount or interest in property to the extent
that an employer has withheld amounts from the wages of
employees for contribution to an employee benefit plan
subject to title I of the Employee Retirement Income
Security Act of 1974, or to the extent that the
employer has received amounts as a result of payments
by participants or beneficiaries to an employer for
contribution to an employee benefit plan subject to
title I of the Employee Retirement Income Security Act
of 1974.
(e) For purposes of this section, the following definitions
shall apply:
(1) the term ``asset-backed securitization'' means a
transaction in which eligible assets transferred to an
eligible entity are used as the source of payment on
securities, the most senior of which are rated
investment grade by 1 or more nationally recognized
securities rating organizations, issued by an issuer;
(2) the term ``eligible asset'' means--
(A) financial assets (including interests
therein and proceeds thereof), either fixed or
revolving, including residential and commercial
mortgage loans, consumer receivables, trade
receivables, and lease receivables, that, by
their terms, convert into cash within a finite
time period, plus any residual interest in
property subject to receivables included in
such financial assets plus any rights or other
assets designed to assure the servicing or
timely distribution of proceeds to security
holders;
(B) cash; and
(C) securities.
(3) the term ``eligible entity'' means--
(A) an issuer; or
(B) a trust, corporation, partnership, or
other entity engaged exclusively in the
business of acquiring and transferring eligible
assets directly or indirectly to an issuer and
taking actions ancillary thereto;
(4) the term ``issuer'' means a trust, corporation,
partnership, or other entity engaged exclusively in the
business of acquiring and holding eligible assets,
issuing securities backed by eligible assets, and
taking actions ancillary thereto; and
(5) the term ``transferred'' means the debtor,
pursuant to a written agreement, represented and
warranted that eligible assets were sold, contributed,
or otherwise conveyed with the intention of removing
them from the estate of the debtor pursuant to
subsection (b)(5), irrespective, without limitation
of--
(A) whether the debtor directly or indirectly
obtained or held an interest in the issuer or
in any securities issued by the issuer;
(B) whether the debtor had an obligation to
repurchase or to service or supervise the
servicing of all or any portion of such
eligible assets; or
(C) the characterization of such sale,
contribution, or other conveyance for tax,
accounting, regulatory reporting, or other
purposes.
(f) Notwithstanding any other provision of this title,
property that is held by a debtor that is a corporation
described in section 501(c)(3) of the Internal Revenue Code of
1986 and exempt from tax under section 501(a) of such Code may
be transferred to an entity that is not such a corporation, but
only under the same conditions as would apply if the debtor had
not filed a case under this title.

* * * * * * *

Sec. 545. Statutory liens

The trustee may avoid the fixing of a statutory lien on
property of the debtor to the extent that such lien--
(1) * * *
(2) is not perfected or enforceable at the time of
the commencement of the case against a bona fide
purchaser that purchases such property at the time of
the commencement of the case, whether or not such a
purchaser exists[;], except where such purchaser is a
purchaser described in section 6323 of the Internal
Revenue Code of 1986 or similar provision of State or
local law;

* * * * * * *

Sec. 546. Limitations on avoiding powers

(a) * * *

* * * * * * *

(c) Except as provided in subsection (d) of this section, the
rights and powers of a trustee under sections 544(a), 545, 547,
and 549 of this title are subject to any statutory or common-
law right of a seller of goods that has sold goods to the
debtor, in the ordinary course of such seller's business, to
reclaim such goods if the debtor has received such goods while
insolvent, but--
(1) such a seller may not reclaim any such goods
unless such seller demands in writing reclamation of
such goods--
(A) * * *
(B) if such 10-day period expires after the
commencement of the case, before [20] 45 days
after receipt of such goods by the debtor; and

* * * * * * *

(e) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and
548(b) of this title, the trustee may not avoid a transfer that
is a margin payment, as defined in section 101, 741, or 761 of
this title, or settlement payment, as defined in section 101 or
741 of this title, made by or to a commodity broker, forward
contract merchant, stockbroker, financial institution,
financial participant, or securities clearing agency, that is
made before the commencement of the case, except under section
548(a)(1)(A) of this title.

* * * * * * *

(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] under or in connection with
any swap agreement and that is made before the commencement of
the case, except under section 548(a)(1)(A) of this title.
[(g) 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.]
(h) Notwithstanding sections 544, 545, 547, 548(a)(2)(B), and
548(b) of this title, the trustee may not avoid a transfer made
by or to a master netting agreement participant under or in
connection with any master netting agreement or any individual
contract covered thereby that is made before the commencement
of the case, except under section 548(a)(1)(A) of this title,
and except to the extent the trustee could otherwise avoid such
a transfer made under an individual contract covered by such
master netting agreement.
(i) Notwithstanding section 545 (2) and (3) of this title,
the trustee may not avoid a warehouseman's lien for storage,
transportation or other costs incidental to the storage and
handling of goods, as provided by section 7-209 of the Uniform
Commercial Code.
(j) Notwithstanding the rights and powers of a trustee under
sections 544(a), 545, 547, 549, and 553 of this title, 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 hearing, that a
return is in the best interests of the estate, the debtor, with
the consent of the creditor, and subject to the prior rights,
if any, of third parties in such goods, 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) * * *
(b) Except as provided in [subsection (c)] subsections (c)
and (i) of this section, the trustee may avoid any transfer of
an interest of the debtor in property--
(1) * * *

* * * * * * *

(c) The trustee may not avoid under this section a transfer--
(1) * * *
[(2) to the extent that such transfer was--
[(A) in payment of a debt incurred by the
debtor in the ordinary course of business or
financial affairs of the debtor and the
transferee;
[(B) made in the ordinary course of business
or financial affairs of the debtor and the
transferee; and
[(C) made according to ordinary business
terms;]
(2) to the extent that such transfer was in payment
of a debt incurred by the debtor in the ordinary course
of business or financial affairs of the debtor and the
transferee, and such transfer was--
(A) made in the ordinary course of business
or financial affairs of the debtor and the
transferee; or
(B) made according to ordinary business
terms;
(3) that creates a security interest in property
acquired by the debtor--
(A) * * *
(B) that is perfected on or before [20] 30
days after the debtor receives possession of
such property;

* * * * * * *

(8) if, in a case filed by an individual debtor whose
debts are primarily consumer debts, the aggregate value
of all property that constitutes or is affected by such
transfer is less than $600[.]; or
(9) if, in a case filed by a debtor whose debts are
not primarily consumer debts, the aggregate value of
all property that constitutes or is affected by such
transfer is less than $5,000.

* * * * * * *

(e)(1) * * *
(2) For the purposes of this section, except as provided in
paragraph (3) of this subsection, a transfer is made--
(A) at the time such transfer takes effect between
the transferor and the transferee, if such transfer is
perfected at, or within [10] 30 days after, such time,
except as provided in subsection (c)(3)(B);
(B) at the time such transfer is perfected, if such
transfer is perfected after such [10] 30 days; or
(C) immediately before the date of the filing of the
petition, if such transfer is not perfected at the
later of--
(i) * * *
(ii) [10] 30 days after such transfer takes
effect between the transferor and the
transferee.

* * * * * * *

(h) The trustee may not avoid a transfer if such transfer was
made as a part of an alternative repayment plan between the
debtor and any creditor of the debtor created by an approved
credit counseling agency.
(i) If the trustee avoids under subsection (b) a transfer
made between 90 days and 1 year before the date of the filing
of the petition, by the debtor to an entity that is not an
insider for the benefit of a creditor that is an insider, such
transfer may be avoided under this section only with respect to
the creditor that is an insider.

* * * * * * *

Sec. 548. Fraudulent transfers and obligations

(a) * * *

* * * * * * *

(d)(1) * * *
(2) In this section--
(A) * * *
(B) a commodity broker, forward contract merchant,
stockbroker, financial institution, financial
participant, or securities clearing agency that
receives a margin payment, as defined in section 101,
741, or 761 of this title, or settlement payment, as
defined in section 101 or 741 of this title, takes for
value to the extent of such payment;
(C) a repo participant that receives a margin
payment, as defined in section 741 or 761 of this
title, or settlement payment, as defined in section 741
of this title, in connection with a repurchase
agreement, takes for value to the extent of such
payment; [and]
(D) a swap participant that receives a transfer in
connection with a swap agreement takes for value to the
extent of such transfer[.]; and
(E) a master netting agreement participant that
receives a transfer in connection with a master netting
agreement or any individual contract covered thereby
takes for value to the extent of such transfer, except,
with respect to a transfer under any individual
contract covered thereby, to the extent such master
netting agreement participant otherwise did not take
(or is otherwise not deemed to have taken) such
transfer for value.

Sec. 549. Postpetition transactions

(a) * * *

* * * * * * *

(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
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) * * *
(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 ifthe 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 as otherwise provided in this section and in
sections 362 and 363 of this title, this title does not affect
any right of a creditor to offset a mutual debt owing by such
creditor to the debtor that arose before the commencement of
the case under this title against a claim of such creditor
against the debtor that arose before the commencement of the
case, except to the extent that--
(1) * * *

* * * * * * *

(3) the debt owed to the debtor by such creditor was
incurred by such creditor--
(A) * * *

* * * * * * *

(C) for the purpose of obtaining a right of
setoff against the debtor (except for a setoff
of a kind described in section 362(b)(6),
362(b)(7), 362(b)(17), 362(b)(19), 555, 556,
559, 560 or 561 of this title).
(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),
362(b)(19), 555, 556, 559, 560, 561, 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--
(A) * * *

* * * * * * *

[Sec. 555. Contractual right to liquidate a securities contract]

Sec. 555. Contractual right to liquidate, terminate, or accelerate a
securities contract

The exercise of a contractual right of a stockbroker,
financial institution, financial participant, or securities
clearing agency to cause the liquidation, termination, or
acceleration of a securities contract, as defined in section
741 of this title, because of a condition of the kind specified
in section 365(e)(1) of this title shall not be stayed,
avoided, or otherwise limited by operation of any provision of
this title or by order of a court or administrative agency in
any proceeding under this title unless such order is authorized
under the provisions of the Securities Investor Protection Act
of 1970 or any statute administered by the Securities and
Exchange Commission. As used in this section, the term
``contractual right'' includes a right set forth in a rule or
bylaw of a national securities exchange, a national securities
association, or a securities clearing agency, a right set forth
in a bylaw of a clearing organization or contract market or in
a resolution of the governing board thereof, and a right,
whether or not in writing, arising under common law, under law
merchant, or by reason of normal business practice.

[Sec. 556. Contractual right to liquidate a commodities contract or
forward contract]

Sec. 556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract

The contractual right of a commodity broker, financial
participant or forward contract merchant to cause the
liquidation, termination, or acceleration of a commodity
contract, as defined in section 761 of this title, or forward
contract because of a condition of the kind specified in
section 365(e)(1) of this title, and the right to a variation
or maintenance margin payment received from a trustee with
respect to open commodity contracts or forward contracts, shall
not be stayed, avoided, or otherwise limited by operation of
any provision of this title or by the order of a court in any
proceeding under this title. As used in this section, the term
``contractual right'' includes a right set forth in a rule or
bylaw of a clearing organization or contract market or in a
resolution of the governing board thereof and a right, whether
or not evidenced in writing, arising under common law, under
law merchant or by reason of normal business practice.

* * * * * * *

[Sec. 559. Contractual right to liquidate a repurchase agreement]

Sec. 559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement

The exercise of a contractual right of a repo participant to
cause the liquidation, termination, or acceleration of a
repurchase agreement because of a condition of the kind
specified in section 365(e)(1) of this title shall not be
stayed, avoided, or otherwise limited by operation of any
provision of this title or by order of a court or
administrative agency in any proceeding under this title,
unless, where the debtor is a stockbroker or securities
clearing agency, such order is authorized under the provisions
of the Securities Investor Protection Act of 1970 or any
statute administered by the Securities and Exchange Commission.
In the event that a repo participant liquidates one or more
repurchase agreements with a debtor and under the terms of one
or more such agreements has agreed to deliver assets subject to
repurchase agreements to the debtor, any excess of the market
prices received on liquidation of such assets (or if any such
assets are not disposed of on the date of liquidation of such
repurchase agreements, at the prices available at the time of
liquidation of such repurchase agreements from a generally
recognized source or the most recent closing bid quotationfrom
such a source) over the sum of the stated repurchase prices and all
expenses in connection with the liquidation of such repurchase
agreements shall be deemed property of the estate, subject to the
available rights of setoff. As used in this section, the term
``contractual right'' includes a right set forth in a rule or bylaw,
applicable to each party to the repurchase agreement, of a national
securities exchange, a national securities association, or a securities
clearing agency, and a right, whether or not evidenced in writing,
arising under common law, under law merchant or by reason of normal
business practice.

[Sec. 560. Contractual right to terminate a swap agreement]

Sec. 560. Contractual right to liquidate, terminate, or accelerate a
swap agreement

The exercise of any contractual right of any swap participant
to cause the [termination of a swap agreement] liquidation,
termination, or acceleration of 1 or more swap agreements
because of a condition of the kind specified in section
365(e)(1) of this title or to offset or net out any termination
values or payment amounts arising under or [in connection with
any swap agreement] in connection with the termination,
liquidation, or acceleration of 1 or more swap agreements shall
not be stayed, avoided, or otherwise limited by operation of
any provision of this title or by order of a court or
administrative agency in any proceeding under this title. As
used in this section, the term ``contractual right'' includes a
right, whether or not evidenced in writing, arising under
common law, under law merchant, or by reason of normal business
practice.

Sec. 561. Contractual right to terminate, liquidate, accelerate, or
offset under a master netting agreement and across
contracts

(a) In General.--Subject to subsection (b), the exercise of
any contractual right, because of a condition of the kind
specified in section 365(e)(1), to cause the termination,
liquidation, or acceleration of or to offset or net termination
values, payment amounts or other transfer obligations arising
under or in connection with 1 or more (or the termination,
liquidation, or acceleration of 1 or more)--
(1) securities contracts, as defined in section
741(7);
(2) commodity contracts, as defined in section
761(4);
(3) forward contracts;
(4) repurchase agreements;
(5) swap agreements; or
(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by operation
of any provision of this title or by any order of a court or
administrative agency in any proceeding under this title.
(b) Exception.--
(1) A party may exercise a contractual right
described in subsection (a) to terminate, liquidate, or
accelerate only to the extent that such party could
exercise such a right under section 555, 556, 559, or
560 for each individual contract covered by the master
netting agreement in issue.
(2) If a debtor is a commodity broker subject to
subchapter IV of chapter 7 of this title--
(A) a party may not net or offset an
obligation to the debtor arising under, or in
connection with, a commodity contract against
any claim arising under, or in connection with,
other instruments, contracts, or agreements
listed in subsection (a) except to the extent
the party has positive net equity in the
commodity accounts at the debtor, as calculated
under subchapter IV; and
(B) another commodity broker may not net or
offset an obligation to the debtor arising
under, or in connection with, a commodity
contract entered into or held on behalf of a
customer of the debtor against any claim
arising under, or in connection with, other
instruments, contracts, or agreements listed in
subsection (a).
(c) Definition.--As used in this section, the term
``contractual right'' includes a right set forth in a rule or
bylaw of a national securities exchange, a national securities
association, or a securities clearing agency, a right set forth
in a bylaw of a clearing organization or contract market or in
a resolution of the governing board thereof, and a right,
whether or not evidenced in writing, arising under common law,
under law merchant, or by reason of normal business practice.

Sec. 562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity contracts,
repurchase agreements, or master netting agreements

If the trustee rejects a swap agreement, securities contract
as defined in section 741 of this title, forward contract,
commodity contract (as defined in section 761 of this title)
repurchase agreement, or master netting agreement pursuant to
section 365(a) of this title, or if a forward contract
merchant, stockbroker, financial institution, securities
clearing agency, repo participant, financial participant,
master netting agreement participant, or swap participant
liquidates, terminates, or accelerates such contract or
agreement, damages shall be measured as of the earlier of--
(1) the date of such rejection; or
(2) the date of such liquidation, termination, or
acceleration.

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.
* * * * * * *

SUBCHAPTER III--STOCKBROKER LIQUIDATION

* * * * * * *
753. Stockbroker liquidation and forward contract merchants, commodity
brokers, stockbrokers, financial institutions, securities
clearing agencies, swap participants, repo participants, and
master netting agreement participants.

SUBCHAPTER IV--COMMODITY BROKER LIQUIDATION

761. Definitions for this subchapter.
* * * * * * *
767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
securities clearing agencies, swap participants, repo
participants, and master netting agreement participants.

* * * * * * *

Sec. 704. Duties of trustee

(a) The trustee shall--
(1) * * *

* * * * * * *

(8) if the business of the debtor is authorized to be
operated, file with the court, with the United States
trustee, and with any governmental unit charged with
responsibility for collection or determination of any
tax arising out of such operation, periodic reports and
summaries of the operation of such business, including
a statement of receipts and disbursements, and such
other information as the United States trustee or the
court requires; [and]
(9) make a final report and file a final account of
the administration of the estate with the court and
with the United States trustee[.];
(10)(A) With respect to an individual debtor, the
trustee shall review all materials filed by the debtor,
consider all information presented at the first meeting
of creditors, and within 10 days after the first
meeting of creditors file with the court a statement as
to whether the debtor's case should be presumed to be
an abuse under section 707(b) of this title. The court
shall provide a copy of such statement to all creditors
within 5 days after such statement is filed. If, based
on the filing of such statement with the court, the
trustee determines that the debtor's case should be
presumed to be an abuse under section 707(b) of this
title and if the current monthly income of the debtor
and the debtor's spouse combined, as of the date of the
order for relief, when multiplied by 12, is not less
than the highest national median family income reported
for a family of equal or lesser size, or in the case of
a household of 1 person, the national median household
income for 1 earner, then the trustee shall within 30
days of the filing of such statement, either--
(i) file a motion to dismiss or convert under
section 707(b) of this title; or
(ii) file a statement setting forth the
reasons the trustee or bankruptcy administrator
does not believe that such a motion would be
appropriate.
(B) Notwithstanding subparagraph (A), for purposes of
this paragraph the national family income for a family
of more than 4 individuals shall be the national median
family income lastreported by the Bureau of the Census
for a family of 4 individuals plus $583 for each additional member of
the family; and
(11) if, with respect to an individual debtor, there
is a claim for support of a child of the debtor or a
custodial parent of such child entitled to receive
priority under section 507(a)(1) of this title, provide
the applicable notification specified in subsection
(b).
(b)(1) In any case described in subsection (a)(11), the
trustee shall--
(A)(i) notify in writing the holder of the claim of
the right of such holder to use the services of a State
child support enforcement agency established under
sections 464 and 466 of the Social Security Act for the
State in which the holder resides; and
(ii) include in the notice under this paragraph the
address and telephone number of the child support
enforcement agency; and
(B)(i) notify in writing the State child support
agency of the State in which the holder of the claim
resides of the claim;
(ii) include in the notice under this paragraph the
name, address, and telephone number of the holder of
the claim; and
(iii) at such time as the debtor is granted a
discharge under section 727 of this title, notify the
holder of such claim and the State child support agency
of the State in which such holder resides of--
(I) the granting of the discharge;
(II) the last recent known address of the
debtor; and
(III) with respect to the debtor's case, the
name of each creditor that holds a claim that
is not discharged under paragraph (2), (4), or
(14A) of section 523(a) of this title or that
was reaffirmed by the debtor under section
524(c) of this title.
(2)(A) If, after receiving a notice under paragraph
(1)(B)(iii), a holder of a claim or a State child support
agency is unable to locate the debtor that is the subject of
the notice, such holder or such agency may request from a
creditor described in paragraph (1)(B)(iii)(III) the last known
address of the debtor.
(B) Notwithstanding any other provision of law, a creditor
that makes a disclosure of a last known address of a debtor in
connection with a request made under subparagraph (A) shall not
be liable to the debtor or any other person by reason of making
such disclosure.

* * * * * * *

Sec. 706. Conversion

(a) * * *

* * * * * * *

(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) * * *
(b)(1) After notice and a hearing, the court, on its own
motion or on a motion by the United States trustee, [but not at
the request or suggestion of] the trustee, or 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 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 that term is defined in section 548(d)(4)).]
(2)(A)(i) In considering under paragraph (1) whether the
granting of relief would be an abuse of the provisions of this
chapter, the court shall presume abuse exists if the debtor's
current monthly income less estimated administrative expenses
and reasonable attorneys' fees, and amounts set forth in
clauses (ii) for monthly expenses (which shall include, if
applicable, the continuation of actual expenses of a dependent
child under the age of 18 for tuition, books, and required fees
at a private elementary or secondary school, not exceeding
$10,000 per year, which amount shall be adjusted pursuant to
section 104(b)), (iii) for monthly payments on account of
secured debts, and (iv) for monthly unsecured priority debt
payments, and multiplied by 60 months is not less than $6,000.
(ii) The debtor's monthly expenses shall be the debtor's
applicable monthly expense amounts specified under the National
Standards and Local Standards, and the debtor's applicable
monthly expenses for the categories specifically listed as
Other Necessary Expenses issued by the Internal Revenue Service
for the area in which the debtor resides, as in effect on the
date of the entry of the order for relief, for the debtor, the
dependents of the debtor, and the spouse of the debtor in a
joint case, if the spouse is not otherwise a dependent. In
addition, if it is demonstrated that it is reasonable and
necessary, the debtor may also subtract an allowance of up to
5% of the food and clothing categories as specified by the
National Standards issued by the Internal Revenue Service.
Notwithstanding any other provision of this clause, the
debtor's monthly expenses shall not include any payments for
debts.
(iii) The debtor's average monthly payments on account of
secured debts shall be calculated as the total of all amounts
scheduled as contractually due to secured creditors in each
month of the 60 months following the date of the petition, and
dividing that total by 60 months.
(iv) The debtor's monthly unsecured priority debt payments
(including payments for priority child support and alimony
claims)shall be calculated as the total amount of unsecured
debts entitled to priority, and dividing the total by 60 months.
(v) For the purposes of this subsection, a family or
household shall consist of the debtor, the debtor's spouse, and
the debtor's dependents, but not a legally separated spouse
unless the spouse files a joint case with the debtor.
(B) In any proceeding brought under this subsection, the
presumption of abuse may be rebutted only by demonstrating
extraordinary circumstances that require additional expenses or
adjustment of current monthly income. In order to establish
extraordinary circumstances, the debtor must itemize each
additional expense or adjustment of income and provide
documentation for such expenses or adjustment of income and a
detailed explanation of the extraordinary circumstances which
make such expenses or adjustment of income necessary and
reasonable. The debtor shall attest under oath to the accuracy
of any information provided to demonstrate that additional
expenses or adjustment to income are required. The presumption
of abuse may be rebutted only if such additional expenses or
adjustments to income cause the debtor's current monthly income
less estimated administrative expenses and reasonable
attorneys' fees, and the amounts set forth in clauses (ii),
(iii), and (iv) of subparagraph (A) when multiplied by 60 to be
less than $6,000.
(C) As part of the schedule of current income and
expenditures required under section 521 of this title, the
debtor shall include a statement of the debtor's current
monthly income, and the calculations which determine whether a
presumption arises under subparagraph (A)(i), showing how each
amount is calculated. The bankruptcy rules promulgated under
section 2075 of title 28, United States Code, shall prescribe a
form for such statement and may provide general rules on its
content.
(D) No judge, United States trustee, panel trustee,
bankruptcy administrator or other party in interest shall bring
a motion under this paragraph 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 regional
median household monthly income calculated on a semiannual
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.
(3) In considering under paragraph (1) whether the granting
of relief would be an abuse of the provisions of this chapter
in a case in which the presumption in paragraph (2)(A)(i) does
not apply or has been rebutted, the court shall consider--
(A) whether the debtor filed the petition in bad
faith; or
(B) the totality of the circumstances (including
whether the debtor seeks to reject a personal services
contract and the financial need for such rejection as
sought by the debtor) of the debtor's financial
situation demonstrates abuse.
(4)(A) If a panel trustee appointed under section 586(a)(1)
of title 28 or bankruptcy administrator 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 violated Rule 9011, the
court shall assess damages which may include ordering:
(i) the counsel for the debtor to reimburse the
trustee for all reasonable costs in prosecuting the
motion, including reasonable attorneys' fees.
(ii) the assessment of an appropriate civil penalty
against the counsel for the debtor; and
(iii) the payment of the civil penalty to the panel
trustee, bankruptcy administrator or the United States
trustee.
(B) In the case of a petition filed under sections 301, 302,
or 303 of this title and supporting lists, schedules and
documents filed under section 521(a)(1) of this title, the
signature of an attorney on the petition 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, lists, schedules,
and documents--
(I) are well grounded in fact; and
(II) are warranted by existing law or a good
faith argument for the extension, modification,
or reversal of existing law and do not
constitute an abuse under paragraph (1) of this
subsection.
(5) The court may award a debtor all reasonable costs in
contesting a motion filed by a party in interest (not including
a trustee or the United States trustee) under this subsection
(including reasonable attorneys' fees) if--
(A) the court does not grant the motion; and
(B) 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.
(6) However, only the court, the United States trustee, or
the trustee may file a motion to dismiss or convert a case
under this subsection if the current monthly income of the
debtor and the debtor's spouse combined, as of the date of the
order for relief, when multiplied by 12, is less than the
highest national median family income last reported by the
Bureau of the Census for a family of equal or lesser size, or
in the case of a household of 1 person, the national median
household income for 1 earner. Notwithstanding the foregoing,
the national median family income for a family of more than 4
individuals shall be the national median family income last
reported by the Bureau of the Census for a family of 4
individuals plus $583 for each additional member of the family.
(7) 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 that term is
defined in section 548(d)(4)).
(8) Not later than 3 years after the date of enactment of the
Bankruptcy Reform Act of 1999, the Director of the Executive
Office for United States Trustees shall submit a report, to the
Committee on the Judiciary of the House of Representatives and
the Committee on the Judiciary of the Senate, containing its
findings regarding theutilization of the Internal Revenue
Service standards for determining the current monthly expenses under
section 707(b)(1)(A)(ii) of title 11, United States Code, of debtors
and the impact that the application of such standards has had on
debtors and on the bankruptcy courts. Such report may include
recommendations for amendments to such title, consistent with the
Director's findings.

SUBCHAPTER II--COLLECTION, LIQUIDATION, AND DISTRIBUTION OF THE ESTATE

Sec. 722. Redemption

An individual debtor may, whether or not the debtor has
waived the right to redeem under this section, redeem tangible
personal property intended primarily for personal, family, or
household use, from a lien securing a dischargeable consumer
debt, if such property is exempted under section 522 of this
title or has been abandoned under section 554 of this title, by
paying the holder of such lien the amount of the allowed
secured claim of such holder that is secured by such lien in
full at the time of redemption.

* * * * * * *

Sec. 724. Treatment of certain liens

(a) The trustee may avoid a lien that secures a claim of a
kind specified in section 726(a)(4) of this title.
(b) Property in which the estate has an interest and that is
subject to a lien that is not avoidable under this title (other
than to the extent that there is a properly perfected
unavoidable tax lien arising in connection with an ad valorem
tax on real or personal property of the estate) and that
secures an allowed claim for a tax, or proceeds of such
property, shall be distributed--
(1) first, to any holder of an allowed claim secured
by a lien on such property that is not avoidable under
this title and that is senior to such tax lien;
(2) second, to any holder of a claim of a kind
specified in section 507(a)(1) (except that such
expenses, other than claims for wages, salaries, or
commissions which arise after the filing of a petition,
shall be limited to expenses incurred under chapter 7
of this title and shall not include expenses incurred
under chapter 11 of this title), 507(a)(2), 507(a)(3),
507(a)(4), 507(a)(5), 507(a)(6), or 507(a)(7) of this
title, to the extent of the amount of such allowed tax
claim that is secured by such tax lien;

* * * * * * *

(e) Before subordinating a tax lien on real or personal
property of the estate, the trustee shall--
(1) exhaust the unencumbered assets of the estate;
and
(2) in a manner consistent with section 506(c) of
this title, recover from property securing an allowed
secured claim the reasonable, necessary costs and
expenses of preserving or disposing of that property.
(f) Notwithstanding the exclusion of ad valorem tax liens set
forth in this section and subject to the requirements of
subsection (e)--
(1) claims for wages, salaries, and commissions that
are entitled to priority under section 507(a)(3) of
this title; or
(2) claims for contributions to an employee benefit
plan entitled to priority under section 507(a)(4) of
this title,
may be paid from property of the estate which secures a tax
lien, or the proceeds of such property.

* * * * * * *

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--
(1) first, in payment of claims of the kind specified
in, and in the order specified in, section 507 of this
title, proof of which is timely filed under section 501
of this title or tardily filed [before the date on
which the trustee commences distribution under this
section] on or before the earlier of 10 days after the
mailing to creditors of the summary of the trustee's
final report or the date on which the trustee commences
final distribution under this section;

* * * * * * *

(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) * * *

* * * * * * *

(8) the debtor has been granted a discharge under
this section, under section 1141 of this title, or
under section 14, 371, or 476 of the Bankruptcy Act, in
a case commenced within [six] 8 years before the date
of the filing of the petition;
(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
unless the debtor resides in a district for which the
United States trustee or bankruptcy administrator of
the bankruptcy court of that district determines that
the approved instructional courses are not adequate to
provide service to the additional individuals who would
be required to compete the instructional course by
reason of the requirements of this section. Each United
States trustee or bankruptcy administrator that makes
such a determination shall review that determination
not later than 1 year after the date of that
determination, and not less frequently than every year
thereafter.

* * * * * * *

(d) On request of the trustee, a creditor, or the United
States trustee, and after notice and a hearing, the court shall
revoke a discharge granted under subsection (a) of this section
if--
(1) * * *
(2) the debtor acquired property that is property of
the estate, or became entitled to acquire property that
would be property of the estate, and knowingly and
fraudulently failed to report the acquisition of or
entitlement to such property, or to deliver or
surrender such property to the trustee; [or]
(3) the debtor committed an act specified in
subsection (a)(6) of this section[.]; or
(4) the debtor has failed to explain satisfactorily--
(A) a material misstatement in an audit
performed pursuant to section 586(f) of title
28, United States Code; or
(B) a failure to make available for
inspection all necessary accounts, papers,
documents, financial records, files, and all
other papers, things, or property belonging to
the debtor that are requested for an audit
conducted pursuant to section 586(f) of title
28, United States Code.

* * * * * * *

SUBCHAPTER III--STOCKBROKER LIQUIDATION

Sec. 741. Definitions for this subchapter

In this subchapter--
(1) * * *

* * * * * * *

[(7) ``securities contract'' means contract for the
purchase, sale, or loan of a security, including an
option for the purchase or sale of a security,
certificate of deposit, or group or index of securities
(including any interest therein or based on the value
thereof), or any option entered into on a national
securities exchange relating to foreign currencies, or
the guarantee of any settlement of cash or securities
by or to a securities clearing agency;]
(7) ``securities contract''--
(A) means--
(i) a contract for the purchase,
sale, or loan of a security, a
certificate of deposit, a mortgage loan
or any interest in a mortgage loan, a
group or index of securities,
certificates of deposit or mortgage
loans or interests therein (including
an interest therein or based on the
value thereof), or option on any of the
foregoing, including an option to
purchase or sell any such security
certificate of deposit, loan, interest,
group or index or option;
(ii) any option entered into on a
national securities exchange relating
to foreign currencies;
(iii) the guarantee by or to any
securities clearing agency of a
settlement of cash, securities,
certificates of deposit mortgage loans
or interests therein, group or index of
securities, or mortgage loans or
interests therein (including any
interest therein or based on the value
thereof), or option on any of the
foregoing, including an option to
purchase or sell any such security
certificate of deposit, loan, interest,
group or index or option;
(iv) any margin loan;
(v) any other agreement or
transaction that is similar to an
agreement or transaction referred to in
this paragraph;
(vi) any combination of the
agreements or transactions referred to
in this paragraph;
(vii) any option to enter into any
agreement or transaction referred to in
this paragraph;
(viii) a master agreement that
provides for an agreement or
transaction referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii),
together with all supplements to any
such master agreement, without regard
to whether the master agreement
provides for an agreement or
transaction that is not a securities
contract under this paragraph, except
that such master agreement shall be
considered to be a securities contract
under this paragraph only with respect
to each agreement or transaction under
such master agreement that is referred
to in clause (i), (ii), (iii), (iv),
(v), (vi), or (vii); or
(ix) any security agreement or
arrangement, or other credit
enhancement, related to any agreement
or transaction referred to in this
paragraph, but not to exceed the actual
value of such contract on the date of
the filing of the petition; and
(B) does not include any purchase, sale, or
repurchase obligation under a participation in
a commercial mortgage loan.

* * * * * * *

Sec. 753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, securities clearing agencies, swap
participants, repo participants, and master netting
agreement participants

Notwithstanding any other provision of this title, the
exercise of rights by a forward contract merchant, commodity
broker, stockbroker, financial institution, securities clearing
agency, swap participant, repo participant, financial
participant, or master netting agreement participant under this
title shall not affect the priority of any unsecured claim it
may have after the exercise of such rights.

SUBCHAPTER IV--COMMODITY BROKER LIQUIDATION

Sec. 761. Definitions for this subchapter

In this subchapter--
(1) * * *

* * * * * * *

(4) ``commodity contract'' means--
(A) * * *

* * * * * * *

(D) with respect to a clearing organization,
contract for the purchase or sale of a
commodity for future delivery on, or subject to
the rules of, a contract market or board of
trade that is cleared by such clearing
organization, or commodity option traded on, or
subject to the rules of, a contract market or
board of trade that is cleared by such clearing
organization; [or]

* * * * * * *

(F) any other agreement or transaction that
is similar to an agreement or transaction
referred to in this paragraph;
(G) any combination of the agreements or
transactions referred to in this paragraph;
(H) any option to enter into an agreement or
transaction referred to in this paragraph;
(I) a master agreement that provides for an
agreement or transaction referred to in
subparagraph (A), (B), (C), (D), (E), (F), (G),
or (H), together with all supplements to such
master netting agreement, without regard to
whether the master netting agreement provides
for an agreement or transaction that is not a
commodity contract under this paragraph, except
that the master agreement shall be considered
to be a commodity contract under this paragraph
only with respect to each agreement or
transaction under the master agreement that is
referred to in subparagraph (A), (B), (C), (D),
(E), (F), (G), or (H); or
(J) a security agreement or arrangement, or
other credit enhancement related to any
agreement or transaction referred to in this
paragraph, but not to exceed the actual value
of such contract on the date of the filing of
the petition;

* * * * * * *

Sec. 767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, securities clearing agencies, swap
participants, repo participants, and master netting
agreement participants

Notwithstanding any other provision of this title, the
exercise of rights by a forward contract merchant, commodity
broker, stockbroker, financial institution, securities clearing
agency, swap participant, repo participant, or master netting
agreement participant under this title shall not affect the
priority of any unsecured claim it may have after the exercise
of such rights.

* * * * * * *

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, 555, 556, 557,
559, 560, 561, 562, 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.

* * * * * * *

SUBCHAPTER II--ADMINISTRATION

Sec. 921. Petition and proceedings relating to petition

(a) * * *

* * * * * * *

(d) If the petition is not dismissed under subsection (c) of
this section, the court shall order relief under this chapter
notwithstanding section 301(b).

* * * * * * *

CHAPTER 11--REORGANIZATION

SUBCHAPTER I--OFFICERS AND ADMINISTRATION

Sec.
1101. Definitions for this chapter.
* * * * * * *
1115. Duties of trustee or debtor in possession in small business
cases.

* * * * * * *

Sec. 1102. Creditors' and equity security holders' committees

(a)(1) * * *
(2) On its own motion or on request of a party in interest,
and after notice and hearing, the court may order a change in
the membership of a committee appointed under this subsection,
if the court determines that the change is necessary to ensure
adequate representation of creditors or equity security
holders. On request of a party in interest, the court may order
the appointment of additional committees of creditors or of
equity security holders if necessary to assure adequate
representation of creditors or of equity security holders. The
United States trustee shall appoint any such committee.
(3) On request of a party in interest in a case in which the
debtor is a small business debtor and for cause, the court may
order that a committee of creditors not be appointed.

* * * * * * *

Sec. 1104. Appointment of trustee or examiner

(a) * * *
(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.

* * * * * * *

(e) If grounds exist to convert or dismiss the case under
section 1112 of this title, the court may instead appoint a
trustee or examiner, if it determines that such appointment is
in the best interests of creditors and the estate.

* * * * * * *

[Sec. 1110. Aircraft equipment and vessels

[(a)(1) The right of a secured party with a security interest
in equipment described in paragraph (2) or of a lessor or
conditionalvendor of such equipment to take possession of such
equipment in compliance with a security agreement, lease, or
conditional sale contract is not affected by section 362, 363, or 1129
or by any power of the court to enjoin the taking of possession
unless--
[(A) before the date that is 60 days after the date
of the order for relief under this chapter, the
trustee, subject to the court's approval, agrees to
perform all obligations of the debtor that become due
on or after the date of the order under such security
agreement, lease, or conditional sale contract; and
[(B) any default, other than a default of a kind
specified in section 365(b)(2), under such security
agreement, lease, or conditional sale contract--
[(i) that occurs before the date of the order
is cured before the expiration of such 60-day
period; and
[(ii) that occurs after the date of the order
is cured before the later of--
[(I) the date that is 30 days after
the date of the default; or
[(II) the expiration of such 60-day
period.
[(2) Equipment is described in this paragraph if it is--
[(A) an aircraft, aircraft engine, propeller,
appliance, or spare part (as defined in section 40102
of title 49) that is subject to a security interest
granted by, leased to, or conditionally sold to a
debtor that is a citizen of the United States (as
defined in section 40102 of title 49) holding an air
carrier operating certificate issued by the Secretary
of Transportation pursuant to chapter 447 of title 49
for aircraft capable of carrying 10 or more individuals
or 6,000 pounds or more of cargo; or
[(B) a documented vessel (as defined in section
30101(1) of title 46) that is subject to a security
interest granted by, leased to, or conditionally sold
to a debtor that is a water carrier that holds a
certificate of public convenience and necessity or
permit issued by the Interstate Commerce Commission.
[(3) Paragraph (1) applies to a secured party, lessor, or
conditional vendor acting in its own behalf or acting as
trustee or otherwise in behalf of another party.
[(b) The trustee and the secured party, lessor, or
conditional vendor whose right to take possession is protected
under subsection (a) may agree, subject to the court's
approval, to extend the 60-day period specified in subsection
(a)(1).
[(c) With respect to equipment first placed in service on or
prior to the date of enactment of this subsection, for purposes
of this section--
[(1) the term ``lease'' includes any written
agreement with respect to which the lessor and the
debtor, as lessee, have expressed in the agreement or
in a substantially contemporaneous writing that the
agreement is to be treated as a lease for Federal
income tax purposes; and
[(2) the term ``security interest'' means a purchase-
money equipment security interest.]

Sec. 1110. Aircraft equipment and vessels

(a)(1) Except as provided in paragraph (2) and subject to
subsection (b), the right of a secured party with a security
interest in equipment described in paragraph (3), or of a
lessor or conditional vendor of such equipment, to take
possession of such equipment in compliance with a security
agreement, lease, or conditional sale contract, and to enforce
any of its other rights or remedies, under such security
agreement, lease, or conditional sale contract, to sell, lease,
or otherwise retain or dispose of such equipment, is not
limited or otherwise affected by any other provision of this
title or by any power of the court.
(2) The right to take possession and to enforce the other
rights and remedies described in paragraph (1) shall be subject
to section 362 of this title if--
(A) before the date that is 60 days after the date of
the order for relief under this chapter, the trustee,
subject to the approval of the court, agrees to perform
all obligations of the debtor under such security
agreement, lease, or conditional sale contract; and
(B) any default, other than a default of a kind
specified in section 365(b)(2) of this title, under
such security agreement, lease, or conditional sale
contract--
(i) that occurs before the date of the order
is cured before the expiration of such 60-day
period;
(ii) that occurs after the date of the order
and before the expiration of such 60-day period
is cured before the later of--
(I) the date that is 30 days after
the date of the default; or
(II) the expiration of such 60-day
period; and
(iii) that occurs on or after the expiration
of such 60-day period is cured in compliance
with the terms of such security agreement,
lease, or conditional sale contract, if a cure
is permitted under that agreement, lease, or
contract.
(3) The equipment described in this paragraph--
(A) is--
(i) an aircraft, aircraft engine, propeller,
appliance, or spare part (as defined in section
40102 of title 49) that is subject to a
security interest granted by, leased to, or
conditionally sold to a debtor that, at the
time such transaction is entered into, holds an
air carrier operating certificate issued
pursuant to chapter 447 of title 49 for
aircraft capable of carrying 10 or more
individuals or 6,000 pounds or more of cargo;
or
(ii) a documented vessel (as defined in
section 30101(1) of title 46) that is subject
to a security interest granted by, leased to,
or conditionally sold to a debtor that is a
water carrier that, at the time such
transaction is entered into, holds a
certificate of public convenience and necessity
or permit issued by the Department of
Transportation; and
(B) includes all records and documents relating to
such equipment that are required, under the terms of
the security agreement, lease, or conditional sale
contract, to be surrendered or returned by the debtor
in connection with the surrender or return of such
equipment.
(4) Paragraph (1) applies to a secured party, lessor, or
conditional vendor acting in its own behalf or acting as
trustee or otherwise in behalf of another party.
(b) The trustee and the secured party, lessor, or conditional
vendor whose right to take possession is protected under
subsection (a) may agree, subject to the approval of the court,
to extend the 60-day period specified in subsection (a)(1).
(c)(1) In any case under this chapter, the trustee shall
immediately surrender and return to a secured party, lessor, or
conditional vendor, described in subsection (a)(1), equipment
described in subsection (a)(3), if at any time after the date
of the order for relief under this chapter such secured party,
lessor, or conditional vendor is entitled pursuant to
subsection (a)(1) to take possession of such equipment and
makes a written demand for such possession to the trustee.
(2) At such time as the trustee is required under paragraph
(1) to surrender and return equipment described in subsection
(a)(3), any lease of such equipment, and any security agreement
or conditional sale contract relating to such equipment, if
such security agreement or conditional sale contract is an
executory contract, shall be deemed rejected.
(d) With respect to equipment first placed in service on or
before October 22, 1994, for purposes of this section--
(1) the term ``lease'' includes any written agreement
with respect to which the lessor and the debtor, as
lessee, have expressed in the agreement or in a
substantially contemporaneous writing that the
agreement is to be treated as a lease for Federal
income tax purposes; and
(2) the term ``security interest'' means a purchase-
money equipment security interest.

* * * * * * *

Sec. 1112. Conversion or dismissal

(a) The debtor may convert a case under this chapter to a
case under chapter 7 of this title unless--
[(b) Except as provided in subsection (c) of this section, on
request of a party in interest or the United States trustee or
bankruptcy administrator, and after notice and a hearing, the
court may convert a case under this chapter to a case under
chapter 7 of this title or may dismiss a case under this
chapter, whichever is in the best interest of creditors and the
estate, for cause, including--
[(1) continuing loss to or diminution of the estate
and absence of a reasonable likelihood of
rehabilitation;
[(2) inability to effectuate a plan;
[(3) unreasonable delay by the debtor that is
prejudicial to creditors;
[(4) failure to propose a plan under section 1121 of
this title within any time fixed by the court;
[(5) denial of confirmation of every proposed plan
and denial of a request made for additional time for
filing another plan or a modification of a plan;
[(6) revocation of an order of confirmation under
section 1144 of this title, and denial of confirmation
of another plan or a modified plan under section 1129
of this title;
[(7) inability to effectuate substantial consummation
of a confirmed plan;
[(8) material default by the debtor with respect to a
confirmed plan;
[(9) termination of a plan by reason of the
occurrence of a condition specified in the plan; or
[(10) nonpayment of any fees or charges required
under chapter 123 of title 28.]
(b)(1) Except as provided in paragraphs (2) and (4) of this
subsection, and in subsection (c) of this section, on request
of a party in interest, and after notice and a hearing, the
court shall convert a case under this chapter to a case under
chapter 7 of this title or dismiss a case under this chapter,
or appoint a trustee or examiner under section 1104(e) of this
title, whichever is in the best interest of creditors and the
estate, if the movant establishes cause.
(2) The court may decline to grant the relief specified in
paragraph (1) of this subsection if the debtor or another party
in interest objects and establishes by a preponderance of the
evidence that--
(A) it is more likely than not that a plan will be
confirmed within a time as fixed by this title or by
order of the court entered pursuant to section
1121(e)(3), or within a reasonable time if no time has
been fixed; and
(B) if the cause is an act or omission of the debtor
that--
(i) there exists a reasonable justification
for the act or omission; and
(ii) the act or omission will be cured within
a reasonable time fixed by the court not to
exceed 30 days after the court decides the
motion, unless the movant expressly consents to
a continuance for a specific period of time, or
compelling circumstances beyond the control of
the debtor justify an extension.
(3) For purposes of this subsection, cause includes--
(A) substantial or continuing loss to or diminution
of the estate;
(B) gross mismanagement of the estate;
(C) failure to maintain insurance that poses a
material risk to the estate or the public;
(D) unauthorized use of cash collateral harmful to 1
or more creditors;
(E) failure to comply with an order of the court;
(F) failure timely to satisfy any filing or reporting
requirement established by this title or by any rule
applicable to a case under this chapter;
(G) failure to attend the meeting of creditors
convened under section 341(a) of this title;
(H) failure timely to provide information or attend
meetings reasonably requested by the United States
trustee or bankruptcy administrator;
(I) failure timely to pay taxes due after the date of
the order for relief or to file tax returns due after
the order for relief;
(J) failure to file a disclosure statement, or to
file or confirm a plan, within the time fixed by this
title or by order of the court;
(K) failure to pay any fees or charges required under
chapter 123 of title 28;
(L) revocation of an order of confirmation under
section 1144 of this title;
(M) inability to effectuate substantial consummation
of a confirmed plan;
(N) material default by the debtor with respect to a
confirmed plan; and
(O) termination of a plan by reason of the occurrence
of a condition specified in the plan.
(4) The court may grant relief under this subsection for
cause as defined in subparagraphs C, F, G, H, or K of paragraph
3 of this subsection only upon motion of the United States
trustee or bankruptcy administrator or upon the court s own
motion.
(5) The court shall commence the hearing on any motion under
this subsection not later than 30 days after filing of the
motion, and shall decide the motion within 15 days after
commencement of the hearing, unless the movant expressly
consents to a continuance for a specific period of time or
compelling circumstances prevent the court from meeting the
time limits established by this paragraph.
(6) In addition to any other relief granted under this
subsection, if the cause established is an act or omission of
the debtor, the court may impose monetary sanctions against the
debtor, debtor's responsible person, and/or a professional
employed by the debtor responsible for the act or omission.

* * * * * * *

Sec. 1115. Duties of trustee or debtor in possession in small business
cases

(a) In a small business case, a trustee or the debtor in
possession, in addition to the duties provided in this title
and as otherwise required by law, shall--
(1) append to the voluntary petition or, in an
involuntary case, file within 3 days after the date of
the order for relief--
(A) its most recent balance sheet, statement
of operations, cash-flow statement, Federal
income tax return; or
(B) a statement made under penalty of perjury
that no balance sheet, statement of operations,
or cash-flow statement has been prepared and no
Federal tax return has been filed;
(2) attend, through its responsible individual,
meetings scheduled by the court or the United States
trustee, including initial debtor interviews and
meetings of creditors convened under section 341 of
this title;
(3) timely file all schedules and statements of
financial affairs, unless the court, after notice and a
hearing, grants an extension, which shall not extend
such time period to a date later than 30 days after the
date of the order for relief, absent extraordinary and
compelling circumstances;
(4) file all postpetition financial and other reports
required by the Federal Rules of Bankruptcy Procedure
or by local rule of the district court;
(5) subject to section 363(c)(2) of this title,
maintain insurance customary and appropriate to the
industry;
(6)(A) timely file tax returns;
(B) subject to section 363(c)(2) of this title,
timely pay all administrative expense tax claims,
except those being contested by appropriate proceedings
being diligently prosecuted; and
(C) subject to section 363(c)(2) of this title,
establish 1 or more separate deposit accounts not later
than 10 business days after the date of order for
relief (or as soon thereafter as possible if all banks
contacted decline the business) and deposit therein,
not later than 1 business day after receipt thereof or
a responsible time set by the court, all taxes payable
for periods beginning after the date the case is
commenced that are collected or withheld by the debtor
for governmental units unless the court waives this
requirement after notice and hearing; and
(7) allow the United States trustee, or its
designated representative, to inspect the debtor's
business premises, books, and records at reasonable
times, after reasonable prior written notice, unless
notice is waived by the debtor.

SUBCHAPTER II--THE PLAN

Sec. 1121. Who may file a plan

(a) * * *

* * * * * * *

(d) [On] (1) Subject to paragraph (1), on request of a party
in interest made within the respective periods specified in
subsections (b) and (c) of this section and after notice and a
hearing, the court may for cause reduce or increase the 120-day
period or the 180-day period referred to in this section.
(2)(A) Such 120-day period may not be extended beyond a date
that is 18 months after the date of the order for relief under
this chapter.
(B) Such 180-day period may not be extended beyond a date
that is 20 months after the date of the order for relief under
this chapter.
[(e) In a case in which the debtor is a small business and
elects to be considered a small business--
[(1) only the debtor may file a plan until after 100
days after the date of the order for relief under this
chapter;
[(2) all plans shall be filed within 160 days after
the date of the order for relief; and
[(3) on request of a party in interest made within
the respective periods specified in paragraphs (1) and
(2) and after notice and a hearing, the court may--
[(A) reduce the 100-day period or the 160-day
period specified in paragraph (1) or (2) for
cause; and
[(B) increase the 100-day period specified in
paragraph (1) if the debtor shows that the need
for an increase is caused by circumstances for
which the debtor should not be held
accountable.]
(e) In a small business case--
(1) only the debtor may file a plan until after 90
days after the date of the order for relief, unless a
trustee has been appointed under this chapter, or
unless the court, on request of a party in interest and
after notice and hearing, shortens such time;
(2) the debtor shall file a plan, and any necessary
disclosure statement, not later than 90 days after the
date of the order for relief, unless the United States
Trustee has appointed under section 1102(a)(1) of this
title a committee of unsecured creditors that the court
has determined, before the 90 days has expired, is
sufficiently active and representative to provide
effective oversight of the debtor; and
(3) the time periods specified in paragraphs (1) and
(2) of this subsection and the time fixed in section
1129(e) of this title for confirmation of a plan, may
be extended only as follows:
(A) On request of a party in interest made
within the respective periods, and after notice
and hearing, the court may for cause grant one
or more extensions, cumulatively not to exceed
60 days, if the movant establishes--
(i) that no cause exists to dismiss
or convert the case or appoint a
trustee or examiner under subparagraphs
(A) (I) of section 1112(b) of this
title; and
(ii) that there is a reasonable
possibility the court will confirm a
plan within a reasonable time;
(B) On request of a party in interest made
within the respective periods, and after notice
and hearing, the court may for cause grant one
or more extensions in excess of those
authorized under subparagraph (A) of this
paragraph, if the movant establishes:
(i) that no cause exists to dismiss
or convert the case or appoint a
trustee or examiner under subparagraphs
(A) (I) of section 1112(b)(3) of this
title; and
(ii) that it is more likely than not
that the court will confirm a plan
within a reasonable time; and
(C) a new deadline shall be imposed whenever
an extension is granted.

* * * * * * *

Sec. 1124. Impairment of claims or interests

Except as provided in section 1123(a)(4) of this title, a
class of claims or interests is impaired under a plan unless,
with respect to each claim or interest of such class, the
plan--
(1) * * *
(2) notwithstanding any contractual provision or
applicable law that entitles the holder of such claim
or interest to demand or receive accelerated payment of
such claim or interest after the occurrence of a
default--
(A) cures any such default that occurred
before or after the commencement of the case
under this title, other than a default of a
kind specified in section 365(b)(2) of this
title or of a kind that section 365(b)(1)(A) of
this title expressly does not require to be
cured;

* * * * * * *

(C) compensates the holder of such claim or
interest for any damages incurred as a result
of any reasonable reliance by such holder on
such contractual provision or such applicable
law; [and]
(D) if such claim or such interest arises
from any failure to perform a nonmonetary
obligation, compensates the holder of such
claim or such interest (other than the debtor
or an insider) for any actual pecuniary loss
incurred by such holder as a result of such
failure; and
[(D)] (E) does not otherwise alter the legal,
equitable, or contractual rights to which such
claim or interest entitles the holder of such
claim or interest.

* * * * * * *

Sec. 1125. Postpetition disclosure and solicitation

(a) In this section--
(1) ``adequate information'' means information of a
kind, and in sufficient detail, as far as is reasonably
practicable in light of the nature and history of the
debtor and the condition of the debtor's books and
records, including a full discussion of the potential
material Federal, State, and local tax consequences of
the plan to the debtor, any successor to the debtor,
and a hypothetical investor domiciled in the State in
which the debtor resides or has its principal place of
business typical of the holders of claims or interests
in the case, that would enable such a hypothetical
[reasonable] investor [typical of holders of claims or
interests] of the relevant class to make an informed
judgment about the plan, but adequate information need
not include such information about any other possible
or proposed plan and in determining whether a
disclosure statement provides adequate information, the
court shall consider the complexity of the case, the
benefit of additional information to creditors and
other parties in interest, and the cost of providing
additional information; and

* * * * * * *

[(f) Notwithstanding subsection (b), in a case in which the
debtor has elected under section 1121(e) to be considered a
small business--
[(1) the court may conditionally approve a disclosure
statement subject to final approval after notice and a
hearing;
[(2) acceptances and rejections of a plan may be
solicited based on a conditionally approved disclosure
statement as long as the debtor provides adequate
information to each holder of a claim or interest that
is solicited, but a conditionally approved disclosure
statement shall be mailed at least 10 days prior to the
date of the hearing on confirmation of the plan; and
[(3) a hearing on the disclosure statement may be
combined with a hearing on confirmation of a plan.]
(f) Notwithstanding subsection (b)--
(1) the court may determine that the plan itself
provides adequate information and that a separate
disclosure statement is not necessary;
(2) the court may approve a disclosure statement
submitted on standard forms approved by the court or
adopted pursuant to section 2075 of title 28; and
(3)(A) the court may conditionally approve a
disclosure statement subject to final approval after
notice and a hearing;
(B) acceptances and rejections of a plan may be
solicited based on a conditionally approved disclosure
statement if the debtor provides adequate information
to each holder of a claim or interest that is
solicited, but a conditionally approved disclosure
statement shall be mailed not less than 20 days before
the date of the hearing on confirmation of the plan;
and
(C) the hearing on the disclosure statement may be
combined with the hearing on confirmation of a plan.
(g) Notwithstanding subsection (b), an acceptance or
rejection of the plan may be solicited from a holder of a claim
or interest if such solicitation complies with applicable
nonbankruptcy law and if such holder was solicited before the
commencement of the case in a manner complying with applicable
nonbankruptcy law.

* * * * * * *

Sec. 1129. Confirmation of plan

(a) The court shall confirm a plan only if all of the
following requirements are met:
(1) * * *

* * * * * * *

(9) Except to the extent that the holder of a
particular claim has agreed to a different treatment of
such claim, the plan provides that--
(A) * * *
(B) with respect to a class of claims of a
kind specified in section 507(a)(3), 507(a)(4),
507(a)(5), 507(a)(6), or 507(a)(7) of this
title, each holder of a claim of such class
will receive--
(i) if such class has accepted the
plan, deferred cash payments of a
value, as of the effective date of the
plan, equal to the allowed amount of
such claim; or
(ii) if such class has not accepted
the plan, cash on the effective date of
the plan equal to the allowed amount of
such claim; [and]
(C) with respect to a claim of a kind
specified in section 507(a)(8) of this title,
the holder of such claim will receive on
account of such claim [deferred cash payments,
over a period not exceeding six years after the
date of assessment of such claim,] regular
installment payments in cash, but in no case
with a balloon provision, and no more than
three months apart, beginning no later than the
effective date of the plan and ending on the
earlier of five years after the petition date
or the last date payments are to be made under
the plan to unsecured creditors, of a value, as
of the effective date of the plan, equal to the
allowed amount of such claim[.]; and
(D) with respect to a secured claim which
would be described in section 507(a)(8) of this
title but for its secured status, the holder of
such claim will receive on account of such
claim cash payments of not less than is
required in subparagraph (C) and over a period
no greater than is required in such
subparagraph.

* * * * * * *

(14) If the debtor is required by a judicial or
administrative order or statute to pay a domestic
support obligation, the debtor has paid all amounts
payable under such order or statute for such obligation
that become payable after the date on which the
petition is filed.
(15) All transfers of property of the plan shall be
made in accordance with any applicable provisions of
nonbankruptcy law that govern the transfer of property
by a corporation or trust that is not a moneyed,
business, or commercial corporation or trust.

* * * * * * *

(e) In a small business case, the debtor shall confirm a plan
not later than 150 days after the date of the order for relief
unless--
(1) the United States Trustee has appointed, under
section 1102(a)(1) of this title, a committee of
unsecured creditors that the court has determined,
before the 150 days has expired, is sufficiently active
and representative to provide effective oversight of
the debtor; or
(2) such 150-day period is extended as provided in
section 1121(e)(3) of this title.

* * * * * * *

SUBCHAPTER III--POSTCONFIRMATION MATTERS

Sec. 1141. Effect of confirmation

(a) * * *

* * * * * * *

(d)(1) * * *

* * * * * * *

(6) Notwithstanding the provisions of paragraph (1), the
confirmation of a plan does not discharge a debtor which is a
corporation from any debt for a tax or customs duty with
respect to which the debtor made a fraudulent return or
willfully attempted in any manner to evade or defeat such tax.

* * * * * * *

[Sec. 1168. Rolling stock equipment

[(a)(1) The right of a secured party with a security interest
in or of a lessor or conditional vendor of equipment described
in paragraph (2) to take possession of such equipment in
compliance with an equipment security agreement, lease, or
conditional salecontract is not affected by section 362, 363,
or 1129 or by any power of the court to enjoin the taking of
possession, unless--
[(A) before the date that is 60 days after the date
of commencement of a case under this chapter, the
trustee, subject to the court's approval, agrees to
perform all obligations of the debtor that become due
on or after the date of commencement of the case under
such security agreement, lease, or conditional sale
contract; and
[(B) any default, other than a default of a kind
described in section 365(b)(2), under such security
agreement, lease, or conditional sale contract--
[(i) that occurs before the date of
commencement of the case and is an event of
default therewith is cured before the
expiration of such 60-day period; and
[(ii) that occurs or becomes an event of
default after the date of commencement of the
case is cured before the later of--
[(I) the date that is 30 days after
the date of the default or event of
default; or
[(II) the expiration of such 60-day
period.
[(2) Equipment is described in this paragraph if it is
rolling stock equipment or accessories used on such equipment,
including superstructures and racks, that is subject to a
security interest granted by, leased to, or conditionally sold
to the debtor.
[(3) Paragraph (1) applies to a secured party, lessor, or
conditional vendor acting in its own behalf or acting as
trustee or otherwise in behalf of another party.
[(b) The trustee and the secured party, lessor, or
conditional vendor whose right to take possession is protected
under subsection (a) may agree, subject to the court's
approval, to extend the 60-day period specified in subsection
(a)(1).
[(c) With respect to equipment first placed in service on or
prior to the date of enactment of this subsection, for purposes
of this section--
[(1) the term ``lease'' includes any written
agreement with respect to which the lessor and the
debtor, as lessee, have expressed in the agreement or
in a substantially contemporaneous writing that the
agreement is to be treated as a lease for Federal
income tax purposes; and
[(2) the term ``security interest'' means a purchase-
money equipment security interest.
[(d) With respect to equipment first placed in service after
the date of enactment of this subsection, for purposes of this
section, the term ``rolling stock equipment'' includes rolling
stock equipment that is substantially rebuilt and accessories
used on such equipment.]

Sec. 1168. Rolling stock equipment

(a)(1) The right of a secured party with a security interest
in or of a lessor or conditional vendor of equipment described
in paragraph (2) to take possession of such equipment in
compliance with an equipment security agreement, lease, or
conditional sale contract, and to enforce any of its other
rights or remedies under such security agreement, lease, or
conditional sale contract, to sell, lease, or otherwise retain
or dispose of such equipment, is not limited or otherwise
affected by any other provision of this title or by any power
of the court, except that the right to take possession and
enforce those other rights and remedies shall be subject to
section 362 of this title, if--
(A) before the date that is 60 days after the date of
commencement of a case under this chapter, the trustee,
subject to the court's approval, agrees to perform all
obligations of the debtor under such security
agreement, lease, or conditional sale contract; and
(B) any default, other than a default of a kind
described in section 365(b)(2) of this title, under
such security agreement, lease, or conditional sale
contract--
(i) that occurs before the date of
commencement of the case and is an event of
default therewith is cured before the
expiration of such 60-day period;
(ii) that occurs or becomes an event of
default after the date of commencement of the
case and before the expiration of such 60-day
period is cured before the later of--
(I) the date that is 30 days after
the date of the default or event of the
default; or
(II) the expiration of such 60-day
period; and
(iii) that occurs on or after the expiration
of such 60-day period is cured in accordance
with the terms of such security agreement,
lease, or conditional sale contract, if cure is
permitted under that agreement, lease, or
conditional sale contract.
(2) The equipment described in this paragraph--
(A) is rolling stock equipment or accessories used on
rolling stock equipment, including superstructures or
racks, that is subject to a security interest granted
by, leased to, or conditionally sold to a debtor; and
(B) includes all records and documents relating to
such equipment that are required, under the terms of
the security agreement, lease, or conditional sale
contract, that is to be surrendered or returned by the
debtor in connection with the surrender or return of
such equipment.
(3) Paragraph (1) applies to a secured party, lessor, or
conditional vendor acting in its own behalf or acting as
trustee or otherwise in behalf of another party.
(b) The trustee and the secured party, lessor, or conditional
vendor whose right to take possession is protected under
subsection (a) may agree, subject to the court's approval, to
extend the 60-day period specified in subsection (a)(1).
(c)(1) In any case under this chapter, the trustee shall
immediately surrender and return to a secured party, lessor, or
conditional vendor, described in subsection (a)(1), equipment
described in subsection (a)(2), if at any time after the date
of commencement of the case under this chapter such secured
party, lessor, or conditional vendor is entitled pursuant to
subsection (a)(1) to take possession of such equipment and
makes a written demand for such possession of the trustee.
(2) At such time as the trustee is required under paragraph
(1) to surrender and return equipment described in subsection
(a)(2),any lease of such equipment, and any security agreement
or conditional sale contract relating to such equipment, if such
security agreement or conditional sale contract is an executory
contract, shall be deemed rejected.
(d) With respect to equipment first placed in service on or
prior to October 22, 1994, for purposes of this section--
(1) the term ``lease'' includes any written agreement
with respect to which the lessor and the debtor, as
lessee, have expressed in the agreement or in a
substantially contemporaneous writing that the
agreement is to be treated as a lease for Federal
income tax purposes; and
(2) the term ``security interest'' means a purchase-
money equipment security interest.
(e) With respect to equipment first placed in service after
October 22, 1994, for purposes of this section, the term
``rolling stock equipment'' includes rolling stock equipment
that is substantially rebuilt and accessories used on such
equipment.

* * * * * * *

Sec. 1170. Abandonment of railroad line

(a) * * *

* * * * * * *

(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] 11326(a) of title 49.

* * * * * * *

Sec. 1172. Contents of plan

(a) * * *

* * * * * * *

(c)(1) In approving an application under subsection (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] 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 of
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
(2) of the kind specified in section 523(a) of this
title.

* * * * * * *

(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
(2) of a kind specified in section 523(a) of this
title.

* * * * * * *

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.
* * * * * * *
1307A. Adequate protection in chapter 13 cases.
1308. Filing of prepetition tax returns.

* * * * * * *

SUBCHAPTER I--OFFICERS, ADMINISTRATION, AND THE ESTATE

* * * * * * *

Sec. 1301. Stay of action against codebtor

(a) * * *
(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'sinterest 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. 1302. Trustee

(a) * * *
(b) The trustee shall--
(1) * * *

* * * * * * *

(4) advise, other than on legal matters, and assist
the debtor in performance under the plan; [and]
(5) ensure that the debtor commences making timely
payments under section 1326 of this title[.]; and
(6) if, with respect to an individual debtor, there
is a claim for support of a child of the debtor or a
custodial parent of such child entitled to receive
priority under section 507(a)(1) of this title, provide
the applicable notification specified in subsection
(d).

* * * * * * *

(d)(1) In any case described in subsection (b)(6), the
trustee shall--
(A)(i) notify in writing the holder of the claim of
the right of such holder to use the services of a State
child support enforcement agency established under
sections 464 and 466 of the Social Security Act for the
State in which the holder resides; and
(ii) include in the notice under this paragraph the
address and telephone number of the child support
enforcement agency; and
(B)(i) notify in writing the State child support
agency of the State in which the holder of the claim
resides of the claim; and
(ii) include in the notice under this paragraph the
name, address, and telephone number of the holder of
the claim;
(iii) at such time as the debtor is granted a
discharge under section 1328 of this title, notify the
holder of the claim and the State child support agency
of the State in which such holder resides of--
(I) the granting of the discharge;
(II) the last recent known address of the
debtor; and
(III) with respect to the debtor's case, the
name of each creditor that holds a claim that
is not discharged under paragraph (2), (4), or
(14A) of section 523(a) of this title or that
was reaffirmed by the debtor under section
524(c) of this title.
(2)(A) If, after receiving a notice under paragraph
(1)(B)(iii), a holder of a claim or a State child support
agency is unable to locate the debtor that is the subject of
the notice, such holder or such agency may request from a
creditor described in paragraph (1)(B)(iii) the last known
address of the debtor.
(B) Notwithstanding any other provision of law, a creditor
that makes a disclosure of a last known address of a debtor in
connection with a request made under subparagraph (A) shall not
be liable to the debtor or any other person by reason of making
such disclosure.

* * * * * * *

Sec. 1307. Conversion or dismissal

(a) * * *

* * * * * * *

(e) Upon the failure of the debtor to file tax returns under
section 1308 of this title, on request of a party in interest
or the United States trustee and after notice and a hearing,
the court shall dismiss a case or convert a case under this
chapter to a case under chapter 7 of this title, whichever is
in the best interests of creditors and the estate.
[(e)] (f) The court may not convert a case under this chapter
to a case under chapter 7, 11, or 12 of this title if the
debtor is a farmer, unless the debtor requests such conversion.
[(f)] (g) 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), 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 required under subparagraph (A) 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 the
contract amount and shall reduce any amount payable under
section 1326(a) of the title.
(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 payments referred to in paragraph (1) shall
not be less than the amount of any weekly, biweekly, monthly,
or other periodic payment scheduled as payable under the
contract between the debtor and creditor.
(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.
(e) On or before 60 days after the filling of a case under
this chapter, a debtor retaining possession of personal
property subject to a lease or securing a claim attributable in
whole or in part to the purchase price of such property shall
provide each creditor or lessor reasonable evidence of the
maintenance of any required insurance coverage with respect to
the use or ownership of such property and continue to do so for
so long as the debtor retains possession of such property.

Sec. 1308. Filing of prepetition tax returns

(a) On or before the day prior to the day on which the first
meeting of the creditors is convened under section 341(a) of
this title, the debtor shall have filed with appropriate tax
authorities all tax returns for all taxable periods ending in
the 3-year period ending on the date of filing of the petition.
(b) If the tax returns required by subsection (a) have not
been filed by the date on which the first meeting of creditors
is convened under section 341(a) of this title, the trustee may
continue such meeting for a reasonable period of time, to allow
the debtor additional time to file any unfiled returns, but
such additional time shall be no more than--
(1) for returns that are past due as of the date of
the filing of the petition, 120 days from such date;
(2) for returns which are not past due as of the date
of the filing of the petition, the later of 120 days
from such date or the due date for such returns under
the last automatic extension of time for filing such
returns to which the debtor is entitled, and for which
request has been timely made, according to applicable
nonbankruptcy law; and
(3) upon notice and hearing, and order entered before
the lapse of any deadline fixed according to this
subsection, where the debtor demonstrates, by clear and
convincing evidence, that the failure to file the
returns as required is because of circumstances beyond
the control of the debtor, the court may extend the
deadlines set by the trustee as provided in this
subsection for--
(A) a period of no more than 30 days for
returns described in paragraph (1) of this
subsection; and
(B) for no more than the period of time
ending on the applicable extended due date for
the returns described in paragraph (2).
(c) For purposes of this section only, a return includes a
return prepared pursuant to section 6020 (a) or (b) of the
Internal Revenue Code of 1986 or similar State or local law, or
a written stipulation to a judgment entered by a nonbankruptcy
tribunal.

SUBCHAPTER II--THE PLAN

* * * * * * *

Sec. 1322. Contents of plan

(a) * * *
(b) Subject to subsections (a) and (c) of this section, the
plan may--
(1) * * *
[(2) modify the rights of holders of secured claims,
other than a claim secured only by a security interest
in real property that is the debtor's principal
residence, or of holders of unsecured claims, or leave
unaffected the rights of holders of any class of
claims;]
(2) modify the rights of holders of secured claims,
other than a claim secured primarily by a security
interest in property used as the debtor's principal
residence at any time during 180 days prior to the
filing of the petition, or of holders of unsecured
claims, or leave unaffected the rights of holders of
any class of claims;

* * * * * * *

[(d) The plan may not provide for payments over a period that
is longer than three years, unless the court, for cause,
approves a longer period, but the court may not approve a
period that is longer than five years.]
(d) If the current monthly income of the debtor and the
debtor's spouse combined, when multiplied by 12, is not less
than the highest national median family income last reported by
the Bureau of the Census for a family of equal or lesser size
or, in the case of a household of 1 person, not less than the
national median household income for 1 earner, the plan may not
provide for payments over a period that is longer than 5 years.
If the current monthly income of the debtor and the debtor's
spouse combined, when multiplied by 12, is less than the
highest national median family income for a family of equal or
lesser size, or in the case of a household of 1 person, the
national median household income for 1 earner, the plan may not
provide for payments over a period that is longer than 3 years,
unless the court, for cause, approves a longer period, but the
court may not approve a period that is longer than 5 years.
Notwithstanding the foregoing, the national median family
income for a family of more than 4 individuals shall be the
national median family income last reported by the Bureau of
the Census for a family of 4 individuals plus $583 for each
additional member of the family.

* * * * * * *

(f) A plan may not materially alter the terms of a loan
described in section 362(b)(29) of this title.

* * * * * * *

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.
(b) The hearing on confirmation of the plan may be held not
earlier than 20 days, and not later than 45 days, after the
meeting of creditors under section 341(a) of this title.
(c) Whenever a party in interest is given notice of a hearing
on the confirmation or modification of a plan under this
chapter, such notice shall include the information provided by
the debtor on the most recent statement filed with the court
pursuant to section 521(a)(1)(B)(ii) or (f)(4) of this title.

Sec. 1325. Confirmation of plan

(a) Except as provided in subsection (b), the court shall
confirm a plan if--
(1) * * *

* * * * * * *

(5) with respect to each allowed secured claim
provided for by the plan--
(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] (i) the plan provides that the holder of
such claim retain the lien securing such claim
until the earlier of payment of the underlying
debt determined under nonbankruptcy law or
discharge under section 1328 of this title, and
that if the case under this chapter is
dismissed or converted without completion of
the plan, such lien shall also be retained by
such holder to the extent recognized by
applicable nonbankruptcy law; and
(ii) the value, as of the effective date of
the plan, of property to be distributed under
the plan on account of such claim is not less
than the allowed amount of such claim; or
(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[.];
(7) if the debtor is required by a judicial or
administrative order or statute to pay a domestic
support obligation, the debtor has paid all amounts
payable under such order for such obligation that
become payable after the date on which the petition is
filed; and
(8) if the debtor has filed all Federal, State, and
local tax returns as required by section 1308 of this
title.
(b)(1) If the trustee or the holder of an allowed unsecured
claim objects to the confirmation of the plan, then the court
may not approve the plan unless, as of the effective date of
the plan--
(A) the value of the property to be distributed under
the plan on account of such claim is not less than the
amount of such claim; or
(B) the plan provides that all of the debtor's
projected disposable income to be received in the
[three-year period] applicable commitment period
beginning on the date that the first payment is due
under the plan will be applied to make payments to
unsecured creditors under the plan. The ``applicable
commitment period'' shall be not less than 5 years if
the current monthly income of the debtor and the
debtor's spouse combined, when multiplied by 12, is not
less than the highest national median family income
last reported by the Bureau of the Census for a family
of equal or lesser size, or in the case of a household
of 1 person, the national median household income for 1
earner. Notwithstanding the foregoing, the national
median family income for a family of more than 4
individuals shall be the national median family income
last reported by the Bureau of the Census for a family
of 4 individuals plus $583 for each additional member
of the family.
(2) For purposes of this subsection, ``disposable income''
means income which is received by the debtor (other than child
support payments, foster care payments, or disability payments
for a dependent child made in accordance with applicable
nonbankruptcy law and which is reasonably necessary to be
expended) and [which is not] less amounts reasonably necessary
to be expended--
(A) for the maintenance or support of the debtor or a
dependent of the debtor, as determined in accordance
with section 707(b)(2)(A) and if applicable
707(b)(2)(B), including charitable contributions (that
meet the definition of ``charitable contribution''
under section 548(d)(3)) to a qualified religious or
charitable entity or organization (as that term is
defined in section 548(d)(4)) in an amount not to
exceed 15 percent of the gross currently monthly income
of the debtor for the year in which the contributions
are made; and
(B) if the debtor is engaged in business, for the
payment of expenditures necessary for the continuation,
preservation, and operation of such business.

* * * * * * *

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 a
domestic support obligation, certifies that all amounts payable
under such order or statute that are due on or before the date
of the certification (including amounts due before or after the
petition was filed) have been paid, 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) of this
title;
(2) of the kind specified in paragraph (1), (2), (4),
(3)(B), (5), (8), or (9) of section 523(a) of this
title;
(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) Notwithstanding subsections (a) and (b), the court shall
not grant a discharge of all debts provided for by the plan or
disallowed under section 502 of this title if the debtor has
received a discharge in any case filed under this title within
5 years of the order for relief under this chapter.
(g) The court shall not grant a discharge under this section
to a debtor, unless after filing a petition the debtor has
completed an instructional course concerning personal financial
management described in section 111.
(h) Subsection (g) shall not apply with respect to a debtor
who resides in a district for which the United States trustee
or bankruptcy administrator of the bankruptcy court of that
district determines that the approved instructional courses are
not adequate to provide service to the additional individuals
who would be required to complete the instructional course by
reason of the requirements of this section.
(i) Each United States trustee or bankruptcy administrator
that makes a determination described in subsection (h) shall
review that determination not later than 1 year after the date
of that determination, and not less frequently than every year
thereafter.

Sec. 1329. Modification of plan after confirmation

(a) * * *

* * * * * * *

(c) A plan modified under this section may not provide for
payments over a period that expires after [three years] the
applicable commitment period under section 1325(b)(1)(B) after
the time that the first payment under the original confirmed
plan was due, unless the court, for cause, approves a longer
period, but the court may not approve a period that expires
after five years after such time. The duration period shall be
5 years if the current monthly income of the debtor and the
debtor's spouse combined, when multiplied by 12, is not less
than the highest national median family income last reported by
the Bureau of the Census for a family of equal or lesser size
or, in the case of a household of 1 person, the national median
household income for 1 earner, as of the date of the
modification and shall be 3 years if the current monthly total
income of the debtor and the debtor's spouse combined, when
multiplied by 12, is less than the highest national median
family income last reported by the Bureau of the Census for a
family of equal or lesser size or, in the case of a household
of 1 person, less than the national median household income for
1 earner as of the date of the modification. Notwithstanding
the foregoing, the national median family income for a family
of more than 4 individuals shall be the national median family
income last reported by the Bureau of the Census for a family
of 4 individuals plus $583 for each additional member of the
family.

* * * * * * *

CHAPTER 15--ANCILLARY AND OTHER CROSS-BORDER CASES

Sec.
1501. Purpose and scope of application.

SUBCHAPTER I--GENERAL PROVISIONS

1502. Definitions.
1503. International obligations of the United States.
1504. Commencement of ancillary case.
1505. Authorization to act in a foreign country.
1506. Public policy exception.
1507. Additional assistance.
1508. Interpretation.

SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT

1509. Right of direct access.
1510. Limited jurisdiction.
1511. Commencement of case under section 301 or 303.
1512. Participation of a foreign representative in a case under this
title.
1513. Access of foreign creditors to a case under this title.
1514. Notification to foreign creditors concerning a case under this
title.

SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF

1515. Application for recognition of a foreign proceeding.
1516. Presumptions concerning recognition.
1517. Order recognizing a foreign proceeding.
1518. Subsequent information.
1519. Relief that may be granted upon petition for recognition of a
foreign proceeding.
1520. Effects of recognition of a foreign main proceeding.
1521. Relief that may be granted upon recognition of a foreign
proceeding.
1522. Protection of creditors and other interested persons.
1523. Actions to avoid acts detrimental to creditors.
1524. Intervention by a foreign representative.

SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES

1525. Cooperation and direct communication between the court and foreign
courts or foreign representatives.
1526. Cooperation and direct communication between the trustee and
foreign courts or foreign representatives.
1527. Forms of cooperation.

SUBCHAPTER V--CONCURRENT PROCEEDINGS

1528. Commencement of a case under this title after recognition of a
foreign main proceeding.
1529. Coordination of a case under this title and a foreign proceeding.
1530. Coordination of more than 1 foreign proceeding.
1531. Presumption of insolvency based on recognition of a foreign main
proceeding.
1532. Rule of payment in concurrent proceedings.

Sec. 1501. Purpose and scope of application

(a) The purpose of this of chapter is to incorporate the
Model Law on Cross-Border Insolvency so as to provide effective
mechanisms for dealing with cases of cross-border insolvency
with the objectives of--
(1) cooperation between--
(A) United States courts, United States
trustees, trustees, examiners, debtors, and
debtors in possession; and
(B) the courts and other competent
authorities of foreign countries involved in
cross-border insolvency cases;
(2) greater legal certainty for trade and investment;
(3) fair and efficient administration of cross-border
insolvencies that protects the interests of all
creditors, and other interested entities, including the
debtor;
(4) protection and maximization of the value of the
debtor's assets; and
(5) facilitation of the rescue of financially
troubled businesses, thereby protecting investment and
preserving employment.
(b) This chapter applies where--
(1) assistance is sought in the United States by a
foreign court or a foreign representative in connection
with a foreign proceeding;
(2) assistance is sought in a foreign country in
connection with a case under this title;
(3) a foreign proceeding and a case under this title
with respect to the same debtor are taking place
concurrently; or
(4) creditors or other interested persons in a
foreign country have an interest in requesting the
commencement of, or participating in, a case or
proceeding under this title.
(c) This chapter does not apply to--
(1) a proceeding concerning an entity identified by
exclusion in subsection 109(b);
(2) an individual, or to an individual and such
individual's spouse, who have debts within the limits
specified in section 109(e) and who are citizens of the
United States or aliens lawfully admitted for permanent
residence in the United States; or
(3) an entity subject to a proceeding under the
Securities Investor Protection Act, a stockbroker
subject to subchapter III of chapter 7 of this title,
or a commodity broker subject to subchapter IV of
chapter 7 of this title.

SUBCHAPTER I--GENERAL PROVISIONS

Sec. 1502. Definitions

For the purposes of this chapter, the term--
(1) ``debtor'' means an entity that is the subject of
a foreign proceeding;
(2) ``establishment'' means any place of operations
where the debtor carries out a nontransitory economic
activity;
(3) ``foreign court'' means a judicial or other
authority competent to control or supervise a foreign
proceeding;
(4) ``foreign main proceeding'' means a foreign
proceeding taking place in the country where the debtor
has the center of its main interests;
(5) ``foreign nonmain proceeding'' means a foreign
proceeding, other than a foreign main proceeding,
taking place in a country where the debtor has an
establishment;
(6) ``trustee'' includes a trustee, a debtor in
possession in a case under any chapter of this title,
or a debtor under chapter 9 of this title; and
(7) ``within the territorial jurisdiction of the
United States'' when used with reference to property of
a debtor refers to tangible property located within the
territory of the United States and intangible property
deemed under applicable nonbankruptcy law to be located
within that territory, including any property subject
to attachment or garnishment that may properly be
seized or garnished by an action in a Federal or State
court in the United States.

Sec. 1503. International obligations of the United States

To the extent that this chapter conflicts with an obligation
of the United States arising out of any treaty or other form of
agreement to which it is a party with 1 or more other
countries, the requirements of the treaty or agreement prevail.

Sec. 1504. Commencement of ancillary case

A case under this chapter is commenced by the filing of a
petition for recognition of a foreign proceeding under section
1515.

Sec. 1505. Authorization to act in a foreign country

A trustee or another entity (including an examiner) may be
authorized by the court to act in a foreign country on behalf
of an estate created under section 541. An entity authorized to
act under this section may act in any way permitted by the
applicable foreign law.

Sec. 1506. Public policy exception

Nothing in this chapter prevents the court from refusing to
take an action governed by this chapter if the action would be
manifestly contrary to the public policy of the United States.

Sec. 1507. Additional assistance

(a) Subject to the specific limitations stated elsewhere in
this chapter the court, upon recognition of a foreign
proceeding, the court may provide additional assistance to a
foreign representative under this title or under other laws of
the United States.
(b) In determining whether to provide additional assistance
under this title or under other laws of the United States, the
court shall consider whether such additional assistance,
consistent with the principles of comity, will reasonably
assure--
(1) just treatment of all holders of claims against
or interests in the debtor's property;
(2) protection of claim holders in the United States
against prejudice and inconvenience in the processing
of claims in such foreign proceeding;
(3) prevention of preferential or fraudulent
dispositions of property of the debtor;
(4) distribution of proceeds of the debtor's property
substantially in accordance with the order prescribed
by this title; and
(5) if appropriate, the provision of an opportunity
for a fresh start for the individual that such foreign
proceeding concerns.

Sec. 1508. Interpretation

In interpreting this chapter, the court shall consider its
international origin, and the need to promote an application of
this chapter that is consistent with the application of similar
statutes adopted by foreign jurisdictions.

SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT

Sec. 1509. Right of direct access

(a) A foreign representative may commence a case under
section 1504 of this title by filing with the court a petition
for recognition of a foreign proceeding under section 1515 of
this title.
(b) If the court grants recognition under section 1515 of
this title, and subject to any limitations that the court may
impose consistent with the policy of this chapter--
(1) the foreign representative has the capacity to
sue and be sued in a court in the United States;
(2) the foreign representative may apply directly to
a court in the United States for appropriate relief in
that court; and
(3) a court in the United States shall grant comity
or cooperation to the foreign representative.
(c) A request for comity or cooperation by a foreign
representative in a court in the United States shall be
accompanied by a certified copy of an order granting
recognition under section 1517 of this title.
(d) If the court denies recognition under this chapter, the
court may issue any appropriate order necessary to prevent the
foreign representative from obtaining comity or cooperation
from courts in the United States.
(e) Whether or not the court grants recognition, and subject
to sections 306 and 1510 of this title, a foreign
representative is subject to applicable nonbankruptcy law.
(f) Notwithstanding any other provision of this section, the
failure of a foreign representative to commence a case or to
obtain recognition under this chapter does not affect any right
the foreign representative may have to sue in a court in the
United State to collect or recover a claim which is the
property of the debtor.

Sec. 1510. Limited jurisdiction

The sole fact that a foreign representative files a petition
under section 1515 does not subject the foreign representative
to the jurisdiction of any court in the United States for any
other purpose.

Sec. 1511. Commencement of case under section 301 or 303

(a) Upon recognition, a foreign representative may commence--
(1) an involuntary case under section 303; or
(2) a voluntary case under section 301 or 302, if the
foreign proceeding is a foreign main proceeding.
(b) The petition commencing a case under subsection (a) must
be accompanied by certified copy of an order granting
recognition. The court where the petition for recognition has
been filed must be advised of the foreign representative's
intent to commence a case under subsection (a) prior to such
commencement.

Sec. 1512. Participation of a foreign representative in a case under
this title

Upon recognition of a foreign proceeding, the foreign
representative in that proceeding is entitled to participate as
a party in interest in a case regarding the debtor under this
title.

Sec. 1513. Access of foreign creditors to a case under this title

(a) Foreign creditors have the same rights regarding the
commencement of, and participation in, a case under this title
as domestic creditors.
(b)(1) Subsection (a) does not change or codify present law
as to the priority of claims under section 507 or 726 of this
title, except that the claim of a foreign creditor under those
sections shall not be given a lower priority than that of
general unsecured claims without priority solely because the
holder of such claim is a foreign creditor.
(2)(A) Subsection (a) and paragraph (1) do not change or
codify present law as to the allowability of foreign revenue
claims or other foreign public law claims in a proceeding under
this title.
(B) Allowance and priority as to a foreign tax claim or other
foreign public law claim shall be governed by any applicable
tax treaty of the United States, under the conditions and
circumstances specified therein.

Sec. 1514. Notification to foreign creditors concerning a case under
this title

(a) Whenever in a case under this title notice is to be given
to creditors generally or to any class or category of
creditors, such notice shall also be given to the known
creditors generally, or to creditors in the notified class or
category, that do not have addresses in the United States. The
court may order that appropriate steps be taken with a view to
notifying any creditor whose address is not yet known.
(b) Such notification to creditors with foreign addresses
described in subsection (a) shall be given individually, unless
the court considers that, under the circumstances, some other
form of notification would be more appropriate. No letters
rogatory or other similar formality is required.
(c) When a notification of commencement of a case is to be
given to foreign creditors, the notification shall--
(1) indicate the time period for filing proofs of
claim and specify the place for their filing;
(2) indicate whether secured creditors need to file
their proofs of claim; and
(3) contain any other information required to be
included in such a notification to creditors under this
title and the orders of the court.
(d) Any rule of procedure or order of the court as to notice
or the filing of a claim shall provide such additional time to
creditors with foreign addresses as is reasonable under the
circumstances.

SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF

Sec. 1515. Application for recognition of a foreign proceeding

(a) A foreign representative applies to the court for
recognition of the foreign proceeding in which the foreign
representative has been appointed by filing a petition for
recognition.
(b) A petition for recognition shall be accompanied by--
(1) a certified copy of the decision commencing the
foreign proceeding and appointing the foreign
representative;
(2) a certificate from the foreign court affirming
the existence of the foreign proceeding and of the
appointment of the foreign representative; or
(3) in the absence of evidence referred to in
paragraphs (1) and (2), any other evidence acceptable
to the court of the existence of the foreign proceeding
and of the appointment of the foreign representative.
(c) A petition for recognition shall also be accompanied by a
statement identifying all foreign proceedings with respect to
the debtor that are known to the foreign representative.
(d) The documents referred to in paragraphs (1) and (2) of
subsection (b) must be translated into English. The court may
require a translation into English of additional documents.

Sec. 1516. Presumptions concerning recognition

(a) If the decision or certificate referred to in section
1515(b) indicates that the foreign proceeding is a foreign
proceeding as defined in section 101 and that the person or
body is a foreign representative as defined in section 101, the
court is entitled to so presume.
(b) The court is entitled to presume that documents submitted
in support of the petition for recognition are authentic,
whether or not they have been legalized.
(c) In the absence of evidence to the contrary, the debtor's
registered office, or habitual residence in the case of an
individual, is presumed to be the center of the debtor's main
interests.

Sec. 1517. Order recognizing a foreign proceeding

(a) Subject to section 1506, after notice and a hearing an
order recognizing a foreign proceeding shall be entered if--
(1) the foreign proceeding is a foreign main
proceeding or foreign nonmain proceeding within the
meaning of section 1502;
(2) the foreign representative applying for
recognition is a person or body as defined in section
101; and
(3) the petition meets the requirements of section
1515.
(b) The foreign proceeding shall be recognized--
(1) as a foreign main proceeding if it is taking
place in the country where the debtor has the center of
its main interests; or
(2) as a foreign nonmain proceeding if the debtor has
an establishment within the meaning of section 1502 in
the foreign country where the proceeding is pending.
(c) A petition for recognition of a foreign proceeding shall
be decided upon at the earliest possible time. Entry of an
order recognizing a foreign proceeding constitutes recognition
under this chapter.
(d) The provisions of this subchapter do not prevent
modification or termination of recognition if it is shown that
the grounds for granting it were fully or partially lacking or
have ceased to exist, but in considering such action the court
shall give due weight to possible prejudice to parties that
have relied upon the granting of recognition. The case under
this chapter may be closed in the manner prescribed for a case
under section 350.

Sec. 1518. Subsequent information

From the time of filing the petition for recognition of the
foreign proceeding, the foreign representative shall file with
the court promptly a notice of change of status concerning--
(1) any substantial change in the status of the
foreign proceeding or the status of the foreign
representative's appointment; and
(2) any other foreign proceeding regarding the debtor
that becomes known to the foreign representative.

Sec. 1519. Relief that may be granted upon petition for recognition of
a foreign proceeding

(a) From the time of filing a petition for recognition until
the court rules on the petition, the court may, at the request
of the foreign representative, where relief is urgently needed
to protect the assets of the debtor or the interests of the
creditors, grant relief of a provisional nature, including--
(1) staying execution against the debtor's assets;
(2) entrusting the administration or realization of
all or part of the debtor's assets located in the
United States to the foreign representative or another
person authorized by the court, including an examiner,
in order to protect and preserve the value of assets
that, by their nature or because of other
circumstances, are perishable, susceptible to
devaluation or otherwise in jeopardy; and
(3) any relief referred to in paragraph (3), (4), or
(7) of section 1521(a).
(b) Unless extended under section 1521(a)(6), the relief
granted under this section terminates when the petition for
recognition is decided upon.
(c) It is a ground for denial of relief under this section
that such relief would interfere with the administration of a
foreign main proceeding.
(d) The court may not enjoin a police or regulatory act of a
governmental unit, including a criminal action or proceeding,
under this section.
(e) The standards, procedures, and limitations applicable to
an injunction shall apply to relief under this section.

Sec. 1520. Effects of recognition of a foreign main proceeding

(a) Upon recognition of a foreign proceeding that is a
foreign main proceeding--
(1) sections 361 and 362 with respect to the debtor
and that property of the debtor that is within the
territorial jurisdiction of the United States;
(2) sections 363, 549, and 552 of this title apply to
a transfer of an interest of the debtor in property
that is within the territorial jurisdiction of the
United States to the same extent that the sections
would apply to property of an estate;
(3) unless the court orders otherwise, the foreign
representative may operate the debtor's business and
may exercise the rights and powers of a trustee under
and to the extent provided by sections 363 and 552; and
(4) section 552 applies to property of the debtor
that is within the territorial jurisdiction of the
United States.
(b) Subsection (a) does not affect the right to commence an
individual action or proceeding in a foreign country to the
extent necessary to preserve a claim against the debtor.
(c) Subsection (a) does not affect the right of a foreign
representative or an entity to file a petition commencing a
case under this title or the right of any party to file claims
or take other proper actions in such a case.

Sec. 1521. Relief that may be granted upon recognition of a foreign
proceeding

(a) Upon recognition of a foreign proceeding, whether main or
nonmain, where necessary to effectuate the purpose of this
chapter and to protect the assets of the debtor or the
interests of the creditors, the court may, at the request of
the foreign representative, grant any appropriate relief,
including--
(1) staying the commencement or continuation of an
individual action or proceeding concerning the debtor's
assets, rights, obligations or liabilities to the
extent they have not been stayed under section 1520(a);
(2) staying execution against the debtor's assets to
the extent it has not been stayed under section
1520(a);
(3) suspending the right to transfer, encumber or
otherwise dispose of any assets of the debtor to the
extent this right has not been suspended under section
1520(a);
(4) providing for the examination of witnesses, the
taking of evidence or the delivery of information
concerning the debtor's assets, affairs, rights,
obligations or liabilities;
(5) entrusting the administration or realization of
all or part of the debtor's assets within the
territorial jurisdiction of the United States to the
foreign representative or another person, including an
examiner, authorized by the court;
(6) extending relief granted under section 1519(a);
and
(7) granting any additional relief that may be
available to a trustee, except for relief available
under sections 522, 544, 545, 547, 548, 550, and
724(a).
(b) Upon recognition of a foreign proceeding, whether main or
nonmain, the court may, at the request of the foreign
representative, entrust the distribution of all or part of the
debtor's assets located in the United States to the foreign
representative or another person, including an examiner,
authorized by the court, provided that the court is satisfied
that the interests of creditors in the United States are
sufficiently protected.
(c) In granting relief under this section to a representative
of a foreign nonmain proceeding, the court must be satisfied
that the relief relates to assets that, under the law of the
United States, should be administered in the foreign nonmain
proceeding or concerns information required in that proceeding.
(d) The court may not enjoin a police or regulatory act of a
governmental unit, including a criminal action or proceeding,
under this section.
(e) The standards, procedures, and limitations applicable to
an injunction shall apply to relief under paragraphs (1), (2),
(3), and (6) of subsection (a).

Sec. 1522. Protection of creditors and other interested persons

(a) The court may grant relief under section 1519 or 1521, or
may modify or terminate relief under subsection (c), only if
the interests of the creditors and other interested entities,
including the debtor, are sufficiently protected.
(b) The court may subject relief granted under section 1519
or 1521, or the operation of the debtor's business under
section 1520(a)(3) of this title, to conditions it considers
appropriate, including the giving of security or the filing of
a bond.
(c) The court may, at the request of the foreign
representative or an entity affected by relief granted under
section 1519 or 1521, or at its own motion, modify or terminate
such relief.
(d) Section 1104(d) shall apply to the appointment of an
examiner under this chapter. Any examiner shall comply with the
qualification requirements imposed on a trustee by section 322.

Sec. 1523. Actions to avoid acts detrimental to creditors

(a) Upon recognition of a foreign proceeding, the foreign
representative has standing in a case concerning the debtor
pending under another chapter of this title to initiate actions
under sections 522, 544, 545, 547, 548, 550, and 724(a).
(b) When the foreign proceeding is a foreign nonmain
proceeding, the court must be satisfied that an action under
subsection (a) relates to assets that, under United States law,
should be administered in the foreign nonmain proceeding.

Sec. 1524. Intervention by a foreign representative

Upon recognition of a foreign proceeding, the foreign
representative may intervene in any proceedings in a State or
Federal court in the United States in which the debtor is a
party.

SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES

Sec. 1525. Cooperation and direct communication between the court and
foreign courts or foreign representatives

(a) Consistent with section 1501, the court shall cooperate
to the maximum extent possible with foreign courts or foreign
representatives, either directly or through the trustee.
(b) The court is entitled to communicate directly with, or to
request information or assistance directly from, foreign courts
or foreign representatives, subject to the rights of parties in
interest to notice and participation.

Sec. 1526. Cooperation and direct communication between the trustee and
foreign courts or foreign representatives

(a) Consistent with section 1501, the trustee or other
person, including an examiner, authorized by the court, shall,
subject to the supervision of the court, cooperate to the
maximum extent possible with foreign courts or foreign
representatives.
(b) The trustee or other person, including an examiner,
authorized by the court is entitled, subject to the supervision
of the court, to communicate directly with foreign courts or
foreign representatives.

Sec. 1527. Forms of cooperation

Cooperation referred to in sections 1525 and 1526 may be
implemented by any appropriate means, including--
(1) appointment of a person or body, including an
examiner, to act at the direction of the court;
(2) communication of information by any means
considered appropriate by the court;
(3) coordination of the administration and
supervision of the debtor's assets and affairs;
(4) approval or implementation of agreements
concerning the coordination of proceedings; and
(5) coordination of concurrent proceedings regarding
the same debtor.

SUBCHAPTER V--CONCURRENT PROCEEDINGS

Sec. 1528. Commencement of a case under this title after recognition of
a foreign main proceeding

After recognition of a foreign main proceeding, a case under
another chapter of this title may be commenced only if the
debtor has assets in the United States. The effects of such
case shall be restricted to the assets of the debtor that are
within the territorial jurisdiction of the United States and,
to the extent necessary to implement cooperation and
coordination under sections 1525, 1526, and 1527, to other
assets of the debtor that are within the jurisdiction of the
court under sections 541(a) of this title, and 1334(e) of title
28, to the extent that such other assets are not subject to the
jurisdiction and control of a foreign proceeding that has been
recognized under this chapter.

Sec. 1529. Coordination of a case under this title and a foreign
proceeding

Where a foreign proceeding and a case under another chapter
of this title are taking place concurrently regarding the same
debtor, the court shall seek cooperation and coordination under
sections 1525, 1526, and 1527, and the following shall apply:
(1) When the case in the United States is taking
place at the time the petition for recognition of the
foreign proceeding is filed--
(A) any relief granted under sections 1519 or
1521 must be consistent with the relief granted
in the case in the United States; and
(B) even if the foreign proceeding is
recognized as a foreign main proceeding,
section 1520 does not apply.
(2) When a case in the United States under this title
commences after recognition, or after the filing of the
petition for recognition, of the foreign proceeding--
(A) any relief in effect under sections 1519
or 1521 shall be reviewed by the court and
shall be modified or terminated if inconsistent
with the case in the United States; and
(B) if the foreign proceeding is a foreign
main proceeding, the stay and suspension
referred to in section 1520(a) shall be
modified or terminated if inconsistent with the
relief granted in the case in the United
States.
(3) In granting, extending, or modifying relief
granted to a representative of a foreign nonmain
proceeding, the court must be satisfied that the relief
relates to assets that, under the law of the United
States, should be administered in the foreign nonmain
proceeding or concerns information required in that
proceeding.
(4) In achieving cooperation and coordination under
sections 1528 and 1529, the court may grant any of the
relief authorized under section 305.

Sec. 1530. Coordination of more than 1 foreign proceeding

In matters referred to in section 1501, with respect to more
than 1 foreign proceeding regarding the debtor, the court shall
seek cooperation and coordination under sections 1525, 1526,
and 1527, and the following shall apply:
(1) Any relief granted under section 1519 or 1521 to
a representative of a foreign nonmain proceeding after
recognition of a foreign main proceeding must be
consistent with the foreign main proceeding.
(2) If a foreign main proceeding is recognized after
recognition, or after the filing of a petition for
recognition, of a foreign nonmain proceeding, any
relief in effect under section 1519 or 1521 shall be
reviewed by the court and shall be modified or
terminated if inconsistent with the foreign main
proceeding.
(3) If, after recognition of a foreign nonmain
proceeding, another foreign nonmain proceeding is
recognized, the court shall grant, modify, or terminate
relief for the purpose of facilitating coordination of
the proceedings.

Sec. 1531. Presumption of insolvency based on recognition of a foreign
main proceeding

In the absence of evidence to the contrary, recognition of a
foreign main proceeding is for the purpose of commencing a
proceeding under section 303, proof that the debtor is
generally not paying its debts as such debts become due.

Sec. 1532. Rule of payment in concurrent proceedings

Without prejudice to secured claims or rights in rem, a
creditor who has received payment with respect to its claim in
a foreign proceeding pursuant to a law relating to insolvency
may not receive a payment for the same claim in a case under
any other chapter of this title regarding the debtor, so long
as the payment to other creditors of the same class is
proportionately less than the payment the creditor has already
received.

SECTION 127 OF THE TRUTH IN LENDING ACT

Sec. 127. Open end consumer credit plans

(a) Before opening any account under an open end consumer
credit plan, the creditor shall disclose to the person to whom
credit is to be extended each of the following items, to the
extent applicable:
(1) * * *

* * * * * * *

(9) In the case of any credit or charge card account
under an open-end consumer credit plan on which a
minimum monthly or periodic payment will be required,
other than an account described in paragraph (8)--
(A) the following statement: ``The minimum
payment amount shown on your billing statement
is the smallest payment which you can make in
order to keep the account in good standing.
This payment option is offered as a convenience
and you may make larger payments at any time.
Making only the minimum payment each month will
increase the amount of interest you pay and the
length of time it takes to repay your
outstanding balance.''
(B) if the plan provides that the consumer
will be permitted to forgo making a minimum
payment during a specified billing cycle, a
statement, if applicable, that if the consumer
chooses to forgo making the minimum payment,
finance charges will continue to accrue; and
(C) an example, based on an annual percentage
rate and method for determining minimum
periodic payments recently in effect for that
creditor, and a $500 outstanding balance,
showing the estimated minimum periodic payment,
and the estimated period of time it would take
to repay the $500 outstanding balance if the
consumer paid only the minimum periodic payment
on each monthly or periodic statement and
obtained no additional extensions of credit.
(10) With respect to one billing cycle per calendar
year, the creditor shall transmit the information
required under paragraph (9) to each consumer to whom
the creditor is required to transit a statement
pursuant to subsection (b) for such billing cycle. The
creditor shall also transmit to such consumer for such
cycle a worksheet prescribed by the Board to assist the
consumer in determining the consumer's household income
and debt obligations.
(b) The creditor of any account under an open end consumer
credit plan shall transmit to the obligor, for each billing
cycle at the end of which there is an outstanding balance in
that account or with respect to which a finance charge is
imposed, a statement setting forth each of the following items
to the extent applicable:
(1) * * *

* * * * * * *

(11) The following statement: ``The minimum payment
amount shown on your billing statement is the smallest
payment which you can make in order to keep the account
in good standing. This payment option is offered as a
convenience and you may make larger payments at any
time. Making only the minimum payment each month will
increase the amount of interest you pay and the length
of time it takes to repay your outstanding balance.''

* * * * * * *

(h) In promulgating regulations to implement the disclosure
of an example required under subsection (a)(9)(C) and (a)(10),
the Board shall set forth a model disclosure to accompany the
example stating that the credit features shown are only an
example which does not obligate the creditor, but is intended
to illustrate the approximate length of time it could take to
repay using the assumptions set forth in subsection (a)(9)(C)
without regard to any other factors that could impact an
approximate repayment period, including other credit features
or the consumer's payment or other behavior with respect to the
account. Compliance with the disclosures required under
subsection (a)(9)(C) and (a)(10) shall be enforced exclusively
by the Federal agencies set forth in section 108.
(i) Prohibition on Certain Actions for Failure To Incur
Finance Charges.--A creditor of an account under an open end
consumer credit plan may not terminate an account prior to its
expiration date solely because the consumer has not incurred
finance charges on the account. Nothing in this subsection
shall prohibit a creditor from terminating an account for
inactivity in 3 or more consecutive months.
----------

TITLE 28, UNITED STATES CODE

* * * * * * *

PART I--ORGANIZATION OF COURTS

* * * * * * *

CHAPTER 6--BANKRUPTCY JUDGES

Sec.
151 Designation of bankruptcy courts.
* * * * * * *
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) * * *

* * * * * * *

(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. 157. Procedures

(a) * * *
(b)(1) Bankruptcy judges may hear and determine all cases
under title 11 and all core proceedings arising under title 11,
or arising in a case under title 11, referred under subsection
(a) of this section, and may enter appropriate orders and
judgments, subject to review under section 158 of this title.
(2) Core proceedings include, but are not limited to--
(A) * * *

* * * * * * *

(N) orders approving the sale of property other than
property resulting from claims brought by the estate
against persons who have not filed claims against the
estate; [and]
(O) other proceedings affecting the liquidation of
the assets of the estate or the adjustment of the
debtor-creditor or the equity security holder
relationship, except personal injury tort or wrongful
death claims[.]; and
(P) recognition of foreign proceedings and other
matters under chapter 15 of title 11.

* * * * * * *

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, 2000, and annually
thereafter, prepare, and submit to Congress a report
concerning theinformation collected under subsection
(a) that contains an analysis of the information.
(c) The compilation required under subsection (b) shall--
(1) be itemized, by chapter, with respect to title
11;
(2) be presented in the aggregate and for each
district; and
(3) include information concerning--
(A) the total assets and total liabilities of
the debtors described in subsection (a), and in
each category of assets and liabilities, as
reported in the schedules prescribed pursuant
to section 2075 of this title and filed by
those debtors;
(B) the current monthly income, and average
income and average expenses of those debtors as
reported on the schedules and statements that
each such debtor files under sections 521 and
1322 of title 11;
(C) the aggregate amount of debt discharged
in the reporting period, determined as the
difference between the total amount of debt and
obligations of a debtor reported on the
schedules and the amount of such debt reported
in categories which are predominantly
nondischargeable;
(D) the average period of time between the
filing of the petition and the closing of the
case;
(E) for the reporting period--
(i) the number of cases in which a
reaffirmation was filed; and
(ii)(I) the total number of
reaffirmations filed;
(II) of those cases in which a
reaffirmation was filed, the number 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,
the number of cases dismissed for
failure to make payments under the
plan, the number of cases refiled after
dismissal, and the number of cases in
which the plan was completed,
separately itemized with respect to the
number of modifications made before
completion of the plan, if any; and
(iii) the number of cases in which
the debtor filed another case within
the 6 years previous to the filing;
(G) the number of cases in which creditors
were fined for misconduct and any amount of
punitive damages awarded by the court for
creditor misconduct; and
(H) the number of cases in which sanctions
under rule 9011 of the Federal Rules of
Bankruptcy Procedure were imposed against
debtor's counsel and damages awarded under such
Rule.

* * * * * * *

PART II--DEPARTMENT OF JUSTICE

* * * * * * *

CHAPTER 39--UNITED STATES TRUSTEES

Sec.
581.United States trustees.
* * * * * * *
589b. Bankruptcy data.

* * * * * * *

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) * * *

* * * * * * *

(3) supervise the administration of cases and
trustees in cases under chapter 7, 11, 12, [or 13] 13,
or 15, of title 11 by, whenever the United States
trustee considers it to be appropriate----
(A) * * *

* * * * * * *

(G) monitoring the progress of cases under
title 11 and taking such actions as the United
States trustee deems to be appropriate to
prevent undue delay in such progress; [and]
(H) in small business cases (as defined in
section 101 of title 11), performing the
additional duties specified in title 11
pertaining to such cases;
[(H)] (I) monitoring applications filed under
section 327 of title 11 and, whenever the
United States trustee deems it to be
appropriate, filing with the court comments
with respect to the approval of such
applications;

* * * * * * *

(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[.];
(7) in each of such small business cases--
(A) conduct an initial debtor interview as
soon as practicable after the entry of order
for relief but before the first meeting
scheduled under section 341(a) of title 11 at
which time the United States trustee shall
begin to investigate the debtor's viability,
inquire about the debtor's business plan,
explain the debtor's obligations to file
monthly operating reports and other required
reports, attempt to develop anagreed scheduling
order, and inform the debtor of other obligations;
(B) when determined to be appropriate and
advisable, visit the appropriate business
premises of the debtor and ascertain the state
of the debtor's books and records and verify
that the debtor has filed its tax returns; and
(C) review and monitor diligently the
debtor's activities, to identify as promptly as
possible whether the debtor will be unable to
confirm a plan; and
(8) in cases in which the United States trustee finds
material grounds for any relief under section 1112 of
title 11, the United States trustee shall apply
promptly to the court for relief.

* * * * * * *

(d)(1) The Attorney General shall prescribe by rule
qualifications for membership on the panels established by
United States trustees under paragraph (a)(1) of this section,
and qualifications for appointment under subsection (b) of this
section to serve as standing trustee in cases under chapter 12
or 13 of title 11. The Attorney General may not require that an
individual be an attorney in order to qualify for appointment
under subsection (b) of this section to serve as standing
trustee in cases under chapter 12 or 13 of title 11.
(2) A trustee whose appointment under subsection (a)(1) or
under subsection (b) is terminated or who ceases to be assigned
to cases filed under title 11 of the United States Code may
obtain judicial review of the final agency decision by
commencing an action in the United States district court for
the district for which the panel to which the trustee is
appointed under subsection (a)(1), or in the United States
district court for the district in which the trustee is
appointed under subsection (b) resides, after first exhausting
all available administrative remedies, which if the trustee so
elects, shall also include an administrative hearing on the
record. Unless the trustee elects to have an administrative
hearing on the record, the trustee shall be deemed to have
exhausted all administrative remedies for purposes of this
paragraph if the agency fails to make a final agency decision
within 90 days after the trustee requests administrative
remedies. The Attorney General shall prescribe procedures to
implement this paragraph. The decision of the agency shall be
affirmed by the district court unless it is unreasonable and
without cause based on the administrative record before the
agency.
(e)(1) * * *

* * * * * * *

(3) After first exhausting all available administrative
remedies, an individual appointed under subsection (b) may
obtain judicial review of final agency action to deny a claim
of actual, necessary expenses under this subsection by
commencing an action in the United States district court in the
district where the individual resides. The decision of the
agency shall be affirmed by the district court unless it is
unreasonable and without cause based upon the administrative
record before the agency.
(4) The Attorney General shall prescribe procedures to
implement this subsection.

* * * * * * *

Sec. 589b. Bankruptcy data

(a) Rules.--The Attorney General shall, within a reasonable
time after the effective date of this section, issue rules
requiring uniform forms for (and from time to time thereafter
to appropriately modify and approve)--
(1) final reports by trustees in cases under chapters
7, 12, and 13 of title 11; and
(2) periodic reports by debtors in possession or
trustees, as the case may be, in cases under chapter 11
of title 11.
(b) Reports.--All reports referred to in subsection (a) shall
be designed (and the requirements as to place and manner of
filing shall be established) so as to facilitate compilation of
data and maximum possible access of the public, both by
physical inspection at 1 or more central filing locations, and
by electronic access through the Internet or other appropriate
media.
(c) Required Information.--The information required to be
filed in the reports referred to in subsection (b) shall be
that which is in the best interests of debtors and creditors,
and in the public interest in reasonable and adequate
information to evaluate the efficiency and practicality of the
Federal bankruptcy system. In issuing rules proposing the forms
referred to in subsection (a), the Attorney General shall
strike the best achievable practical balance between--
(1) the reasonable needs of the public for
information about the operational results of the
Federal bankruptcy system; and
(2) economy, simplicity, and lack of undue burden on
persons with a duty to file reports.
(d) Final Reports.--Final reports proposed for adoption by
trustees under chapters 7, 12, and 13 of title 11 shall, in
addition to such other matters as are required by law oras the
Attorney General in the discretion of the Attorney General, shall
propose, include with respect to a case under such title--
(1) information about the length of time the case was
pending;
(2) assets abandoned;
(3) assets exempted;
(4) receipts and disbursements of the estate;
(5) expenses of administration;
(6) claims asserted;
(7) claims allowed; and
(8) distributions to claimants and claims discharged
without payment,
in each case by appropriate category and, in cases under
chapters 12 and 13 of title 11, date of confirmation of the
plan, each modification thereto, and defaults by the debtor in
performance under the plan.
(e) Periodic Reports.--Periodic reports proposed for adoption
by trustees or debtors in possession under chapter 11 of title
11 shall, in addition to such other matters as are required by
law or as the Attorney General, in the discretion of the
Attorney General, shall propose, include--
(1) information about the standard industry
classification, published by the Department of
Commerce, for the businesses conducted by the debtor;
(2) length of time the case has been pending;
(3) number of full-time employees as at the date of
the order for relief and at end of each reporting
period since the case was filed;
(4) cash receipts, cash disbursements and
profitability of the debtor for the most recent period
and cumulatively since the date of the order for
relief;
(5) compliance with title 11, whether or not tax
returns and tax payments since the date of the order
for relief have been timely filed and made;
(6) all professional fees approved by the court in
the case for the most recent period and cumulatively
since the date of the order for relief (separately
reported, in for the professional fees incurred by or
on behalf of the debtor, between those that would have
been incurred absent a bankruptcy case and those not);
and
(7) plans of reorganization filed and confirmed and,
with respect thereto, by class, the recoveries of the
holders, expressed in aggregate dollar values and, in
the case of claims, as a percentage of total claims of
the class allowed.

* * * * * * *

PART III--COURT OFFICERS AND EMPLOYEES

* * * * * * *

CHAPTER 57--GENERAL PROVISIONS APPLICABLE TO COURT OFFICERS AND
EMPLOYEES

* * * * * * *

Sec. 960. Tax liability

(a) Any officers and agents conducting any business under
authority of a United States court shall be subject to all
Federal, State and local taxes applicable to such business to
the same extent as if it were conducted by an individual or
corporation.
(b) Such taxes shall be paid when due in the conduct of such
business unless--
(1) the tax is a property tax secured by a lien
against property that is abandoned within a reasonable
time after the lien attaches, by the trustee of a
bankruptcy estate, pursuant to section 554 of title 11;
or
(2) payment of the tax is excused under a specific
provision of title 11.
(c) In a case pending under chapter 7 of title 11, payment of
a tax may be deferred until final distribution is made under
section 726 of title 11 if--
(1) the tax was not incurred by a trustee duly
appointed under chapter 7 of title 11; or
(2) before the due date of the tax, the court has
made a finding of probable insufficiency of funds of
the estate to pay in full the administrative expenses
allowed under section 503(b) of title 11 that have the
same priority in distribution under section 726(b) of
title 11 as such tax.

* * * * * * *

PART IV--JURISDICTION AND VENUE

* * * * * * *

CHAPTER 83--COURTS OF APPEALS

* * * * * * *

Sec. 1293. Bankruptcy appeals

(a) The courts of appeals (other than the United States Court
of Appeals for the Federal Circuit) shall have jurisdiction of
appeals from the following:
(1) Final orders and judgments entered by bankruptcy
courts and district courts in cases under title 11, in
proceedings arising under title 11, and in proceedings
arising in or related to a case under title 11,
including final orders in proceedings regarding the
automatic stay of section 362 of title 11.
(2) Interlocutory orders entered by bankruptcy courts
and district courts granting, continuing, modifying,
refusing or dissolving injunctions, or refusing to
dissolve or modify injunctions in cases under title 11,
in proceedings arising under title 11, and in
proceedings arising in or related to a case under title
11, other than interlocutory orders in proceedings
regarding the automatic stay of section 362 of title
11.
(3) Interlocutory orders of bankruptcy courts and
district courts entered under section 1104(a) or
1121(d) of title 11, or the refusal to enter an order
under such section.
(4) An interlocutory order of a bankruptcy court or
district court entered in a case under title 11, in a
proceeding arising under title 11, or in a proceeding
arising in or related to a case under title 11, if the
court of appeals that would have jurisdiction of an
appeal of a final order entered in such case or such
proceeding permits, in its discretion, appeal to be
taken from such interlocutory order.
(b) Final decisions, judgments, orders, and decrees entered
by a bankruptcy appellate panel under subsection (b) of this
section.
(c)(1) The judicial council of a circuit may establish a
bankruptcy appellate panel composed of bankruptcy judges in the
circuit who are appointed by the judicial council, which panel
shall exercise the jurisdiction to review orders and judgments
of bankruptcy courts described in paragraphs (1)-(4) of
subsection (a) of this section unless--
(A) the appellant elects at the time of filing the
appeal; or
(B) any other party elects, not later than 10 days
after service of the notice of the appeal;
to have such jurisdiction exercised by the court of appeals.
(2) An appeal to be heard by a bankruptcy appellate panel
under this subsection (b) shall be heard by 3 members of the
bankruptcy appellate panel, provided that a member of such
panel may not hear an appeal originating in the district for
which such member is appointed or designated under section 152
of this title.
(3) If authorized by the Judicial Conference of the United
States, the judicial councils of 2 or more circuits may
establish a joint bankruptcy appellate panel.

* * * * * * *

CHAPTER 85--DISTRICT COURTS; JURISDICTION

Sec. 1334. Bankruptcy cases and proceedings

(a) * * *

* * * * * * *

(c)(1) [Nothing in] Except with respect to a case under
chapter 15 of title 11, nothing in this section prevents a
district court in the interest of justice, or in the interest
of comity with State courts or respect for State law, from
abstaining from hearing a particular proceeding arising under
title 11 or arising in or related to a case under title 11.

* * * * * * *

(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.

* * * * * * *

CHAPTER 87--DISTRICT COURTS; VENUE

Sec. 1408. Venue of cases under title 11

Except as provided in section 1410 of this title, a case
under title 11 may be commenced in the district court for the
district----
(1) in which the domicile, residence, principal place
of business in the United States, or principal assets
in the United States, of the person or entity that is
the subject of such case have been located for the one
hundred and eighty days immediately preceding such
commencement, or for a longer portion of such one-
hundred-and-eighty-day period than the domicile,
residence, or principal place of business, in the
United States, or principal assets in the United
States, of such person were located in any other
district; or
(2) in which there is pending a case under title 11
concerning such person's affiliate, general partner, or
partnership.

Sec. 1409. Venue of proceedings arising under title 11 or arising in or
related to cases under title 11

(a) * * *
(b) Except as provided in subsection (d) of this section, a
trustee in a case under title 11 may commence a proceeding
arising in or related to such case to recover a money judgment
of or property worth less than $1,000 or a consumer debt of
less than $5,000, or a nonconsumer debt against a noninsider of
less than $10,000, only in the district court for the district
in which the defendant resides.

* * * * * * *

CHAPTER 123--FEES AND COSTS

Sec. 1930. Bankruptcy fees

(a) [Notwithstanding section 1915 of this title, the] The
parties commencing a case under title 11 shall pay to the clerk
of the district court or the clerk of the bankruptcy court, if
one has been certified pursuant to section 156(b) of this
title, the following filing fees:
(1) * * *

* * * * * * *

(6) In addition to the filing fee paid to the clerk,
a quarterly fee shall be paid to the United States
trustee, for deposit in the Treasury, in each case
under chapter 11 of title 11 for each quarter
(including any fraction thereof) [until the case is
converted or dismissed, whichever occurs first]. [The]
Until the plan is confirmed or the case is converted
(whichever occurs first) the fee shall be $250 for each
quarter in which disbursements total less than $15,000;
$500 for each quarter in which disbursements total
$15,000 or more but less than $75,000; $750 for each
quarter in which disbursements total $75,000 or more
but less than $150,000; $1,250 for each quarter in
which disbursements total $150,000 or more but less
than $225,000; $1,500 for each quarter in which
disbursements total $225,000 or more but less than
[$300,000;] less than $300,000. Until the case is
converted, dismissed, or closed (whichever occurs first
and without regard to confirmation of the plan) the fee
shall be $3,750 for each quarter in which disbursements
total $300,000 or more but less than $1,000,000; $5,000
for each quarter in which disbursements total
$1,000,000 or more but less than $2,000,000; $7,500 for
each quarter in which disbursements total $2,000,000 or
more but less than $3,000,000; $8,000 for each quarter
in which disbursements total $3,000,000 or more but
less than $5,000,000; $10,000 for each quarter in which
disbursements total $5,000,000 or more. The fee shall
be payable on the last day of the calendar month
following the calendar quarter for which the fee is
owed.

* * * * * * *

(f)(1) Pursuant to procedures prescribed by the Judicial
Conference of the United States, the district court or the
bankruptcy court may waive the filing fee in a case under
chapter 7 of title 11 for an individual debtor who is unable to
pay such fee in installments.For purposes of this paragraph,
the term `filing fee' means the filing fee required by subsection (a),
or any other fee prescribed by the Judicial Conference under
subsections (b) and (c) that is payable to the clerk upon the
commencement of a case under chapter 7 of title 11.
(2) The district court or the bankruptcy court may also waive
for such debtors other fees prescribed pursuant to subsections
(b) and (c).
(3) This subsection does not restrict the district court or
the bankruptcy court from waiving, in accordance with Judicial
Conference policy, fees prescribed pursuant to such subsections
for other debtors and creditors.
----------

SECTION 302 OF THE BANKRUPTCY, JUDGES, UNITED STATES TRUSTEES, AND
FAMILY FARMER BANKRUPTCY ACT OF 1986

SEC. 302. EFFECTIVE DATES; APPLICATION OF AMENDMENTS.

(a) * * *

* * * * * * *

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

* * * * * * *

(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 (Sec. 201 to
231 of Pub. L. 99-554, see Tables for classification),
and section 1930(a)(6) of title 28 of the United States
Code (as added by section 117(4) of this Act), 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, [or October 1, 2002, whichever occurs first],
except that the amendment to section 105(a) of title
11, United States Code, shall become effective as of
the date of the enactment of the Federal Courts Study
Committee Implementation Act of 1990.

* * * * * * *

(F)(i) Subject to clause (ii), with respect to cases
under chapters 7, 11, 12, and 13 of title 11, United
States Code--
(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),
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 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), shall
not apply with respect to a case under chapter 7, 11,
12, or 13 of title 11, United States Code, 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, or
(II) a plan is confirmed under section 1129,
1225, or 1325 of such title,
[before October 1, 2003, or] the expiration of the 1-
year period beginning on the date such election becomes
effective[, whichever occurs first.]

* * * * * * *

----------

FEDERAL DEPOSIT INSURANCE ACT

* * * * * * *

Sec. 11. (a) * * *

* * * * * * *

(e) Provisions Relating to Contracts Entered Into Before
Appointment of Conservator or Receiver.--
(1) * * *

* * * * * * *

(8) Certain qualified financial contracts.--
(A) Rights of parties to contracts.--Subject
to [paragraph (10)] paragraphs (9) and (10) of
this subsection and notwithstanding any other
provision of this Act (other than subsection
(d)(9) of this section and section 13(e)), any
other Federal law, or the law of any State, no
person shall be stayed or prohibited from
exercising--
(i) any right [to cause the
termination or liquidation] such person
has to cause the termination,
liquidation, or acceleration of any
qualified financial contract with an
insured depository institution which
arises upon the appointment of the
Corporation as receiver for such
institution at any time after such
appointment;
[(ii) any right under any security
arrangement relating to any contract or
agreement described in clause (i); or]
(ii) any right under any security
agreement or arrangement or other
credit enhancement related to 1 or more
qualified financial contracts described
in clause (i);

* * * * * * *

(C) Certain transfers not avoidable.--
(i) In general.--Notwithstanding
paragraph (11), section 5242 of the
Revised Statutes of the United States
(12 U.S.C. 91) or any other Federal or
State law relating to the avoidance of
preferential or fraudulent transfers,
the Corporation, whether acting as such
or as conservator or receiver of an
insured depository institution, may not
avoid any transfer of money or other
property in connection with any
qualified financial contract with an
insured depository institution.

* * * * * * *

(D) Certain contracts and agreements
defined.--For purposes of this subsection--
(i) Qualified financial contract.--
The term ``qualified financial
contract'' means any securities
contract, commodity contract, forward
contract, repurchase agreement, swap
agreement, and any similar agreement
that the Corporation determines by
regulation, resolution or order to be a
qualified financial contract for
purposes of this paragraph.
[(ii) Securities contract.--The term
``securities contract''--
[(I) has the meaning given to
such term in section 741 of
title 11, United States Code,
except that the term
``security'' (as used in such
section) shall be deemed to
include any mortgage loan, any
mortgage-related security (as
defined in section 3(a)(41) of
the Securities Exchange Act of
1934), and any interest in any
mortgage loan or mortgage-
related security; and
[(II) does not include any
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
participation within the
meaning of such term.
[(iii) Commodity contract.--The term
``commodity contract'' has the meaning
given to such term in section 761 of
title 11, United States Code.
[(iv) Forward contract.--The term
``forward contract'' has the meaning
given to such term in section 101 of
title 11, United States Code.
[(v) Repurchase agreement.--The term
``repurchase agreement''--
[(I) has the meaning given to
such term in section 101 of
title 11, the United States
Code, except that the items (as
described in such section)
which may be subject to any
such agreement shall be deemed
to include mortgage-related
securities (as such term is
defined in section 3(a)(41) of
the Securities Exchange Act of
1934), any mortgage loan, and
any interest in any mortgage
loan; and
[(II) does not include any
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
participation within the
meaning of such term.
[(vi) Swap agreement.--The term
``swap agreement''--
[(I) means any agreement,
including the terms and
conditions incorporated by
reference in any such
agreement, which is a rate swap
agreement, basis swap,
commodity swap, forward rate
agreement, interest rate
future, interest rate option
purchased, forward foreign
exchange agreement, rate cap
agreement, rate floor
agreement, rate collar
agreement, currency swap
agreement, cross-currency rate
swap agreement, currency
future, or currency option
purchased or any other similar
agreement, and
[(II) includes any
combination of such agreements
and any option to enter into
any such agreement.
[(vii) Treatment of master agreement
as 1 swap agreement.--Any master
agreement for any agreements described
in clause (vi)(I) together with all
supplements to such master agreement
shall be treated as 1 swap agreement.
[(viii) Transfer.--The term
``transfer'' has the meaning given to
such term in section 101 of title 11,
United States Code.]
(ii) Securities contract.--The term
``securities contract''--
(I) means a contract for the
purchase, sale, or loan of a
security, a certificate of
deposit, a mortgage loan, or
any interest in a mortgage
loan, a group or index of
securities, certificates of
deposit, or mortgage loans or
interests therein (including
any interest therein or based
on the value thereof) or any
option on any of the foregoing,
including any option to
purchase or sell any such
security, certificate of
deposit, loan, interest, group
or index, or option;
(II) does not include any
purchase, sale, or repurchase
obligation under a
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
agreement within the meaning of
such term;
(III) means any option
entered into on a national
securities exchange relating to
foreign currencies;
(IV) means the guarantee by
or to any securities clearing
agency of any settlement of
cash, securities, certificates
of deposit, mortgage loans or
interests therein, group or
index of securities,
certificates of deposit, or
mortgage loans or interests
therein (including any interest
therein or based on the value
thereof) or option on any of
the foregoing, including any
option to purchase or sell any
such security, certificate of
deposit, loan, interest, group
or index or option;
(V) means any margin loan;
(VI) means any other
agreement or transaction that
is similar to any agreement or
transaction referred to in this
clause;
(VII) means any combination
of the agreements or
transactions referred to in
this clause;
(VIII) means any option to
enter into any agreement or
transaction referred to in this
clause;
(IX) means a master agreement
that provides for an agreement
or transaction referred to in
subclause (I), (III), (IV),
(V), (VI), (VII), or (VIII),
together with all supplements
to any such master agreement,
without regard to whether the
master agreement provides for
an agreement or transaction
that is not a securities
contract under this clause,
except that the master
agreement shall be considered
to be a securities contract
under this clause only with
respect to each agreement or
transaction under the master
agreement that is referred to
in subclause (I), (III), (IV),
(V), (VI), (VII), or (VIII);
and
(X) means any security
agreement or arrangement or
other credit enhancement
related to any agreement or
transaction referred to in this
clause.
(iii) Commodity contract.--The term
``commodity contract'' means--
(I) with respect to a futures
commission merchant, a contract
for the purchase or sale of a
commodity for future delivery
on, or subject to the rules of,
a contract market or board of
trade;
(II) with respect to a
foreign futures commission
merchant, a foreign future;
(III) with respect to a
leverage transaction merchant,
a leverage transaction;
(IV) with respect to a
clearing organization, a
contract for the purchase or
sale of a commodity for future
delivery on, or subject to the
rules of, a contract market or
board of trade that is cleared
by such clearing organization,
or commodity option traded on,
or subject to the rules of, a
contract market or board of
trade that is cleared by such
clearing organization;
(V) with respect to a
commodity options dealer, a
commodity option;
(VI) any other agreement or
transaction that is similar to
any agreement or transaction
referred to in this clause;
(VII) any combination of the
agreements or transactions
referred to in this clause;
(VIII) any option to enter
into any agreement or
transaction referred to in this
clause;
(IX) a master agreement that
provides for an agreement or
transaction referred to in
subclause (I), (II), (III),
(IV), (V), (VI), (VII), or
(VIII), together with all
supplements to any such master
agreement, without regard to
whether the master agreement
provides for an agreement or
transaction that is not a
commodity contract under this
clause, except that the master
agreement shall be considered
to be a commodity contract
under this clause only with
respect to each agreement or
transaction under the master
agreement that is referred to
in subclause (I), (II), (III),
(IV), (V), (VI), (VII), or
(VIII); or
(X) a security agreement or
arrangement or other credit
enhancement related to any
agreement or transaction
referred to in this clause.
(iv) Forward contract.--The term
``forward contract'' means--
(I) a contract (other than a
commodity contract) for the
purchase, sale, or transfer of
a commodity or any similar
good, article, service, right,
or interest which is presently
or in the future becomes the
subject of dealing in the
forward contract trade, or
product or byproduct thereof,
with a maturity date more than
2 days after the date the
contract is entered into,
including, but not limited to,
a repurchase agreement, reverse
repurchase agreement,
consignment, lease, swap, hedge
transaction, deposit, loan,
option, allocated transaction,
unallocated transaction, or any
other similar agreement;
(II) any combination of
agreements or transactions
referred to in subclauses (I)
and (III);
(III) any option to enter
into any agreement or
transaction referred to in
subclause (I) or (II);
(IV) a master agreement that
provides for an agreement or
transaction referred to in
subclauses (I), (II), or (III),
together with all supplements
to any such master agreement,
without regard to whether the
master agreement provides for
an agreement or transaction
that is not a forward contract
under this clause, except that
the master agreement shall be
considered to be a forward
contract under this clause only
with respect to each agreement
or transaction under the master
agreement that is referred to
in subclause (I), (II), or
(III); or
(V) a security agreement or
arrangement or other credit
enhancement related to any
agreement or transaction
referred to in subclause (I),
(II), (III), or (IV).
(v) Repurchase agreement.--The term
``repurchase agreement'' (which
definition also applies to a reverse
repurchase agreement)--
(I) mean an agreement,
including related terms, which
provides for the transfer of 1
or more certificates of
deposit, mortgage-related
securities (as such term is
defined in the Securities
Exchange Act of 1934), mortgage
loans, interests in mortgage-
related securities or mortgage
loans, eligible bankers'
acceptances, qualified foreign
government securities or
securities that are direct
obligations of, or that are
fully guaranteed by, the United
States or any agency of the
United States against the
transfer of funds by the
transferee of such certificates
of deposit, eligible bankers'
acceptances, securities, loans,
or interests with a
simultaneous agreement by such
transferee to transfer to the
transferor thereof certificates
of deposit, eligible bankers'
acceptances, securities, loans,
or interests as described
above, at a date certain not
later than 1 year after such
transfers or on demand, against
the transfer of funds, or any
other similar agreement;
(II) does not include any
repurchase obligation under a
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
participation within the
meaning of such term;
(III) means any combination
of agreements or transactions
referred to in subclauses (I)
and (IV);
(IV) means any option to
enter into any agreement or
transaction referred to in
subclause (I) or (III);
(V) means a master agreement
that provides for an agreement
or transaction referred to in
subclause (I), (III), or (IV),
together with all supplements
to any such master agreement,
without regard to whether the
master agreement provides for
an agreement or transaction
that is not a repurchase
agreement under this clause,
except that the master
agreement shall be considered
to be a repurchase agreement
under this subclause only with
respect to each agreement or
transaction under the master
agreement that is referred to
in subclause (I), (III), or
(IV); and
(VI) means a security
agreement or arrangement or
other credit enhancement
related to any agreement or
transaction referred to in
subclause (I), (III), (IV), or
(V).
For purposes of this clause, the term
``qualified foreign government
security'' means a security that is a
direct obligation of, or that is fully
guaranteed by, the central government
of a member of the Organization for
Economic Cooperation and Development
(as determined by regulation or order
adopted by the appropriate Federal
banking authority).
(vi) Swap agreement.--The term ``swap
agreement'' means--
(I) any agreement, including
the terms and conditions
incorporated by reference in
any such agreement, which is an
interest rate swap, option,
future, or forward agreement,
including a rate floor, rate
cap, rate collar, cross-
currency rate swap, and basis
swap; a spot, same day-
tomorrow, tomorrow-next,
forward, or other foreign
exchange or precious metals
agreement; a currency swap,
option, future, or forward
agreement; an equity index or
equity swap, option, future, or
forward agreement; a debt index
or debt swap, option, future,
or forward agreement; a credit
spread or credit swap, option,
future, or forward agreement; a
commodity index or commodity
swap, option, future, or
forward agreement;
(II) any agreement or
transaction similar to any
other agreement or transaction
referred to in this clause that
is presently, or in the future
becomes, regularly entered into
in the swap market (including
terms and conditions
incorporated by reference in
such agreement) and that is a
forward, swap, future, or
option on 1 or more rates,
currencies, commodities, equity
securities or other equity
instruments, debt securities or
other debt instruments, or
economic indices or measures of
economic risk or value;
(III) any combination of
agreements or transactions
referred to in this clause;
(IV) any option to enter into
any agreement or transaction
referred to in this clause;
(V) a master agreement that
provides for an agreement or
transaction referred to in
subclause (I), (II), (III), or
(IV), together with all
supplements to any such master
agreement, without regard to
whether the master agreement
contains an agreement or
transaction that is not a swap
agreement under this clause,
except that the master
agreement shall be considered
to be a swap agreement under
this clause only with respect
to each agreement or
transaction under the master
agreement that is referred to
in subclause (I), (II), (III),
or (IV); and
(VI) any security agreement
or arrangement or other credit
enhancement related to any
agreements or transactions
referred to in subparagraph
(I), (II), (III), or (IV).
Such term is applicable for purposes of
this title only and shall not be
construed or applied so as to challenge
or affect the characterization,
definition, or treatment of any swap
agreement under any other statute,
regulation, or rule, including the
Securities Act of 1933, the Securities
Exchange Act of 1934, the PublicUtility
Holding Company Act of 1935, the Trust Indenture Act of 1939, the
Investment Company Act of 1940, the Investment Advisers Act of 1940,
the Securities Investor Protection Act of 1970, the Commodity Exchange
Act, and the regulations promulgated by the Securities and Exchange
Commission or the Commodity Futures Trading Commission.
(vii) Treatment of master agreement
as 1 agreement.--Any master agreement
for any contract or agreement described
in any preceding clause of this
subparagraph (or any master agreement
for such master agreement or
agreements), together with all
supplements to such master agreement,
shall be treated as a single agreement
and a single qualified financial
contract. If a master agreement
contains provisions relating to
agreements or transactions that are not
themselves qualified financial
contracts, the master agreement shall
be deemed to be a qualified financial
contract only with respect to those
transactions that are themselves
qualified financial contracts.
(viii) Transfer.--The term
``transfer'' means every mode, direct
or indirect, absolute or conditional,
voluntary or involuntary, of disposing
of or parting with property or with an
interest in property, including
retention of title as a security
interest and foreclosure of the
depository institutions's equity of
redemption.
(E) Certain protections in event of
appointment of conservator.--Notwithstanding
any other provision of this Act ([other than
paragraph (12) of this subsection, subsection
(d)(9)] other than subsections (d)(9) and
(e)(10) of this section, and section 13(e) of
this Act), any other Federal law, or the law of
any State, no person shall be stayed or
prohibited from exercising--
(i) * * *
[(ii) any right under any security
arrangement relating to such qualified
financial contracts; or]
(ii) any right under any security
agreement or arrangement or other
credit enhancement related to 1 or more
qualified financial contracts described
in clause (i);

* * * * * * *

(F) Clarification.--No provision of law shall
be construed as limiting the right or power of
the Corporation, or authorizing any court or
agency to limit or delay, in any manner, the
right or power of the Corporation to transfer
any qualified financial contract in accordance
with paragraphs (9) and (10) of this subsection
or to disaffirm or repudiate any such contract
in accordance with subsection (e)(1) of this
section.
(G) Walkaway clauses not effective.--
(i) In general.--Notwithstanding the
provisions of subparagraphs (A) and
(E), and sections 403 and 404 of the
Federal Deposit Insurance Corporation
Improvement Act of 1991, no walkaway
clause shall be enforceable in a
qualified financial contract of an
insured depository institution in
default.
(ii) Walkaway clause defined.--For
purposes of this subparagraph, the term
``walkaway clause'' means a provision
in a qualified financial contract that,
after calculation of a value of a
party's position or an amount due to or
from 1 of the parties in accordance
with its terms upon termination,
liquidation, or acceleration of the
qualified financial contract, either
does not create a payment obligation of
a party or extinguishes a payment
obligation of a party in whole or in
part solely because of such party's
status as a nondefaulting party.
(H) Recordkeeping requirements.--The
Corporation, in consultation with the
appropriate Federal banking agencies, may
prescribe regulations requiring more detailed
recordkeeping with respect to qualified
financial contracts (including market
valuations) by insured depository institutions.
[(9) Transfer of qualified financial contracts.--In
making any transfer of assets or liabilities of a
depository institution in default which includes any
qualified financial contract, the conservator or
receiver for such depository institution shall either--
[(A) transfer to 1 depository institution
(other than a depository institution in
default)--
[(i) all qualified financial
contracts between--
[(I) any person or any
affiliate of such person; and
[(II) the depository
institution in default;
[(ii) all claims of such person or
any affiliate of such person against
such depository institution under any
such contract (other than any claim
which, under the terms of any such
contract, is subordinated to the claims
of general unsecured creditors of such
institution);
[(iii) all claims of such depository
institution against such person or any
affiliate of such person under any such
contract; and
[(iv) all property securing any claim
described in clause (ii) or (iii) under
any such contract; or
[(B) transfer none of the financial
contracts, claims, or property referred to in
subparagraph (A) (with respect to such person
and any affiliate of such person).]
(9) Transfer of qualified financial contracts.--
(A) In general.--In making any transfer of
assets or liabilities of a depository
institution in default which includes any
qualified financial contract, the conservator
or receiver for such depository institution
shall either--
(i) transfer to 1 financial
institution, other than a financial
institution for which a conservator,
receiver, trustee in bankruptcy, or
other legal custodian has been
appointed or which is otherwise the
subject of a bankruptcy or insolvency
proceeding--
(I) all qualified financial
contracts between any person or
any affiliate of such person
and the depository institution
in default;
(II) all claims of such
person or any affiliate of such
person against such depository
institution under any such
contract (other than any claim
which, under the terms of any
such contract, is subordinated
to the claims of general
unsecured creditors of such
institution);
(III) all claims of such
depository institution against
such person or any affiliate of
such person under any such
contract; and
(IV) all property securing or
any other credit enhancement
for any contract described in
subclause (I) or any claim
described in subclause (II) or
(III) under any such contract;
or
(ii) transfer none of the qualified
financial contracts, claims, property
or other credit enhancement referred to
in clause (i) (with respect to such
person and any affiliate of such
person).
(B) Transfer to foreign bank, foreign
financial institution, or branch or agency of a
foreign bank or financial institution.--In
transferring any qualified financial contracts
and related claims and property pursuant to
subparagraph (A)(i), the conservator or
receiver for such depository institution shall
not make such transfer to a foreign bank,
financial institution organized under the laws
of a foreign country, or a branch or agency of
a foreign bank or financial institution unless,
under the law applicable to such bank,
financial institution, branch or agency, to the
qualified financial contracts, and to any
netting contract, any security agreement or
arrangement or other credit enhancement related
to 1 or more qualified financial contracts, the
contractual rights of the parties to such
qualified financial contracts, netting
contracts, security agreements or arrangements,
or other credit enhancements are enforceable
substantially to the same extent as permitted
under this section.
(C) Transfer of contracts subject to the
rules of a clearing organization.--In the event
that a conservator or receiver transfers any
qualified financial contract and related
claims, property and credit enhancements
pursuant to subparagraph (A)(i) and such
contract is subject to the rules of a clearing
organization, the clearing organization shall
not be required to accept the transferee as a
member by virtue of the transfer.
(D) Definition.--For purposes of this
section, the term ``financial institution''
means a broker or dealer, a depository
institution, a futures commission merchant, or
any other institution as determined by the
Corporation by regulation to be a financial
institution.
(10) Notification of transfer.--
(A) In general.--If--
(i) the conservator or receiver for
an insured depository institution in
default makes any transfer of the
assets and liabilities of such
institution; and
(ii) the transfer includes any
qualified financial contract,
[the conservator or receiver shall use such
conservator's or receiver's best efforts to
notify any person who is a party to any such
contract of such transfer by 12:00, noon (local
time) on the business day following such
transfer.] the conservator or receiver shall
notify any person who is a party to any such
contract of such transfer by 5:00 p.m. (eastern
time) on the business day following the date of
the appointment of the receiver, in the case of
a receivership, or the business day following
such transfer, in the case of a
conservatorship.
(B) Certain rights not enforceable.--
(i) Receivership.--A person who is a
party to a qualified financial contract
with an insured depository institution
may not exercise any right such person
has to terminate, liquidate, or net
such contract under paragraph (8)(A) or
section 403 or 404 of the Federal
Deposit Insurance Corporation
Improvement Act of 1991 solely by
reason of or incidental to the
appointment of a receiver for the
depository institution (or the
insolvency or financial condition of
the depository institution for which
the receiver has been appointed)--
(I) until 5:00 p.m. (eastern
time) on the business day
following the date of the
appointment of the receiver; or
(II) after the person has
received notice that the
contract has been transferred
pursuant to paragraph (9)(A).
(ii) Conservatorship.--A person who
is a party to a qualified financial
contract with an insured depository
institution may not exercise any right
such person has to terminate,
liquidate, or net such contract under
paragraph (8)(E) or sections 403 or 404
of the Federal Deposit Insurance
Corporation Improvement Act of 1991,
solely by reason of or incidental to
the appointment of a conservator for
the depository institution (or the
insolvency or financial condition of
the depository institution for which
the conservator has been appointed).
(iii) Notice.--For purposes of this
subsection, the Corporation as receiver
or conservator of an insured depository
institution shall be deemed to have
notified a person who is a party to a
qualified financial contract with such
depository institution if the
Corporation has taken steps reasonably
calculated to provide notice to such
person by the time specified in
subparagraph (A) of this subsection.
(C) Treatment of bridge banks.--The following
institutions shall not be considered a
financial institution for which a conservator,
receiver, trustee in bankruptcy, orother legal
custodian has been appointed or which is otherwise the subject of a
bankruptcy or insolvency proceeding for purposes of subsection (e)(9)--
(i) a bridge bank; or
(ii) a depository institution
organized by the Corporation, for which
a conservator is appointed either--
(I) immediately upon the
organization of the
institution; or
(II) at the time of a
purchase and assumption
transaction between such
institution and the Corporation
as receiver for a depository
institution in default.
[(B)] (D) Business day defined.--For purposes
of this paragraph, the term ``business day''
means any day other than any Saturday, Sunday,
or any day on which either the New York Stock
Exchange or the Federal Reserve Bank of New
York is closed.
(11) Disaffirmance or repudiation of qualified
financial contracts.--In exercising the rights of
disaffirmance or repudiation of a conservator or
receiver with respect to any qualified financial
contract to which an insured depository institution is
a party, the conservator or receiver for such
institution shall either--
(A) disaffirm or repudiate all qualified
financial contracts between--
(i) any person or any affiliate of
such person; and
(ii) the depository institution in
default; or
(B) disaffirm or repudiate none of the
qualified financial contracts referred to in
subparagraph (A) (with respect to such person
or any affiliate of such person).
[(11)] (12) Certain security interests not
avoidable.--No provision of this subsection shall be
construed as permitting the avoidance of any legally
enforceable or perfected security interest in any of
the assets of any depository institution except where
such an interest is taken in contemplation of the
institution's insolvency or with the intent to hinder,
delay, or defraud the institution or the creditors of
such institution.
[(12)] (13) Authority to enforce contracts.--
(A) In general.--The conservator or receiver
may enforce any contract, other than a
director's or officer's liability insurance
contract or a depository institution bond,
entered into by the depository institution
notwithstanding any provision of the contract
providing for termination, default,
acceleration, or exercise of rights upon, or
solely by reason of, insolvency or the
appointment or the exercise of rights or powers
of a conservator or receiver.

* * * * * * *

[(13)] (14) Exception for federal reserve and federal
home loan banks.--No provision of this subsection shall
apply with respect to--
(A) any extension of credit from any Federal
home loan bank or Federal Reserve bank to any
insured depository institution; or
(B) any security interest in the assets of
the institution securing any such extension of
credit.
[(14)] (15) Selling credit card accounts
receivable.--
(A) * * *

* * * * * * *

[(15)] (16) Certain credit card customer lists
protected.--
(A) * * *

* * * * * * *

Sec. 13. (a) * * *

* * * * * * *

(e) Agreements Against Interests of Corporation.--
(1) * * *
[(2) Public deposits.--An agreement to provide for
the lawful collateralization of deposits of a Federal,
State, or local governmental entity or of any depositor
referred to in section 11(a)(2) shall not be deemed to
be invalid pursuant to paragraph (1)(B) solely because
such agreement was not executed contemporaneously with
the acquisition of the collateral or with any changes
in the collateral made in accordance with such
agreement.]
(2) Exemptions from contemporaneous execution
requirement.--An agreement to provide for the lawful
collateralization of--
(A) deposits of, or other credit extension
by, a Federal, State, or local governmental
entity, or of any depositor referred to in
section 11(a)(2), including an agreement to
provide collateral in lieu of a surety bond;
(B) bankruptcy estate funds pursuant to
section 345(b)(2) of title 11, United States
Code;
(C) extensions of credit, including any
overdraft, from a Federal reserve bank or
Federal home loan bank; or
(D) 1 or more qualified financial contracts,
as defined in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph
(1)(B) solely because such agreement was not executed
contemporaneously with the acquisition of the
collateral or because of pledges, delivery, or
substitution of the collateral made in accordance with
such agreement.

* * * * * * *

----------

SECTION 5 OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970

SEC. 5. PROTECTION OF CUSTOMERS.

(a) * * *

* * * * * * *

(b) Court Action.--
(1) * * *
(2) Jurisdiction and powers of court.--
(A) * * *

* * * * * * *

(C) Exception from stay.--
(i) Notwithstanding section 362 of
title 11, United States Code, neither
the filing of an application under
subsection (a)(3) nor any order or
decree obtained by Securities Investor
Protection Corporation from the court
shall operate as a stay of any
contractual rights of a creditor to
liquidate, terminate, or accelerate a
securities contract, commodity
contract, forward contract, repurchase
agreement, swap agreement, or master
netting agreement, each as defined in
title 11, to offset or net termination
values, payment amounts, or other
transfer obligations arising under or
in connection with 1 or more of such
contracts or agreements, or to
foreclose on any cash collateral
pledged by the debtor whether or not
with respect to 1 or more of such
contracts or agreements.
(ii) Notwithstanding clause (i), such
application, order, or decree may
operate as a stay of the foreclosure on
securities collateral pledged by the
debtor, whether or not with respect to
1 or more of such contracts or
agreements, securities sold by the
debtor under a repurchase agreement or
securities lent under a securities
lending agreement.
(iii) As used in this section, the
term ``contractual right'' includes a
right set forth in a rule or bylaw of a
national securities exchange, a
national securities association, or a
securities clearing agency, a right set
forth in a bylaw of a clearing
organization or contract market or in a
resolution of the governing board
thereof, and a right, whether or not in
writing, arising under common law,
under law merchant, or by reason of
normal business practice.
----------

SECTION 16 OF THE FEDERAL RESERVE ACT

Sec. 16. Federal Reserve notes, to be issued at the
discretion of the Board of Governors of the Federal Reserve
System for the purpose of making advances to Federal Reserve
banks through the Federal reserve agents as hereinafter set
forth and for no other purpose, are hereby authorized. The said
notes shall be obligations of the United States and shall be
receivable by all national and member banks and Federal Reserve
banks and for all taxes, customs, and other public dues. They
shall be redeemed in lawful money on demand at the Treasury
Department of the United States, in the city of Washington,
District of Columbia, or at any Federal Reserve bank. (12
U.S.C. 411)
Any Federal Reserve bank may make application to the local
Federal Reserve agent for such amount of the Federal Reserve
notes hereinbefore provided for as it may require. Such
application shall be accompanied with a tender to the local
Federal Reserve agent of collateral in amount equal to the sum
of the Federal Reserve notes thus applied for and issued
pursuant to such application. The collateral security thus
offered shall be notes, drafts, bills of exchange, or
[acceptances acquired under the provisions of section 13 of
this Act] acceptances acquired under section 10A, 10B, 13, or
13A of this Act, or bills of exchange endorsed by a member bank
of any Federal Reserve district and purchased under the
provisions of section 14 of this Act, or bankers' acceptances
purchased under the provisions of said section 14, or gold
certificates, or Special Drawing Right certificates, or any
obligations which are direct obligations of, or are fully
guaranteed as to principal and interest by, the United States
or any agency thereof, or assets that Federal Reserve banks may
purchase or hold under section 14 of this Act. In no event
shall such collateral security be less than the amount of
Federal Reserve notes applied for. The Federal Reserve agent
shall each day notify the Board of Governors of the Federal
Reserve System of all issues and withdrawals of Federal Reserve
notes to and by the Federal Reserve bank to which he is
accredited. The said Board of Governors of the Federal Reserve
System may at any time call upon a Federal Reserve bank for
additional security to protect the Federal Reserve notes issued
to it. Collateral shall not be required for Federal Reserve
notes which are held in the vaults of Federal Reserve banks.

* * * * * * *

----------

SECTION 156 OF TITLE 18, UNITED STATES CODE

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.

* * * * * * *

ADDITIONAL VIEWS

An overwhelming majority of Americans believe it is too
easy to declare bankruptcy and that individuals should not be
allowed to erase their debt in bankruptcy if they are able to
repay at least a portion of what they owe. The Bankruptcy
Reform Act of 1999 would restore some degree of personal
responsibility, fairness, and accountability to our nation's
bankruptcy laws. The bill ends some of the abuses that have
allowed individuals to file bankruptcy and walk away from their
debts, even though many are able to repay a portion of what
they owe.
The number of consumer bankruptcy filings hit a record high
of 1,442,549 million in 1998--a 400 percent increase since 1980
and an 84.2 percent increase since 1990--erasing some $40
billion in consumer debt. Total filings in 1998 increased by
2.7 percent from 1997, when bankruptcies totaled 1,404,145.
Those losses were borne by businesses and passed on to the
consumer, costing every household that pays its bills $400 in
hidden taxes.
In the first six months of 1997, Chapter 13 bankruptcies in
Georgia rose 11 percent to a total of 10,576. Chapter 7
liquidations' filings rose even higher up 26 percent to a total
of 6,789 in the same period. Georgia had the fifth highest
number of bankruptcies in the entire nation. These numbers
clearly illustrate why I cosponsored and fully supported H.R.
833.
The bankruptcy debate is really about nothing more than
personal responsibility. Will we continue to allow a handful of
individuals to abuse the process, by running high debts and
then hiding their resources behind lenient bankruptcy laws, or
will we require individuals to make good on their promises when
they have the ability to do so? The Bankruptcy Reform Act
changes these dynamics by initiating comprehensive reforms
pertaining to consumer and business bankruptcy law and
practice. The Act includes provisions regarding the treatment
of tax claims and enhanced data collection regarding annual
bankruptcy filings.
When we allow the bankruptcy process to be abused, everyone
loses. Small businesses are forced to close, employers hire
fewer employees, new retail establishments do not open, and we
are all forced to pay higher prices at the cash register. The
Bankruptcy Reform Act of 1999 will help remedy this problem. In
the 105th Congress a Conference Report on Bankruptcy Reform
passed by a vote of 300 to 125. Unfortunately, by a combination
of factors, Congress was not able to send this comprehensive
bankruptcy reform to the President before the election end of
the session.
Due to a personal medical reason, I was absent on final
passage in the Judiciary Committee on the vote on H.R. 833.
However, my strong cosponsorship of this legislation is a clear
indication of my belief it is time to reform our bankruptcy
laws. I will continue to support this important bill as it
moves onto the floor to be considered by the entire House.

Bob Barr.

ADDITIONAL VIEWS

While some of us support H.R. 833 and others oppose it, we
are united in our disappointment at the committee's refusal to
put an end to one of the most notorious abuses of the
bankruptcy system--the ``financial planning'' strategy by which
debtors purchase expensive homes in states which allow an
unlimited homestead exemption under 11 U.S.C.
Sec. 522(b)(2)(A), declare bankruptcy, and continue to enjoy a
life of luxury while their creditors get little or nothing.
During the subcommittee markup, Mr. Delahunt offered an
amendment to eliminate this abuse--and implement a key
recommendation of the National Bankruptcy Review Commission
¹--by placing a $100,000 national cap on the
homestead exemption.² Mr. Watt proposed that the cap
be set at $250,000, and with this modification the Delahunt
amendment was agreed to by a vote of 10-2.
---------------------------------------------------------------------------
\1\ Recommendation 1.2.2 (Homestead Property), Nat'l Bankr. Rev.
Comm'n, Final Report: Bankruptcy: The Next Twenty Years 125 (1997).
\2\ The Delahunt amendment limited the aggregate amount that a
debtor may exempt 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. It protected farm families by specifying that the cap does not
apply to an exemption claimed for the principal residence of a family
farmer.
During the 105th Congress, the committee agreed by voice vote to an
identical amendment offered by Mr. Delahunt to H.R. 3150. However,
during floor consideration, the House agreed, by a vote of 222-204, to
an amendment by Messrs. Gekas, Smith of Texas and McCollum, which
eliminated the Delahunt provision and put in its place the residency
requirement retained in section 127 of the present bill. That provision
reduces the value of an interest in exempt property ``to the extent
such value is attributable to any portion of any property that the
debtor disposed of in the 730-day period ending on the date of the
filing of the petition, with the intent to hinder, delay, or defraud a
creditor.''
---------------------------------------------------------------------------
At full committee, Ms. Jackson-Lee offered an amendment to
negate the Delahunt-Watt provision (section 150 of the
subcommittee bill) to the extent that it purports to ``modify
or supersede any provision of State constitutional law that
prohibits forced sale of a homestead for the payment of
debts.'' Mr. Bryant offered a substitute amendment providing
that the cap shall not apply in states which ``opt out'' by
enacting a subsequent statute. After extensive debate, the
Bryant amendment was agreed to by a vote of 18-15.
We opposed the Bryant amendment because it runs counter to
the stated goals of bankruptcy reform, perpetuating an abuse so
flagrant and notorious as to bring the entire system into
disrepute. Proponents of the ``means test'' and other
provisions included in H.R. 833 seek to eliminate what some
have characterized as the use of the Bankruptcy Code as a
``financial planning tool.'' Yet if we are truly serious about
reform, we cannot confine our attention to those at the bottom
of the economic ladder.
Rather, we should start with individuals like Marvin
Warner, a former ambassador to Switzerland and the owner of a
failed Ohio Savings & Loan, who paid off only a fraction of
$300 million in bankruptcy claims while keeping his multi-
million-dollar horse ranch near Ocala, Florida.³
---------------------------------------------------------------------------
\3\ Larry Rohter, ``Rich Debtors Finding Shelter Under a Populist
Florida Law,'' N.Y. Times, July 25, 1993, at A1.
---------------------------------------------------------------------------
Or Martin A. Siegel, a former Wall Street investment banker
convicted of insider trading. While facing a $2.75 billion
civil suit, he bought a $3.25 million, 7,000-square-foot
beachfront home in Ponte Vedra Beach.⁴
---------------------------------------------------------------------------
\4\ Id.
---------------------------------------------------------------------------
Or former baseball commissioner Bowie Kuhn, whose Manhattan
law firm went into bankruptcy. After creditors seized his
weekend house in the Hamptons and were about to attach his $1.2
million home in Ridgewood, New Jersey, Kuhn acquired a million-
dollar house in Florida with five bedrooms and five
baths.⁵
---------------------------------------------------------------------------
\5\ Id.
---------------------------------------------------------------------------
Or Dr. Carlos Garcia-Rivera, a Miami physician with no
malpractice insurance, who was named in four separate
malpractice actions, filed for bankruptcy protection, and kept
a $500,000 home with a 100-foot swimming pool.⁶
---------------------------------------------------------------------------
\6\ David J. Morrow, ``Key to a Cozier Bankruptcy: Location,
Location, Location,'' N.Y. Times, Jan. 7, 1998, at A1.
---------------------------------------------------------------------------
Or the Dallas developer, Talmadge Wayne Tinsley, who filed
under chapter 7 after incurring $60 million in debts. Tinsley
objected to the Texas law that permitted him to keep only one
acre of his $3.5 million, 3.1-acre magnolia-lined estate. But
that acre included a five-bedroom, six-and-a-half-bath mansion
with two studies, a pool and a guest house.⁷
---------------------------------------------------------------------------
\7\ Id.
---------------------------------------------------------------------------
Or the movie actor, Burt Reynolds, who declared bankruptcy
in 1996, claiming more than $10 million in debt. Reynolds kept
a $2.5 million home--appropriately named ``Valhalla''--while
his creditors received 20 cents on the dollar.⁸
---------------------------------------------------------------------------
\8\ Eliot Kleinberg, ``Reynolds Gets Out from under Bankruptcy,''
The Palm Beach Post, Oct. 8, 1998.
---------------------------------------------------------------------------
The situation in Florida has become so notorious that one
Miami bankruptcy judge told the New York Times, ``You could
shelter the Taj Mahal in this state and no one could do
anything about it.'' ⁹
---------------------------------------------------------------------------
\9\ Judge A. Jay Cristol, quoted in Rohter, supra note 3.
---------------------------------------------------------------------------
This is a national problem that demands a uniform solution.
Without a nationwide cap, debtors who live in the 45 states
that cap the exemption at less than $250,000 are free to
relocate to one of the five so-called ``debtors' paradises''
that have no cap at all.¹⁰
---------------------------------------------------------------------------
\10\ The following are the state exemption levels (per household,
i.e., for joint debtors with two dependents), as of Fall 1997. In 18
jurisdictions, the debtor may choose between the state exemption and a
Federal exemption (currently $16,150 per debtor):

Unlimited: Florida, Iowa, Kansas, South Dakota, Texas
$200,000: Minnesota
$125,000: Nevada
$100,000: Arizona, Massachusetts
$80,000: North Dakota
$75,000: California, Connecticut, Mississippi
$60,000: New Mexico
$54,000: Alaska
$50,000: Idaho
$40,000: Montana, Wisconsin, Wyoming
$33,000: Oregon
$30,000: Colorado, Hawaii, New Hampshire, Vermont, Virgin Islands,
Washington
$20,000: New York
$15,000: Indiana, Louisiana
$12,500: Maine
$10,000: Alabama, Georgia, Nebraska, North Carolina, South
Carolina, Utah
$8,000: Missouri
$7,500: Illinois, Tennessee, West Virginia
$6,500: Virginia
$5,500: Maryland
$5,000: Delaware, Kentucky, Ohio, Oklahoma
$3,500: Michigan
$2,500: Arkansas
$1,500: Puerto Rico
$0: District of Columbia, New Jersey, Pennsylvania, Rhode Island

Source: Nat'l Bankr. Rev. Comm'n, supra note 1 at 299-301; Morrow,
supra note 6, at D3.
---------------------------------------------------------------------------
Some have suggested that a Federal cap is a ``violation of
states' rights.'' ¹¹ Yet the Bankruptcy Code is a
Federal statutory scheme, and the system it envisions is one
which is administered by the Federal courts. To defer to the
states on such a matter is like legislating a Federal income
tax and leaving it to the state legislatures to determine what
will count as a business deduction. Such an arrangement invites
forum shopping and encourages gross inequities in the treatment
of debtors who live in different states.
---------------------------------------------------------------------------
\11\ See, e.g., Letter from 21 members of the Texas Congressional
Delegation to Chairman Henry Hyde and Ranking Member John Conyers, Jr.
(Apr. 19, 1999) (on file with the House Judiciary Committee).
---------------------------------------------------------------------------
It is important to recognize that section 150 would have no
effect whatsoever on the 45 jurisdictions that currently place
their own cap on the exemption. But it will discourage
residents of those jurisdictions from moving to one of the five
states with no cap at all in order to take advantage of this
enormous loophole in the law.
Nor will unscrupulous debtors be unduly hindered by section
127 of the bill, which disallows the exemption if the
individual converted the property within 730 days of the filing
of the petition ``with the intent to hinder, delay, or defraud
a creditor.'' Those already resident in a state with no
exemption cap are unaffected by the limitation. And wealthy
debtors from other states who are sophisticated enough to plan
ahead can simply wait the 730 days and then file their
petition. Debtors who have owned their homestead for two years
or more can continue to use it to ``hinder, delay, or defraud''
their creditors out of millions of dollars.
During the committee debate, several speakers argued that
these abuses are not common. That is true. We do not suggest
that they are daily occurrences. But the fact that a particular
form of misconduct occurs infrequently is not an argument that
it should be condoned. By condoning these spectacular abuses by
a handful of wealthy debtors, we bring the fairness and
rationality of the entire system into disrepute.
John Conyers, Jr.
Howard L. Berman.
Jerrold Nadler.
Bobby Scott.
Melvin L. Watt.
Zoe Lofgren.
Maxine Waters.
Marty T. Meehan.
William D. Delahunt.
Steven R. Rothman.
Tammy Baldwin.
Anthony D. Weiner.

DISSENTING VIEWS

Although we could support a responsible and balanced
bankruptcy reform effort that remedies debtor and creditor
abuses in a balanced manner, we believe the legislation the
Committee reported is far too extreme. Indeed, the bill is so
one-sided and anti-consumer that its central element--the use
of IRS expense standards to determine eligibility for
bankruptcy--is opposed strongly by such conservative
Republicans as Chairman Hyde (R-IL) and Rep. Bachus (R-AL).
H.R. 833 is an omnibus bankruptcy bill that includes titles
concerning consumer bankruptcy, business bankruptcy, municipal
bankruptcy, tax, and bankruptcy administration. Although some
of the bill's titles and provisions are non-controversial and
stem from recommendations of the congressionally-created
National Bankruptcy Review Commission (which completed its two-
year review of the bankruptcy laws in October 1997), the titles
relating to consumer and business bankruptcies and tax matters
constitute a significant departure from historical bankruptcy
procedures and would harm low- and middle-income Americans,
single mothers and children dependent upon domestic support,
minorities, seniors, and small businesses.
In its present form, the legislation is strongly opposed by
the Administration, and surely will be vetoed.¹
Moreover, a number of groups oppose, or have expressed serious
concerns with, H.R. 833, including:
---------------------------------------------------------------------------
\1\ Letter from Jacob J. Lew, Director, Office of Management and
Budget, to the Honorable Jerrold Nadler, Ranking Member, House Subcomm.
on Commercial and Admin. Law (Mar. 23, 1999).
---------------------------------------------------------------------------
(1) Executive branch departments (such as the Justice
Department); ²
---------------------------------------------------------------------------
\2\ Letter from Dennis K. Burke, Office of Legislative Affairs,
U.S. Department of Justice, to the Honorable George W. Gekas, Chair,
House Subcomm. on Commercial and Admin. Law (Mar. 24, 1999).
---------------------------------------------------------------------------
(2) groups concerned about the rights of workers
(such as the AFL-CIO; the American Federation of State,
County, and Municipal Employees (``AFSCME''); the
United Auto Workers (``UAW''); and the Union of
Needletrades, Industrial and Textile Employees
(``UNITE'')); ³
---------------------------------------------------------------------------
\3\ Letter from Peggy Taylor, Director of Legislation, AFL-CIO, to
the Honorable Henry J. Hyde, Chair, House Comm. on the Judiciary (Apr.
20, 1999); Letter from Charles M. Loveless, Director of Legislation,
AFSCME, to Members of Congress (Apr. 19, 1999); Letter from Alan
Reuther, Legislative Director, UAW, to Members of Congress (Apr. 26,
1999); Letter from Ann Hoffman, Legislative Director, UNITE, to the
Honorable John Conyers, Jr., Ranking Member, House Comm. on the
Judiciary (May 4, 1998).
---------------------------------------------------------------------------
(3) groups of non-partisan bankruptcy lawyers,
judges, and academics (such as the National Bankruptcy
Conference (``NBC''), the American Bankruptcy Institute
(``ABI''), the National Conference of Bankruptcy Judges
(``NCBJ''), the National Association of Chapter 13
Trustees (``NACTT''), the National Association of
Bankruptcy Trustees (``NABT''), the Commercial Law
League of America, the American College of Bankruptcy,
and the National Association of Consumer Bankruptcy
Attorneys (``NACBA'')); ⁴
---------------------------------------------------------------------------
\4\ Letter from Douglas G. Baird, Vice Chair, NBC, to the Honorable
Henry J. Hyde, Chair, House Comm. on the Judiciary (Apr. 19, 1999);
Hearing on H.R. 833, the ``Bankruptcy Reform Act of 1999,'' Before the
House Subcomm. on Commercial and Admin. Law, 106th Cong., 1st Sess.
(Mar. 17, 1999) [hereinafter March 17, 1999 Hearing] (written statement
of the Honorable William Houston Brown, ABI); Id. (written statement of
the Honorable Randall J. Newsome, NCBJ; Id. (written statement of Henry
E. Hildebrand, III, NACTT); Id. (written statement of Robert H.
Waldschmidt, NABT); Commercial Law League of America, Position Paper on
the Bankruptcy Reform Act of 1999, H.R. 833, Submitted to the U.S.
House of Representatives and the U.S. Senate (Mar. 9, 1999); Letter
from Raymond L. Shapiro, Chair, American College of Bankruptcy, to
Members of Congress (Apr. 26, 1999); Letter from Norma Hammes,
President, NACBA, to Members of Congress (Apr. 26, 1999).
---------------------------------------------------------------------------
(4) groups concerned about the rights of women,
children, and victims of crimes and torts (such as the
National Women's Law Center, the National Partnership
for Women and Families, the National Organization for
Women (``NOW''), the Association for Children for
Enforcement of Support (``ACES''), the California
Women's Law Center, Mothers Against Drunk Driving
(``MADD''), the National Organization for Victim
Assistance (``NOVA''), and the National Victim Center);
⁵ and
---------------------------------------------------------------------------
\5\ Letter from the National Women's Law Center & the National
Partnership for Women and Families to the Honorable John Conyers, Jr.,
Ranking Member, House Comm. on the Judiciary (Apr. 19, 1999); Letter
from Patricia Ireland, President, NOW, to the Honorable John Conyers,
Jr., Ranking Member, House Comm. on the Judiciary (May 15, 1998);
Letter from Geraldine Jensen, President, ACES, to the Honorable George
W. Gekas, Chair, House Subcomm. on Commercial and Admin. Law (Mar. 17,
1999); Letter from Abby J. Leibman, Executive Director, California
Women's Law Center, to the Honorable Dianne Feinstein, Senate Comm. on
the Judiciary (Apr. 27, 1998); Letter from Karolyn V. Nunnallee,
National President, MADD, to Members of Congress (Apr. 26, 1999);
Letter from Marlene A. Young, Executive Director, NOVA, to the
Honorable Henry J. Hyde, Chair, House Comm. on the Judiciary (Apr. 26,
1999); Letter from David Beatty, Director of Public Policy, The
National Center for Victims of Crime, to the Honorable Jerrold Nadler,
Ranking Member, House Subcomm. on Commercial and Admin. Law (Apr. 28,
1999).
---------------------------------------------------------------------------
(5) consumer and civil rights organizations (such as
the Leadership Conference on Civil Rights (``LCCR''),
National Consumer Law Center, Consumers Union, the
Consumer Federation of America, U.S. Public Interest
Research Group (``U.S. PIRG''), Public Citizen, the
Alliance for Justice, and the National Council of
Senior Citizens).\6\
---------------------------------------------------------------------------
\6\ Letter from the Leadership Conference on Civil Rights to
Members of Congress (Apr. 21, 1999); Letter from Gary Klein, Senior
Attorney, National Consumer Law Center, to Members of Congress (Apr.
23, 1999); Press Release of National Consumer Law Center, Consumer
Federation of America, Consumers Union, and U.S. PIRG (Apr. 19, 1999);
Letter from Frank Clemente, Legislative Director, Public Citizen, to
House Comm. on the Judiciary (May 11, 1998); Letter from Nan Aron,
President, Alliance for Justice, to Members of the Senate Comm. on the
Judiciary (Apr. 23, 1998); Letter from Dan Schulder, Director
Legislation, National Council of Senior Citizens, to the Honorable
Jerrold Nadler, Ranking Member, House Subcomm. on Commercial and Admin.
Law (June 9, 1998).
---------------------------------------------------------------------------
In certain respects, H.R. 833 is, relative to last
Congress's Conference Report, even more anti-consumer, and the
justifications for its provisions even weaker. For example, the
means test in the bill does not allow a debtor to count as
expenses the expenses of a legally-separated spouse receiving
support for the debtor, even if that spouse is a dependent of
the debtor.\7\ Also, the bill imports into chapter 13 the rigid
Internal Revenue Service Collection Standards,\8\ which chapter
13 trustees have said would be a disaster for the
administration of voluntary chapter 13 cases.
---------------------------------------------------------------------------
\7\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)(2)(A)(v)).
\8\ H.R. 833, Sec. 130.
---------------------------------------------------------------------------
Moreover, new information has become available since the
vote on the Conference Report that contradicts the basic
premises of the bill. The nonpartisan American Bankruptcy
Institute, which includes many creditors and attorneys for
creditors, released a study showing that, while the credit
industry estimates it could recover $4 billion under the rigid
standards of the means test, at most $450 million might be
recovered.\9\ The Executive Office of United States Trustees in
the Justice Department conducted a study that reached similar
results, estimating that passage of the Conference Report
probably would have netted creditors no more than 3% of the
$400 per household they claim to be losing. This calls into
question the hundreds of millions of dollars in bureaucratic
expenses the means test would require of both government and
private citizens. Finally, Sears Roebuck has pleaded guilty to
criminal charges in connection with its illegal reaffirmation
practices;\10\ making the anti-class action provisions of this
bill, which would deprive consumers of the most effective
remedy they have against abusive creditors like Sears, even
less defensible.
---------------------------------------------------------------------------
\9\ Culhane and White, ``Means Testing for Chapter 7 Debtors:
Repayment Capacity Untapped?'' (American Bankruptcy Institute, 1998).
\10\ Leslie Kaufman, ``Sears to Pay Fine of $60 Million in
Bankruptcy Fraud Lawsuit,'' N.Y. Times, Feb. 10, 1999, at C2.
---------------------------------------------------------------------------
Section I of the Dissenting Views points out the general
concerns we have with the bill. Section II describes concerns
with the consumer provisions, including, most notably, the
means test. Section III discusses flaws in the small business
and single-asset real estate provisions, and Section IV turns
to the tax sections of H.R. 833.

I. General Concerns

A. The Process has Been Hurried and Partisan

Up until last year, Congress consistently has addressed
bankruptcy legislation in a deliberate and bipartisan manner.
The last major overhaul of the bankruptcy laws--the 1978
Bankruptcy Code--was enacted a full five years and scores of
hearings after the 1973 Bankruptcy Commission issued its
report.\11\ In addition, the House developed in close
bipartisan cooperation and approved, on a consensus basis--
typically on the suspension calendar--all of the recent
bankruptcy law changes (enacted in 1978, 1984, and 1994). Such
careful deliberation is important given the wide-ranging impact
of the bankruptcy laws and the fact that more Americans come
into contact with the bankruptcy courts--whether as debtors or
as creditors--than all other Federal courts combined.
---------------------------------------------------------------------------
\11\ The 1971 Commission conducted four hearings and deliberated
for 44 days before filing their two-part report with Congress; the
second part of the report was a draft statute. Between May of 1975 and
May 1976, the House Judiciary Committee's Subcommittee on Civil and
Constitutional Rights held 35 days of hearings on bankruptcy reform
producing more than 2,700 pages of testimony from over 100 witnesses.
Kenneth N. Klee, ``Legislative History of the New Bankruptcy Law,'' 28
DePaul L. Rev. 941, 943-44, 946 (1979). Three more days of hearings
were held on the House side in December 1977. On the Senate side,
between February and November 1975, the Senate Judiciary Committee's
Subcommittee on Improvements in Judicial Machinery held 21 days of
hearings. The Senate held three more hearings in November and December
of 1977. Id. at 944, 950. Once developing the Bankruptcy Reform Act of
1978 specifically, the House Subcommittee on Civil and Constitutional
Rights spent 42 hours debating the legislation in 22 separate markup
sessions, during which the legislation was reviewed line- by-line. Over
120 amendments were offered and over 100 were adopted. Id. at 946. A
700-page briefing book was prepared for the full Judiciary Committee.
Id. at 947. Full Committee markup took 3 days, and 6 amendments were
adopted on the unanimous, bipartisan Subcommittee bill. The Senate held
additional hearings as well.
---------------------------------------------------------------------------
Unfortunately, the Committee abandoned this historic
approach with respect to H.R. 833 and elected a rushed and
partisan process. For H.R. 833, the Majority began four days of
Subcommittee hearings on March 11, 1999, the day the Committee
referred the bill to the Subcommittee,\12\ with three of the
hearings taking place in the same week.\13\ The two-day
Subcommittee markup of the bill started on March 24, 1999--the
week immediately following the fourth hearing. Moreover, the
Majority delivered to the Minority a copy of Chairman Gekas's
substitute amendment at approximately 11:00 P.M. the night
before the Subcommittee markup--barely fifteen hours before
debate on the bill was to begin.
---------------------------------------------------------------------------
\12\ Hearings on H.R. 833, the ``Bankruptcy Reform Act of 1999,''
Before the House Subcomm. on Commercial and Admin. Law, 106th Cong.,
1st Sess. (1999). Hearings were held on March 18, 1999; March 17, 1999;
March 16, 1999; and March 11, 1999. The March 11, 1999 hearing was a
joint hearing between the House Subcommittee on Commercial and
Administrative Law and the Senate Subcommittee on Administrative
Oversight and the Courts.
\13\ Id.
---------------------------------------------------------------------------
In its further rush to judgment, the Majority has scheduled
the bill to go through the Rules Committee and to the floor
less than one week after leaving the Committee. This
effectively cuts off the Banking Committee, which has joint
jurisdiction over portions of H.R. 833, from proper
consideration of the bill; as a result, the House is being
deprived of that Committee's expertise on issues relating to
credit card abuse and disclosure of credit card terms.
Furthermore, this constrained process is hardly sufficient time
to make technical and conforming amendments and prepare a
report and dissenting views to this more than 300-page
legislation, let alone allow Members outside the Committee to
understand the legislation's implications. This abbreviated
period also will deny the House the benefit of any CBO cost
estimate or estimate of the costs of unfunded mandates in this
legislation.

B. The Quantitative Evidence Does not Justify Radical Changes in
Bankruptcy Law

One of the major reasons accounting for the differing views
regarding H.R. 833 relates to differing understandings of the
quantitative evidence of the causes, costs, and effects of
bankruptcy. H.R. 833's proponents point to (1) the fact that
the United States is experiencing a record number of bankruptcy
filings (1.4 million filings during the most recent calendar
year), ¹⁴ and (2) credit industry-funded studies by
Professor Michael Staten of Georgetown University's Credit
Research Center,¹⁵ Ernst & Young,¹⁶ and
the WEFA ¹⁷ group that purport to demonstrate that
the bankruptcy laws allow many relatively high income
individuals to avoid debts they could otherwise pay and that
this avoidance imposes substantial costs on the economy.
Proponents of bankruptcy ``reform,'' in general, and H.R. 833,
in particular, point to the ``easy'' availability of filing for
bankruptcy and the declining stigma associated with doing so to
explain the increase in filings.¹⁸
---------------------------------------------------------------------------
\14\ According to the American Bankruptcy Institute, there were
1,007,922 personal chapter 7 filings (72.1%), 862 personal chapter 11
filings, and 389,398 personal chapter 13 filings in 1998. Press Release
of the American Bankruptcy Institute, ``Bankruptcies Break Another
Record in 1998'' (Mar. 1, 1999). Personal bankruptcy filings
represented 96.9% of all filings in 1998; they were 91.7% of all 1990
filings. Id.
\15\ Professor Michael E. Staten of Georgetown University's Credit
Research Center (``CRC''), which has many credit industry officials on
its board, conducted what is perhaps the most-discussed study. John M.
Barron & Michael E. Staten, Purdue University Credit Research Center,
Personal Bankruptcy: A Report on Petitioners' Ability to Pay (Oct.
1997); see also March 17, 1999 Hearing (written statement of Michael E.
Staten). Staten concluded that 5% of chapter 7 debtors could repay all
of their non-priority, non-housing debt over 5 years, 10% could repay
at least 78% of such debt, and 25% could repay 30% of their debt.
\16\ An Ernst & Young study, funded by VISA USA and MasterCard
International, purports to corroborate the CRC findings. Policy
Economics and Quantitative Analysis Group, ``Chapter 7 Bankruptcy
Petitioner's Ability to Repay: Additional Evidence from Bankruptcy
Petition Files,'' Ernst & Young LLP (Feb. 1998).
\17\ Wharton Econometric Forecasting Associates (``WEFA'') examined
the financial cost of personal bankruptcy cases filed in 1997, which it
defined as ``the amount of credit dollars (outstanding loans) lost due
to bankruptcy filings . . . [and] the costs of the U.S. court system .
. . and other creditor's expenses relating to bankruptcy.'' WEFA Group
Resource Planning Service, The Financial Costs of Personal Bankruptcy 4
(Feb. 1998). The WEFA study calculated that ``financial losses due to
1997 personal bankruptcies totaled more than $44 billion. . . .
Unsecured nonpriority losses totaled almost $35 billion in 1997 . . .
[and] passing such financial losses on to consumers in terms of higher
prices would cost the average household over $400 annually.'' Id. at 1.
The WEFA study also concluded that the needs based proposal in H.R.
3150 ``should decrease financial costs due to bankruptcy . . . from 8%
to 17% annually.'' Id. at 2.
\18\ Hearing on H.R. 833, the ``Bankruptcy Reform Act of 1999,''
Before the House Subcomm. on Commercial and Admin. Law, 106th Cong.,
1st Sess. (Mar. 17, 1999) (written statement of Michael E. Staten);
Joint Hearing Before the House Subcomm. on Commercial and Admin. Law
and the Senate Subcomm. on Admin. Oversight and the Courts, 106th
Cong., 1st Sess. (Mar. 11, 1999) (written statements of (1) Bruce L.
Hammonds, Senior Vice Chairman of MBNA Corporation; (2) Judge Edith H.
Jones, U.S. Court of Appeals for the Fifth Circuit; (3) Professor Todd
J. Zywicki, George Mason University School of Law; and (4) Dean
Sheaffer, National Retail Federation).
---------------------------------------------------------------------------
Despite the earlier trend in higher numbers of bankruptcy
filings, the vast weight of studies have contradicted the
proponents' rationales and have shown that the increasing
filing rate is a symptom, not a root cause, of financial
difficulties. Analysts with the Congressional Budget
Office,¹⁹ the General Accounting
Office,²⁰ and the Federal Deposit Insurance
Corporation all have called into question the conclusions of
those studies. These critiques focus on a number of grounds,
including numerous flaws in the analysis and the assumptions
underlying the studies. Moreover, other analyses indicate that
the rise in bankruptcies is more properly attributable to a
number of changes unrelated to the bankruptcy laws, such as
unexpected medical costs, family crises like divorce, loss of
high paying full time jobs, and most notably, the deregulation
of credit card interest rates and the dramatic increase in
credit card solicitations and overall consumer
debt.²¹ Even a credit card industry official found
that ``[t]he majority of bankruptcies in [its] file are on
customers who have been on the books for more than three years
and have had some significant change in their financial
condition.'' ²² It also has been shown that the
average income of persons filing for bankruptcy has declined
from the 1980's, further contradicting assertions of widespread
abuse by high-income individuals.²³
---------------------------------------------------------------------------
\19\ Kim Kowalewski of the Congressional Budget Office (``CBO''),
at the request of the National Bankruptcy Review Commission, conducted
a review of three economic analyses of this question. Kowalewski
concluded that a 1996 VISA study did not support such a conclusion and,
in fact, ``because the social trends variable is flat during 1995 and
early 1996, VISA believes that their social factors played no role
behind the increase in personal bankruptcies in that period.'' Kim J.
Kowalewski, Evaluations of Three Studies Submitted to the National
Bankruptcy Review Commission 4 (Oct. 6, 1997). At the request of
Subcommittee Democrats, Mr. Kowalewski reviewed the economic issues
affecting the rate and nature of bankruptcy in the United States. The
Democratic Members made their original request on January 14, 1998; the
response from CBO, in draft form only, was delivered April 16, 1999,
over one year later. Mr. Kowalewski has still not been made available
to testify before the Subcommittee; the Minority has reserved its right
under House rules for one day of hearings to hear his testimony.
\20\ At the request of Senators Charles Grassley and Richard
Durbin, the General Accounting Office (``GAO'') examined the CRC study
and found five areas of concern: (1) data supplied by the debtors
regarding their income expenses, and debts and the stability of their
income and expenses over a 5-year period were not validated, (2) the
report did not define the universe of debts for which it estimated
debtors' ability to pay, (3) payments on non-housing debts that debtors
stated they intended to reaffirm were not included in debtor expenses
in determining the net income debtors had, (4) the CRC did not account
for the considerable variation among the 13 locations used in the
analysis, and (5) a scientific random sampling methodology was not used
to select the 13 bankruptcy locations or the bankruptcy petitions used
in the analysis. General Accounting Office, Personal Bankruptcy: The
Credit Research Center Report on Debtors' Ability to Pay, GAO/GGD-98-47
(Feb. 1998).
\21\ The Federal Deposit Insurance Corporation (``FDIC'') contested
many of assertions made in the above-noted studies. Federal Deposit
Insurance Corp., Bank Trends (Mar. 1998); Lawrence M. Ausubel, ``Credit
Card Defaults, Credit Card Profits, and Bankruptcy,'' 71 American
Bankruptcy L.J. 249 (1997). The FDIC observed a strong correlation
between credit card default rates and personal bankruptcies, both of
which increased in the 1990's. The FDIC found that, because of and
following interest rate deregulation in 1978, credit card companies
became more profitable and credit card lenders were able to extend more
unsecured credit to less creditworthy borrowers.
\22\ March 11, 1999 Hearing (written statement of Bruce L.
Hammonds, Senior Vice Chairman, MBNA Corporation).
\23\ Both the American Bankruptcy Institute and Professor Ausubel
pointed out, however, that the recent rise in personal bankruptcy
rates, which were used to manufacture fear of a so-called bankruptcy
crisis, in fact ended in 1998. American Bankruptcy Institute, 18 ABI
Journal 1 (Apr. 1999); Lawrence M. Ausubel, University College London,
A Self-Correcting ``Crisis'': The Status of Personal Bankruptcy in 1999
1 (Mar. 10, 1999). In fact, the ABI found that ``consumer bankruptcy
filings have dropped dramatically nationwide in January and February
[1999], after three consecutive years of record filings.'' American
Bankruptcy Institute, supra, at 1. Specifically, ``[t]he personal
bankruptcy filing rate per thousand population grew at an annual rate
of only 1.5% in the last year, and at a (seasonally-adjusted) annual
rate of only 1.0% in the last quarter.'' Lawrence M. Ausubel, supra, at
1. The crisis corrected itself because lenders, as they normally would,
tightened their lending practices when defaults became more common and
infringed upon profits, thereby limiting the number of people going
into debt and filing for bankruptcy. See id. at 3.
---------------------------------------------------------------------------
The most recent study, however, is the most telling. The
non-partisan American Bankruptcy Institute commissioned
Professors Marianne B. Culhane and Michaela M. White of the
Creighton University School of Law to conduct a study
independent of the credit industry.²⁴ Professors
Culhane and White used for their study a database of chapter 7
cases; the National Conference of Bankruptcy Judges funded the
compilation of the database. The study estimated that 3.6% of
the debtors in their sample had sufficient income, after
deducting allowable living expenses, to pay all of their non-
housing secured debts, all of their unsecured priority debts,
and at least 20% of their unsecured nonpriority debts.
Moreover, in making their calculations, Professors Culhane and
White assumed that 100% of the debtors in chapter 13 would
complete a five-year repayment plan even though more than 60%
of voluntary chapter 13 plans currently do not complete. These
figures are significantly lower than those of the Credit
Research Center and VISA--two entities that had financial
stakes in their own bankruptcy studies--and show that the
credit industry may have overstated the ``problem'' by as much
as 500%.
---------------------------------------------------------------------------
\24\ March 17, 1999 Hearing (written statement of Marianne B.
Culhane); Marianne B. Culhane & Michaela M. White, Taking the New
Consumer Bankruptcy Model for a Test Drive: Means-Testing Real Chapter
7 Debtors (Mar. 8, 1999).
---------------------------------------------------------------------------
Finally, we have never received any evidence that the
credit card industry likely would pass on any of the
``savings'' from bankruptcy law changes to individual debtors.
Instead the evidence shows that credit card companies, which
represent by far the most profitable sector of the commercial
banking business,²⁵ tend to maintain high interest
rates, even when their own cost of credit
declines.²⁶ The lack of competition in this industry
has caught even the Justice Department's attention, which has
brought an antitrust suit against VISA and MasterCard in the
Southern District of New York.²⁷
---------------------------------------------------------------------------
\25\ In 1993, credit card banks were nearly four times as
profitable as all commercial banks. Despite the slight decrease in the
average credit card interest rate, credit card banks remain twice as
profitable as commercial banks. March 16, 1999 Hearing (written
statement of the Honorable Joe Lee) (citing Federal Reserve Board, The
Profitability of Credit Card Operations of Depository Institutions
(Aug. 1997)).
\26\ In 1996, Professor James Medoff, the Meyer Kestnbaum Professor
of Labor and Industry at Harvard University, pointed out that, between
1980 and 1992, when the federal funds rate (the interest that banks
charge for overnight loans) fell from 13.4% to 3.5%, a drop of nearly
10 percentage points, the average credit card interest rate rose from
17.3% to 17.8%. Professor Medoff suggests that during the 1980s, when
interest rates were high, lenders learned a valuable lesson; consumer
debtors in general pay very little attention to interest rates. March
16, 1999 Hearing (written statement of the Honorable Joe Lee at 1)
(citations omitted).
\27\ Kenneth N. Gilpin, ``Antitrust Suit Filed Against VISA and
MasterCard,'' N.Y. Times, Oct. 8, 1998, at C1.
---------------------------------------------------------------------------

II. The Consumer Provisions Are Arbitrary and Costly and Will Harm
Vulnerable Segments of Society

A. Current Law and Proposed Changes

Under current law, individuals facing financial difficulty
may seek a variety of forms of relief under the bankruptcy
laws, with chapter 7 (liquidation) being by far the most common
form of relief sought. Under this chapter, debtors are required
to forfeit all of their property other than their ``exempt''
assets (i.e., deemed necessary for the debtor's maintenance, as
determined under federal or state law, at the state's option)
in exchange for receiving a discharge of their unsecured debts.
Creditors are entitled to receive any net proceeds from the
sale of the debtor's nonexempt property, subject to the
statutory priority schedule.²⁸ The Bankruptcy Code
does not permit the discharge of certain debts whose payments
are considered to be important to society. Some of this debt is
of the same nature as priority debt (e.g., family support
obligations and taxes), but the law also excepts from discharge
debts incurred through the debtor's misconduct, such as debts
arising from fraud and intentional injuries.²⁹
---------------------------------------------------------------------------
\28\ For example, the costs of administering the estate are
entitled to the first priority, and payments of alimony, child support,
and taxes are entitled to later priorities, with general unsecured debt
entitled to any residual assets left over. 11 U.S.C. Sec. 507(a).
\29\ 11 U.S.C. Sec. 523(a).
---------------------------------------------------------------------------
While there are no specific financial criteria for
determining who seeks chapter 7 relief, Sec. 707(b) of the
Bankruptcy Code grants the court the discretion to deny relief
where the filing is found to be a ``substantial abuse.''
³⁰ Under Sec. 707(b), however, there is a
presumption in favor of granting relief to the debtor. This
stems in part from the costs and potential hardships associated
with developing specific criteria for chapter 7 eligibility,
the belief that all honest, hard-working individuals are
entitled to a ``fresh start,'' and the importance of
encouraging risk-taking and entrepreneurship, and avoiding
situations where it is impossible for individuals to escape
aggressive creditor collection tactics. ³¹ Section
707(b) is not the only provision in the Bankruptcy Code that
prevents individuals from misusing chapter 7. For example,
creditors may request that certain debts be held
nondischargeable under Sec. 523(a) or that the debtor be denied
a discharge altogether under Sec. 727.
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\30\ The Code does not define the term ``substantial abuse,'' which
is used in Sec. 707(b), although, some courts have found that the
ability to pay an appreciable proportion of one's debts over three
years, using future income, could constitute ``substantial abuse.''
See, e.g., Fonder v. United States, 974 F.2d 996 (8th Cir. 1992)
(debtor could pay 89% of unsecured debts in three years); In re Krohn,
886 F.2d 123 (6th Cir. 1989) (ability to pay portion of debts from
``ample income'' in excess of $80,000 per year); In re Walton, 866 F.2d
981 (8th Cir. 1989) (ability to pay two thirds of debts in three
years).
\31\ There are a number of disincentives to filing for bankruptcy,
such as the fact that a person filed for a chapter 7 bankruptcy will be
disclosed on a debtor's credit report, and the law's prohibitions on
repeat chapter 7 filings for six years.
---------------------------------------------------------------------------
A separate bankruptcy alternative available to individual
debtors is chapter 13, which was formerly known as a wage
earner's plan.³² Under chapter 13, a debtor is
permitted to retain his or her property, but is required to pay
to creditors over a 3-5 year period out of future income at
least as much as the creditors would have received under a
chapter 7 liquidation, and is also required to pay all priority
debts in full. To accomplish this, the debtor must propose a
plan, administered by a trustee, that pays creditors in full or
that devotes the debtor's ``disposable income'' after
accounting for necessary support of the debtor, his or her
family, or a business. In order to encourage the use of chapter
13 plans, which are currently voluntary to the debtor, Congress
determined that persons who meet their chapter 13 obligations
are entitled to a broader discharge of their unpaid debts than
is available under chapter 7. This ``superdischarge'' results
in the discharge of several types of debt that chapter 7 does
not discharge. In addition, debtors are permitted to retain
property whether or not the property is encumbered by liens and
the debtor committed a prepetition default, so long as the
chapter 13 plan cures any arrearages. In this manner, debtors
can use chapter 13 to save their homes from foreclosure. In
addition, in chapter 13 a debtor is permitted to bifurcate a
loan on personal property, such as an automobile, into secured
and unsecured portions based on its present value, and treat
only the secured portion as a priority debt.³³ Also,
chapter 13 plans can provide for the payment of priority debts,
such as taxes and family support obligations, before payment on
general unsecured debts.
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\32\ The eligibility requirements for chapter 13 may be found in 11
U.S.C. Sec. 109(e). To be eligible for chapter 13, an individual must
have regular income and unsecured debts of less than $269,250 and
secured debts of less than $807,750. These numbers were indexed for
inflation in April of 1998. Individuals also may reorganize their
affairs under chapter 11.
\33\ This is known as a ``stripdown.'' Specifically, except for
certain home mortgages, a debtor in chapter 13 may be able to bifurcate
a debt to a secured creditor, treating only the current value of the
collateral as secured, even if it is less than the full amount of the
loan, and treating the remaining debt as unsecured.
---------------------------------------------------------------------------
H.R. 833 would institute a number of major changes to
consumer bankruptcy, in general, and chapter 7 and 13, in
particular, that may reduce the number of bankruptcy filings
(but will not reduce the number of cases of financial hardship)
and that are designed to increase pay-outs to non-priority
unsecured creditors, particularly credit card companies.

1. Means testing

The most far-reaching change, set forth in section 102 of
the bill, would institute a so-called ``means testing''
approach to consumer bankruptcy. This new standard would create
a presumption of abuse of the bankruptcy system and deny
chapter 7 relief to debtors who fail a ``means test.'' The
means test applies to debtors with income above their regional
median income levels who are able to pay out $6,000 to their
unsecured non-priority creditors over 60 months (instead of 36
months),³⁴ after allowing for deductions for pro-
rated portions of their secured and priority debts and
projected living expenses, based on Internal Revenue Service
collection standards, and other administrative expenses,
reasonable attorneys' fees, and private elementary or secondary
education costs not exceeding $10,000 per year.³⁵
Debtors fitting this profile would be forced to utilize chapter
13 or the expensive chapter 11 of the Bankruptcy Code if they
wished to obtain bankruptcy relief and would be subject to
mandatory repayment plans incorporating the same means
test.³⁶
---------------------------------------------------------------------------
\34\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)(2)(A)).
\35\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C. Sec. 707).
The consumer provisions were considered so one-sided, that the
principal sponsor of a predecessor version setting forth these changes
(H.R. 2500) received a ``Golden Leash'' special interest ``award'' from
Public Campaign. The banking and credit industry spent approximately
$40 million to lobby Congress in favor of the anti-debtor provisions of
H.R. 3150, the 105th Congress version of H.R. 833. Sam Loewenberg,
``Mad Dash as the Curtain Closes,'' Legal Times, Oct. 5, 1998, at 4;
Katharine Q. Seelye, ``House to Vote Today on Legislation for
Bankruptcy Overhaul,'' N.Y. Times, June 10, 1998, at A18.
\36\ Id.
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The only way a debtor can rebut the presumption of abuse
under the means test is to show that ``extraordinary
circumstances that require additional expenses or adjustment of
current monthly total income.'' ³⁷ The debtor must
swear to the extraordinary circumstances statement, which
includes detailed itemizations and explanations. To be
successful in this rebuttal, a debtor must show that
extraordinary expenses reduce the debtor's monthly income under
the proposed formula to an extent that renders the debtor
unable to pay $6,000 over 5 years.³⁸ The bill
further mandates that private trustees file and litigate a
motion to convert a case to chapter 13 in any case where the
debtor has income greater than the debtor's regional household
semiannual income for a family of equal or lesser size,
regardless of any other extenuating circumstances.³⁹
---------------------------------------------------------------------------
\37\ H.R. 833, Sec. Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)(2)(B)), 130.
\38\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)(2)(B)).
\39\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)(6)).
---------------------------------------------------------------------------
Even if a debtor is not barred from chapter 7 by virtue of
having sufficient debts or expenses such that he or she cannot
meet the means testing payment requirements, H.R. 833 provides
another, independent ground for dismissal for debtors earning
income above the regional median income. Under the bill, a
court can dismiss or convert a case based upon (1) whether the
debtor filed for chapter 7 in bad faith or (2) the ``totality
of the circumstances'' (including whether the debtor sought to
reject a personal service contract) indicates that ``the
debtor's financial situation demonstrates abuse.''
⁴⁰ Unlike current law, the bill requires that the
court consider these factors when determining whether to
dismiss or convert a case.⁴¹ To implement this test,
motions to dismiss or convert may be brought by creditors,
rather than only the court or the U.S. Trustee (as under
current law).⁴² The court may award a debtor
reasonable costs and attorneys' fees if a creditor's motion was
not ``substantially justified'' or if the creditor brought the
motion solely for the purpose of coercing the debtor to waive a
right guaranteed under the Bankruptcy Code.⁴³
---------------------------------------------------------------------------
\40\ H.R. 833, Sec. 102 (proposed 11 U.S.C. Sec. 707(b)(3)).
\41\ Id.
\42\ H.R. 833 Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)). Section 102 permits creditors to bring such motions
against debtors, but states that, if the debtor's income is less than
the highest national median family income for a household of equal
size, only the court, a private trustee, or a U.S. Trustee could bring
such a motion to dismiss or convert. H.R. 833, Sec. 102 proposed 11
U.S.C. Sec. 707(b)(6)). This income threshold is based on ``family''
income while the threshold for the trustee's requirement to bring
motions looks to the regional median ``household'' income, which is
lower than the family income. The Census Bureau defines a ``family'' as
a group of two or more people related by birth, marriage, or adoption
who reside together.'' Bureau of the Census, Econ. and Stats. Admin.,
U.S. Dept. of Commerce, Money Income in the United States A-1 (1997). A
``household'' consists of all people who occupy a housing unit [and]
includes the related family members and all the unrelated people, if
any.'' Id. In 1997, the national median family income was $37,005,
while the regional incomes ranged from $19,810 to $36,578. Id. at xi-
xii.
\43\ H.R. 833, Sec. 102 (proposed 11 U.S.C. Sec. 707(b)(5)).
---------------------------------------------------------------------------
The bill also converts chapter 13 into a mandatory approach
based upon IRS expense standards rather than a flexible
approach based upon disposable income. Accordingly, under
section 130 of the bill, debtors would be required to dedicate
all of their available income to unsecured debt, again after
allowing deductions for secured and priority debts and living
expenses per the means test and its IRS collection standards,
even if the debtor's actual expenses are reasonable but exceed
the IRS permitted, but arbitrarily-created,
expenses.⁴⁴ Section 130 of the bill also varies from
current law by failing to allow the debtor to make up arrears
on secured debts and leases. Although the provisions clarifying
the means test allow for adjustments for ``extraordinary
circumstances that require additional expenses or adjustments
of current monthly total income,'' this requires the debtor to
file a motion with the court, which may be challenged by the
trustee or any creditor, with the burden of proof lying with
the debtor.⁴⁵
---------------------------------------------------------------------------
\44\ H.R. 833, Sec. 130 (proposed amendment to 11 U.S.C.
Sec. 1325(b)).
\45\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C. Sec. 707).
---------------------------------------------------------------------------
The bill also goes on to calculate the means test using
expenses over 5 years rather than 3 years. That guarantees
that, if the means test pushes a debtor into chapter 13, the
repayment capacity assumptions would force the debtor into a
five-year repayment plan. Although the bill does say debtors
will not be forced into a five-year plan unless they are above
the median income, once in chapter 13 based upon assumptions
drawn from a five-year calculation, debtors will have little
choice but to follow a five-year plan. This legislation also
eliminates the broader discharge requirements currently
applicable to chapter 13, eliminating any inducement for
voluntary debtor participation in chapter 13.⁴⁶
---------------------------------------------------------------------------
\46\ H.R. 833, Sec. 127 (proposed amendment to 11 U.S.C.
Sec. 1328(a)).
---------------------------------------------------------------------------

2. Exceptions to Discharge & Loan Bifurcations

H.R. 833 would make two significant additions to the types
of debts that a debtor may not discharge under chapters 7 or 13
and proscribe a debtor's ability to bifurcate a loan into
secured and unsecured portions based upon the value of the
collateral. Section 133 grants nondischargeable status to debts
of $250 in the aggregate (as opposed to $1,075 under current
law) or more owed to a single creditor for cash advances or
luxury goods or services incurred within 90 days prior to the
bankruptcy filing (as opposed to 60 days under current
law).⁴⁷ Section 143 adds another exception to
discharge when the ``debtor incurred the debt to pay such a
nondischargeable debt with the intent to discharge in
bankruptcy the newly-created debt.'' ⁴⁸ Moreover,
regardless of the debtor's intent, any debts incurred within 90
days to pay nondischargeable debts would be
nondischargeable.⁴⁹
---------------------------------------------------------------------------
\47\ H.R. 833, Sec. 133 (proposed amendment to 11 U.S.C.
Sec. 523(a)(2)(C)).
\48\ H.R. 833, Sec. 143 (proposed amendment to 11 U.S.C.
Sec. 523(a)).
\49\ Id.
---------------------------------------------------------------------------
The legislation would also largely eliminate the
possibility of loan bifurcations in chapter 13 cases. As noted
above, under current law a debtor is permitted to bifurcate a
loan between the secured and unsecured portions, and to treat
only the secured portion as a priority debt. Section 122 of the
legislation prevents such bifurcations (including with regard
to interest and penalty provisions) with respect to any
personal property acquired within 5 years of the bankruptcy.

3. Domestic support

Sections 138-144 of the bill make a number of changes to
current law purportedly intended to enhance the status of child
support and alimony payments in bankruptcy. These changes are
presumably being made in an effort to offset the considerable
criticism the legislation has received from child and spouse
support advocates.
Section 138 creates a new definition of ``domestic support
obligation.'' ⁵⁰ In addition to applying to debts
owed on account of child support and alimony, which are largely
covered by current law, the new definition includes alimony and
child support debts owed or recoverable to a governmental
unit.⁵¹ This definition is in turn relevant to new
sections of the bankruptcy code that give certain enhanced
rights to the holders of domestic support obligations in terms
of priorities, payments, automatic stay, preferences, and
foreclosure.⁵²
---------------------------------------------------------------------------
\50\ H.R. 833, Sec. 138 (proposed amendment to 11 U.S.C. Sec. 101).
\51\ Id.
\52\ See H.R. 833, Sec. 139 et seq.
---------------------------------------------------------------------------
In particular, section 139 grants alimony and child care
creditors a first priority inbankruptcy (they are currently
seventh, although most of the higher priority debts are seen rarely in
consumer bankruptcy cases).⁵³ Section 140 prevents the
confirmation of a reorganization plan unless the debtor has paid all
domestic support obligations.⁵⁴ Section 141 provides that
the automatic stay does not prevent legal actions enforcing wage orders
for domestic support obligations and similar actions.⁵⁵
Section 142 makes nondischargeable all domestic support obligations,
including obligations owed to government support agencies.⁵⁶
Section 143 permits nondischargeable domestic support obligations to be
collected from property--notwithstanding state laws making that
property exempt from collection or attachment--after
bankruptcy.⁵⁷ Lastly, section 144 makes clear that a
transfer that was a bona fide payment for a domestic support obligation
will not be considered a fraudulent prepetition transfer.⁵⁸
---------------------------------------------------------------------------
\53\ H.R. 833, Sec. 139 (proposed amendment to 11 U.S.C.
Sec. 507(a)). In the current enumeration of priority, the unsecured
claims of person who raise grain or operate fish-processing facilities
have fifth priority. 11 U.S.C. Sec. 507(a)(5).
\54\ H.R. 833, Sec. 140 (proposed amendments to title 11, United
States Code).
\55\ H.R. 833, Sec. 141 (proposed amendment to 11 U.S.C.
Sec. 362(b)). This includes the interception of tax refunds, the
enforcement of medical obligations, or actions to withhold, suspend, or
restrict licenses of the debtor for delinquency in support obligations.
\56\ H.R. 833, Sec. 142 (proposed amendment to 11 U.S.C. Sec. 523).
Under current law, a property settlement that is not in the nature of
support is excepted from discharge unless the court finds (1) that the
debtor does not have the ability to pay the obligation or (2) that
discharging the debt would result in a benefit to the debtor that
outweighs the detrimental consequences to the ex-spouse or children.
\57\ H.R. 833, Sec. 143 (proposed amendment to 11 U.S.C. Sec. 522).
\58\ H.R. 833, Sec. 144 (proposed amendment to 11 U.S.C.
Sec. 547(c)(7)).
---------------------------------------------------------------------------
Finally, a few provisions concerning domestic support were
added at the initiative of Democratic Members. Section 149 of
the bill, added by an amendment of Representative Jackson Lee
(D-TX), requires chapter 7 and chapter 13 trustees to send
written notice to recipients of alimony and child support
payments, and to the local and state child support agencies,
notifying them that a debtor of such payments has filed for
bankruptcy.⁵⁹ An amendment offered by Representative
Nadler (D-NY), provisions of which were struck at markup by
Representative Gekas (R-PA) creates exceptions to the automatic
stay for: (1) wage garnishment to satisfy family claims for
current payments and arrears, and for post-petition debts to
the government,⁶⁰ and (2) child custody and
visitation proceedings, proceedings to dissolve a marriage
(except to the extent it involves property of the estate), and
proceedings alleging domestic violence.⁶¹
---------------------------------------------------------------------------
\59\ Notices to domestic support recipients must also state that
they can use the services of a government support enforcement agency to
collect the support.
\60\ H.R. 833, Sec. 152.
\61\ H.R. 833, Sec. 153. Representative Gekas moved to strike many
of the provisions in Representative Nadler's amendment that placed the
claims of women and children above those of the government and other
creditors. Among those protections were: (1) requiring that a debtor
pay all domestic support obligations before obtaining confirmation of a
plan; (2) exempting from the automatic stay actions all proceedings to
establish paternity, to establish or modify a domestic support
obligation order, to withhold state licenses, and to intercept tax
refunds; (3) exempting from bankruptcy all support or property
reasonably traceable to divorce decrees or property settlement
agreements; and (4) requiring that creditors who are owed
nondischargeable debts hold them, when paid, in trust for five years
for domestic support creditors.
---------------------------------------------------------------------------

4. Other anti-debtor provisions

The legislation makes a host of additional changes to the
consumer provisions of the bankruptcy laws. The majority of the
provisions are designed to increase creditor pay outs and would
greatly harm low- and middle-class debtors. As Harvard Law
Professor Elizabeth Warren writes, the bill ``has more than 120
pages of amendments affecting consumer cases, and they all head
in the same direction: They give a few creditor interests more
opportunities to try to recover from their debtors while they
reduce the protection for other creditors and debtors.''
⁶² Chairman Hyde himself noted that the bill
contains at least 25 provisions detrimental to debtors and
favorable to creditors. Among other things, the bill extends
the period permitted between chapter 7 filings from six years
(under current law) to eight years; ⁶³ expands the
ability of residential landlords to evict tenants without
seeking permission from the court; ⁶⁴ eliminates the
right of debtors to bring class action lawsuits and seek
punitive damages against creditors for abusive reaffirmation
agreements; ⁶⁵ requires debtors to make ``adequate
protection payments,'' or double payments, to retain property
obtained on secured credit.⁶⁶
---------------------------------------------------------------------------
\62\ March 11, 1999 Hearing (written statement of Professor
Elizabeth Warren).
\63\ H.R. 833, Sec. 140.
\64\ H.R. 833, Sec. 139.
\65\ H.R. 833, Sec. 116 (proposed amendment to 11 U.S.C. Sec. 425).
\66\ H.R. 833, Sec. 137.
---------------------------------------------------------------------------

B. Principal Problems with Proposed Changes

1. H.R. 833's means testing is arbitrary and unworkable in practice

The National Bankruptcy Review Commission's majority
specifically rejected the so-called ``means testing''
approach,⁶⁷ observing:
---------------------------------------------------------------------------
\67\ Only two members of the National Bankruptcy Review commission
signed onto a dissenting statement supporting the consideration of
various mens testing options. National Bankruptcy Review Commission,
Final Report: Bankruptcy--The Next Twenty Years (Oct. 20, 1997)
(Chapter 5, Additional Dissent to Recommendations for Reform of
Consumer Bankruptcy Law Submitted by the Honorable Edith H. Jones and
Commissioner James I. Shepard).

The credit industry has sought means testing
consistently for at least 30 years, but Congress has
consistently refused to change the basic structure of
the consumer bankruptcy laws. * * * Access to chapter 7
and to chapter 13, the central feature of the consumer
bankruptcy system for nearly 60 years, should be
preserved.⁶⁸
---------------------------------------------------------------------------
\68\ ``Bankruptcy: The Next Twenty Years,'' National Bankruptcy
Review Commission Final Report 90-91 (Oct. 20, 1997).

The 1973 Commission on Bankruptcy Laws similarly considered
and rejected industry calls for mandatory chapter 13's, noting
that Congress had itself rejected similar proposals in 1967,
---------------------------------------------------------------------------
and observed:

[B]usiness debtors are not subject to any limitation
on the availability of straight bankruptcy relief,
including discharge from debts, and it was pointed out
that, quite apart from bankruptcy, business debtors are
able to incorporate and to limit their liability to
their investments in corporate assets. To force
unwilling wage earners to devote their future earnings
to payment of past debts smacked to some of debt
peonage, particularly when business debtors could not
be subjected to the same kind of regimen under the
Bankruptcy Act. * * * The Commission concluded that
forced participation by a debtor in a plan requiring
contributions out of future income has so little
prospect for success that it should not be adopted as a
feature of the bankruptcy system.⁶⁹
---------------------------------------------------------------------------
\69\ ``Report of the Commission on Bankruptcy Laws,'' H.R. Doc. No.
137, Part I, 93rd Congress, 158-59 (1973) (citation omitted).

The principal problem with the means that is that the rigid
one-size-fits-all test used in determining eligibility for
chapter 7 and the operation of chapter 13 will often operate in
anarbitrary fashion. Many of these flaws were highlighted by
Chairman Hyde when he unsuccessfully sought to delete the use of the
rigid IRS standards and instead substitute a more fact specific test
based on the court's assessment of the facts and
circumstances.⁷⁰ First, the bill relies upon IRS collection
standards, which lay out no comprehensive or specific standards for the
deduction of living expenses. Unless it is clear which of these
expenses can be deducted from monthly income, it will be very difficult
to determine if the individuals that are being denied access to chapter
7 actually would be able to meet their payment obligations in chapter
13. Part of the problem arises from the fact that the IRS standards
referenced by the bill are not automatic in many cases. Although the
IRS does set forth national standards for some expenses, such as food
and clothing,⁷¹ and local standards for expenses such as
housing and transportation,⁷² it leaves the determination of
``other necessary expenses'' to the discretion of the relevant IRS
employee.⁷³ This means that the bill fails to provide
specific guidance concerning the appropriateness of deducting part or
all of the funds a debtor may expend for items such as health care
(both medical expenses and health insurance), taxes, and accounting and
legal fees, among other items. Even more dangerously, the IRS
collection standards specify that it is generally inappropriate to
allow expense allowances for such important items as school
tuition,⁷⁴ and generally discourage payment for expenses
relating to care for the elderly, invalid, or handicapped.⁷⁵
As a result, the means test will have the effect of requiring the
payment of unsecured debt before allowing for payment of certain
necessities such as health care.
---------------------------------------------------------------------------
\70\ The Committee had initially approved an amendment offered by
Chairman Hyde eliminating the IRS collection standards from the means
test. Subsequently, however, Rep. Graham (R-SC) offered an amendment
reintroducing the IRS collection standards into the means test;
effectively reversing the Chairman's earlier amendment. The Committee
accepted this amendment by a 17-14 largely party line vote, with
Chairman Hyde and Rep. Bachus (R-AL), crossing party lines to join with
most Democrats in opposing the reinsertion of the IRS standards.
\71\ IRS Manual Sec. 5323.432.
\72\ IRS Manual Sec. 5323.433.
\73\ IRS Manual Sec. 5323.12.
\74\ As amended by Representative Graham (R-SC), the bill allows a
deduction for ``the continuation of actual expenses of a dependent
child under the age of 18 for tuition, books, and required fees at a
private elementary or secondary school, not exceeding $10,000 per
year.''
\75\ IRS Manual, Exhibit 5300-46.
---------------------------------------------------------------------------
Moreover, where the IRS has specific local expense
standards, those standards do not provide adequately for normal
expenses. For example, the permitted automobile expense in the
San Francisco Bay area for two cars is only $373 per month,
even though most families could barely cover the cost of
automobile insurance, let alone car payments, gasoline, tolls,
and insurance under this amount.⁷⁶ Ironically,
Congress itself has recognized the inadequacy of such
collection standards. The Internal Revenue Service
Restructuring and Reform Act of 1998 directs the IRS to
``determine, on the basis of the facts and circumstances of
each taxpayer, whether the use of the schedules * * * is
appropriate'' and to ensure that they not be used ``to result
in the taxpayer not having adequate means to provide for basic
living expenses.'' ⁷⁷ However, neither that law nor
H.R. 833 grants this safeguard in the bankruptcy context.
---------------------------------------------------------------------------
\76\ Hearing on H.R. 3150, the ``Bankruptcy Reform Act of 1998,''
Before the House Subcomm. on Commercial and Admin. Law, 105th Cong., 2d
Sess. (Mar. 10, 1998) (written statement of the Honorable Randall J.
Newsome, U.S. Bankruptcy Judge, Northern District of California).
\77\ Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. No. 105-206, Sec. 3462 (1998).
---------------------------------------------------------------------------
The seemingly arbitrary allowances for such expenses points
to another problem with the means test under H.R. 833--its bias
against debtors without secured debts. This is because the bill
allows all secured debt payments to be deducted from monthly
income, but limits rental and lease payments to the amount
permitted by the IRS standards. This means that persons renting
apartments and leasing cars may not be able to deduct the full
amount of their housing and transportation costs in bankruptcy,
while persons with mortgages and automobile debt will be able
to do so. There is no legitimate policy rationale for this
discrepancy, which appears to punish personally-responsible
individuals who tightened their belts and tried to live
modestly within their means and nonetheless had to resort to
bankruptcy.
Also, it is important to note that the IRS collection
standards can change the manner in which the bankruptcy laws
are applied. The collection standards serve as internal
guidelines for the IRS; they are not regulations that are
subject to the Administrative Procedures Act. As such, the IRS
does not need to provide notice and comment when introducing
new standards or when changing the existing ones. If the
bankruptcy law was amended to incorporate the collection
standards, as H.R. 833 proposes, and IRS were to change the
collection standards in the future, the alteration in the
standards would completely change how the Bankruptcy Code is
applied. In effect, H.R. 833 would delegate authority to the
IRS to change the Bankruptcy Code.
It is no answer to assert, as the legislation's proponents
have done, that the ``glitches'' in the collection standards
can be resolved through the bill's allowance for
``extraordinary circumstances.'' Establishing that a particular
expense is ``extraordinary'' is not simple or cost or risk-
free. Extraordinary circumstances may be established only upon
a debtor's motion to the court.⁷⁸ The motion must be
heavily detailed and documented; the ``debtor must itemize each
additional expense or adjustment of income and provide
documentation for such expenses or adjustment of income and a
detailed explanation of the extraordinary circumstances which
make such expenses or adjustment of income necessary and
reasonable.'' ⁷⁹ Moreover, the burden of proof lies
with the debtor in establishing extraordinary circumstances,
and, if the debtor's motion fails, he or she is subject to
paying the creditor's fees and costs.⁸⁰ This risk
provides a tremendous disincentive for debtors to claim
extraordinary circumstances, let alone incur the legal costs
the debtor himself is required to pay to bring the motion.
---------------------------------------------------------------------------
\78\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)(2)(B)).
\79\ Id.
\80\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)(2)(B)).
---------------------------------------------------------------------------
Finally, making chapter 13 the only avenue for bankruptcy
relief for some individuals and imposing the bill's strict
income and expense tests will undoubtedly result in an even
smaller proportion of successful chapter 13 plans. It is also
somewhat unrealistic to expect many chapter 13 cases to result
in successful completion of repayment plans. The current
completion rate is less than one-third,⁸¹ and this
is at a time when chapter 13 is voluntary and the disposable
income tests are less rigid than this bill's proposal.
---------------------------------------------------------------------------
\81\ National Bankruptcy Review Commission, Final Report:
``Bankruptcy--The Next Twenty Years, 90-91'' (Oct. 20, 1997).
---------------------------------------------------------------------------

2. Means testing will be costly and bureaucratic

The bill's attempt to impose rigid financial criteria on
debtors' eligibility for chapter 7 and the operation of chapter
13 will impose substantial new costs on the bankruptcy system--
both the portions paid for by private parties (through payment
for private chapter 7 and chapter 13 trustees and higher
attorneys' fees) and the federal government (through the
bankruptcy courts and the U.S. Trustees Program).
a. Costs to private parties
Some of these costs would be borne by debtors through
increased opportunities for creditor-initiated litigation by
allowing (and, in some cases, mandating) trustees and creditors
to bring motions for dismissal or conversion based on ``bad
faith'' or the ``totality of the circumstances,'' and new
opportunities for creditors to challenge the dischargeability
of certain consumer debts.⁸²
---------------------------------------------------------------------------
\82\ H.R. 833, Sec. 102 (proposed amendment to 11 U.S.C.
Sec. 707(b)(4)(B)).
---------------------------------------------------------------------------
Additional costs on debtors will be manifested through the
many provisions providing for fee shifting against the debtor
and his lawyer if a chapter 7 case is dismissed or converted.
This could place debtor's attorneys in the position of choosing
between their clients' best interests and their own--a clear
conflict of interest. The bill provides no similar provisions
for fee-shifting with respect to creditor motions. While the
bill does allow a court to award a debtor all reasonable costs,
including reasonable attorneys' fees, if a creditor brings an
unsuccessful and unjustified motion to dismiss or convert, the
bill does not require creditors' attorneys to vouch for their
clients' filings.
The CBO has also noted that ``the direct costs to the
private sector of complying with mandates in [the predecessor
legislation] would exceed the [$100 million] statutory
threshold in [the Unfunded Mandates Reform Act] in each of the
first five years that the new mandates were effective. The
lion's share of the costs would be imposed on private trustees
who administer bankruptcy estates, providers of debt relief
counseling services, and attorneys.'' ⁸³ In
particular, with regard to private trustees, the National
Association of Bankruptcy Trustees has complained:
---------------------------------------------------------------------------
\83\ Congressional Budget Office, H.R. 3150: Bankruptcy Reform Act
of 1998--Private-Sector Mandates Statement (June 10, 1998).

[U]nder the bill, trustees must (1) review the
debtor's income and expenses prior to five days before
the Sec. 341 hearing, (2) file a ``certification'' that
the debtor is qualified to be a chapter 7 debtor at
least five days before the Sec. 341 hearing, (3) filed
motions to dismiss under Sec. 707(b) where the debtor's
disposable income would yield [specified payments] to a
chapter 13 trustee over a five-year plan. This is a
great deal of work for trustees who only receive $60 in
the typical chapter 7 case. In addition, the plight of
the trustee is multiplied when, even if he is
successful, he cannot count on any
compensation.⁸⁴
---------------------------------------------------------------------------
\84\ March 17, 1999 Hearing (written statement of Robert H.
Waldschmidt, National Association of Bankruptcy Trustees at 3).
---------------------------------------------------------------------------
b. Costs to the Federal Government
Increased administrative duties imposed on panel and
standing trustees would also raise the overall cost of this
legislation. Henry E. Hildebrand, Chair of the Legislative
Committee of the National Association of Chapter Thirteen
Trustees estimated that:

* * * [i]f the investigation by a [chapter 7] trustee
required about an hour and the preparation of the
report required on half hour, then the time required
would total about 1.5 million hours of time (assuming a
bankruptcy filing rate of one million petitions filed
in a year which would be a reduction of about 25%). If
the value of that time were calculated at $150 per
hour, the costs would be $225 million in time. * * *
Assuming that one out of nine cases filing for chapter
7 relief would be contested and further assuming that
the contest would require about two hours of pretrial
preparation and one hour of court time, the litigation
would require276,000 additional hours, about 90,000 of
which would occupy the court.⁸⁵
---------------------------------------------------------------------------
\85\ Henry E. Hildebrand, ``The Hidden Costs of Bankruptcy Reform''
2 (1998)(unpublished manuscript on file with the Committee on the
Judiciary, minority staff).
---------------------------------------------------------------------------
Another likely source of higher costs for the government is
the requirement that one in every 250 cases be randomly
audited, presumably at taxpayer expense under generally-
accepted auditing standards.⁸⁶ There are
approximately 1.4 million bankruptcy filings per year; an audit
of one in every 250 would result in a total of 5,600 audits. In
his testimony in the 105th Congress, Kevyn Orr of the Executive
Office for U.S. Trustees, stated that each audit, conducted
under generally-accepted auditing standards by Certified Public
Accountants, would cost approximately $2,000.⁸⁷ At
this rate, the total annual cost for auditing 5,600 filings
would be $11.2 million. The Honorable William Houston Brown, a
U.S. Bankruptcy Judge in the Western District of Tennessee,
testified on behalf of the ABI that the audits required ``are
likely to be very expensive, and such formal audits are likely
unnecessary to determine significant misstatements in debtors'
petitions and schedules.'' ⁸⁸
---------------------------------------------------------------------------
\86\ H.R. 833, Sec. 602. Although there is broad support for
audits, which were a National Bankruptcy Review Commission proposal,
the purpose of the proposal (to ensure honesty and accuracy) will fail
unless a reasonable requirement is set on the ratio of cases to audit
and unless the appropriate substantive standard is applied to the
audits.
\87\ Hearing on Business Bankruptcy Issues in H.R. 3150, the
``Bankruptcy Reform Act of 1998,'' Before the House Subcomm. on
Commercial and Admin. Law, 105th Cong., 2d Sess. (Mar. 19, 1998).
\88\ March 17, 1999 Hearing (testimony of the Honorable William
Houston Brown).
---------------------------------------------------------------------------
According to a CBO estimate of the costs to the government,
means testing would require ``between 15 and 30 additional
bankruptcy judges * * * to meet the increased workload
requirements that would be imposed on the courts. Costs for the
salaries and benefits of judges would be between $2 million and
$4 million annually, and costs for support personnel and other
administrative expenses would be between $9 million and $12
million annually.'' ⁸⁹ In the absence of creating
new judgeships, the CBO estimated that the courts would suffer
from a backlog of work because of the means-testing
provisions.⁹⁰ An additional $5 million annually
would be required by the U.S. Trustees for increased
litigation.⁹¹ Overall, CBO estimates that to
implement the means testing provisions, exclusive of the audit
costs, ``would most likely cost $16 million to $20 million
annually.'' ⁹²
---------------------------------------------------------------------------
\89\ Congressional Budget Office, Comparison of 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, and in H.R. 3150, as introduced on February 3, 1998 5 (May 8,
1998).
\90\ Id. at 3.
\91\ Id. at 5.
\92\ Id.
---------------------------------------------------------------------------
In addition, provisions in the legislation mandating that
all debtors file three years of tax returns with their
bankruptcy petitions, even if no party in interest requests
them, ⁹³ would have required appropriations of $33
million over the next five years * * * to store and provide
access to over 20 million tax returns.'' ⁹⁴
---------------------------------------------------------------------------
\93\ H.R. 833, Sec. 603 (proposed amendment to 11 U.S.C. Sec. 521).
\94\ Congressional Budget Office, Comparison of 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, and in H.R. 3150, as introduced on February 3, 1998 5 (May 8,
1998). Democratic Representative Melvin Watt, in an attempt to
alleviate the burden and cost of this provision to low-income debtors,
unsuccessfully offered an amendment that would have required debtors to
submit tax returns only if requested by the court, trustee, or any
party in interest.
---------------------------------------------------------------------------
Another concern is the many, many new opportunities for
litigation and confusion created by the bill. Judge Randall
Newsome testified on behalf of the National Conference of
Bankruptcy Judges that at least 16 potential sources of
litigation are contained in the means testing provisions alone,
and that another 42 litigation points have been identified in
the other consumer provisions, noting that ``[t]his is probably
only the tip of the iceberg.'' ⁹⁵
---------------------------------------------------------------------------
\95\ March 17, 1999 Hearing (written statement of the Honorable
Randall J. Newsome, President, National Conference of Bankruptcy Judges
at 1).
---------------------------------------------------------------------------

3. Means testing and the other consumer provisions will harm low- and
middle-income people

a. Concerns regarding the means test
It is incorrect to assume that the effect of H.R. 833's
harmful provisions would be limited to individuals seeking
bankruptcy relief who earn more than the regional median
income. First, there are numerous, significant flaws in the
manner in which median income is calculated. For example, the
median income figure required under H.R. 833 will be outdated
and understated. This is because the bill states that household
income is to be based on the most recent Census Bureau figures
available as of January 1. But as of January 1, the Census has
informationavailable for only the second year prior to the
date. Accordingly, during this year, 1999, census figures are available
for only 1997, not 1998. At times of inflation, this two-year lag could
result in a significant increase in the number of individuals who are
the subject of motions to dismiss or convert and who may earn more than
the outdated median income figure being used. In addition, the starting
point for the calculation of median income may be overstated.
Another flaw in the median income formula is that the test
measures a debtor's income based upon how much the debtor
earned in the six months prior to bankruptcy. If the debtor
lost a good job in month three and has been working at a low-
wage job ever since, the income from that good job, and help
from family members, would be counted as if that is what his
future income would be. The debtor would be expected to pay out
of income that may no longer exist. Also, the means test will
pickup a variety of revenue sources--such as Social Security
Disability receipts, disaster assistance, and Veterans''
benefits--which will result in lower- and middle- income
individuals being cast as bankruptcy ``abusers'' with income
above the median.
In addition, due to the fact that H.R. 833, unlike current
law, will permit creditors and other parties-in-interest to
bring motions to dismiss or convert, more aggressive and well-
funded creditors will have extremely wide latitude to use such
motions as a tool for making bankruptcy an expensive,
protracted, and contentious process for honest debtors, their
families, and other creditors. Creditors could use such motions
as leverage to obtain reaffirmation agreements so that their
unsecured debts survive bankruptcy.
Collectively, provisions forcing large number of
individuals from chapter 7 into forced repayment plans under
chapter 13 will have the effect of relegating large numbers of
otherwise middle-income families into poverty level
subsistence. This is because they will have no way of avoiding
their crushing debt load, whether it was derived from a medical
emergency or irresponsible credit card borrowing aggravated by
high interest and penalty rates. Such individuals will actually
be much worse off than other impoverished families because
their nominal income is higher than the median income level and
they cannot qualify for programs such as the earned income tax
credit, school lunch programs, food stamps, or other
subsistence provided to families with income below the poverty
level.
Another problem with the new means test and its associated
use of IRS expense standards in chapter 13 is that it will
apply to low-income debtors with income far below the median
income.⁹⁶ Previously, such individuals could have
voluntarily elected chapter 13 over chapter 7 to attempt to
catch up on their mortgages and save their homes; now, it is
less likely this will occur. If the bill's authors chose to
exempt such low-income individuals from the chapter 7 means
test, its unclear why they would ensnare them in the chapter 13
means test.
---------------------------------------------------------------------------
\96\ H.R. 833, Sec. 130 (proposed amendment to 11 U.S.C.
Sec. 1325(b)).
---------------------------------------------------------------------------
b. Other concerns
As noted above, the bill grants nondischargeable status to
a wider range of cash advances and debts incurred for so-called
luxury goods and debts incurred to pay a nondischargeable
debt.⁹⁷ These new exceptions from discharge obviate
many of the benefits that debtors may realize from filing for
bankruptcy, under chapter 7 or 13 and increase the opportunity
for creditor abuse. The provisions are opposed by the White
House also, which has written that it is ``generally
inappropriate to make post-bankruptcy credit card debt a new
category of nondischargeable debt. * * * We remain skeptical
that the current protections against fraud and debt run-up
prior to bankruptcy are ineffective and that the additional
debts made nondischargeable by [H.R. 833] meet the standard of
an overriding public purpose.'' ⁹⁸
---------------------------------------------------------------------------
\97\ H.R. 833, Sec. Sec. 133 (proposed amendment to 11 U.S.C.
Sec. 523(a)(2)(C)), 146.
\98\ Letter from Jacob J. Lew, Director, Office of Management and
Budget, to the Honorable Jerrold Nadler, Ranking Member, House Subcomm.
on Commercial and Admin. Law 2 (Mar. 23, 1999).
---------------------------------------------------------------------------
Consumer bankruptcy expert Henry Sommer also has explained
that such provisions:

* * * increase the opportunity for creditors to file
the types of abusive fraud complaints which have been
found by many courts to be baseless and unjustified
attempts to coerce reaffirmations by debtors who cannot
afford to defend them. The new presumptions of
nondischargeability will fall mainly on low income
debtors who are unsophisticated, do not have the time,
budget flexibility, or attorney advice to plan their
bankruptcy cases carefully, have to file on short
notice to prevent utility shutoffs or other impending
creditor actions and will not have the funds to defend
dischargeability complaints.'' ⁹⁹
---------------------------------------------------------------------------
\99\ Hearing on Consumer Bankruptcy Issues in H.R. 3150, the
``Bankruptcy Reform Act of 1999,'' Before the House Subcomm. on
Commerical and Admin. Law, 105th Cong., 2d Sess. (March 10, 1998)
(written statement of Henry J. Sommer).

The new ban on loan bifurcations for loans less than 5
years old will further obviate the possibility of obtaining a
fresh start through bankruptcy.¹⁰⁰ The ban will be
most pernicious in the case of automobile loans, very few of
which exceed 5 years. Since an automobile depreciates rapidly
when it leaves the showroom, it typically declines below its
value and secured debt by several thousand dollars the day
after it is bought. Such a prohibition on automobile
bifurcation is likely to render many chapter 13 plans
unfeasible because a debtor may be able to repay the entire
secured value, but not the entire purchase price of the car
along with penalties. The provision also permits the lender to
come out of the bankruptcy in a superior position than if it
had foreclosed on the loan, the usual rule that applies in
bankruptcy cases.
---------------------------------------------------------------------------
\100\ H.R. 833, Sec. 122.
---------------------------------------------------------------------------
Several other consumer provisions also will exact
significant hardships on all debtors, regardless of income
level or degree of culpability. For example, by allowing
landlords to continue eviction or unlawful detainer actions
even after debtors have obtained an automatic stay, the bill
will force many battered women and families with children and
seniors out on to the streets, without ever having an
opportunity to use bankruptcy to catch up on their
rent.¹⁰¹ Extending the permitted period between
bankruptcy filings to eight years ¹⁰² exceeds the
period between filings set forth in the Bible,¹⁰³
and could prove a substantial hardship to families in already
unstable economic situations.
---------------------------------------------------------------------------
\101\ H.R. 833, Sec. 136.
\102\ H.R. 833, Sec. 137 (proposed amendment to 11 U.S.C.
Sec. Sec. 727(a)(8), 1328).
\103\ The Biblical origin of debt forgiveness may be found in
Deuteronomy 15:1-3: ``[a]t the end of every seven years you shall grant
a release of debts. And this is the form of the release: Every creditor
who has lent anything to his neighbor shall release it; he shall not
require it of his neighbor or his brother, because it is called the
Lord's release. Of a foreigner you may require it; but you shall give
up your claim to what is owed by your brother.'' In Deuteronomy 15:9,
we are instructed, ``See that you do not harbor iniquitous thoughts
when you find that the seventh year, the year of remission, is near and
look askance at your needy countryman and give him nothing. If you do,
he will appeal to the Lord against you and you will be found guilty of
sin.''
---------------------------------------------------------------------------

4. The consumer provisions will have a significant, adverse impact on
women, children, minorities, and seniors, as well as victims of
crimes and Severe Torts

a. Women and children
H.R. 833 will have a devastating impact upon single mothers
and their children, both as debtors and as creditors. On the
debtor side, the means test will make it far more difficult for
women to access the bankruptcy system. For example, women whose
average income was at the median during the last 180 days,
before the support checks stopped--or women whose child care
expenses exceed IRS standards--may be denied access to chapter
7 and forced into restrictive chapter 13 repayment plans.
Second, the bill does not exempt child support or foster care
payments from the means test definition of disposable income,
and does not exclude alimony and child support payments
received within six months after filing for bankruptcy from the
property of the estate.¹⁰⁴ In addition, the bill
will also make it more difficult for women to hold onto the car
they need to get to work, or the refrigerator or washing
machine they need to care for their families if they were
purchased on credit in the last five years.¹⁰⁵ The
new nondischargeability categories also are problematic--even
if a single mother filing for bankruptcy believes they do not
apply, it will be more difficult for her to litigate a credit
card company's claim of nondischargeability.¹⁰⁶
---------------------------------------------------------------------------
\104\ H.R. 833, Sec. 102.
\105\ H.R. 833, Sec. Sec. 133, 146.
\106\ H.R. 833, Sec. 133.
---------------------------------------------------------------------------
On the creditor side, the bill will have a particularly
adverse impact on the payment of domestic support to women and
children. The basic problem arises from the fact that
bankruptcy and insolvency are by definition a zero-sum game.
There is only so much money available to be divided among the
creditors. By design, H.R. 833 will increase the amount of
funds being paid to unsecured creditors, and it therefore
should come as no surprise that such payments will often come
at the expense of other, less-aggressive creditors, such as
women and children owed alimony and child support. This problem
is by no means insignificant given that an estimated 243,000-
325,000 bankruptcy cases involved child support and alimony
orders during the most recent years.¹⁰⁷
---------------------------------------------------------------------------
\107\ The reported data are from the Consumer Bankruptcy Project,
Phase II. Principal researchers are Dr. Teresa Sullivan, Vice-President
of the University of Texas; Jay Westbrook, Benno Schmidt Chair in
Business Law, University of Texas; and Elizabeth Warren, Leo Gottlieb
Professor of Law, Harvard Law School. These estimates are based on data
collected in 1991 in sixteen judicial districts around the country. For
more details about the study, see Teresa Sullivan et al., ``Consumer
Debtors Ten Years Later: A Financial Comparison of Consumer Bankrupts
1981-91,'' 68 Am Bankruptcy L.J. 121 (1994).
---------------------------------------------------------------------------
Moreover, under current law, alimony and child support are
treated as priority debt and are not subject to
discharge.¹⁰⁸ This preferential treatment dates from
as early as 1903 and is based on Congress's determination that
the payment of these debts is so important to society that it
should come ahead of most general creditors. Although H.R. 833
does not revoke this special treatment, viewed as a whole, the
legislation will have the effect of diminishing the likelihood
of full payment of alimony and child support. This arises as a
result of several features of the bill: its creation of
significant new categories of nondischargeable debt, the
extension of the length and onerousness of chapter 13 plans,
and the bill's general limitations on the availability of
chapter 7 relief.
---------------------------------------------------------------------------
\108\ 11 U.S.C. Sec. Sec. 507(a)(7) & 523(a)(5).
---------------------------------------------------------------------------
Each one of these changes will make it less likely that a
former spouse will be able to make his required alimony and
child support payments. First, by making significant amounts of
credit card debt nondischargeable, more of these debts will
survive bankruptcy. Since most chapter 7 and 13 debtors do not
have the ability to repay most of their unsecured debts,
financial pressure on the debtor will continue after
bankruptcy, decreasing his ability to handle important support
obligations.
Collectively considered, these changes will help foster an
environment where unsecured and credit card debt is far more
likely to compete against alimony and child support obligations
in the state law collection process. As a Congressional
Research Service Memorandum analyzing predecessor legislation
concluded last year, under the bill ``child support and credit
card obligations could be ``pitted against'' one another. * * *
Both the domestic creditor and the commercial credit card
creditor could pursue the debtor and attempt to collect from
post-petition assets, but not in the bankruptcy court.''
¹⁰⁹
---------------------------------------------------------------------------
\109\ Congressional Research Service, Impact of Consumer Bankruptcy
Reform Proposals on Child Support Obligations (May 13, 1998).
---------------------------------------------------------------------------
Of course, outside of the bankruptcy court is precisely the
arena where sophisticated credit card companies have the
greatest advantages. While federal bankruptcy court provides a
strict set of priority and payment rules and generally seeks to
provide equal treatment of creditors with similar legal rights,
state law collection is far more akin to ``survival of the
fittest.'' Whichever creditor engages in the most aggressive
tactic--be it through repeated collection demands and letters,
cutting off access to future credit, garnishment wages or
foreclose on assets--is most likely to be repaid. As Marshall
Wolf has written on behalf of the Governing Counsel of the
Family Law Section of the American Bar Association, ``if credit
card debt is added to the current list of items that are now
not dischargeable after a bankruptcy of a support payer, the
alimony and child support recipient will be forced to compete
with the well organized, well financed, and obscenely
profitable credit card companies to receive payments form the
limited income of the poor guy who just went through a
bankruptcy. It is not a fair fight and it is one that women and
children who rely on support will lose.'' ¹¹⁰
---------------------------------------------------------------------------
\110\ Statement of Marshall J. Wolf (May 13, 1998) (on file with
the House Comm. on the Judiciary).
---------------------------------------------------------------------------
It is for these reasons that groups concerned about the
payment of alimony and child support have expressed their
strong opposition to the bill. Professor Karen Gross of New
York Law School stated succinctly that ``the proposed
legislation does not live up to its billing; it fails to
protect women and children adequately.'' ¹¹¹ Joan
Entmacher, on behalf of the National Women's Law Center,
testified that ``the child support provisions of the bill fail
to ensure that the increased rights the bill would give to
commercial creditors do not come at the expense of families
owed support.'' ¹¹² Last year, First Lady Hillary
Rodham Clinton highlighted the predecessor legislation's impact
on women and children, writing, ``I do quarrel with aspects of
the legislation that would force single parents to compete for
their child support payments with bank banks trying to collect
credit card debt.'' ¹¹³
---------------------------------------------------------------------------
\111\ March 18, 1999 Hearing (written statement of Karen Gross, New
York Law School).
\112\ Id. (written statement of Joan Entmacher, National Women's
Law Center).
\113\ Hillary Rodham Clinton, Bankruptcy Shouldn't let Parents off
the Hook, Wash. Times, May 7, 1998.
---------------------------------------------------------------------------
Assertions by the legislation's supporters that any
disadvantages to women and children under H.R. 833 are offset
by supposedly pro-child support provisions (sections 138-144)
are not persuasive. It is useful to recall the context in which
these provisions were added. First, last Congress, the bill's
proponents adamantly denied that the bill created any problems
with regard to alimony and child support.¹¹⁴
Although the proponents have now changed course, the child
support and alimony provisions included do not respond to the
provisions in the bill causing the problem--namely the
provisions limiting the ability of struggling, single mothers
to file for bankruptcy; enhancing the bankruptcy and post-
bankruptcy status of credit card debt; and making it more
difficult for debtors to eliminate debts and focus on domestic
support obligations. In some instances, the new sections are
counterproductive in furthering the goal of payment of support
obligations to ex-spouses and children.
---------------------------------------------------------------------------
\114\ Letter from Representative George W. Gekas, et al., to
Members of Congress (Apr. 29, 1998).
---------------------------------------------------------------------------
For example, section 138 provides a definition of
``domestic support obligation'' that includes funds owed to
government units.¹¹⁵ If the government is acting as
the debt collector for a woman or child, this is appropriate;
the benefits of this inure to women and children directly.
However, if the government is collecting for its own benefit
(say, for example, the woman recipient is on welfare and the
government is collecting arrearages to reduce a state or
Federal deficit), then the result is inappropriate and will put
the government collection agency in direct competition with
single mothers and children, particularly in chapter
13.¹¹⁶
---------------------------------------------------------------------------
\115\ Under current law, domestic support owed to families is a
priority debt; support owed to the government is nondischargeable, but
is not priority debt.
\116\ Although the bill gives priority to support claims owed to
actual people over those owed to the government in chapter 7 cases
where there are assets to distribute, those cases are few, and the new
definition could serve to hurt women and children, the most likely
creditors of domestic support.
---------------------------------------------------------------------------
Section 139 purportedly increases to first priority from
seventh priority obligations for domestic support, including
debts owed to the government. It is misleading to suggest that
moving up to ``first priority'' to ``seventh priority'' makes a
significant difference: the debts that have second through
sixth priorities almost never appear in consumer
cases.¹¹⁷ However, knocking out the first priority
for administrative expenses incurred by the trustee could
thwart the original purpose of the provision. Putting support
claims ahead of administrative expenses in priority may prevent
trustees from liquidating assets because trustees need to use
estate funds to liquidate property. If the trustee is not
assured that the estate can cover the expenses of liquidating
property, the trustee may have to abandon the property back to
the debtor, resulting in the domestic support obligations
receiving no distribution--the opposite of bill's intent.
---------------------------------------------------------------------------
\117\ Those priorities--which would apply in less than 1% of all
cases--deal with debts of grain storage facility operators, debts of
fishermen, employee wage claims, retail layaway claims, and the like.
11 U.S.C. Sec. 507(a).
---------------------------------------------------------------------------
Section 140, which requires that domestic support
obligations be paid in full before the debtor receives any
bankruptcy discharge, may reduce the likelihood that a feasible
plan can be confirmed. This is because current law gives a
woman owed support the option to agree to allow the Chapter 13
discharge to proceed, even if her arrears have not been fully
paid. That might be in her best interest: her claim for arrears
is nondischargeable, and allowing other debts to be discharged
may make it easier for her to collect both current support and
arrears in the future. Moreover, when combined with the other
increased payments that must be made to secured creditors under
Chapter 13, the requirement that state arrears as well as
family arrears must be paid in full would make it more
difficult for a debtor to get a Chapter 13 plan confirmed and
successfully completed, and could, therefore, adversely affect
the family.
Section 141 creates additional exceptions to the automatic
stay ¹¹⁸ that, like other provisions in the bill,
have the potential of placing women and children at a
disadvantage. First, these provisions apply only to income
withholding orders issued by government agencies under the
Social Security Act, even though an estimated 40-50% of all
child support cases, and all alimony-only cases, are enforced
privately, not by government child support agencies. Second,
income withholding is helpful only if such orders are placed
against debtors with regular income. Yet, in 1997, more than
four out of ten cases in state child support systems across the
country lacked a support order.¹¹⁹
---------------------------------------------------------------------------
\118\ H.R. 833, Sec. 141 (proposed amendment to 11 U.S.C.
Sec. 362(b)). Specifically, the bill creates exceptions to the
automatic stay for enforcement actions undertaken by government child
support agencies, including income withholding in cases being enforced
by public agencies; actions to withhold, suspend or restrict drivers',
professional and occupational, or recreational licenses; reporting
overdue support to credit bureaus; intercepting tax refunds; and
enforcing medical support. Furthermore, Representative Gekas struck
many of the provisions from Representative Nadler's amendment creating
new exceptions to the automatic stay. As altered by Representative
Gekas, the exceptions to the automatic stay do not go far enough in
protecting the interests of women and children because there is no
exception for proceedings to establish paternity or to establish or
modify a domestic support obligation. It is inconsistent for the bill
to except from the stay some family-related proceedings, but to subject
others to its requirements.
\119\ March 18, 1999 Hearing (written statement of Joan Entmacher,
National Women's Law Center) (citing U.S. Dept. of Health and Human
Servs., Office of Child Support Enforcement, Preliminary Data Report:
Child Support Enforcement FY 1997 (Aug. 1998).
---------------------------------------------------------------------------
Section 142, which makes all property settlement
obligations nondischargeable, also could have unintended
consequences in practice. For example, under this provision, a
financially-troubled ex-spouse who is owed alimony and child
support could be forced to compete with another ex-spouse who
is not in need of support but had a settlement agreement
dealing with business debts. Alternatively, a financially-needy
ex-spouse who files for bankruptcy may be left with
nondischargeable debt owed to her wealthier ex-spouse because
of a property settlement. Again, the result is the needy spouse
and child could be placed at a disadvantage by these changes.
Section 143, which allows domestic support creditors to
levy otherwise exempt homesteads and other exempt property,
also does not go far enough. Like the other provisions, it is
effective only if a single mother goes to the time and expense
of hiring an attorney to enforce her new rights. It also grants
state and local governments the right to pursue claims in
possible competition with the single mother.
Finally, section 144's insulation of payments to the
government from preference actions also may hurt an ex-spouse
and child of the debtor. This is because those funds, which
were preferentially paid to the government, otherwise may have
been available for ongoing support payments.
The Majority's legislation also totally ignores another
very serious problem facing women as a result of the Bankruptcy
Code--the fear that violent and reckless individuals will be
able to bomb abortion clinics and eliminate their liability
from that action through the bankruptcy process. Although the
current bankruptcy laws prevent discharge for ``willful and
malicious injuries,'' ¹²⁰ Supreme Court precedent
has raised doubt whether this standard applies to a clinic
bombing where a particular victim was not
targeted.¹²¹ It is also unclear whether the law
applies to damages resulting for barricading clinic entrances.
At the same time, notorious clinic bomber and ``Operation
Rescue'' found Randall Terry has specifically filed for
bankruptcy in order to void a $1.6 million judgment he owed to
the National Organization for Women and Planned
Parenthood.¹²²
---------------------------------------------------------------------------
\120\ 11 U.S.C. Sec. 523(a)(6).
\121\ Kawaauchau v. Geiger, 523 U.S. 57 (1998) (holding that the
actor must intend the consequences of the act, injury to someone or
something, not just the act, itself). If, therefore, the actor intends
only to damage the building and not any person inside, but does injure
a person inside, he may be able to discharge the debts arising out of
the injury to the person because that injury was not intended. See id.
\122\ ``Operation Rescue Founder Files for Bankruptcy due to
Lawsuits'', Wash. Post, Nov. 8, 1998, at A29; ``An Anti-Abortion Leader
Files for Bankruptcy'', N.Y. Times, Nov. 8, 1998, at 45.
---------------------------------------------------------------------------
In our view, it is totally irresponsible to allow the
Bankruptcy Code to be used to void debts of this nature
committed by violent individuals in violation of federal law.
As the National Abortion and Reproductive Rights Actions League
has written, ``[d]ebtors whose debts arise from their own
clinic violence are not honest debtors and should not be able
to escape the financial liabilities incurred by their illegal
conduct.'' ¹²³ Unfortunately, the Majority rejected
along a party line vote an amendment offered by Mr. Nadler that
would have made nondischargeable debts arising out of
violations of the Freedom of Access to Clinic Entrances Act.
---------------------------------------------------------------------------
\123\ Memorandum of NARAL 8 (Mar. 30, 1999).
---------------------------------------------------------------------------
b. Minorities, seniors, and victims of crimes and severe
torts
H.R. 833 will have a disparate impact upon minorities and
victims of crimes and torts, also. The Leadership Conference on
Civil Rights has warned that, under the legislation, ``African
American and Hispanic American families, suffering from
discrimination in home mortgage lending and in housing
purchases and facing inequality in hiring opportunities, wages,
and health insurance coverage [will be less able to] turn to
bankruptcy to stabilize their economic circumstances.''
¹²⁴ We know this because the economic struggle for
Hispanic American and African American homeowners is harder
than for any other group. While 68% of whites own their own
homes, only 44% of African Americans and Hispanic Americans own
their homes. Both African American and Hispanic American
families are likely to commit a larger fraction of their take-
home pay for their mortgages, and their homes represent
virtually all their family wealth. It is no surprise, then,
that African American and Hispanic American homeowners are six
hundred percent more likely to seek bankruptcy protection when
a period of unemployment or uninsured medical loss puts them at
risk for losing their homes. ¹²⁵
---------------------------------------------------------------------------
\124\ Letter from LCCR to Members of Congress (Apr. 21, 1999).
\125\ Id.
---------------------------------------------------------------------------
Similar concerns have been raised on behalf of seniors, who
could lose their retirement savings if forced into chapter 13
plans.¹²⁶ The National Council of Senior Citizens
has warned that legislation of this nature:

\126\ Letter from Dan Schulder, Director, Legislation, National
Council of Senior Citizens, to the Honorable Jerrold Nadler, Ranking
Member, House Subcomm. on Commercial and Admin. Law (June 9, 1998).
---------------------------------------------------------------------------
would have a harsh impact on a group of people who are
often subject to job loss or catastrophic health costs;
instead of ameliorating these problems, this bill will
only exacerbate them. * * * Since 1992, more than a
million people over the age of 50 have filed for
bankruptcy; in 1997, an estimated 280,000 older
Americans filed. For them it is particularly hard. If
they are forced into prolonged repayment schedules,
they may not be able to maintain or accumulate savings
for retirement. As you know, approximately two-thirds
of voluntary, Chapter 13 workout plans fail, and we
believe that retirement savings must be protected for
that purpose.¹²⁷
---------------------------------------------------------------------------
\127\ Id.

With regard to the concerns of victims' groups, it is
important to note that current law reserves the
nondischargeability of debts for obligations arising out of
willful or malicious injury, death or personal injury caused by
the operation of a motor vehicle, or criminal restitution
payments.¹²⁸ However, making more credit card debt
nondischargeable, encouraging more reaffirmations of general
unsecured debt, and discouraging more financially-troubled
individuals from seeking debt relief will place these
individual creditors at a relative disadvantage. As the
National Organization for Victim Assistance has written, ``more
exempted creditors with rights to the same finite amount of
resources means lower payments to all. Inevitably, for victim-
creditors, that means either a smaller return on the
restitution owed, or a longer period of repayment, or both.''
¹²⁹ The National Center for Victims of Crime has
similarly observed, ``to equate contractual losses of a
commercial creditor with * * * personal obligations [for victim
claims as the legislation does] is to belittle their importance
and to directly reduce the likelihood that crime victims will
ever be financially restored, despite obtaining an order of
restitution or a civil judgment.'' ¹³⁰ Mothers
Against Drunk Driving (``MADD'') has also complained that if
``individuals [whose lives] have been shattered financially and
emotionally by the death or serious injury of their family
members * * * have to compete with credit card debt holders for
the limited post-discharge income of debtors available [as the
predecessor legislation requires], they may themselves end up
in bankruptcy.'' ¹³¹ MADD also noted that in
contrast to crash victims, ``lending institutions have the
ability to provide some degree of protection to themselves when
they issue credit cards to individuals and they are in a better
financial position to absorb losses, which to them is a cost of
doing business.'' ¹³²
---------------------------------------------------------------------------
\128\ 11 U.S.C. Sec. Sec. 523(a)(6), (9), (13).
\129\ Letter from Marlene A. Young, Executive Director, NOVA, to
the Honorable Henry J. Hyde, Chair, House Comm. on the Judiciary (Apr.
26, 1999).
\130\ Letter from David Beatty, Director of Public Policy, The
National Center for Victims of Crime, to the Honorable Jerrold Nadler,
Ranking Member, House Subcomm. on Commercial and Admin. Law (Apr. 28,
1999).
\131\ Letter from Karolyn V. Nunnallee, National President, MADD,
to Members of Congress (Apr. 26, 1999).
\132\ Id.
---------------------------------------------------------------------------

5. The bill does not address abuses of the bankruptcy system by
creditors

Perhaps the bill's most glaring omission is its failure to
address the problem of abusive lending practices. At the same
time the legislation responds to every conceivable debtor
excess--whether real or imagined--it gives a complete pass to
the transgressions of the credit industry.
As noted at the outset, the overwhelming weight of
authority establishes that it is the massive increase in
consumer debt, not any change in bankruptcy laws, which has
brought about the increases in consumer filings. Indeed, there
is an almost perfect correlation between the increasing amount
of consumer debt and the number of consumer bankruptcy filings.
For example, between 1993 and 1998, bank credit card loans in
the United States more than doubled from $223 billion to nearly
$500 billion, and personal bankruptcy filings increased
accordingly.¹³³ The same basic correlation holds
from 1946 through 1998, as the below chart indicates:
---------------------------------------------------------------------------
\133\ March 16, 1999 Hearing (written statement of Joe Lee, Charts
5-6). In 1993, banks issued credit card loans in the amount of $223
billion; in the same year, there were approximately 900,000 consumer
bankruptcy filings. Id. (citing the FDIC and the Administrative Office
of the U.S. Courts). In 1998, banks issued $455 billion in credit card
loans; that year, there were 1.4 million consumer bankruptcy filings.
Id.

Review of this data indicates that the primary factor that
led to the increase in bankruptcy filings after 1978 was not
the enactment of the revised bankruptcy laws, but the
deregulation of credit.

The deregulation resulted from the Supreme Court decision in
Marquette National Bank of Minneapolis v. First Omaha Service
Corp.,¹³⁴ which held that out-of-state banks were
not subject to the usury laws of the state where the consumer
was located. This decision led credit card concerns to relocate
to states with lax usury laws that gave banks the ability to
charge exorbitant interest rates in all 50 states.
Subsequently, other legal changes permitted a broad range of
new entities to get into the ever-growing, and lucrative,
credit card business.¹³⁵ Among other things, we know
that it was this unprecedented increase in high-cost credit,
not the changed bankruptcy laws, that led to the change by
virtue of Canada's experience. In Canada, bankruptcy filings
began to explode in the late 1960's, simultaneous with the
entry of VISA and MasterCard into that nation and the growth in
credit card lending. There was no change in Canada's laws that
could account for the increase.¹³⁶
---------------------------------------------------------------------------
\134\ 439 U.S. 299 (1978).
\135\ See March 16, 1999 Hearing (written statement of Joe Lee at
1-3).
\136\ Id. (written statement of Joe Lee at 4-5).
---------------------------------------------------------------------------
This deregulation of credit and the accompanying explosion
in credit availability--the number of credit card solicitations
in 1998 reached 3.5 billion, an increase of 15 percent from the
prior year ¹³⁷--and consumer debt, have been
accompanied by a wide variety of credit card abuses. For
example, solicitations of minors and college students are a
particular problem. Credit card companies purposefully solicit
students and other minors who have little ability to pay their
debts. Illustrative of the seriousness with which credit card
companies target students is the following topic from the 1998
Card Marketing Conference:

\137\ Press Release of the National Consumer Law Center, Consumers
Union, Consumer Federation of America, and U.S. PIRG (Apr. 19, 1999).
---------------------------------------------------------------------------
Targeting Teens: ``You Never Forget Your First Card!''
Most teens never forget their first love. Nor do they
forget the issuer who dares to accept their
application. Their brand loyalty and propensity to
spend make consumers in their mid- to late-teens priced
prospects for many card issuers.¹³⁸
---------------------------------------------------------------------------
\138\ Id. (quoting Agenda for Card Marketing Conference '98 (Nov.
9-11, 1998)).

The credit card tactics are myriad, including offering
gifts such as mugs, Slinkees, T-shirts, and
Frisbees.¹³⁹ Campus groups managing credit card
tables receive large cash payments from credit card
companies.¹⁴⁰ Such tactics apparently work, as 61%
of students responsible for their own bills have indicated that
they received credit cards at college.¹⁴¹ Some
colleges have become so fed up with card marketing practices
that they banned the credit card companies from their campus
¹⁴²--although they cannot stop mail solicitations.
---------------------------------------------------------------------------
\139\ Id.
\140\ Id.
\141\ U.S. Public Interest Research Group, The Campus Credit Card
Trap: Results of a PIRG Survey of College Students and Credit Cards
(Sept. 1998).
\142\ Press Release of the National Consumer Law Center, Consumers
Union, Consumer Federation of America, and U.S. PIRG (Apr. 19, 1999).
---------------------------------------------------------------------------
Credit card companies even go so far as to solicit business
from the developmentally disabled.¹⁴³ One
developmentally-disabled man, aged 35, has the reading and
mathematic skills of a second-grader and an annual income of
$7,000 from Social Security disability benefits; nevertheless,
he has thirteen credit cards, generating a debt of
$11,745.¹⁴⁴ When his counselor asked the bank to
lower his credit limit to $500, his limit was instead raised to
$4,900.¹⁴⁵ Credit card companies have no answer for
how this occurs other than to say that they screen all
applicants to ensure they can handle the risk;¹⁴⁶
clearly, however, credit card companies have not been doing a
sufficient job of screening their applicants. Unfortunately,
H.R. 833 does nothing to discourage any of these practices.
---------------------------------------------------------------------------
\143\ Dan Herbeck, ``Where Credit Isn't Due: Developmentally-
Disable Become Victims'', Buffalo News, Apr. 7, 1998, at 1A.
\144\ Id.
\145\ Id.
\146\ Id.
---------------------------------------------------------------------------
The bill also ignores the problem of credit card companies
lending to individuals with already substantial debts and
little prospect of repayment. Gary Klein of the National
Consumer Law Center noted ``offering additional credit * * * to
families already struggling to pay their debts hurts not only
borrowers, but also the borrowers' honest creditors if the new
credit pushes the family over the edge. Similarly, failure by
one creditor to seriously consider payment arrangements outside
bankruptcy for families facing hardship may lead to a
bankruptcy filing which affects all creditors.'' ¹⁴⁷
One credit card company goes so far as to solicit debt
counselors and offers them $10 for each chapter 7 client who
requests a VISA card.¹⁴⁸
---------------------------------------------------------------------------
\147\ March 11, 1999 Hearing (written statement of Gary Klein,
National Consumer Law Center).
\148\ Letter from American Bankruptcy Service to Michael Schwartz
(Dec. 18, 1998).
---------------------------------------------------------------------------
A particularly pernicious credit card practice occurs in
the so-called ``subprime'' market, where lenders seek out
riskier borrowers and offer home equity financing at loan to
value ratios in excess of 100%. Another lending abuse targets
low income and minority neighborhoods with ``serial''
refinancing loans that carry high interest rates and other
onerous terms.¹⁴⁹ In essence this causes poor
individuals to place their homes at risk in order to finance
their credit card purchases.
---------------------------------------------------------------------------
\149\ March 18, 1999 Hearing (written statement of Damon A.
Silvers, AFL-CIO, n.9 (citing Debra Nussbaum, ``Lenders Laud the Value
of Home Sweet Equity,'' N.Y. Times, Mar. 22, 1998, Sec. 3 at 10;
Richard W. Stevenson, ``How Serial Refinancings Can Rob Equity,'' N.Y.
Times, Mar. 22, 1998, Sec. 3 at 10. See also Julia Patterson Forrester,
``Mortgaging the American Dream: A Critical Evaluation of the Federal
Government's Promotion of Home Equity Financing,'' 69 Tulane L. Rev.
373 (1994))).
---------------------------------------------------------------------------
These problems are compounded by the fact that credit card
companies fail to disclose clearly on their account statements
the total amount and total time it would take to pay off
balances if only the minimum amount due was paid each
month.¹⁵⁰ Unlike mortgage loans and car loans,
credit card loans do not disclose the amortization rates or the
total interest that will be paid if the cardholder makes only
the minimum monthly payment. As a result, using a typical
minimum monthly payment rate on a credit card, it could take 34
years to pay off a $2,500 loan, and total payments would exceed
300 percent of the original principle. This is why many lenders
encourage minimum payments that do not pay down the
loan.¹⁵¹ Nevertheless, the Majority defeated an
amendment offered by Representative Watt (D-NC) that would have
required credit card companies to disclose on each customer
account statement how long it would take, and what the total
cost would be, if the customer paid only the minimum amount
due.
---------------------------------------------------------------------------
\150\ Section 112 of the bill requires only that credit card
companies disclose customer account statements that making the minimum
payments each month will increase the length of time it takes to pay
off the account. This ``disclosure'' provision is meaningless because
it would not require credit card companies to tell customers exactly
how long it would take, and how much it would cost, if the minimum
payments were made.
\151\ March 16, 1999 Hearing (written statement of Frank Torres,
Consumers Union).
---------------------------------------------------------------------------
Finally, the legislation does nothing to address the
problem of abuse in the area of reaffirmation agreements, by
for example, banning their use with respect to unsecured and
dischargeable loans.¹⁵² Instead the bill actually
weakens current law by preventing courts from awarding punitive
damages to debtors in cases where creditor's actions have been
particularly abusive, and by prohibiting civil lawsuits against
such creditors from being brought as class
actions.¹⁵³ This bans the primary mechanism that
consumers use for challenging abusive practices on the part of
creditors,¹⁵⁴ and the one which in March of this
year caused Sears Bankruptcy Recovery Management Services to
pay a $60 million fines for failing to file reaffirmation
agreements with bankruptcy courts.¹⁵⁵
---------------------------------------------------------------------------
\152\ The bill fails to address the major problem with respect to
reaffirmation agreements. It does not penalize creditors that coerce
debtors into signing such agreements; instead, it merely penalizes
creditors that violate the terms of such agreements. This does not
protect already-bankrupt debtors who were coerced into signing
reaffirmation agreements at the risk of losing appliances, children's
toys, or clothing.
\153\ H.R. 833, Sec. 114.
\154\ See Susan Chandler, ``Sears Keeps Reporting Discharged
Debts'', Chicago Trib., Nov. 13, 1998, at 2.
\155\ Leslie Kaufman, ``Sears to Pay Fine of $60 Million in
Bankruptcy Fraud Lawsuit'', N.Y. Times, Feb. 10, 1999, at C2. Sears
forced customers to sign such agreements and pay back debts despite the
fact that the customers had filed for bankruptcy protection. Id. The
company ultimately had to pay a $60 million criminal penalty following
a guilty plea and another $180 million in reimbursements and penalties
to cardholders, and $40 million to settle civil suits brought by state
attorneys general. ``Sears' Subsidiary Admits Bankruptcy Fraud, Agrees
to $60 Million Fine'', 8 Consumer Bankruptcy News 11 (Feb. 25, 1999).
Some reaffirmation agreements are poorly understood by debtors and are
obtained either through the debtor's lack of understanding or coercive
creditor tactics. In a separate case involving Sears's reaffirmation
practices, decided in the Eastern District of New York, In re Bruzzese,
214 B.R. 444 (E.D.N.Y. 1997), a debtor reaffirmed an $1,800 debt to
obtain $500 in ``new credit'' that the court calculated would cost the
debtor $621 in finance charges under the terms of the agreement in the
first year, or an effective rate of 124.2%. Id. at 448. The court went
on to point out, ``[w]hat Sears did not disclose and what the debtor's
attorney did not explain to his client is that, assuming no defaults in
the timely payment of the reaffirmed amount, it would take 76 months to
satisfy this amount. Over the 76 months, she would pay a stream of
payments totaling $3,269.02, of which the aggregate interest would be
$1,469.02. For a wholly-unsecured obligation, this would exceed the
maximum payment term of 60 months permitted under a chapter 13 plan by
15 months. Other credit card issuers charge a far lower actual annual
percentage rate for a $500 line of credit even to persons who have
received a recent discharge in chapter 7 bankruptcy case.'' Id. Based
on its findings, the court ordered Sears to repay all payments made by
the debtor with respect to the reaffirmed debt, and annulled the
reaffirmation agreement. Id. at 451.
---------------------------------------------------------------------------

III. Small Business and Single-Asset Real Estate Provisions

Under current law, businesses may use chapter 11 of the
Bankruptcy Code in an effort to obtain relief from the
creditors while they seek to develop a plan to reorder their
affairs and pay as much of their debts as their operations will
allow. Under this chapter, businesses obtain an ``automatic
stay,'' which forestalls creditor collection efforts. During
this time period, debtors have an opportunity to examine their
contracts and leases and determine which ones to assume and
which ones to reject (with rejection leading to a claim for
damages). Debtors are subject to a number of requirements
during this period, such as the formation of creditor
committees andvarious ongoing financial disclosures.
The goal of chapter 11 is to determine whether there is any
ongoing business value that can be preserved to pay off
creditors while maintaining as many jobs and contractual
relationships as possible. To this end, the debtor is given an
exclusive 120-day period (unless lengthened or shortened for
cause) in which to develop a reorganization plan that satisfies
a host of statutory requirements and convince a majority of the
creditors that the plan is in their best interests and is
preferable to a liquidation ``fire sale.''
In 1994, Congress enacted two modest exceptions to the
general rules of chapter 11. The first related to ``small
businesses,'' defined as entities engaged in commercial or
business activities whose aggregate debts do not exceed $2
million. Debtors that elect to be treated as small businesses
are permitted to dispense with creditor committees, receive
only a 100-day plan exclusivity period, and are entitled to
more flexible provisions for disclosure and solicitation for
acceptances of their proposed reorganization plan. In 1994,
Congress also developed a special set of rules applicable to
``single asset real estate,'' generally defined as cases in
which the principal asset is a single piece of real estate
subject to debt of no more than $4 million. In cases falling
within this definition, secured creditors are permitted to
foreclose on their collateral unless the debtor files a
reorganization plan which is likely to be confirmed or
commences payment on the secured loan within a 90-day period.
This exception to chapter 11 procedures was justified on the
grounds that single asset real estate cases were seen as
essentially private two-party loan disputes, which did not
implicate ongoing businesses or jobs.

A. Small Business Provisions

The business provisions of the bill would effectuate a
number of changes in the manner in which corporations,
partnerships and other business entities are permitted to
reorganize their financial affairs. With respect to small
business, H.R. 833 would expand the definition of covered small
business to those companies having debts of less than $4
million,¹⁵⁶ covering approximately 85% of all
chapter 11 cases.¹⁵⁷ It would also make the small
business requirements mandatory (rather than optional) and
mandate the operation of numerous additional requirements on
debtors.¹⁵⁸ For example, under H.R. 833, small
business debtors would be required to provide balance sheets,
statements of operations, cash-flow statements, and income tax
returns within three days after filing a bankruptcy petition,
the time period the debtor has the exclusive right to file a
plan of reorganization would be further shortened (to 90 days),
and the standards for being able to seek an extension of this
time period would be substantially narrowed.¹⁵⁹
---------------------------------------------------------------------------
\156\ H.R. 833, Sec. 402 (proposed amendment to 11 U.S.C.
Sec. 101(51D)).
\157\ See March 18, 1999 Hearing (written statement of Jere W.
Glover, Chief Counsel for Advocacy, SBA).
\158\ H.R. 833, Sec. 406 (proposed 11 U.S.C. Sec. 1115).
\159\ H.R. 833, Sec. 407 (proposed amendment to 11 U.S.C.
Sec. 1121(e)).
---------------------------------------------------------------------------
It is for these reasons that both the AFL-CIO, the Small
Business Administration's Office of Advocacy, and a number of
other organizations representing both debtor and creditor
interests are opposed to, or have serious concerns with, the
small business provisions of the bill. The AFL-CIO has warned
that the small business provisions in the bill will ``threaten
jobs by placing substantial procedural and substantive barriers
in the way of small businesses' access to the protections of
Chapter 11; * * * threaten jobs by requiring commercial debtors
to assume or reject commercial leases within a rigid timetable,
which would force debtors to favor one class of creditors over
others, and threaten their overall ability to successfully
reorganize.'' ¹⁶⁰ Similarly, Jere W. Glover of the
Office of Advocacy has written that under H.R. 833, ``[u]nder
the proposals, small business owners who are legitimately using
Chapter 11 proceedings to reorganize their businesses may be
forced into a premature dismissal or conversion or may have to
expend vital resources to fend off challenges by any creditor
for relatively minor procedural infractions.'' ¹⁶¹
---------------------------------------------------------------------------
\160\ Letter from Peggy Taylor, Director of Legislation, AFL-CIO,
to the Honorable Henry J. Hyde, Chair, House Comm. on the Judiciary
(Apr. 20, 1999).
\161\ March 18, Hearing (written statement of Jere W. Glover, Small
Business Administration).
---------------------------------------------------------------------------
This new bankruptcy mandate, particularly sections 407
through 409, would impose substantial new costs on small
businesses, both in terms of document production and legal
fees, and limit the time frame that the business has to develop
a reasonable reorganization plan.¹⁶² Section 407
provides an absolute limit on the period the business debtor
has the exclusive right to file a plan of reorganization.
Congress has previously enacted laws that have made it far more
difficult for debtors to unduly delay filing a plan of
reorganization, and these appear to have had a salutary effect.
The proposed rigid deadline goes much farther and could work to
detriment of debtors involved in complex reorganizations and
force unnecessary liquidations and job losses. In turn, these
changes will lead to the premature liquidation of small
businesses with the attendant loss of jobs. The provisions are
particularly unnecessary at a time when business bankruptcies
have declined by one-third over the most recent ten-year
period.¹⁶³
---------------------------------------------------------------------------
\162\ March 18, 1999 Hearing (written statement of Jere W. Glover,
Chief Counsel for Advocacy, SBA).
\163\ Letter from Jere W. Glover, Chief Counsel for Advocacy, U.S.
Small Business Administration, to the Honorable Jerrold Nadler, Ranking
Member, House Subcomm. on Commercial and Admin. Law (Apr. 22, 1998).
---------------------------------------------------------------------------
The SBA's Office of Advocacy summed up the situation as
follows: ``the proposals in H.R. 833 go too far in addressing
the relatively small number of problem cases.'' ¹⁶⁴
Even more dangerously, it has been noted than many--if not
most--of the business cases in the average district would fall
prey to these harsh new rules.¹⁶⁵
---------------------------------------------------------------------------
\164\ March 18, 1999 Hearing (written statement of Jere W. Glover,
Chief Counsel for Advocacy, SBA).
\165\ Id. (written statement of Damon A. Silvers, AFL-CIO at 4);
March 17, 1999 Hearing (written statement of Kenneth Klee, National
Bankruptcy Conference at 7).
---------------------------------------------------------------------------

B. Single-Asset Real Estate Provisions

A similar concern relates specifically to single-asset real
estate (``SARE'') debtors. While H.R. 833, in section 402, no
longer specifically includes SARE in the definition of ``Small
Business,'' it would significantly expand the definition of
SARE by eliminating the $4 million debt cap. Small business are
defined under current law as having aggregate non-contingent,
liquidated secured and unsecured debts in an amount not more
that $4 million. The definition would take in SARE bankruptcies
below that cap and treat them as small businesses.
As a result of these changes, a much wider range of real
estate operations would be required to conform with the SARE
requirements when they seek to reorganize, not withstanding the
fact that those requirements were drafted with a much smaller
and simpler entity in mind. Large operating entities such as
Rockefeller Center, as well as hotels and nursing homes, could
be considered SARE and put back on the track set forth in
Sec. 362(d)(3) of the Bankruptcy Code. It would create also new
incentives for lenders to require that all of their real estate
borrowers place their holdings in the single asset form in
order to avoid ordinary bankruptcy rules in the future. The
AFL-CIO noted, ``the significant limiting factor in the
application of these rules has been the $4 million cap.
[Eliminating] the cap would place a wide variety of properties
* * * at risk of foreclosure and threaten jobs at these
properties. Absent rules that specifically exclude properties
housing significant business enterprises, there should be no
expansion in the definition of single asset real estate
debtor.'' ¹⁶⁶
---------------------------------------------------------------------------
\166\ March 18, 1999 Hearing (written statement of Damon A.
Silvers, Associate General Counsel, AFL-CIO).
---------------------------------------------------------------------------
By design, the SARE changes will ``broaden the scope of
single asset real estate debtors subject to rules which
increase the threat of disruptive summary foreclosures of
commercial property.'' ¹⁶⁷ This, in turn, would
likely lead to significant job losses.¹⁶⁸ Even if a
hotel or nursing home remains in existence, the new owner would
not necessarily be required to honor any previously negotiated
collective-bargaining agreements applicable to employees at the
facility. In the case of a large real estate operation,
premature foreclosure could also allow the new owner to
terminate many leases, leading to further job losses to the
extent the business is relying on these leases.
---------------------------------------------------------------------------
\167\ Letter from Peggy Taylor, Director of Legislation, AFL-CIO,
to the Honorable Henry J. Hyde, Chair, House Comm. on the Judiciary
(Apr. 1999).
\168\ Id.
---------------------------------------------------------------------------

C. Other Business Concerns

A host of additional concerns have been raised by groups
such as the AFL-CIO and the National Bankruptcy Conference
regarding the business titles of the legislation. These include
concerns about the expansion of remedies available to secured
creditors in the transportation industry;¹⁶⁹ the
imposition of mandatory deadlines for extensions of
``exclusivity;'' ¹⁷⁰ amendments regarding asset
securitization limiting the assets available to a debtor during
a bankruptcy case;¹⁷¹ extending the period for
reclamation of goods by trade creditors;¹⁷² and
limits on repeat filings for troubled businesses (which was
extended at markup to all businesses and not just ``small
businesses'').¹⁷³ In general, the AFL-CIO has warned
that ``the real danger posed by H.R. 833 is the threat is poses
to our economy's ability to weather downturns. The bill aims to
make access to the bankruptcy process more difficult for our
economy's most vulnerable links--small businesses and
consumers. This will likely result in increased business
closures, job loss and home foreclosure, increasing the
severity and length of any future economic downturn.''
¹⁷⁴
---------------------------------------------------------------------------
\169\ March 18, 1999 Hearing (written statement of Damon A.
Silvers, AFL-CIO); March 17, 1999 Hearing (written statement of Kenneth
Klee, National Bankruptcy Conference).
\170\ H.R. 833, Sec. 213.
\171\ H.R. 833, Sec. 1012.
\172\ H.R. 833, Sec. 208.
\173\ H.R. 833, Sec. 412.
\174\ Letter from Peggy Taylor, Director of Legislation, AFL-CIO,
to the Honorable Henry J. Hyde, Chair, House Comm. on the Judiciary
(Apr. 20, 1999).
---------------------------------------------------------------------------
Similar concerns relate to the power of creditors who lease
retail property. Section 205 unfairly grants lessors of
commercial property the ability to coerce debtor-tenants into
decidingprematurely whether to assume or reject a lease. In a
retail insolvency, a debtor may need to wait beyond the 240-day period
until the holiday season is complete to determine which locations have
a realistic chance to succeed; a trustee or debtor in possession may
decide to assume and reject some of the leases based upon this
practical experience.¹⁷⁵ If the trustee or debtor in
possession assumes a nonresidential lease in chapter 11, and the case
subsequently converts to chapter 7, under the bill, the rent due for a
one-year period following rejection of the lease becomes an
administrative expense for compensation, gaining priority over all
other unsecured claims and limiting the opportunity for other unsecured
creditors to receive compensation.¹⁷⁶ By giving the lessor
veto power at the end of 240 days, as the bill now does, the
legislation would have the effect of giving a single creditor
inordinate bargaining power among creditors and with the debtor.
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\175\ The value to the estate of retaining the ability to assign
certain leases is often a significant issue in determining which lease
to assume or reject because it impacts upon the ability to pay other
creditors. It should also be noted that the lessor already is entitled
to get paid post-petition for the use of the property--the debtor is
not using it for free.
\176\ In re Klein Sleep Prods., 78 F.3d 18 (2d Cir. 1996).
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IV. Tax Provisions

The Bankruptcy Code seeks to effectuate a delicate balance
between the rights of the Internal Revenue Service and state
tax agencies to the repayment of any taxes, interest and
penalties owed them, and the rights of other creditors and the
ability of individuals and corporations to be financially
rehabilitated for the benefit of all parties. Title VIII of the
bill, on balance, manifests a strong preference for the IRS and
other taxing authorities to the detriment of other participants
in the bankruptcy system. Concerns have been expressed that,
not only does H.R. 833 generally enhance the rights and
position of the IRS and state authorities in bankruptcy, but
the bill grants the IRS certain rights in bankruptcy cases that
it does not enjoy outside of bankruptcy, and vests the IRS with
new enforcement powers that ordinary creditors do not
posses.¹⁷⁷ We are particularly concerned that the
Majority chose to vary in many significant respects from the
nonpartisan, and often unanimous, recommendations of the
Bankruptcy Commission and its Tax Advisory Committee.
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\177\ Hearing on Business Bankruptcy Issues Before the House
Subcomm. on Commercial and Admin. Law, 105th Cong., 2d Sess., (Mar. 18,
1998) (statement of Paul H. Asofsky).
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Title VIII of the bill deals with the treatment of tax
debts owed to the government by a debtor. It is ironic that the
Majority, which has normally taken such an anti-tax posture on
most issues, not only is using the IRS collection standards for
the means test but also is pressing for changes to the
Bankruptcy Code that favor governmental collections over the
rights of debtors and private sector creditors. In his
testimony on behalf of the American Bar Association's Section
on Taxation, Paul Asofsky, who served as the Chair of the Task
Force on the Tax Recommendations of the National Bankruptcy
Review Commission of the American Bar Association's Tax
Section, observed that [T]here are many provisions in this
legislation with which we agree as a matter of principle, but
the specific provisions are either ambiguously drafted or cut
against the grain of the principal proposal, causing us to
oppose what should be noncontroversial proposals.''
¹⁷⁸
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\178\ March 18, 1999 Hearing (written statement of Paul Asofsky).
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Mr. Asofsky provided a somewhat more detailed discussion of
his concerns in a letter to the Subcommittee's Ranking
Member.¹⁷⁹ Section 802 of the provides new rules for
debtors to provide notice to a governmental entity. Notice is
important in a bankruptcy case, because if the debtor is found
not to have provided adequate notice to a creditor, the debtor
will not be entitled to a discharge of the debt. Section 802
``sets forth detailed rules requiring the debtor, in providing
notice to a governmental creditor, to identify the department
or agency or instrumentality of a governmental unit through
which the debtor is indebted and describe the underlying basis
for the governmental unit's claim. It also requires the debtor
to identify certain instances in which he may be derivatively
liable to such governmental agency for a claim against a non-
debtor. It also imposes certain burdens on debtors in
identifying the particular governmental official to whom notice
must be sent.'' ¹⁸⁰ Forcing the debtor to divine the
correct person or location for notice would place too high a
burden on many individual debtors who would then be required to
demonstrate ``by clear and convincing evidence'' that timely
notice was given to the appropriate official. Instead of
providing a fair means of providing notice to governmental
units, it sets a trap of the unsophisticated and unwary debtor,
and places governments in the enviable position of having their
tax debts made non-dischargeable. The second part of the
provision, which requires a debtor to determine whether she
might have a derivative tax liability, for example for a trust
fund tax penalty, places the onus on the debtor to identify and
pursue claims rightly left to the taxing authority.
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\179\ Letter from Paul Asofsky to the Honorable Jerrold Nadler,
Ranking Member, House Subcomm. on Commercial and Admin. Law (Feb. 5,
1999) [hereinafter Asofsky Letter].
\180\ Id. at 2.
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Section 804 provides for a significantly higher uniform
interest rate to be applied to tax claims in a bankruptcy case.
The Tax Advisory Committee, which included governmental
representatives, concluded that the rate for all types of tax
claims should be the regular tax deficiency rate for federal
income tax purposes. The bill, however, provides that the rate
shall be at least the original issue discount rate of
Sec. 1274(d) of the Internal Revenue Code, plus three points.
Of greater concern, local governments can set their own
interest rates, many of which are substantially higher than
either of the IRS rates.¹⁸¹
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\181\ Id. at 3-4.
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Section 807 severely limits the ``superdischarge''
available to debtors in chapter 13. It would prevent a debtor
from discharging tax debts, which is now permitted in chapter
13, but not in chapter 7. Eliminating the benefit of the
superdischarge also eliminates the single greatest incentive
for an individual debtor to choose chapter 13. As Mr. Asofsky
observed,

[T]he problem faced by many taxpayers who are
delinquent in their obligations is that the IRS
standard allowances for installment payment agreements
¹⁸² clearly do not leave many taxpayers with
the minimum amounts necessary to provide for basic
necessities, and so called ``offers in compromise'' are
very difficult to obtain. Thus, for the most desperate
of taxpayers, the chapter 13 superdischarge affords a
safety net which is the only thing that provides them
with the possibility of living somewhat of a normal
life in dignity * * * elimination of the chapter 13
superdischarge would be devastating to large numbers of
unfortunate individual debtors.¹⁸³
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\182\ These are the same standards used in the means test in
section 102 of H.R. 833.
\183\ Asofsky Letter at 4.

Section 817 requires disclosure of the tax consequences of
a chapter 11 plan of reorganization. Although originally an
uncontroversial idea, the bill adds extra requirements which
will likely cause confusion and may be impossible for debtors
to comply with fully. The section now requires ``a full
disclosure of the potential material federal, state, and local
tax consequences of the plan to the debtor, any successor to
the debtor and a hypothetical investor domiciled in the state
in which the debtor resides or has its principle place of
business typical of the holders of claims or interest in the
case.'' The use of the term ``full disclosure'' will likely
lead to extensive litigation as these statements are
scrutinized. In some instances, the precise tax consequences of
a plan at all levels of government, and for a ``typical''
holder of claim, may be difficult to produce with great
precision.¹⁸⁴
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\184\ Id. at 5-6.
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Finally, section 818 requires that a debtor actually have
commenced an action against the taxing authority to determine
the amount of a disputed tax before a setoff can be prevented.
Absent such an action by the debtor, a governmental entity is
free to ``setoff'' any prepetition refund with a liability. The
Advisory Committee had recommended that such setoff should only
be permitted in cases where the liability was undisputed. The
bill goes much further and to the disadvantage of the debtor
and other, non-governmental creditors.

V. Conclusion

For nearly 100 years, Congress has carefully considered the
bankruptcy laws and legislated on a deliberate and bipartisan
basis. In the past, Congress has elected also to preserve
carefully an insolvency system that provides a fresh start for
honest, hard-working debtors, protects on-going businesses and
jobs, and balances the rights of and between debtors and
creditors. Because H.R. 833 departs from these principles, we
respectfully dissent.

John Conyers, Jr.
Jerrold Nadler.
Melvin L. Watt.
Sheila Jackson Lee.
Marty Meehan.
Robert Wexler.
Anthony D. Weiner.
Howard L. Berman.
Bobby C. Scott.
Zoe Lofgren.
Maxine Waters.
William D. Delahunt.
Tammy Baldwin.

ADDITIONAL DISSENTING VIEWS

We write separately to express our regret that in a bill
which holds individual debtors to new, more draconian
standards, two modest amendments which would each have held
corporations accountable for their fraudulent activities which
have taken the lives of average Americans, much the same way
individual debtors are under current law, were rejected by the
majority.
In each case, the amendment would simply create an
exception to discharge in ch. 11 for civil judgements based on
fraud or misrepresentation by the debtor in connection with the
sale of a firearm, in the case of the first amendment, and
tobacco, in the case of the second amendment. Section 523(a)(2)
of the Bankruptcy Code already applies this rule to individual
debtors. The rejected amendment would have merely have required
gun manufacturers and tobacco companies to abide by the same
rule as every other American.
The gun amendment was aimed at a real, not a hypothetical
problem. For example, in 1996, Lorcin Engineering, one of the
largest producers of sem-automatic pistols, filed for chapter
11 because of 18 product liability claims made against it.
``Lorcin officials said they decided to `take advantage of the
system' when it became obvious that they would be unable to
adequately defend themselves against * * * complaint without
the additional time afforded by filing bankruptcy.''
¹ According to the Violence Policy Center, ``In
1993, Lorcin was the number one pistol manufacturer in America,
churning out 341,243 guns. Many of Lorcin's handguns are of
such poor quality they are ineligible for importation under the
Bureau of Alcohol, Tobacco and Firearms' (ATF) `sporting
purpose' test. Lorcin's .380 pistol tops the list of all guns
traced to crime by ATF.'' ² There are now suits
against the gun industry filed by several U.S. Cities including
Chicago, New Orleans, Miami, Atlanta, Cleveland, and Bridgeport
Connecticut. Manufacturers of deadly weapons who commit fraud
that results in serious injury and death should not be allowed
to ``take advantage of the system.'' We regret that the long
arm of the gun lobby has succeeded in cheating the victims in
these lawsuits from receiving their just compensation by
preserving this loophole in the Bankruptcy Code.
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\1\ Firearms Business 3 (Dec. 1, 1996).
\2\ Violence Policy Center, Don't Let Gun Manufacturerers ``Take
Advantage of the System'' 1 (Flyer on file with Minority Staff) (April
1999).
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Similarly, Rep. Jackson-Lee offered an amendment which
would have prevented tobacco companies from discharging debt
from civil judgements arising from the sale of tobacco products
when fraud or misrepresentation was involved. Certainly there
can be no industry more guilty of such misconduct than the
tobacco industry--and the cost has been paid with the lives of
millions of Americans.
Who can forget the image of the heads of the seven leading
tobacco companies swearing an oath before Congress, under
penalty of perjury, that tobacco was neither harmful nor
addictive? The Supreme Court has held that fraud and conspiracy
claims against tobacco merchants could go forward.³
Since that time numerous states, as well as individual and
class action claims have been pursued against tobacco
companies, in part, on these grounds. Many of them have proved
successful, relying in part on the fraudulent and misleading
claims of tobacco companies.
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\3\ Cipollone v. Liggett Group, 505 U.S. 504 (1992).
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In the last Congress, this Committee accepted a similar
provision, which was dropped out in a House-Senate conference
from which the minority was excluded.⁴ We regret
that, in the face of mounting evidence of fraud, the dangers of
smoking, and recognition by the courts, juries, and in some
instances the tobacco companies themselves, of widespread
misconduct, the majority has refused to hold these corporate
giants to the same rules every other American must observe.
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\4\ Sec. 119A of H.R. 3150 (105th Congress).

John Conyers, Jr.
Jerrold Nadler.
Sheila Jackson Lee.
Marty T. Meehan.
Robert Wexler.
Tammy Baldwin.
Zoe Lofgren.
William D. Delahunt.
Steven R. Rothman.
Anthony D. Weiner.