[House Report 107-617]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 107-617
======================================================================
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2002
_______
July 26 (legislative day, July 25), 2002.--Ordered to be printed
_______
Mr. Sensenbrenner, from the committee of conference, submitted the
following
CONFERENCE REPORT
[To accompany H.R. 333]
The committee of conference on the disagreeing votes of
the two Houses on the amendment of the Senate to the bill (H.R.
333), to amend title 11, United States Code, and for other
purposes, having met, after full and free conference, have
agreed to recommend and do recommend to their respective House
as follows:
That the House recede from its disagreement to the
amendment of the Senate and agree to the same with an amendment
as follows:
In lieu of the matter proposed to be inserted by the
Senate amendment, insert the following:
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Bankruptcy
Abuse Prevention and Consumer Protection Act of 2002''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I--NEEDS-BASED BANKRUPTCY
Sec. 101. Conversion.
Sec. 102. Dismissal or conversion.
Sec. 103. Sense of Congress and study.
Sec. 104. Notice of alternatives.
Sec. 105. Debtor financial management training test program.
Sec. 106. Credit counseling.
Sec. 107. Schedules of reasonable and necessary expenses.
TITLE II--ENHANCED CONSUMER PROTECTION
Subtitle A--Penalties for Abusive Creditor Practices
Sec. 201. Promotion of alternative dispute resolution.
Sec. 202. Effect of discharge.
Sec. 203. Discouraging abuse of reaffirmation practices.
Sec. 204. Preservation of claims and defenses upon sale of predatory
loans.
Sec. 205. GAO study and report on reaffirmation process.
Subtitle B--Priority Child Support
Sec. 211. Definition of domestic support obligation.
Sec. 212. Priorities for claims for domestic support obligations.
Sec. 213. Requirements to obtain confirmation and discharge in cases
involving domestic support obligations.
Sec. 214. Exceptions to automatic stay in domestic support obligation
proceedings.
Sec. 215. Nondischargeability of certain debts for alimony, maintenance,
and support.
Sec. 216. Continued liability of property.
Sec. 217. Protection of domestic support claims against preferential
transfer motions.
Sec. 218. Disposable income defined.
Sec. 219. Collection of child support.
Sec. 220. Nondischargeability of certain educational benefits and loans.
Subtitle C--Other Consumer Protections
Sec. 221. Amendments to discourage abusive bankruptcy filings.
Sec. 222. Sense of Congress.
Sec. 223. Additional amendments to title 11, United States Code.
Sec. 224. Protection of retirement savings in bankruptcy.
Sec. 225. Protection of education savings in bankruptcy.
Sec. 226. Definitions.
Sec. 227. Restrictions on debt relief agencies.
Sec. 228. Disclosures.
Sec. 229. Requirements for debt relief agencies.
Sec. 230. GAO study.
Sec. 231. Protection of personally identifiable information.
Sec. 232. Consumer privacy ombudsman.
Sec. 233. Prohibition on disclosure of name of minor children.
TITLE III--DISCOURAGING BANKRUPTCY ABUSE
Sec. 301. Reinforcement of the fresh start.
Sec. 302. Discouraging bad faith repeat filings.
Sec. 303. Curbing abusive filings.
Sec. 304. Debtor retention of personal property security.
Sec. 305. Relief from the automatic stay when the debtor does not
complete intended surrender of consumer debt collateral.
Sec. 306. Giving secured creditors fair treatment in chapter 13.
Sec. 307. Domiciliary requirements for exemptions.
Sec. 308. Reduction of homestead exemption for fraud.
Sec. 309. Protecting secured creditors in chapter 13 cases.
Sec. 310. Limitation on luxury goods.
Sec. 311. Automatic stay.
Sec. 312. Extension of period between bankruptcy discharges.
Sec. 313. Definition of household goods and antiques.
Sec. 314. Debt incurred to pay nondischargeable debts.
Sec. 315. Giving creditors fair notice in chapters 7 and 13 cases.
Sec. 316. Dismissal for failure to timely file schedules or provide
required information.
Sec. 317. Adequate time to prepare for hearing on confirmation of the
plan.
Sec. 318. Chapter 13 plans to have a 5-year duration in certain cases.
Sec. 319. Sense of Congress regarding expansion of rule 9011 of the
Federal Rules of Bankruptcy Procedure.
Sec. 320. Prompt relief from stay in individual cases.
Sec. 321. Chapter 11 cases filed by individuals.
Sec. 322. Limitations on homestead exemption.
Sec. 323. Excluding employee benefit plan participant contributions and
other property from the estate.
Sec. 324. Exclusive jurisdiction in matters involving bankruptcy
professionals.
Sec. 325. United States trustee program filing fee increase.
Sec. 326. Sharing of compensation.
Sec. 327. Fair valuation of collateral.
Sec. 328. Defaults based on nonmonetary obligations.
Sec. 329. Clarification of postpetition wages and benefits.
Sec. 330. Nondischargeability of debts incurred through violations of
laws relating to the provision of lawful goods and services.
Sec. 331 Delay of discharge during pendency of certain proceedings.
TITLE IV--GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS
Subtitle A--General Business Bankruptcy Provisions
Sec. 401. Adequate protection for investors.
Sec. 402. Meetings of creditors and equity security holders.
Sec. 403. Protection of refinance of security interest.
Sec. 404. Executory contracts and unexpired leases.
Sec. 405. Creditors and equity security holders committees.
Sec. 406. Amendment to section 546 of title 11, United States Code.
Sec. 407. Amendments to section 330(a) of title 11, United States Code.
Sec. 408. Postpetition disclosure and solicitation.
Sec. 409. Preferences.
Sec. 410. Venue of certain proceedings.
Sec. 411. Period for filing plan under chapter 11.
Sec. 412. Fees arising from certain ownership interests.
Sec. 413. Creditor representation at first meeting of creditors.
Sec. 414. Definition of disinterested person.
Sec. 415. Factors for compensation of professional persons.
Sec. 416. Appointment of elected trustee.
Sec. 417. Utility service.
Sec. 418. Bankruptcy fees.
Sec. 419. More complete information regarding assets of the estate.
Subtitle B--Small Business Bankruptcy Provisions
Sec. 431. Flexible rules for disclosure statement and plan.
Sec. 432. Definitions.
Sec. 433. Standard form disclosure statement and plan.
Sec. 434. Uniform national reporting requirements.
Sec. 435. Uniform reporting rules and forms for small business cases.
Sec. 436. Duties in small business cases.
Sec. 437. Plan filing and confirmation deadlines.
Sec. 438. Plan confirmation deadline.
Sec. 439. Duties of the United States trustee.
Sec. 440. Scheduling conferences.
Sec. 441. Serial filer provisions.
Sec. 442. Expanded grounds for dismissal or conversion and appointment
of trustee.
Sec. 443. Study of operation of title 11, United States Code, with
respect to small businesses.
Sec. 444. Payment of interest.
Sec. 445. Priority for administrative expenses.
Sec. 446. Duties with respect to a debtor who is a plan administrator of
an employee benefit plan.
Sec. 447. Appointment of committee of retired employees.
TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS
Sec. 501. Petition and proceedings related to petition.
Sec. 502. Applicability of other sections to chapter 9.
TITLE VI--BANKRUPTCY DATA
Sec. 601. Improved bankruptcy statistics.
Sec. 602. Uniform rules for the collection of bankruptcy data.
Sec. 603. Audit procedures.
Sec. 604. Sense of Congress regarding availability of bankruptcy data.
TITLE VII--BANKRUPTCY TAX PROVISIONS
Sec. 701. Treatment of certain liens.
Sec. 702. Treatment of fuel tax claims.
Sec. 703. Notice of request for a determination of taxes.
Sec. 704. Rate of interest on tax claims.
Sec. 705. Priority of tax claims.
Sec. 706. Priority property taxes incurred.
Sec. 707. No discharge of fraudulent taxes in chapter 13.
Sec. 708. No discharge of fraudulent taxes in chapter 11.
Sec. 709. Stay of tax proceedings limited to prepetition taxes.
Sec. 710. Periodic payment of taxes in chapter 11 cases.
Sec. 711. Avoidance of statutory tax liens prohibited.
Sec. 712. Payment of taxes in the conduct of business.
Sec. 713. Tardily filed priority tax claims.
Sec. 714. Income tax returns prepared by tax authorities.
Sec. 715. Discharge of the estate's liability for unpaid taxes.
Sec. 716. Requirement to file tax returns to confirm chapter 13 plans.
Sec. 717. Standards for tax disclosure.
Sec. 718. Setoff of tax refunds.
Sec. 719. Special provisions related to the treatment of State and local
taxes.
Sec. 720. Dismissal for failure to timely file tax returns.
TITLE VIII--ANCILLARY AND OTHER CROSS-BORDER CASES
Sec. 801. Amendment to add chapter 15 to title 11, United States Code.
Sec. 802. Other amendments to titles 11 and 28, United States Code.
TITLE IX--FINANCIAL CONTRACT PROVISIONS
Sec. 901. Treatment of certain agreements by conservators or receivers
of insured depository institutions.
Sec. 902. Authority of the corporation with respect to failed and
failing institutions.
Sec. 903. Amendments relating to transfers of qualified financial
contracts.
Sec. 904. Amendments relating to disaffirmance or repudiation of
qualified financial contracts.
Sec. 905. Clarifying amendment relating to master agreements.
Sec. 906. Federal Deposit Insurance Corporation Improvement Act of 1991.
Sec. 907. Bankruptcy law amendments.
Sec. 908. Recordkeeping requirements.
Sec. 909. Exemptions from contemporaneous execution requirement.
Sec. 910. Damage measure.
Sec. 911. SIPC stay.
TITLE X--PROTECTION OF FAMILY FARMERS AND FAMILY FISHERMEN
Sec. 1001. Permanent reenactment of chapter 12.
Sec. 1002. Debt limit increase.
Sec. 1003. Certain claims owed to governmental units.
Sec. 1004. Definition of family farmer.
Sec. 1005. Elimination of requirement that family farmer and spouse
receive over 50 percent of income from farming operation in
year prior to bankruptcy.
Sec. 1006. Prohibition of retroactive assessment of disposable income.
Sec. 1007. Family fishermen.
TITLE XI--HEALTH CARE AND EMPLOYEE BENEFITS
Sec. 1101. Definitions.
Sec. 1102. Disposal of patient records.
Sec. 1103. Administrative expense claim for costs of closing a health
care business and other administrative expenses.
Sec. 1104. Appointment of ombudsman to act as patient advocate.
Sec. 1105. Debtor in possession; duty of trustee to transfer patients.
Sec. 1106. Exclusion from program participation not subject to automatic
stay.
TITLE XII--TECHNICAL AMENDMENTS
Sec. 1201. Definitions.
Sec. 1202. Adjustment of dollar amounts.
Sec. 1203. Extension of time.
Sec. 1204. Technical amendments.
Sec. 1205. Penalty for persons who negligently or fraudulently prepare
bankruptcy petitions.
Sec. 1206. Limitation on compensation of professional persons.
Sec. 1207. Effect of conversion.
Sec. 1208. Allowance of administrative expenses.
Sec. 1209. Exceptions to discharge.
Sec. 1210. Effect of discharge.
Sec. 1211. Protection against discriminatory treatment.
Sec. 1212. Property of the estate.
Sec. 1213. Preferences.
Sec. 1214. Postpetition transactions.
Sec. 1215. Disposition of property of the estate.
Sec. 1216. General provisions.
Sec. 1217. Abandonment of railroad line.
Sec. 1218. Contents of plan.
Sec. 1219. Bankruptcy cases and proceedings.
Sec. 1220. Knowing disregard of bankruptcy law or rule.
Sec. 1221. Transfers made by nonprofit charitable corporations.
Sec. 1222. Protection of valid purchase money security interests.
Sec. 1223. Bankruptcy judgeships.
Sec. 1224. Compensating trustees.
Sec. 1225. Amendment to section 362 of title 11, United States Code.
Sec. 1226. Judicial education.
Sec. 1227. Reclamation.
Sec. 1228. Providing requested tax documents to the court.
Sec. 1229. Encouraging creditworthiness.
Sec. 1230. Property no longer subject to redemption.
Sec. 1231. Trustees.
Sec. 1232. Bankruptcy forms.
Sec. 1233. Direct appeals of bankruptcy matters to courts of appeals.
Sec. 1234. Involuntary cases.
Sec. 1235. Federal election law fines and penalties as nondischargeable
debt.
TITLE XIII--CONSUMER CREDIT DISCLOSURE
Sec. 1301. Enhanced disclosures under an open end credit plan.
Sec. 1302. Enhanced disclosure for credit extensions secured by a
dwelling.
Sec. 1303. Disclosures related to ``introductory rates''.
Sec. 1304. Internet-based credit card solicitations.
Sec. 1305. Disclosures related to late payment deadlines and penalties.
Sec. 1306. Prohibition on certain actions for failure to incur finance
charges.
Sec. 1307. Dual use debit card.
Sec. 1308. Study of bankruptcy impact of credit extended to dependent
students.
Sec. 1309. Clarification of clear and conspicuous.
TITLE XIV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
Sec. 1401. Effective date; application of amendments.
TITLE I--NEEDS-BASED BANKRUPTCY
SEC. 101. CONVERSION.
Section 706(c) of title 11, United States Code, is amended
by inserting ``or consents to'' after ``requests''.
SEC. 102. DISMISSAL OR CONVERSION.
(a) In General.--Section 707 of title 11, United States
Code, is amended--
(1) by striking the section heading and inserting
the following:
``Sec. 707. Dismissal of a case or conversion to a case under chapter
11 or 13'';
and
(2) in subsection (b)--
(A) by inserting ``(1)'' after ``(b)'';
(B) in paragraph (1), as so redesignated by
subparagraph (A) of this paragraph--
(i) in the first sentence--
(I) by striking ``but not
at the request or suggestion
of'' and inserting ``trustee,
bankruptcy administrator, or'';
(II) by inserting ``, or,
with the debtor's consent,
convert such a case to a case
under chapter 11 or 13 of this
title,'' after ``consumer
debts''; and
(III) by striking ``a
substantial abuse'' and
inserting ``an abuse''; and
(ii) by striking the next to last
sentence; and
(C) by adding at the end the following:
``(2)(A)(i) In considering under paragraph (1) whether the
granting of relief would be an abuse of the provisions of this
chapter, the court shall presume abuse exists if the debtor's
current monthly income reduced by the amounts determined under
clauses (ii), (iii), and (iv), and multiplied by 60 is not less
than the lesser of--
``(I) 25 percent of the debtor's nonpriority
unsecured claims in the case, or $6,000, whichever is
greater; or
``(II) $10,000.
``(ii)(I) The debtor's monthly expenses shall be the
debtor's applicable monthly expense amounts specified under the
National Standards and Local Standards, and the debtor's actual
monthly expenses for the categories specified as Other
Necessary Expenses issued by the Internal Revenue Service for
the area in which the debtor resides, as in effect on the date
of the entry of the order for relief, for the debtor, the
dependents of the debtor, and the spouse of the debtor in a
joint case, if the spouse is not otherwise a dependent.
Notwithstanding any other provision of this clause, the monthly
expenses of the debtor shall not include any payments for
debts. In addition, the debtor's monthly expenses shall include
the debtor's reasonably necessary expenses incurred to maintain
the safety of the debtor and the family of the debtor from
family violence as identified under section 309 of the Family
Violence Prevention and Services Act, or other applicable
Federal law. The expenses included in the debtor's monthly
expenses described in the preceding sentence shall be kept
confidential by the court. In addition, if it is demonstrated
that it is reasonable and necessary, the debtor's monthly
expenses may also include an additional allowance for food and
clothing of up to 5 percent of the food and clothing categories
as specified by the National Standards issued by the Internal
Revenue Service.
``(II) In addition, the debtor's monthly expenses may
include, if applicable, the continuation of actual expenses
paid by the debtor that are reasonable and necessary forcare
and support of an elderly, chronically ill, or disabled household
member or member of the debtor's immediate family (including parents,
grandparents, siblings, children, and grandchildren of the debtor, the
dependents of the debtor, and the spouse of the debtor in a joint case
who is not a dependent) and who is unable to pay for such reasonable
and necessary expenses.
``(III) In addition, for a debtor eligible for chapter 13,
the debtor's monthly expenses may include the actual
administrative expenses of administering a chapter 13 plan for
the district in which the debtor resides, up to an amount of 10
percent of the projected plan payments, as determined under
schedules issued by the Executive Office for United States
Trustees.
``(IV) In addition, the debtor's monthly expenses may
include the actual expenses for each dependent child less than
18 years of age, not to exceed $1,500 per year per child, to
attend a private or public elementary or secondary school if
the debtor provides documentation of such expenses and a
detailed explanation of why such expenses are reasonable and
necessary, and why such expenses are not already accounted for
in the National Standards, Local Standards, or Other Necessary
Expenses referred to in subclause (I).
``(V) In addition, the debtor's monthly expenses may
include an allowance for housing and utilities, in excess of
the allowance specified by the Local Standards for housing and
utilities issued by the Internal Revenue Service, based on the
actual expenses for home energy costs if the debtor provides
documentation of such actual expenses and demonstrates that
such actual expenses are reasonable and necessary.
``(iii) The debtor's average monthly payments on account of
secured debts shall be calculated as the sum of--
``(I) the total of all amounts scheduled as
contractually due to secured creditors in each month of
the 60 months following the date of the petition; and
``(II) any additional payments to secured creditors
necessary for the debtor, in filing a plan under
chapter 13 of this title, to maintain possession of the
debtor's primary residence, motor vehicle, or other
property necessary for the support of the debtor and
the debtor's dependents, that serves as collateral for
secured debts;
divided by 60.
``(iv) The debtor's expenses for payment of all priority
claims (including priority child support and alimony claims)
shall be calculated as the total amount of debts entitled to
priority, divided by 60.
``(B)(i) In any proceeding brought under this subsection,
the presumption of abuse may only be rebutted by demonstrating
special circumstances that justify additional expenses or
adjustments of current monthly income for which there is no
reasonable alternative.
``(ii) In order to establish special circumstances, the
debtor shall be required to itemize each additional expense or
adjustment of income and to provide--
``(I) documentation for such expense or adjustment
to income; and
``(II) a detailed explanation of the special
circumstances that make such expenses or adjustment to
income necessary and reasonable.
``(iii) The debtor shall attest under oath to the accuracy
of any information provided to demonstrate that additional
expenses or adjustments to income are required.
``(iv) The presumption of abuse may only be rebutted if the
additional expenses or adjustments to income referred to in
clause (i) cause the product of the debtor's current monthly
income reduced by the amounts determined under clauses (ii),
(iii), and (iv) of subparagraph (A) when multiplied by 60 to be
less than the lesser of--
``(I) 25 percent of the debtor's nonpriority
unsecured claims, or $6,000, whichever is greater; or
``(II) $10,000.
``(C) As part of the schedule of current income and
expenditures required under section 521, the debtor shall
include a statement of the debtor's current monthly income, and
the calculations that determine whether a presumption arises
under subparagraph (A)(i), that shows how each such amount is
calculated.
``(3) In considering under paragraph (1) whether the
granting of relief would be an abuse of the provisions of this
chapter in a case in which the presumption in subparagraph
(A)(i) of such paragraph does not apply or has been rebutted,
the court shall consider--
``(A) whether the debtor filed the petition in bad
faith; or
``(B) the totality of the circumstances (including
whether the debtor seeks to reject a personal services
contract and the financial need for such rejection as
sought by the debtor) of the debtor's financial
situation demonstrates abuse.
``(4)(A) The court, on its own initiative or on the motion
of a party in interest, in accordance with the procedures
described in rule 9011 of the Federal Rules of Bankruptcy
Procedure, may order the attorney for the debtor to reimburse
the trustee for all reasonable costs in prosecuting a motion
filed under section 707(b), including reasonable attorneys'
fees, if--
``(i) a trustee files a motion for dismissal or
conversion under this subsection; and
``(ii) the court--
``(I) grants such motion; and
``(II) finds that the action of the
attorney for the debtor in filing under this
chapter violated rule 9011 of the Federal Rules
of Bankruptcy Procedure.
``(B) If the court finds that the attorney for the debtor
violated rule 9011 of the Federal Rules of Bankruptcy
Procedure, the court, on its own initiative or on the motion of
a party in interest, in accordance with such procedures, may
order--
``(i) the assessment of an appropriate civil
penalty against the attorney for the debtor; and
``(ii) the payment of such civil penalty to the
trustee, the United States trustee, or the bankruptcy
administrator.
``(C) In the case of a petition, pleading, or written
motion, the signature of an attorney shall constitute a
certification that the attorney has--
``(i) performed a reasonable investigation into the
circumstances that gave rise to the petition, pleading,
or written motion; and
``(ii) determined that the petition, pleading, or
written motion--
``(I) is well grounded in fact; and
``(II) is warranted by existing law or a
good faith argument for the extension,
modification, or reversal of existing law and
does not constitute an abuse under paragraph
(1).
``(D) The signature of an attorney on the petition shall
constitute a certification that the attorney has no knowledge
after an inquiry that the information in the schedules filed
with such petition is incorrect.
``(5)(A) Except as provided in subparagraph (B) and subject
to paragraph (6), the court, on its own initiative or on the
motion of a party in interest, in accordance with the
procedures described in rule 9011 of the Federal Rules of
Bankruptcy Procedure, may award a debtor all reasonable costs
(including reasonable attorneys' fees) in contesting a motion
filed by a party in interest (other than a trustee, United
States trustee, or bankruptcy administrator) under this
subsection if--
``(i) the court does not grant the motion; and
``(ii) the court finds that--
``(I) the position of the party that filed
the motion violated rule 9011 of the Federal
Rules of Bankruptcy Procedure; or
``(II) the attorney (if any) who filed the
motion did not comply with the requirements of
clauses (i) and (ii) of paragraph (4)(C), and
the motion was made solely for the purpose of
coercing a debtor into waiving a right
guaranteed to the debtor under this title.
``(B) A small business that has a claim of an aggregate
amount less than $1,000 shall not be subject to subparagraph
(A)(ii)(I).
``(C) For purposes of this paragraph--
``(i) the term `small business' means an
unincorporated business, partnership, corporation,
association, or organization that--
``(I) has fewer than 25 full-time employees
as determined on the date on which the motion
is filed; and
``(II) is engaged in commercial or business
activity; and
``(ii) the number of employees of a wholly owned
subsidiary of a corporation includes the employees of--
``(I) a parent corporation; and
``(II) any other subsidiary corporation of
the parent corporation.
``(6) Only the judge, United States trustee, or bankruptcy
administrator may file a motion under section 707(b), if the
current monthly income of the debtor, or in a joint case, the
debtor and the debtor's spouse, as of the date of the order for
relief, when multiplied by 12, is equal to or less than--
``(A) in the case of a debtor in a household of 1
person, the median family income of the applicable
State for 1 earner;
``(B) in the case of a debtor in a household of 2,
3, or 4 individuals, the highest median family income
of the applicable State for a family of the same number
or fewer individuals; or
``(C) in the case of a debtor in a household
exceeding 4 individuals, the highest median family
income of the applicable State for a family of 4 or
fewer individuals, plus $525 per month for each
individual in excess of 4.
``(7)(A) No judge, United States trustee, trustee,
bankruptcy administrator, or other party in interest may file a
motion under paragraph (2) if the current monthly income of the
debtor and the debtor's spouse combined, as of the date of the
order for relief when multiplied by 12, is equal to or less
than--
``(i) in the case of a debtor in a household of 1
person, the median family income of the applicable
State for 1 earner;
``(ii) in the case of a debtor in a household of 2,
3, or 4 individuals, the highest median family income
of the applicable State for a family of the same number
or fewer individuals; or
``(iii) in the case of a debtor in a household
exceeding 4 individuals, the highest median family
income of the applicable State for a family of 4 or
fewer individuals, plus $525 per month for each
individual in excess of 4.
``(B) In a case that is not a joint case, current monthly
income of the debtor's spouse shall not be considered for
purposes of subparagraph (A) if--
``(i)(I) the debtor and the debtor's spouse are
separated under applicable nonbankruptcy law; or
``(II) the debtor and the debtor's spouse are
living separate and apart, other than for the purpose
of evading subparagraph (A); and
``(ii) the debtor files a statement under penalty
of perjury--
``(I) specifying that the debtor meets the
requirement of subclause (I) or (II) of clause
(i); and
``(II) disclosing the aggregate, or best
estimate of the aggregate, amount of any cash
or money payments received from the debtor's
spouse attributed to the debtor's current
monthly income.''.
(b) Definition.--Section 101 of title 11, United States
Code, is amended by inserting after paragraph (10) the
following:
``(10A) `current monthly income'--
``(A) means the average monthly income from
all sources that the debtor receives (or in a
joint case the debtor and the debtor's spouse
receive) without regard to whether such income
is taxable income, derived during the 6-month
period ending on--
``(i) the last day of the calendar
month immediately preceding the date of
the commencement of the case if the
debtor files the schedule of current
income required by section
521(a)(1)(B)(ii); or
``(ii) the date on which current
income is determined by the court for
purposes of this title if the debtor
does not file the schedule of current
income required by section
521(a)(1)(B)(ii); and
``(B) includes any amount paid by any
entity other than the debtor (or in a joint
case the debtor and the debtor's spouse), on a
regular basis for the household expenses of the
debtor or the debtor's dependents (and in a
joint case the debtor's spouse if not otherwise
a dependent), but excludes benefits received
under the Social Security Act, payments to
victims of war crimes or crimes against
humanity on account of their status as victims
of such crimes, and payments to victims of
international terrorism (as defined in section
2331 of title 18) or domestic terrorism (as
defined in section 2331 of title 18) on account
of their status as victims of such
terrorism;''.
(c) United States Trustee and Bankruptcy Administrator
Duties.--Section 704 of title 11, United States Code, is
amended--
(1) by inserting ``(a)'' before ``The trustee
shall--''; and
(2) by adding at the end the following:
``(b)(1) With respect to a debtor who is an individual in a
case under this chapter--
``(A) the United States trustee or bankruptcy
administrator shall review all materials filed by the
debtor and, not later than 10 days after the date of
the first meeting of creditors, file with the court a
statement as to whether the debtor's case would be
presumed to be an abuse under section 707(b); and
``(B) not later than 5 days after receiving a
statement under subparagraph (A), the court shall
provide a copy of the statement to all creditors.
``(2) The United States trustee or bankruptcy administrator
shall, not later than 30 days after the date of filing a
statement under paragraph (1), either file a motion to dismiss
or convert under section 707(b) or file a statement setting
forth the reasons the United States trustee or bankruptcy
administrator does not believe that such a motion would be
appropriate, if the United States trustee or bankruptcy
administrator determines that the debtor's case should be
presumed to be an abuse under section 707(b) and the product of
the debtor's current monthly income, multiplied by 12 is not
less than--
``(A) in the case of a debtor in a household of 1
person, the median family income of the applicable
State for 1 earner; or
``(B) in the case of a debtor in a household of 2
or more individuals, the highest median family income
of the applicable State for a family of the same number
or fewer individuals .''.
(d) Notice.--Section 342 of title 11, United States Code,
is amended by adding at the end the following:
``(d) In a case under chapter 7 of this title in which the
debtor is an individual and in which the presumption of abuse
is triggered under section 707(b), the clerk shall give written
notice to all creditors not later than 10 days after the date
of the filing of the petition that the presumption of abuse has
been triggered.''.
(e) Nonlimitation of Information.--Nothing in this title
shall limit the ability of a creditor to provide information to
a judge (except for information communicated ex parte, unless
otherwise permitted by applicable law), United States trustee,
bankruptcy administrator or trustee.
(f) Dismissal for Certain Crimes.--Section 707 of title 11,
United States Code, is amended by adding at the end the
following:
``(c)(1) In this subsection--
``(A) the term `crime of violence' has the meaning
given such term in section 16 of title 18; and
``(B) the term `drug trafficking crime' has the
meaning given such term in section 924(c)(2) of title
18.
``(2) Except as provided in paragraph (3), after notice and
a hearing, the court, on a motion by the victim of a crime of
violence or a drug trafficking crime, may when it is in the
best interest of the victim dismiss a voluntary case filed
under this chapter by a debtor who is an individual if such
individual was convicted of such crime.
``(3) The court may not dismiss a case under paragraph (2)
if the debtor establishes by a preponderance of the evidence
that the filing of a case under this chapter is necessary to
satisfy a claim for a domestic support obligation.''.
(g) Confirmation of Plan.--Section 1325(a) of title 11,
United States Code, is amended--
(1) in paragraph (5), by striking ``and'' at the
end;
(2) in paragraph (6), by striking the period and
inserting a semicolon; and
(3) by inserting after paragraph (6) the following:
``(7) the action of the debtor in filing the
petition was in good faith;''.
(h) Applicability of Means Test to Chapter 13.--Section
1325(b) of title 11, United States Code, is amended--
(1) in paragraph (1)(B), by inserting ``to
unsecured creditors'' after ``to make payments''; and
(2) by striking paragraph (2) and inserting the
following:
``(2) For purposes of this subsection, the term
`disposable income' means current monthly income
received by the debtor (other than child support
payments, foster care payments, or disability payments
for a dependent child made in accordance with
applicable nonbankruptcy law to the extent reasonably
necessary to be expended for such child) less amounts
reasonably necessary to be expended--
``(A) for the maintenance or support of the
debtor or a dependent of the debtor or for a
domestic support obligation that first becomes
payable after the date the petition is filed
and for charitable contributions (that meet the
definition of `charitable contribution' under
section 548(d)(3) to a qualified religious or
charitable entity or organization (as defined
in section 548(d)(4)) in an amount not to
exceed 15 percent of gross income of the debtor
for the year in which the contributions are
made; and
``(B) if the debtor is engaged in business,
for the payment of expenditures necessary for
the continuation, preservation, and operation
of such business.
``(3) Amounts reasonably necessary to be expended
under paragraph (2) shall be determined in accordance
with subparagraphs (A) and (B) of section 707(b)(2), if
the debtor has current monthly income, when multiplied
by 12, greater than--
``(A) in the case of a debtor in a
household of 1 person, the median family income
of the applicable State for 1 earner;
``(B) in the case of a debtor in a
household of 2, 3, or 4 individuals, the
highest median family income of the applicable
State for a family of the same number or fewer
individuals; or
``(C) in the case of a debtor in a
household exceeding 4 individuals, the highest
median family income of the applicable State
for a family of 4 or fewer individuals, plus
$525 per month for each individual in excess of
4.''.
(i) Special Allowance for Health Insurance.--Section
1329(a) of title 11, United States Code, is amended--
(1) in paragraph (2) by striking ``or'' at the end;
(2) in paragraph (3) by striking the period at the
end and inserting ``; or''; and
(3) by adding at the end the following:
``(4) reduce amounts to be paid under the plan by
the actual amount expended by the debtor to purchase
health insurance for the debtor (and for any dependent
of the debtor if such dependent does not otherwise have
health insurance coverage) if the debtor documents the
cost of such insurance and demonstrates that--
``(A) such expenses are reasonable and
necessary;
``(B)(i) if the debtor previously paid for
health insurance, the amount is not materially
larger than the cost the debtor previously paid
or the cost necessary to maintain the lapsed
policy; or
``(ii) if the debtor did not have health
insurance, the amount is not materially larger
than the reasonable cost that would be incurred
by a debtor who purchases health insurance, who
has similar income, expenses, age, and health
status, and who lives in the same geographical
location with the same number of dependents who
do not otherwise have health insurance
coverage; and
``(C) the amount is not otherwise allowed
for purposes of determining disposable income
under section 1325(b) of this title;
and upon request of any party in interest, files proof
that a health insurance policy was purchased.''.
(j) Adjustment of Dollar Amounts.--Section 104(b) of title
11, United States Code, is amended by striking ``and
523(a)(2)(C)'' each place it appears and inserting
``523(a)(2)(C), 707(b), and 1325(b)(3)''.
(k) Definition of `Median Family Income'.--Section 101 of
title 11, United States Code, is amended by inserting after
paragraph (39) the following:
``(39A) `median family income' means for any year--
``(A) the median family income both
calculated and reported by the Bureau of the
Census in the then most recent year; and
``(B) if not so calculated and reported in
the then current year, adjusted annually after
such most recent year until the next year in
which median family income is both calculated
and reported by the Bureau of the Census, to
reflect the percentage change in the Consumer
Price Index for All Urban Consumers during the
period of years occurring after such most
recent year and before such current year;''.
(k) Clerical Amendment.--The table of sections for chapter
7 of title 11, United States Code, is amended by striking the
item relating to section 707 and inserting the following:
``707. Dismissal of a case or conversion to a case under chapter 11 or
13.''.
SEC. 103. SENSE OF CONGRESS AND STUDY.
(a) Sense of Congress.--It is the sense of Congress that
the Secretary of the Treasury has the authority to alter the
Internal Revenue Service standards established to set
guidelines for repayment plans as needed to accommodate their
use under section 707(b) of title 11, United States Code.
(b) Study.--
(1) In general.--Not later than 2 years after the
date of enactment of this Act, the Director of the
Executive Office for United States Trustees shall
submit a report to the Committee on the Judiciary of
the Senate and the Committee on the Judiciary of the
House of Representatives containing the findings of the
Director regarding the utilization of Internal Revenue
Service standards for determining--
(A) the current monthly expenses of a
debtor under section 707(b) of title 11, United
States Code; and
(B) the impact that the application of such
standards has had on debtors and on the
bankruptcy courts.
(2) Recommendation.--The report under paragraph (1)
may include recommendations for amendments to title 11,
United States Code, that are consistent with the
findings of the Director under paragraph (1).
SEC. 104. NOTICE OF ALTERNATIVES.
Section 342(b) of title 11, United States Code, is amended
to read as follows:
``(b) Before the commencement of a case under this title by
an individual whose debts are primarily consumer debts, the
clerk shall give to such individual written notice containing--
``(1) a brief description of--
``(A) chapters 7, 11, 12, and 13 and the
general purpose, benefits, and costs of
proceeding under each of those chapters; and
``(B) the types of services available from
credit counseling agencies; and
``(2) statements specifying that--
``(A) a person who knowingly and
fraudulently conceals assets or makes a false
oath or statement under penalty of perjury in
connection with a bankruptcy case shall be
subject to fine, imprisonment, or both; and
``(B) all information supplied by a debtor
in connection with a bankruptcy case is subject
to examination by the Attorney General.''.
SEC. 105. DEBTOR FINANCIAL MANAGEMENT TRAINING TEST PROGRAM.
(a) Development of Financial Management and Training
Curriculum and Materials.--The Director of the Executive Office
for United States Trustees (in this section referred to as the
``Director'') shall consult with a wide range of individuals
who are experts in the field of debtor education, including
trustees who serve in cases under chapter 13 of title 11,
United States Code, and who operate financial management
education programs for debtors, and shall develop a financial
management training curriculum and materials that can be used
to educate debtors who are individuals on how to better manage
their finances.
(b) Test.--
(1) Selection of districts.--The Director shall
select 6 judicial districts of the United States in
which to test the effectiveness of the financial
management training curriculum and materials developed
under subsection (a).
(2) Use.--For an 18-month period beginning not
later than 270 days after the date of enactment of this
Act, such curriculum and materials shall be, for the 6
judicial districts selected under paragraph (1), used
as the instructional course concerning personal
financial management for purposes of section 111 of
title 11, United States Code.
(c) Evaluation.--
(1) In general.--During the 18-month period
referred to in subsection (b), the Director shall
evaluate the effectiveness of--
(A) the financial management training
curriculum and materials developed under
subsection (a); and
(B) a sample of existing consumer education
programs such as those described in the Report
of the National Bankruptcy Review Commission
(October 20, 1997) that are representative of
consumer education programs carried out by the
credit industry, by trustees serving under
chapter 13 of title 11, United States Code, and
by consumer counseling groups.
(2) Report.--Not later than 3 months after
concluding such evaluation, the Director shall submit a
report to the Speaker of the House of Representatives
and the President pro tempore of the Senate, for
referral to the appropriate committees of the Congress,
containing the findings of the Director regarding the
effectiveness of such curriculum, such materials, and
such programs and their costs.
SEC. 106. CREDIT COUNSELING.
(a) Who May Be a Debtor.--Section 109 of title 11, United
States Code, is amended by adding at the end the following:
``(h)(1) Subject to paragraphs (2) and (3), and
notwithstanding any other provision of this section, an
individual may not be a debtor under this title unless that
individual has, during the 180-day period preceding the date of
filing of the petition of that individual, received from an
approved nonprofit budget and credit counseling agency
described in section 111(a) an individual or group briefing
(including a briefing conducted by telephone or on the
Internet) that outlined the opportunities for available credit
counseling and assisted that individual in performing a related
budget analysis.
``(2)(A) Paragraph (1) shall not apply with respect to a
debtor who resides in a district for which the United States
trustee or bankruptcy administrator of the bankruptcy court of
that district determines that the approved nonprofit budget and
credit counseling agencies for that district are not reasonably
able to provide adequate services to the additional individuals
who would otherwise seek credit counseling from that agency by
reason of the requirements of paragraph (1).
``(B) Each United States trustee or bankruptcy
administrator that makes a determination described in
subparagraph (A) shall review that determination not later than
1 year after the date of that determination, and not less
frequently than every year thereafter. Notwithstanding the
preceding sentence, a nonprofit budget and credit counseling
agency may be disapproved by the United States trustee or
bankruptcy administrator at any time.
``(3)(A) Subject to subparagraph (B), the requirements of
paragraph (1) shall not apply with respect to a debtor who
submits to the court a certification that--
``(i) describes exigent circumstances that merit a
waiver of the requirements of paragraph (1);
``(ii) states that the debtor requested credit
counseling services from an approved nonprofit budget
and credit counseling agency, but was unable to obtain
the services referred to in paragraph (1) during the 5-
day period beginning on the date on which the debtor
made that request; and
``(iii) is satisfactory to the court.
``(B) With respect to a debtor, an exemption under
subparagraph (A) shall cease to apply to that debtor on the
date on which the debtor meets the requirements of paragraph
(1), but in no case may the exemption apply to that debtor
after the date that is 30 days after the debtor files a
petition, except that the court, for cause, may order an
additional 15 days.''.
(b) Chapter 7 Discharge.--Section 727(a) of title 11,
United States Code, is amended--
(1) in paragraph (9), by striking ``or'' at the
end;
(2) in paragraph (10), by striking the period and
inserting ``; or''; and
(3) by adding at the end the following:
``(11) after the filing of the petition, the debtor
failed to complete an instructional course concerning
personal financial management described in section 111,
except that this paragraph shall not apply with respect
to a debtor who resides in a district for which the
United States trustee or bankruptcy administrator of
such district determines that the approved
instructional courses are not adequate to service the
additional individuals required to complete such
instructional courses under this section (Each United
States trustee or bankruptcy administrator who makes a
determination described in this paragraph shall review
such determination not later than 1 year after the date
of such determination, and not less frequently than
annually thereafter.).''.
(c) Chapter 13 Discharge.--Section 1328 of title 11, United
States Code, is amended by adding at the end the following:
``(g)(1) The court shall not grant a discharge under this
section to a debtor unless after filing a petition the debtor
has completed an instructional course concerning personal
financial management described in section 111.
``(2) Paragraph (1) shall not apply with respect to a
debtor who resides in a district for which the United States
trustee or bankruptcy administrator of such district determines
that the approved instructional courses are not adequate to
service the additional individuals who would be required to
complete such instructional course by reason of the
requirements of this section.
``(3) Each United States trustee or bankruptcy
administrator who makes a determination described in paragraph
(2) shall review such determination not later than 1 year after
the date of such determination, and not less frequently than
annually thereafter.''.
(c) Chapter 13 Discharge.--Section 1328 of title 11, United
States Code, is amended by adding at the end the following:
``(g) The court shall not grant a discharge under this
section to a debtor, unless after filing a petition the debtor
has completed an instructional course concerning personal
financial management described in section 111.
``(h) Subsection (g) shall not apply with respect to a
debtor who resides in a district for which the United States
trustee or bankruptcy administrator of the bankruptcy court of
that district determines that the approved instructional
courses are not adequate to service the additional individuals
who would be required to complete the instructional course by
reason of the requirements of this section.
``(i) Each United States trustee or bankruptcy
administrator that makes a determination described in
subsection (h) shall review that determination not later than 1
year after the date of that determination, and not less
frequently than every year thereafter.''.
(d) Debtor's Duties.--Section 521 of title 11, United
States Code, is amended--
(1) by inserting ``(a)'' before ``The debtor
shall--''; and
(2) by adding at the end the following:
``(b) In addition to the requirements under subsection (a),
a debtor who is an individual shall file with the court--
``(1) a certificate from the approved nonprofit
budget and credit counseling agency that provided the
debtor services under section 109(h) describing the
services provided to the debtor; and
``(2) a copy of the debt repayment plan, if any,
developed under section 109(h) through the approved
nonprofit budget and credit counseling agency referred
to in paragraph (1).''.
(e) General Provisions.--
(1) In general.--Chapter 1 of title 11, United
States Code, is amended by adding at the end the
following:
``Sec. 111. Credit counseling agencies; financial management
instructional courses
``(a) The clerk shall maintain a publicly available list
of--
``(1) credit counseling agencies that provide 1 or
more programs described in section 109(h) currently
approved by the United States trustee or the bankruptcy
administrator for the district, as applicable; and
``(2) instructional courses concerning personal
financial management currently approved by the United
States trustee or the bankruptcy administrator for the
district, as applicable.
``(b) The United States trustee or bankruptcy administrator
shall only approve a credit counseling agency or instructional
course concerning personal financial management as follows:
``(1) The United States trustee or bankruptcy
administrator shall have thoroughly reviewed the
qualifications of the credit counseling agency or of
the provider of the instructional course under the
standards set forth in this section, and the programs
or instructional courses which will be offered by such
agency or provider, and may require an agency or
provider of an instructional course which has sought
approval to provide information with respect to such
review.
``(2) The United States trustee or bankruptcy
administrator shall have determined that the credit
counseling agency or instructional course fully
satisfies the applicable standards set forth in this
section.
``(3) When an agency or instructional course is
initially approved, such approval shall be for a
probationary period not to exceed 6 months. An agency
or instructional course is initially approved if it did
not appear on the approved list for the district under
subsection (a) immediately prior to approval.
``(4) At the conclusion of the probationary period
under paragraph (3), the United States trustee or
bankruptcy administrator may only approve for an
additional 1-year period, and for successive 1-year
periods thereafter, any agency or instructional course
which has demonstrated during the probationary or
subsequent period that such agency or instructional
course--
``(A) has met the standards set forth under
this section during such period; and
``(B) can satisfy such standards in the
future.
``(5) Not later than 30 days after any final
decision under paragraph (4), that occurs either after
the expiration of the initial probationary period, or
after any 2-year period thereafter, an interested
person may seek judicial review of such decision in the
appropriate district court of the United States.
``(c)(1) The United States trustee or bankruptcy
administrator shall only approve a credit counseling agency
that demonstrates that it will provide qualified counselors,
maintain adequate provision for safekeeping and payment of
client funds, provide adequate counseling with respect to
client credit problems, and deal responsibly and effectively
with other matters as relate to the quality, effectiveness, and
financial security of such programs.
``(2) To be approved by the United States trustee or
bankruptcy administrator, a credit counseling agency shall, at
a minimum--
``(A) be a nonprofit budget and credit counseling
agency, the majority of the board of directors of
which--
``(i) are not employed by the agency; and
``(ii) will not directly or indirectly
benefit financially from the outcome of a
credit counseling session;
``(B) if a fee is charged for counseling services,
charge a reasonable fee, and provide services without
regard to ability to pay the fee;
``(C) provide for safekeeping and payment of client
funds, including an annual audit of the trust accounts
and appropriate employee bonding;
``(D) provide full disclosures to clients,
including funding sources, counselor qualifications,
possible impact on credit reports, and any costs of
such program that will be paid by the debtor and how
such costs will be paid;
``(E) provide adequate counseling with respect to
client credit problems that includes an analysis of
their current situation, what brought them to that
financial status, and how they can develop a plan to
handle the problem without incurring negative
amortization of their debts;
``(F) provide trained counselors who receive no
commissions or bonuses based on the counseling session
outcome, and who have adequate experience, and have
been adequately trained to provide counseling services
to individuals in financial difficulty, including the
matters described in subparagraph (E);
``(G) demonstrate adequate experience and
background in providing credit counseling; and
``(H) have adequate financial resources to provide
continuing support services for budgeting plans over
the life of any repayment plan.
``(d) The United States trustee or bankruptcy administrator
shall only approve an instructional course concerning personal
financial management--
``(1) for an initial probationary period under
subsection (b)(3) if the course will provide at a
minimum--
``(A) trained personnel with adequate
experience and training in providing effective
instruction and services;
``(B) learning materials and teaching
methodologies designed to assist debtors in
understanding personal financial management and
that are consistent with stated objectives
directly related to the goals of such
instructional course;
``(C) adequate facilities situated in
reasonably convenient locations at which such
instructional course is offered, except that
such facilities may include the provision of
such instructional course or program by
telephone or through the Internet, if such
instructional course or program is effective;
and
``(D) the preparation and retention of
reasonable records (which shall include the
debtor's bankruptcy case number) to permit
evaluation of the effectiveness of such
instructional course or program, including any
evaluation of satisfaction of instructional
course or program requirements for each debtor
attending such instructional course or program,
which shall be available for inspection and
evaluation by the Executive Office for United
States Trustees, the United States trustee,
bankruptcy administrator, or chief bankruptcy
judge for the district in which such
instructional course or program is offered; and
``(2) for any 1-year period if the provider thereof
has demonstrated that the course meets the standards of
paragraph (1) and, in addition--
``(A) has been effective in assisting a
substantial number of debtors to understand
personal financial management; and
``(B) is otherwise likely to increase
substantially debtor understanding of personal
financial management.
``(e) The district court may, at any time, investigate the
qualifications of a credit counseling agency referred to in
subsection (a), and request production of documents to ensure
the integrity and effectiveness of such credit counseling
agencies. The district court may, at any time, remove from the
approved list under subsection (a) a credit counseling agency
upon finding such agency does not meet the qualifications of
subsection (b).
``(f) The United States trustee or bankruptcy administrator
shall notify the clerk that a credit counseling agency or an
instructional course is no longer approved, in which case the
clerk shall remove it from the list maintained under subsection
(a).
``(g)(1) No credit counseling agency may provide to a
credit reporting agency information concerning whether a debtor
who has received or sought instruction concerning personal
financial management from the credit counseling agency.
``(2) A credit counseling agency that willfully or
negligently fails to comply with any requirement under this
title with respect to a debtor shall be liable for damages in
an amount equal to the sum of--
``(A) any actual damages sustained by the debtor as
a result of the violation; and
``(B) any court costs or reasonable attorneys' fees
(as determined by the court) incurred in an action to
recover those damages.''.
(2) Clerical amendment.--The table of sections for
chapter 1 of title 11, United States Code, is amended
by adding at the end the following:
``111. Credit counseling agencies; financial management instructional
courses.''.
(f) Limitation.--Section 362 of title 11, United States
Code, is amended by adding at the end the following:
``(i) If a case commenced under chapter 7, 11, or 13 is
dismissed due to the creation of a debt repayment plan, for
purposes of subsection (c)(3), any subsequent case commenced by
the debtor under any such chapter shall not be presumed to be
filed not in good faith.
``(j) On request of a party in interest, the court shall
issue an order under subsection (c) confirming that the
automatic stay has been terminated.''.
SEC. 107. SCHEDULES OF REASONABLE AND NECESSARY EXPENSES.
For purposes of section 707(b) of title 11, United States
Code, as amended by this Act, the Director of the Executive
Office for United States Trustees shall, not later than 180
days after the date of enactment of this Act, issue schedules
of reasonable and necessary administrative expenses of
administering a chapter 13 plan for each judicial district of
the United States.
TITLE II--ENHANCED CONSUMER PROTECTION
Subtitle A--Penalties for Abusive Creditor Practices
SEC. 201. PROMOTION OF ALTERNATIVE DISPUTE RESOLUTION.
(a) Reduction of Claim.--Section 502 of title 11, United
States Code, is amended by adding at the end the following:
``(k)(1) The court, on the motion of the debtor and after a
hearing, may reduce a claim filed under this section based in
whole on an unsecured consumer debt by not more than 20 percent
of the claim, if--
``(A) the claim was filed by a creditor who
unreasonably refused to negotiate a reasonable
alternative repayment schedule proposed by an approved
credit counseling agency described in section 111
acting on behalf of the debtor;
``(B) the offer of the debtor under subparagraph
(A)--
``(i) was made at least 60 days before the
filing of the petition; and
``(ii) provided for payment of at least 60
percent of the amount of the debt over a period
not to exceed the repayment period of the loan,
or a reasonable extension thereof; and
``(C) no part of the debt under the alternative
repayment schedule is nondischargeable.
``(2) The debtor shall have the burden of proving, by clear
and convincing evidence, that--
``(A) the creditor unreasonably refused to consider
the debtor's proposal; and
``(B) the proposed alternative repayment schedule
was made prior to expiration of the 60-day period
specified in paragraph (1)(B)(i).''.
(b) Limitation on Avoidability.--Section 547 of title 11,
United States Code, is amended by adding at the end the
following:
``(h) The trustee may not avoid a transfer if such transfer
was made as a part of an alternative repayment plan between the
debtor and any creditor of the debtor created by an approved
credit counseling agency.''.
SEC. 202. EFFECT OF DISCHARGE.
Section 524 of title 11, United States Code, is amended by
adding at the end the following:
``(i) The willful failure of a creditor to credit payments
received under a plan confirmed under this title, unless the
order confirming the plan is revoked, the plan is in default,
or the creditor has not received payments required to be made
under the plan in the manner required by the plan (including
crediting the amounts required under the plan), shall
constitute a violation of an injunction under subsection (a)(2)
if the act of the creditor to collect and failure to credit
payments in the manner required by the plan caused material
injury to the debtor.
``(j) Subsection (a)(2) does not operate as an injunction
against an act by a creditor that is the holder of a secured
claim, if--
``(1) such creditor retains a security interest in
real property that is the principal residence of the
debtor;
``(2) such act is in the ordinary course of
business between the creditor and the debtor; and
``(3) such act is limited to seeking or obtaining
periodic payments associated with a valid security
interest in lieu of pursuit of in rem relief to enforce
the lien.''.
SEC. 203. DISCOURAGING ABUSE OF REAFFIRMATION PRACTICES.
(a) In General.--Section 524 of title 11, United States
Code, as amended section 202, is amended--
(1) in subsection (c), by striking paragraph (2)
and inserting the following:
``(2) the debtor received the disclosures described
in subsection (k) at or before the time at which the
debtor signed the agreement;''; and
(2) by adding at the end the following:
``(k)(1) The disclosures required under subsection (c)(2)
shall consist of the disclosure statement described in
paragraph (3), completed as required in that paragraph,
together with the agreement, statement, declaration, motion and
order described, respectively, in paragraphs (4) through (8),
and shall be the only disclosures required in connection with
the reaffirmation.
``(2) Disclosures made under paragraph (1) shall be made
clearly and conspicuously and in writing. The terms `Amount
Reaffirmed' and `Annual Percentage Rate' shall be disclosed
more conspicuously than other terms, data or information
provided in connection with this disclosure, except that the
phrases `Before agreeing to reaffirm a debt, review these
important disclosures' and `Summary of Reaffirmation Agreement'
may be equally conspicuous. Disclosures may be made in a
different order and may use terminology different from that set
forth in paragraphs (2) through (8), except that the terms
`Amount Reaffirmed' and `Annual Percentage Rate' must be used
where indicated.
``(3) The disclosure statement required under this
paragraph shall consist of the following:
``(A) The statement: `Part A: Before agreeing to
reaffirm a debt, review these important disclosures:';
``(B) Under the heading `Summary of Reaffirmation
Agreement', the statement: `This Summary is made
pursuant to the requirements of the Bankruptcy Code';
``(C) The `Amount Reaffirmed', using that term,
which shall be--
``(i) the total amount which the debtor
agrees to reaffirm, and
``(ii) the total of any other fees or cost
accrued as of the date of the disclosure
statement.
``(D) In conjunction with the disclosure of the
`Amount Reaffirmed', the statements--
``(i) `The amount of debt you have agreed
to reaffirm'; and
``(ii) `Your credit agreement may obligate
you to pay additional amounts which may come
due after the date of this disclosure. Consult
your credit agreement.'.
``(E) The `Annual Percentage Rate', using that
term, which shall be disclosed as--
``(i) if, at the time the petition is
filed, the debt is an extension of credit under
an open end credit plan, as the terms
`credit'and `open end credit plan' are defined in section 103 of the
Truth in Lending Act, then--
``(I) the annual percentage rate
determined under paragraphs (5) and (6)
of section 127(b) of the Truth in
Lending Act, as applicable, as
disclosed to the debtor in the most
recent periodic statement prior to the
agreement or, if no such periodic
statement has been given to the debtor
during the prior 6 months, the annual
percentage rate as it would have been
so disclosed at the time the disclosure
statement is given to the debtor, or to
the extent this annual percentage rate
is not readily available or not
applicable, then
``(II) the simple interest rate
applicable to the amount reaffirmed as
of the date the disclosure statement is
given to the debtor, or if different
simple interest rates apply to
different balances, the simple interest
rate applicable to each such balance,
identifying the amount of each such
balance included in the amount
reaffirmed, or
``(III) if the entity making the
disclosure elects, to disclose the
annual percentage rate under subclause
(I) and the simple interest rate under
subclause (II);
``(ii) if, at the time the petition is
filed, the debt is an extension of credit other
than under an open end credit plan, as the
terms `credit' and `open end credit plan' are
defined in section 103 of the Truth in Lending
Act, then--
``(I) the annual percentage rate
under section 128(a)(4) of the Truth in
Lending Act, as disclosed to the debtor
in the most recent disclosure statement
given to the debtor prior to the
reaffirmation agreement with respect to
the debt, or, if no such disclosure
statement was given to the debtor, the
annual percentage rate as it would have
been so disclosed at the time the
disclosure statement is given to the
debtor, or to the extent this annual
percentage rate is not readily
available or not applicable, then
``(II) the simple interest rate
applicable to the amount reaffirmed as
of the date the disclosure statement is
given to the debtor, or if different
simple interest rates apply to
different balances, the simple interest
rate applicable to each such balance,
identifying the amount of such balance
included in the amount reaffirmed, or
``(III) if the entity making the
disclosure elects, to disclose the
annual percentage rate under (I) and
the simple interest rate under (II).
``(F) If the underlying debt transaction was
disclosed as a variable rate transaction on the most
recent disclosure given under the Truth in Lending Act,
by stating `The interest rate on your loan may be a
variable interest rate which changes from time to time,
so that the annual percentage rate disclosed here may
be higher or lower.'.
``(G) If the debt is secured by a security interest
which has not been waived in whole or in part or
determined to be void by a final order of the court at
the time of the disclosure, by disclosing that a
security interest or lien in goods or property is
asserted over some or all of the obligations the debtor
is reaffirming and listing the items and their original
purchase price that are subject to the asserted
security interest, or if not a purchase-money security
interest then listing by items or types and the
original amount of the loan.
``(H) At the election of the creditor, a statement
of the repayment schedule using 1 or a combination of
the following--
``(i) by making the statement: `Your first
payment in the amount of $______ is due on
______ but the future payment amount may be
different. Consult your reaffirmation or credit
agreement, as applicable.', and stating the
amount of the first payment and the due date of
that payment in the places provided;
``(ii) by making the statement: `Your
payment schedule will be:', and describing the
repayment schedule with the number, amount and
due dates or period of payments scheduled to
repay the obligations reaffirmed to the extent
then known by the disclosing party; or
``(iii) by describing the debtor's
repayment obligations with reasonable
specificity to the extent then known by the
disclosing party.
``(I) The following statement: `Note: When this
disclosure refers to what a creditor ``may'' do, it
does not use the word ``may'' to give the creditor
specific permission. The word ``may'' is used to tell
you what might occur if the law permits the creditor to
take the action. If you have questions about your
reaffirmation or what the law requires, talk to the
attorney who helped you negotiate this agreement. If
you don't have an attorney helping you, the judge will
explain the effect of your reaffirmation when the
reaffirmation hearing is held.'.
``(J)(i) The following additional statements:
`` `Reaffirming a debt is a serious financial decision. The
law requires you to take certain steps to make sure the
decision is in your best interest. If these steps are not
completed, the reaffirmation agreement is not effective, even
though you have signed it.
`` `1. Read the disclosures in this Part A
carefully. Consider the decision to reaffirm carefully.
Then, if you want to reaffirm, sign the reaffirmation
agreement in Part B (or you may use a separate
agreement you and your creditor agree on).
`` `2. Complete and sign Part D and be sure you can
afford to make the payments you are agreeing to make
and have received a copy of the disclosure statement
and a completed and signed reaffirmation agreement.
`` `3. If you were represented by an attorney
during the negotiation of the reaffirmation agreement,
the attorney must have signed the certification in Part
C.
`` `4. If you were not represented by an attorney
during the negotiation of the reaffirmation agreement,
you must have completed and signed Part E.
`` `5. The original of this disclosure must be
filed with the court by you or your creditor. If a
separate reaffirmation agreement (other than the one in
Part B) has been signed, it must be attached.
`` `6. If you were represented by an attorney
during the negotiation of the reaffirmation agreement,
your reaffirmation agreement becomes effective upon
filing with the court unless the reaffirmation is
presumed to be an undue hardship as explained in Part
D.
`` `7. If you were not represented by an attorney
during the negotiation of the reaffirmation agreement,
it will not be effective unless the court approves it.
The court will notify you of the hearing on your
reaffirmation agreement. You must attend this hearing
in bankruptcy court where the judge will review your
agreement. The bankruptcy court must approve the
agreement as consistent with your best interests,
except that no court approval is required if the
agreement is for a consumer debt secured by a mortgage,
deed of trust, security deed or other lien on your real
property, like your home.
`` `Your right to rescind a reaffirmation. You may rescind
(cancel) your reaffirmation at any time before the bankruptcy
court enters a discharge order or within 60 days after the
agreement is filed with the court, whicheveris longer. To
rescind or cancel, you must notify the creditor that the agreement is
canceled.
`` `What are your obligations if you reaffirm the debt? A
reaffirmed debt remains your personal legal obligation. It is
not discharged in your bankruptcy. That means that if you
default on your reaffirmed debt after your bankruptcy is over,
your creditor may be able to take your property or your wages.
Otherwise, your obligations will be determined by the
reaffirmation agreement which may have changed the terms of the
original agreement. For example, if you are reaffirming an open
end credit agreement, the creditor may be permitted by that
agreement or applicable law to change the terms of the
agreement in the future under certain conditions.
`` `Are you required to enter into a reaffirmation
agreement by any law? No, you are not required to reaffirm a
debt by any law. Only agree to reaffirm a debt if it is in your
best interest. Be sure you can afford the payments you agree to
make.
`` `What if your creditor has a security interest or lien?
Your bankruptcy discharge does not eliminate any lien on your
property. A ``lien'' is often referred to as a security
interest, deed of trust, mortgage or security deed. Even if you
do not reaffirm and your personal liability on the debt is
discharged, because of the lien your creditor may still have
the right to take the security property if you do not pay the
debt or default on it. If the lien is on an item of personal
property that is exempt under your State's law or that the
trustee has abandoned, you may be able to redeem the item
rather than reaffirm the debt. To redeem, you make a single
payment to the creditor equal to the current value of the
security property, as agreed by the parties or determined by
the court.'.
``(ii) In the case of a reaffirmation under
subsection (m)(2), numbered paragraph 6 in the
disclosures required by clause (i) of this subparagraph
shall read as follows:
`` `6. If you were represented by an attorney
during the negotiation of the reaffirmation agreement,
your reaffirmation agreement becomes effective upon
filing with the court.'.
``(4) The form of reaffirmation agreement required under
this paragraph shall consist of the following:
`` `Part B: Reaffirmation Agreement. I/we agree to reaffirm
the obligations arising under the credit agreement described
below.
`` `Brief description of credit agreement:
`` `Description of any changes to the credit agreement made
as part of this reaffirmation agreement:
`` `Signature: Date:
`` `Borrower:
`` `Co-borrower, if also reaffirming:
`` `Accepted by creditor:
`` `Date of creditor acceptance:'.
``(5)(A) The declaration shall consist of the following:
`` `Part C: Certification by Debtor's Attorney (If Any).
`` `I hereby certify that (1) this agreement represents a
fully informed and voluntary agreement by the debtor(s); (2)
this agreement does not impose an undue hardship on the debtor
or any dependent of the debtor; and (3) I have fully advised
the debtor of the legal effect and consequences of this
agreement and any default under this agreement.
`` `Signature of Debtor's Attorney: Date:'.
``(B) In the case of reaffirmations in which a presumption
of undue hardship has been established, the certification shall
state that in the opinion of the attorney, the debtor is able
to make the payment.
``(C) In the case of a reaffirmation agreement under
subsection (m)(2), subparagraph (B) is not applicable.
``(6)(A) The statement in support of reaffirmation
agreement, which the debtor shall sign and date prior to filing
with the court, shall consist of the following:
`` `Part D: Debtor's Statement in Support of Reaffirmation
Agreement.
`` `1. I believe this agreement will not impose an undue
hardship on my dependents or me. I can afford to make the
payments on the reaffirmed debt because my monthly income (take
home pay plus any other income received) is $______, and my
actual current monthly expenses including monthly payments on
post-bankruptcy debt and other reaffirmation agreements total
$______, leaving $______ to make the required payments on this
reaffirmed debt. I understand that if my income less my monthly
expenses does not leave enough to make the payments, this
reaffirmation agreement is presumed to be an undue hardship on
me and must be reviewed by the court. However, this presumption
may be overcome if I explain to the satisfaction of the court
how I can afford to make the payments here: ______.
`` `2. I received a copy of the Reaffirmation Disclosure
Statement in Part A and a completed and signed reaffirmation
agreement.'.
``(B) Where the debtor is represented by an attorney and is
reaffirming a debt owed to a creditor defined in section
19(b)(1)(A)(iv) of the Federal Reserve Act, the statement of
support of the reaffirmation agreement, which the debtor shall
sign and date prior to filing with the court, shall consist of
the following:
`` `I believe this agreement is in my financial interest. I
can afford to make the payments on the reaffirmed debt. I
received a copy of the Reaffirmation Disclosure Statement in
Part A and a completed and signed reaffirmation agreement.'.
``(7) The motion, which may be used if approval of the
agreement by the court is required in order for it to be
effective and shall be signed and dated by the moving party,
shall consist of the following:
`` `Part E: Motion for Court Approval (To be completed only
where debtor is not represented by an attorney.). I (we), the
debtor, affirm the following to be true and correct:
`` `I am not represented by an attorney in connection with
this reaffirmation agreement.
`` `I believe this agreement is in my best interest based
on the income and expenses I have disclosed in my Statement in
Support of this reaffirmation agreement above, and because
(provide any additional relevant reasons the court should
consider):
`` `Therefore, I ask the court for an order approving this
reaffirmation agreement.'.
``(8) The court order, which may be used to approve a
reaffirmation, shall consist of the following:
`` `Court Order: The court grants the debtor's motion and
approves the reaffirmation agreement described above.'.
``(l) Notwithstanding any other provision of this title the
following shall apply:
``(1) A creditor may accept payments from a debtor
before and after the filing of a reaffirmation
agreement with the court.
``(2) A creditor may accept payments from a debtor
under a reaffirmation agreement which the creditor
believes in good faith to be effective.
``(3) The requirements of subsections (c)(2) and
(k) shall be satisfied if disclosures required under
those subsections are given in good faith.
``(m)(1) Until 60 days after a reaffirmation agreement is
filed with the court (or such additional period as the court,
after notice and a hearing and for cause, orders before the
expiration of such period), it shall be presumed that the
reaffirmation agreement is an undue hardship on the debtor if
the debtor's monthly income less the debtor's monthly expenses
as shown on the debtor's completed and signed statement in
support of the reaffirmation agreement required under
subsection (k)(6)(A) is less than the scheduled payments on the
reaffirmed debt. This presumption shall be reviewed by the
court. The presumption may be rebutted in writing by the debtor
if the statement includes an explanation which identifies
additional sources of funds to make the payments as agreed upon
under the terms of the reaffirmation agreement. If the
presumption is not rebutted to the satisfaction of the court,
the court may disapprove the agreement. No agreement shall be
disapproved without notice and a hearing to the debtor and
creditor and such hearing shall be concluded before the entry
of the debtor's discharge.
``(2) This subsection does not apply to reaffirmation
agreements where the creditor is a credit union, as defined in
section 19(b)(1)(A)(iv) of the Federal Reserve Act.''.
(b) Law Enforcement.--
(1) In general.--Chapter 9 of title 18, United
States Code, is amended by adding at the end the
following:
``Sec. 158. Designation of United States attorneys and agents of the
Federal Bureau of Investigation to address abusive
reaffirmations of debt and materially fraudulent
statements in bankruptcy schedules
``(a) In General.--The Attorney General of the United
States shall designate the individuals described in subsection
(b) to have primary responsibility in carrying out enforcement
activities in addressing violations of section 152 or 157
relating to abusive reaffirmations of debt. In addition to
addressing the violations referred to in the preceding
sentence, the individuals described under subsection (b) shall
address violations of section 152 or 157 relating to materially
fraudulent statements in bankruptcy schedules that are
intentionally false or intentionally misleading.
``(b) United States District Attorneys and Agents of the
Federal Bureau of Investigation.--The individuals referred to
in subsection (a) are--
``(1) a United States attorney for each judicial
district of the United States; and
``(2) an agent of the Federal Bureau of
Investigation (within the meaning of section 3107) for
each field office of the Federal Bureau of
Investigation.
``(c) Bankruptcy Investigations.--Each United States
attorney designated under this section shall, in addition to
any other responsibilities, have primary responsibility for
carrying out the duties of a United States attorney under
section 3057.
``(d) Bankruptcy Procedures.--The bankruptcy courts shall
establish procedures for referring any case which may contain a
materially fraudulent statement in a bankruptcy schedule to the
individuals designated under this section.''.
(2) Clerical amendment.--The analysis for chapter 9
of title 18, United States Code, is amended by adding
at the end the following:
``158. Designation of United States attorneys and agents of the Federal
Bureau of Investigation to address abusive reaffirmations of
debt and materially fraudulent statements in bankruptcy
schedules.''.
SEC. 204. PRESERVATION OF CLAIMS AND DEFENSES UPON SALE OF PREDATORY
LOANS.
Section 363 of title 11, United States Code, is amended--
(1) by redesignating subsection (o) as subsection
(p), and
(2) by inserting after subsection (n) the
following:
``(o) Notwithstanding subsection (f), if a person purchases
any interest in a consumer credit transaction that is subject
to the Truth in Lending Act or any interest in a consumer
credit contract (as defined in section 433.1 of title 16 of the
Code of Federal Regulations (January 1, 2001), as amended from
time to time), and if such interest is purchased through a sale
under this section, then such person shall remain subject to
all claims and defenses that are related to such consumer
credit transaction or such consumer credit contract, to the
same extent as such person would be subject to such claims and
defenses of the consumer had such interest been purchased at a
sale not under this section.''.
SEC. 205. GAO STUDY AND REPORT ON REAFFIRMATION PROCESS.
(a) Study.--The Comptroller General of the United States
shall conduct a study of the reaffirmation process that occurs
under title 11 of the United States Code, to determine the
overall treatment of consumers within the context of such
process, and shall include in such study consideration of--
(1) the policies and activities of creditors with
respect to reaffirmation; and
(2) whether consumers are fully, fairly, and
consistently informed of their rights pursuant to such
title.
(b) Report to the Congress.--Not later than 18 months after
the date of enactment of this Act, the Comptroller General
shall submit to the President pro tempore of the Senate and the
Speaker of the House of Representatives a report on the results
of the study conducted under subsection (a), together with
recommendations for legislation (if any) to address any abusive
or coercive tactics found in connection with the reaffirmation
process that occurs under title 11 of the United States Code.
Subtitle B--Priority Child Support
SEC. 211. DEFINITION OF DOMESTIC SUPPORT OBLIGATION.
Section 101 of title 11, United States Code, is amended--
(1) by striking paragraph (12A); and
(2) by inserting after paragraph (14) the
following:
``(14A) `domestic support obligation' means a debt
that accrues before or after the entry of an order for
relief under this title, including interest that
accrues on that debt as provided under applicable
nonbankruptcy law notwithstanding any other provision
of this title, that is--
``(A) owed to or recoverable by--
``(i) a spouse, former spouse, or
child of the debtor or such child's
parent, legal guardian, or responsible
relative; or
``(ii) a governmental unit;
``(B) in the nature of alimony,
maintenance, or support (including assistance
provided by a governmental unit) of such
spouse, former spouse, or child of the debtor
or such child's parent, without regard to
whether such debt is expressly so designated;
``(C) established or subject to
establishment before or after entry of an order
for relief under this title, by reason of
applicable provisions of--
``(i) a separation agreement,
divorce decree, or property settlement
agreement;
``(ii) an order of a court of
record; or
``(iii) a determination made in
accordance with applicable
nonbankruptcy law by a governmental
unit; and
``(D) not assigned to a nongovernmental
entity, unless that obligation is assigned
voluntarily by the spouse, former spouse,
child, or parent, legal guardian, or
responsible relative of the child for the
purpose of collecting the debt;''.
SEC. 212. PRIORITIES FOR CLAIMS FOR DOMESTIC SUPPORT OBLIGATIONS.
Section 507(a) of title 11, United States Code, is
amended--
(1) by striking paragraph (7);
(2) by redesignating paragraphs (1) through (6) as
paragraphs (2) through (7), respectively;
(3) in paragraph (2), as so redesignated, by
striking ``First'' and inserting ``Second'';
(4) in paragraph (3), as so redesignated, by
striking ``Second'' and inserting ``Third'';
(5) in paragraph (4), as so redesignated--
(A) by striking ``Third'' and inserting
``Fourth''; and
(B) by striking the semicolon at the end
and inserting a period;
(6) in paragraph (5), as so redesignated, by
striking ``Fourth'' and inserting ``Fifth'';
(7) in paragraph (6), as so redesignated, by
striking ``Fifth'' and inserting ``Sixth'';
(8) in paragraph (7), as so redesignated, by
striking ``Sixth'' and inserting ``Seventh''; and
(9) by inserting before paragraph (2), as so
redesignated, the following:
``(1) First:
``(A) Allowed unsecured claims for domestic
support obligations that, as of the date of the
filing of the petition, are owed to or
recoverable by a spouse, former spouse, or
child of the debtor, or the parent, legal
guardian, or responsible relative of such
child, without regard to whether the claim is
filed by such person or is filed by a
governmental unit on behalf of that person, on
the condition that funds received under this
paragraph by a governmental unit under this
title after the date of the filing of the
petition shall be applied and distributed in
accordance with applicable nonbankruptcy law.
``(B) Subject to claims under subparagraph
(A), allowed unsecured claims for domestic
support obligations that, as of the date the
petition was filed are assigned by a spouse,
former spouse, child of the debtor, or such
child's parent, legal guardian, or responsible
relative to a governmental unit (unless such
obligation is assigned voluntarily by the
spouse, former spouse, child, parent, legal
guardian, or responsible relative of the child
for the purpose of collecting the debt) or are
owed directly to or recoverable by a
governmental unit under applicable
nonbankruptcy law, on the condition that funds
received under this paragraph by a governmental
unit under this title after the date of the
filing of the petition be applied and
distributed in accordance with applicable
nonbankruptcy law.
``(C) If a trustee is appointed or elected
under section 701, 702, 703, 1104, 1202, or
1302, the administrative expenses of the
trustee allowed under paragraphs (1)(A), (2),
and (6) of section 503(b) shall be paid before
payment of claims under subparagraphs (A) and
(B), to the extent that the trustee administers
assets that are otherwise available for the
payment of such claims.''.
SEC. 213. REQUIREMENTS TO OBTAIN CONFIRMATION AND DISCHARGE IN CASES
INVOLVING DOMESTIC SUPPORT OBLIGATIONS.
Title 11, United States Code, is amended--
(1) in section 1129(a), by adding at the end the
following:
``(14) If the debtor is required by a judicial or
administrative order or statute to pay a domestic
support obligation, the debtor has paid all amounts
payable under such order or statute for such obligation
that first become payable after the date on which the
petition is filed.'';
(2) in section 1208(c)--
(A) in paragraph (8), by striking ``or'' at
the end;
(B) in paragraph (9), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following:
``(10) failure of the debtor to pay any domestic
support obligation that first becomes payable after the
date on which the petition is filed.'';
(3) in section 1222(a)--
(A) in paragraph (2), by striking ``and''
at the end;
(B) in paragraph (3), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following:
``(4) notwithstanding any other provision of this
section, a plan may provide for less than full payment
of all amounts owed for a claim entitled to priority
under section 507(a)(1)(B) only if the plan provides
that all of the debtor's projected disposable income
for a 5-year period, beginning on the date that the
first payment is due under the plan, will be applied to
make payments under the plan.'';
(4) in section 1222(b)--
(A) by redesignating paragraph (11) as
paragraph (12); and
(B) by inserting after paragraph (10) the
following:
``(11) provide for the payment of interest accruing
after the date of the filing of the petition on
unsecured claims that are nondischargeable under
section 1228(a), except that such interest may be paid
only to the extent that the debtor has disposable
income available to pay such interest after making
provision for full payment of all allowed claims;'';
(5) in section 1225(a)--
(A) in paragraph (5), by striking ``and''
at the end;
(B) in paragraph (6), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following:
``(7) if the debtor is required by a judicial or
administrative order or statute to pay a domestic
support obligation, the debtor has paid all amounts
payable under such order for such obligation that first
become payable after the date on which the petition is
filed.'';
(6) in section 1228(a), in the matter preceding
paragraph (1), by inserting ``, and in the case of a
debtor who is required by a judicial or administrative
order to pay a domestic support obligation, after such
debtor certifies that all amounts payable under such
order or statute that are due on or before the date of
the certification (including amounts due before the
petition was filed, but only to the extent provided for
by the plan) have been paid'' after ``completion by the
debtor of all payments under the plan'';
(7) in section 1307(c)--
(A) in paragraph (9), by striking ``or'' at
the end;
(B) in paragraph (10), by striking the
period at the end and inserting ``; or''; and
(C) by adding at the end the following:
``(11) failure of the debtor to pay any domestic
support obligation that first becomes payable after the
date on which the petition is filed.'';
(8) in section 1322(a)--
(A) in paragraph (2), by striking ``and''
at the end;
(B) in paragraph (3), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following:
``(4) notwithstanding any other provision of this
section, a plan may provide for less than full payment
of all amounts owed for a claim entitled to priority
under section 507(a)(1)(B) only if the plan provides
that all of the debtor's projected disposable income
for a 5-year period beginning on the date that the
first payment is due under the plan will be applied to
make payments under the plan.'';
(9) in section 1322(b)--
(A) in paragraph (9), by striking ``; and''
and inserting a semicolon;
(B) by redesignating paragraph (10) as
paragraph (11); and
(C) inserting after paragraph (9) the
following:
``(10) provide for the payment of interest accruing
after the date of the filing of the petition on
unsecured claims that are nondischargeable under
section 1328(a), except that such interest may be paid
only to the extent that the debtor has disposable
income available to pay such interest after making
provision for full payment of all allowed claims;
and'';
(10) in section 1325(a), as amended by section 102,
by inserting after paragraph (7) the following:
``(8) the debtor is required by a judicial or
administrative order or statute to pay a domestic
support obligation, the debtor has paid all amounts
payable under such order or statute for such obligation
that first becomes payable after the date on which the
petition is filed; and'';
(11) in section 1328(a), in the matter preceding
paragraph (1), by inserting ``, and in the case of a
debtor who is required by a judicial or administrative
order to pay a domestic support obligation, after such
debtor certifies that all amounts payable under such
order or statute that are due on or before the date of
the certification (including amounts due before the
petition was filed, but only to the extent provided for
by the plan) have been paid'' after ``completion by the
debtor of all payments under the plan''.
SEC. 214. EXCEPTIONS TO AUTOMATIC STAY IN DOMESTIC SUPPORT OBLIGATION
PROCEEDINGS.
Section 362(b) of title 11, United States Code, is amended
by striking paragraph (2) and inserting the following:
``(2) under subsection (a)--
``(A) of the commencement or continuation
of a civil action or proceeding--
``(i) for the establishment of
paternity;
``(ii) for the establishment or
modification of an order for domestic
support obligations;
``(iii) concerning child custody or
visitation;
``(iv) for the dissolution of a
marriage, except to the extent that
such proceeding seeks to determine the
division of property that is property
of the estate; or
``(v) regarding domestic violence;
``(B) of the collection of a domestic
support obligation from property that is not
property of the estate;
``(C) with respect to the withholding of
income that is property of the estate or
property of the debtor for payment of a
domestic support obligation under a judicial or
administrative order;
``(D) of the withholding, suspension, or
restriction of drivers' licenses, professional
and occupational licenses, and recreational
licenses under State law, as specified in
section 466(a)(16) of the Social Security Act;
``(E) of the reporting of overdue support
owed by a parent to any consumer reporting
agency as specified in section 466(a)(7) of the
Social Security Act;
``(F) of the interception of tax refunds,
as specified in sections 464 and 466(a)(3) of
the Social Security Act or under an analogous
State law; or
``(G) of the enforcement of medical
obligations as specified under title IV of the
Social Security Act;''.
SEC. 215. NONDISCHARGEABILITY OF CERTAIN DEBTS FOR ALIMONY,
MAINTENANCE, AND SUPPORT.
Section 523 of title 11, United States Code, is amended--
(1) in subsection (a)--
(A) by striking paragraph (5) and inserting
the following:
``(5) for a domestic support obligation;''; and
(B) by striking paragraph (18);
(2) in subsection (c), by striking ``(6), or (15)''
each place it appears and inserting ``or (6)''; and
(3) in paragraph (15), as added by Public Law 103-
394 (108 Stat. 4133)--
(A) by inserting ``to a spouse, former
spouse, or child of the debtor and'' before
``not of the kind'';
(B) by inserting ``or'' after ``court of
record,''; and
(C) by striking ``unless--'' and all that
follows through the end of the paragraph and
inserting a semicolon.
SEC. 216. CONTINUED LIABILITY OF PROPERTY.
Section 522 of title 11, United States Code, is amended--
(1) in subsection (c), by striking paragraph (1)
and inserting the following:
``(1) a debt of a kind specified in paragraph (1)
or (5) of section 523(a) (in which case,
notwithstanding any provision of applicable
nonbankruptcy law to the contrary, such property shall
be liable for a debt of a kind specified in section
523(a)(5));'';
(2) in subsection (f)(1)(A), by striking the dash
and all that follows through the end of the
subparagraph and inserting ``of a kind that is
specified in section 523(a)(5); or''; and
(3) in subsection (g)(2), by striking ``subsection
(f)(2)'' and inserting ``subsection (f)(1)(B)''.
SEC. 217. PROTECTION OF DOMESTIC SUPPORT CLAIMS AGAINST PREFERENTIAL
TRANSFER MOTIONS.
Section 547(c)(7) of title 11, United States Code, is
amended to read as follows:
``(7) to the extent such transfer was a bona fide
payment of a debt for a domestic support obligation;''.
SEC. 218. DISPOSABLE INCOME DEFINED.
Section 1225(b)(2)(A) of title 11, United States Code, is
amended by inserting ``or for a domestic support obligation
that first becomes payable after the date on which the petition
is filed'' after ``dependent of the debtor''.
SEC. 219. COLLECTION OF CHILD SUPPORT.
(a) Duties of Trustee Under Chapter 7.--Section 704 of
title 11, United States Code, as amended by section 102, is
amended--
(1) in subsection (a)--
(A) in paragraph (8), by striking ``and''
at the end;
(B) in paragraph (9), by striking the
period and inserting a semicolon; and
(C) by adding at the end the following:
``(10) if with respect to the debtor there is a
claim for a domestic support obligation, provide the
applicable notice specified in subsection (c); and'';
and
(2) by adding at the end the following:
``(c)(1) In a case described in subsection (a)(10) to which
subsection (a)(10) applies, the trustee shall--
``(A)(i) provide written notice to the holder of
the claim described in subsection (a)(10) of such claim
and of the right of such holder to use the services of
the State child support enforcement agency established
under sections 464 and 466 of the Social Security Act
for the State in which such holder resides, for
assistance in collecting child support during and after
the case under this title;
``(ii) include in the notice provided under clause
(i) the address and telephone number of such State
child support enforcement agency; and
``(iii) include in the notice provided under clause
(i) an explanation of the rights of such holder to
payment of such claim under this chapter;
``(B)(i) provide written notice to such State child
support enforcement agency of such claim; and
``(ii) include in the notice provided under clause
(i) the name, address, and telephone number of such
holder; and
``(C) at such time as the debtor is granted a
discharge under section 727, provide written notice to
such holder and to such State child support enforcement
agency of--
``(i) the granting of the discharge;
``(ii) the last recent known address of the
debtor;
``(iii) the last recent known name and
address of the debtor's employer; and
``(iv) the name of each creditor that holds
a claim that--
``(I) is not discharged under
paragraph (2), (4), or (14A) of section
523(a); or
``(II) was reaffirmed by the debtor
under section 524(c).
``(2)(A) The holder of a claim described in subsection
(a)(10) or the State child support enforcement agency of the
State in which such holder resides may request from a creditor
described in paragraph (1)(C)(iv) the last known address of the
debtor.
``(B) Notwithstanding any other provision of law, a
creditor that makes a disclosure of a last known address of a
debtor in connection with a request made under subparagraph (A)
shall not be liable by reason of making such disclosure.''.
(b) Duties of Trustee Under Chapter 11.--Section 1106 of
title 11, United States Code, is amended--
(1) in subsection (a)--
(A) in paragraph (6), by striking ``and''
at the end;
(B) in paragraph (7), by striking the
period and inserting ``; and''; and
(C) by adding at the end the following:
``(8) if with respect to the debtor there is a
claim for a domestic support obligation, provide the
applicable notice specified in subsection (c).''; and
(2) by adding at the end the following:
``(c)(1) In a case described in subsection (a)(8) to which
subsection (a)(8) applies, the trustee shall--
``(A)(i) provide written notice to the holder of
the claim described in subsection (a)(8) of such claim
and of the right of such holder to use the services of
the State child support enforcement agency established
under sections 464 and 466 of the Social Security Act
for the State in which such holder resides, for
assistance in collecting child support during and after
the case under this title; and
``(ii) include in the notice required by clause (i)
the address and telephone number of such State child
support enforcement agency;
``(B)(i) provide written notice to such State child
support enforcement agency of such claim; and
``(ii) include in the notice required by clasue (i)
the name, address, and telephone number of such holder;
and
``(C) at such time as the debtor is granted a
discharge under section 1141, provide written notice to
such holder of such claim and to such State child
support enforcement agency of--
``(i) the granting of the discharge;
``(ii) the last recent known address of the debtor;
``(iii) the last recent known name and address of
the debtor's employer; and
``(iv) the name of each creditor that holds a claim
that--
``(I) is not discharged under paragraph (2), (3),
or (14A) of section 523(a); or
``(II) was reaffirmed by the debtor under section
524(c).
``(2)(A) The holder of a claim described in subsection
(a)(8) or the State child enforcement support agency of the
State in which such holder resides may request from a creditor
described in paragraph (1)(C)(iv) the last known address of the
debtor.
``(B) Notwithstanding any other provision of law, a
creditor that makes a disclosure of a last known address of a
debtor in connection with a request made under subparagraph (A)
shall not be liable by reason of making such disclosure.''.
(c) Duties of Trustee Under Chapter 12.--Section 1202 of
title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4), by striking ``and''
at the end;
(B) in paragraph (5), by striking the
period and inserting ``; and''; and
(C) by adding at the end the following:
``(6) if with respect to the debtor there is a
claim for a domestic support obligation, provide the
applicable notice specified in subsection (c).''; and
(2) by adding at the end the following:
``(c)(1) In a case described in subsection (b)(6) to which
subsection (b)(6) applies, the trustee shall--
``(A)(i) provide written notice to the holder of
the claim described in subsection (b)(6) of such claim
and of the right of such holder to use the services of
the State child support enforcement agency established
under sections 464 and 466 of the Social Security Act
for the State in which such holder resides, for
assistance in collecting child support during and after
the case under this title; and
``(ii) include in the notice provided under clause
(i) the address and telephone number of such State
child support enforcement agency;
``(B)(i) provide written notice to such State child
support enforcement agency of such claim; and
``(ii) include in the notice provided under clause
(i) the name, address, and telephone number of such
holder; and
``(C) at such time as the debtor is granted a
discharge under section 1228, provide written notice to
such holder and to such State child support enforcement
agency of--
``(i) the granting of the discharge;
``(ii) the last recent known address of the debtor;
``(iii) the last recent known name and address of
the debtor's employer; and
``(iv) the name of each creditor that holds a claim
that--
``(I) is not discharged under paragraph (2), (4),
or (14A) of section 523(a); or
``(II) was reaffirmed by the debtor under section
524(c).
``(2)(A) The holder of a claim described in subsection
(b)(6) or the State child support enforcement agency of the
State in which such holder resides may request from a creditor
described in paragraph (1)(C)(iv) the last known address of the
debtor.
``(B) Notwithstanding any other provision of law, a
creditor that makes a disclosure of a last known address of a
debtor in connection with a request made under subparagraph (A)
shall not be liable by reason of making that disclosure.''.
(d) Duties of Trustee Under Chapter 13.--Section 1302 of
title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4), by striking ``and''
at the end;
(B) in paragraph (5), by striking the
period and inserting ``; and''; and
(C) by adding at the end the following:
``(6) if with respect to the debtor there is a
claim for a domestic support obligation, provide the
applicable notice specified in subsection (d).''; and
(2) by adding at the end the following:
``(d)(1) In a case described in subsection (b)(6) to which
subsection (b)(6) applies, the trustee shall--
``(A)(i) provide written notice to the holder of
the claim described in subsection (b)(6) of such claim
and of the right of such holder to use the services of
the State child support enforcement agency established
under sections 464 and 466 of the Social Security Act
for the State in which such holder resides, for
assistance in collecting child support during and after
the case under this title; and
``(ii) include in the notice provided under clause
(i) the address and telephone number of such State
child support enforcement agency;
``(B)(i) provide written notice to such State child
support enforcement agency of such claim; and
``(ii) include in the notice provided under clause
(i) the name, address, and telephone number of such
holder; and
``(C) at such time as the debtor is granted a
discharge under section 1328, provide written notice to
such holder and to such State child support enforcement
agency of--
``(i) the granting of the discharge;
``(ii) the last recent known address of the
debtor;
``(iii) the last recent known name and
address of the debtor's employer; and
``(iv) the name of each creditor that holds
a claim that--
``(I) is not discharged under paragraph (2) or (4)
of section 523(a); or
``(II) was reaffirmed by the debtor under section
524(c).
``(2)(A) The holder of a claim described in subsection
(b)(6) or the State child support enforcement agency of the
State in which such holder resides may request from a creditor
described in paragraph (1)(C)(iv) the last known address of the
debtor.
``(B) Notwithstanding any other provision of law, a
creditor that makes a disclosure of a last known address of a
debtor in connection with a request made under subparagraph (A)
shall not be liable by reason of making that disclosure.''.
SEC. 220. NONDISCHARGEABILITY OF CERTAIN EDUCATIONAL BENEFITS AND
LOANS.
Section 523(a) of title 11, United States Code, is amended
by striking paragraph (8) and inserting the following:
``(8) unless excepting such debt from discharge
under this paragraph would impose an undue hardship on
the debtor and the debtor's dependents, for--
``(A)(i) an educational benefit overpayment
or loan made, insured, or guaranteed by a
governmental unit, or made under any program
funded in whole or in part by a governmental
unit or nonprofit institution; or
``(ii) an obligation to repay funds
received as an educational benefit,
scholarship, or stipend; or
``(B) any other educational loan that is a
qualified education loan, as defined in section
221(d)(1) of the Internal Revenue Code of 1986,
incurred by a debtor who is an individual;''.
Subtitle C--Other Consumer Protections
SEC. 221. AMENDMENTS TO DISCOURAGE ABUSIVE BANKRUPTCY FILINGS.
Section 110 of title 11, United States Code, is amended--
(1) in subsection (a)(1), by striking ``or an
employee of an attorney'' and inserting ``for the
debtor or an employee of such attorney under the direct
supervision of such attorney'';
(2) in subsection (b)--
(A) in paragraph (1), by adding at the end
the following: ``If a bankruptcy petition
preparer is not an individual, then an officer,
principal, responsible person, or partner of
the preparer shall be required to--
``(A) sign the document for filing; and
``(B) print on the document the name and address of
that officer, principal, responsible person or
partner.''; and
(B) by striking paragraph (2) and inserting
the following:
``(2)(A) Before preparing any document for filing or
accepting any fees from a debtor, the bankruptcy petition
preparer shall provide to the debtor a written notice to
debtors concerning bankruptcy petition preparers, which shall
be on an official form issued by the Judicial Conference of the
United States.
``(B) The notice under subparagraph (A)--
``(i) shall inform the debtor in simple language
that a bankruptcy petition preparer is not an attorney
and may not practice law or give legal advice;
``(ii) may contain a description of examples of
legal advice that a bankruptcy petition preparer is not
authorized to give, in addition to any advice that the
preparer may not give by reason of subsection (e)(2);
and
``(iii) shall--
``(I) be signed by the debtor and, under
penalty of perjury, by the bankruptcy petition
preparer; and
``(II) be filed with any document for
filing.'';
(3) in subsection (c)--
(A) in paragraph (2)--
(i) by striking ``(2) For
purposes'' and inserting ``(2)(A)
Subject to subparagraph (B), for
purposes''; and
(ii) by adding at the end the
following:
``(B) If a bankruptcy petition preparer is not an
individual, the identifying number of the bankruptcy petition
preparer shall be the Social Security account number of the
officer, principal, responsible person, or partner of the
preparer.''; and
(B) by striking paragraph (3);
(4) in subsection (d)--
(A) by striking ``(d)(1)'' and inserting
``(d)''; and
(B) by striking paragraph (2);
(5) in subsection (e)--
(A) by striking paragraph (2); and
(B) by adding at the end the following:
``(2)(A) A bankruptcy petition preparer may not offer a
potential bankruptcy debtor any legal advice, including any
legal advice described in subparagraph (B).
``(B) The legal advice referred to in subparagraph (A)
includes advising the debtor--
``(i) whether--
``(I) to file a petition under this title;
or
``(II) commencing a case under chapter 7,
11, 12, or 13 is appropriate;
``(ii) whether the debtor's debts will be
eliminated or discharged in a case under this title;
``(iii) whether the debtor will be able to retain
the debtor's home, car, or other property after
commencing a case under this title;
``(iv) concerning--
``(I) the tax consequences of a case
brought under this title; or
``(II) the dischargeability of tax claims;
``(v) whether the debtor may or should promise to
repay debts to a creditor or enter into a reaffirmation
agreement with a creditor to reaffirm a debt;
``(vi) concerning how to characterize the nature of
the debtor's interests in property or the debtor's
debts; or
``(vii) concerning bankruptcy procedures and
rights.'';
(6) in subsection (f)--
(A) by striking ``(f)(1)'' and inserting
``(f)''; and
(B) by striking paragraph (2);
(7) in subsection (g)--
(A) by striking ``(g)(1)'' and inserting
``(g)''; and
(B) by striking paragraph (2);
(8) in subsection (h)--
(A) by redesignating paragraphs (1) through
(4) as paragraphs (2) through (5),
respectively;
(B) by inserting before paragraph (2), as
so redesignated, the following:
``(1) The Supreme Court may promulgate rules under section
2075 of title 28, or the Judicial Conference of the United
States may prescribe guidelines, for setting a maximum
allowable fee chargeable by a bankruptcy petition preparer. A
bankruptcy petition preparer shall notify the debtor of any
such maximum amount before preparing any document for filing
for a debtor or accepting any fee from the debtor.'';
(C) in paragraph (2), as so redesignated--
(i) by striking ``Within 10 days after the
date of filing a petition, a bankruptcy
petition preparer shall file a'' and inserting
``A'';
(ii) by inserting ``by the bankruptcy
petition preparer shall be filed together with
the petition,'' after ``perjury''; and
(iii) by adding at the end the following:
``If rules or guidelines setting a maximum fee
for services have been promulgated or
prescribed under paragraph (1), the declaration
under this paragraph shall include a
certification that the bankruptcy petition
preparer complied with the notification
requirement under paragraph (1).'';
(D) by striking paragraph (3), as so
redesignated, and inserting the following:
``(3)(A) The court shall disallow and order the immediate
turnover to the bankruptcy trustee any fee referred to in
paragraph (2) found to be in excess of the value of any
services--
``(i) rendered by the preparer during the 12-month
period immediately preceding the date of filing of the
petition; or
``(ii) found to be in violation of any rule or
guideline promulgated or prescribed under paragraph
(1).
``(B) All fees charged by a bankruptcy petition preparer
may be forfeited in any case in which the bankruptcy petition
preparer fails to comply with this subsection or subsection
(b), (c), (d), (e), (f), or (g).
``(C) An individual may exempt any funds recovered under
this paragraph under section 522(b).''; and
(E) in paragraph (4), as so redesignated,
by striking ``or the United States trustee''
and inserting ``the United States trustee, the
bankruptcy administrator, or the court, on the
initiative of the court,'';
(9) in subsection (i)(1), by striking the matter
preceding subparagraph (A) and inserting the following:
``(i)(1) If a bankruptcy petition preparer violates this
section or commits any act that the court finds to be
fraudulent, unfair, or deceptive, on the motion of the debtor,
trustee, United States trustee, or bankruptcy administrator,
and after the court holds a hearing with respect to that
violation or act, the court shall order the bankruptcy petition
preparer to pay to the debtor--'';
(10) in subsection (j)--
(A) in paragraph (2)--
(i) in subparagraph (A)(i)(I), by striking ``a
violation of which subjects a person to criminal
penalty'';
(ii) in subparagraph (B)--
(I) by striking ``or has not paid a
penalty'' and inserting ``has not paid a
penalty''; and
(II) by inserting ``or failed to disgorge
all fees ordered by the court'' after ``a
penalty imposed under this section,'';
(B) by redesignating paragraph (3) as
paragraph (4); and
(C) by inserting after paragraph (2) the
following:
``(3) The court, as part of its contempt power, may enjoin
a bankruptcy petition preparer that has failed to comply with a
previous order issued under this section. The injunction under
this paragraph may be issued on the motion of the court, the
trustee, the United States trustee, or the bankruptcy
administrator.''; and
(11) by adding at the end the following:
``(l)(1) A bankruptcy petition preparer who fails to comply
with any provision of subsection (b), (c), (d), (e), (f), (g),
or (h) may be fined not more than $500 for each such failure.
``(2) The court shall triple the amount of a fine assessed
under paragraph (1) in any case in which the court finds that a
bankruptcy petition preparer--
``(A) advised the debtor to exclude assets or
income that should have been included on applicable
schedules;
``(B) advised the debtor to use a false Social
Security account number;
``(C) failed to inform the debtor that the debtor
was filing for relief under this title; or
``(D) prepared a document for filing in a manner
that failed to disclose the identity of the preparer.
``(3) The debtor, the trustee, a creditor, the United
States trustee, or the bankruptcy administrator may file a
motion for an order imposing a fine on the bankruptcy petition
preparer for each violation of this section.
``(4)(A) Fines imposed under this subsection in judicial
districts served by United States trustees shall be paid to the
United States trustee, who shall deposit an amount equal to
such fines in a special account of the United States Trustee
System Fund referred to in section 586(e)(2) of title 28.
Amounts deposited under this subparagraph shall be available to
fund the enforcement of this section on a national basis.
``(B) Fines imposed under this subsection in judicial
districts served by bankruptcy administrators shall be
deposited as offsetting receipts to the fund established under
section 1931 of title 28, and shall remain available until
expended to reimburse any appropriation for the amount paid out
of such appropriation for expenses of the operation and
maintenance of the courts of the United States.''.
SEC. 222. SENSE OF CONGRESS.
It is the sense of Congress that States should develop
curricula relating to the subject of personal finance, designed
for use in elementary and secondary schools.
SEC. 223. ADDITIONAL AMENDMENTS TO TITLE 11, UNITED STATES CODE.
Section 507(a) of title 11, United States Code, is amended
by inserting after paragraph (9) the following:
``(10) Tenth, allowed claims for death or personal
injuries resulting from the operation of a motor
vehicle or vessel if such operation was unlawful
because the debtor was intoxicated from using alcohol,
a drug, or another substance.''.
SEC. 224. PROTECTION OF RETIREMENT SAVINGS IN BANKRUPTCY.
(a) In General.--Section 522 of title 11, United States
Code, is amended--
(1) in subsection (b)--
(A) in paragraph (2)--
(i) in subparagraph (A), by
striking ``and'' at the end;
(ii) in subparagraph (B), by
striking the period at the end and
inserting ``; and'';
(iii) by adding at the end the
following:
``(C) retirement funds to the extent that those
funds are in a fund or account that is exempt from
taxation under section 401, 403, 408, 408A, 414, 457,
or 501(a) of the Internal Revenue Code of 1986.''; and
(iv) by striking ``(2)(A) any
property'' and inserting:
``(3) Property listed in this paragraph is--
``(A) any property'';
(B) by striking paragraph (1) and
inserting:
``(2) Property listed in this paragraph is property that is
specified under subsection (d), unless the State law that is
applicable to the debtor under paragraph (3)(A) specifically
does not so authorize.'';
(C) by striking ``(b) Notwithstanding'' and
inserting ``(b)(1) Notwithstanding'';
(D) by striking ``paragraph (2)'' each
place it appears and inserting ``paragraph
(3)'';
(E) by striking ``paragraph (1)'' each
place it appears and inserting ``paragraph
(2)'';
(F) by striking ``Such property is--''; and
(G) by adding at the end the following:
``(4) For purposes of paragraph (3)(C) and subsection
(d)(12), the following shall apply:
``(A) If the retirement funds are in a retirement
fund that has received a favorable determination under
section 7805 of the Internal Revenue Code of 1986, and
that determination is in effect as of the date of the
commencement of the case under section 301, 302, or 303
of this title, those funds shall be presumed to be
exempt from the estate.
``(B) If the retirement funds are in a retirement
fund that has not received a favorable determination
under such section 7805, those funds are exempt from
the estate if the debtor demonstrates that--
``(i) no prior determination to the
contrary has been made by a court or the
Internal Revenue Service; and
``(ii)(I) the retirement fund is in
substantial compliance with the applicable
requirements of the Internal Revenue Code of
1986; or
``(II) the retirement fund fails to be in
substantial compliance with the applicable
requirements of the Internal Revenue Code of
1986 and the debtor is not materially
responsible for that failure.
``(C) A direct transfer of retirement funds from 1
fund or account that is exempt from taxation under
section 401, 403, 408, 408A, 414, 457, or 501(a) of the
Internal Revenue Code of 1986, under section 401(a)(31)
of the Internal Revenue Code of 1986, or otherwise,
shall not cease to qualify for exemption under
paragraph (3)(C) or subsection (d)(12) by reason of
that direct transfer.
``(D)(i) Any distribution that qualifies as an
eligible rollover distribution within the meaning of
section 402(c) of the Internal Revenue Code of 1986 or
that is described in clause (ii) shall not cease to
qualify for exemption under paragraph (3)(C) or
subsection (d)(12) by reason of that distribution.
``(ii) A distribution described in this clause is
an amount that--
``(I) has been distributed from a fund or
account that is exempt from taxation under
section 401, 403, 408, 408A, 414, 457, or
501(a) of the Internal Revenue Code of 1986;
and
``(II) to the extent allowed by law, is
deposited in such a fund or account not later
than 60 days after the distribution of that
amount.''; and
(2) in subsection (d)--
(A) in the matter preceding paragraph (1),
by striking ``subsection (b)(1)'' and inserting
``subsection (b)(2)''; and
(B) by adding at the end the following:
``(12) Retirement funds to the extent that those
funds are in a fund or account that is exempt from
taxation under section 401, 403, 408, 408A, 414, 457,
or 501(a) of the Internal Revenue Code of 1986.''.
(b) Automatic Stay.--Section 362(b) of title 11, United
States Code, is amended--
(1) in paragraph (17), by striking ``or'' at the
end;
(2) in paragraph (18), by striking the period and
inserting a semicolon; and
(3) by inserting after paragraph (18) the
following:
``(19) under subsection (a), of withholding of
income from a debtor's wages and collection of amounts
withheld, under the debtor's agreement authorizing that
withholding and collection for the benefit of a
pension, profit-sharing, stock bonus, or other plan
established under section 401, 403, 408, 408A, 414,
457, or 501(c) of the Internal Revenue Code of 1986,
that is sponsored by the employer of the debtor, or an
affiliate, successor, or predecessor of such employer--
``(A) to the extent that the amounts
withheld and collected are used solely for
payments relating to a loan from a plan that
satisfies the requirements of section 408(b)(1)
of the Employee Retirement Income Security Act
of 1974 or is subject to section 72(p) of the
Internal Revenue Code of 1986; or
``(B) in the case of a loan from a thrift
savings plan described in subchapter III of
chapter 84 of title 5, that satisfies the
requirements of section 8433(g) of such title;
but this paragraph may not be construed to provide that
any loan made under a governmental plan under section
414(d), or a contract or account under section 403(b)
of the Internal Revenue Code of 1986 constitutes a
claim or a debt under this title;''.
(c) Exceptions To Discharge.--Section 523(a) of title 11,
United States Code, as amended by section 215, is amended by
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, under--
``(A) a loan permitted under section
408(b)(1) of the Employee Retirement Income
Security Act of 1974, or subject to section
72(p) of the Internal Revenue Code of 1986; or
``(B) a loan from the thrift savings plan
described in subchapter III of chapter 84 of
title 5, that satisfies the requirements of
section 8433(g) of such title;
but nothing in this paragraph may be construed to
provide that any loan made under a governmental plan
under section 414(d), or a contract or account under
section 403(b), of the Internal Revenue Code of 1986
constitutes a claim or a debt under this title.''.
(d) Plan Contents.--Section 1322 of title 11, United States
Code, is amended by adding at the end the following:
``(f) A plan may not materially alter the terms of a loan
described in section 362(b)(19) and any amounts required to
repay such loan shall not constitute `disposable income' under
section 1325.''.
(e) Asset Limitation.--
(1) Limitation.--Section 522 of title 11, United
States Code, is amended by adding at the end the
following:
``(n) For assets in individual retirement accounts
described in section 408 or 408A of the Internal Revenue Code
of 1986, other than a simplified employee pension under section
408(k) of that Code or a simple retirement account under
section 408(p) of that Code, the aggregate value of such assets
exempted under this section, without regard to amounts
attributable to rollover contributions under sections 402(c),
402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8) of the Internal
Revenue Code of 1986, and earnings thereon, shall not exceed
$1,000,000 in a case filed by a debtor who is an individual,
except that such amount may be increased if the interests of
justice so require.''.
(2) Adjustment of dollar amounts.--Paragraphs (1)
and (2) of section 104(b) of title 11, United States
Code, are amended by inserting ``522(n),'' after
``522(d),''.
SEC. 225. PROTECTION OF EDUCATION SAVINGS IN BANKRUPTCY.
(a) Exclusions.--Section 541 of title 11, United States
Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4), by striking ``or'' at
the end;
(B) by redesignating paragraph (5) as
paragraph (9); and
(C) by inserting after paragraph (4) the
following:
``(5) funds placed in an education individual
retirement account (as defined in section 530(b)(1) of
the Internal Revenue Code of 1986) not later than 365
days before the date of filing of the petition, but--
``(A) only if the designated beneficiary of
such account was a son, daughter, stepson,
stepdaughter, grandchild, or step-grandchild of
the debtor for the taxable year for which funds
were placed in such account;
``(B) only to the extent that such funds--
``(i) are not pledged or promised
to any entity in connection with any
extension of credit; and
``(ii) are not excess contributions
(as described in section 4973(e) of the
Internal Revenue Code of 1986); and
``(C) in the case of funds placed in all
such accounts having the same designated
beneficiary not earlier than 720 days nor later
than 365 days before such date, only so much of
such funds as does not exceed $5,000;
``(6) funds used to purchase a tuition credit or
certificate or contributed to an account in accordance
with section 529(b)(1)(A) of the Internal Revenue Code
of 1986 under a qualified State tuition program (as
defined in section 529(b)(1) of such Code) not later
than 365 days before the date of filing of the
petition, but--
``(A) only if the designated beneficiary of
the amounts paid or contributed to such tuition
program was a son, daughter, stepson,
stepdaughter, grandchild, or step-grandchild of
the debtor for the taxable year for which funds
were paid or contributed;
``(B) with respect to the aggregate amount
paid or contributed to such program having the
same designated beneficiary, only so much of
such amount as does not exceed the total
contributions permitted under section 529(b)(7)
of such Code with respect to such beneficiary,
as adjusted beginning on the date of the filing
of the petition by the annual increase or
decrease (rounded to the nearest tenth of 1
percent) in the education expenditure category
of the Consumer Price Index prepared by the
Department of Labor; and
``(C) in the case of funds paid or
contributed to such program having the same
designated beneficiary not earlier than 720
days nor later than 365 days before such date,
only so much of such funds as does not exceed
$5,000;''; and
(2) by adding at the end the following:
``(e) In determining whether any of the relationships
specified in paragraph (5)(A) or (6)(A) of subsection (b)
exists, a legally adopted child of an individual (and a child
who is a member of an individual's household, if placed with
such individual by an authorized placement agency for legal
adoption by such individual), or a foster child of an
individual (if such child has as the child's principal place of
abode the home of the debtor and is a member of the debtor's
household) shall be treated as a child of such individual by
blood.''.
(b) Debtor's Duties.--Section 521 of title 11, United
States Code, as amended by section 106, is amended by adding at
the end the following:
``(c) In addition to meeting the requirements under
subsection (a), a debtor shall file with the court a record of
any interest that a debtor has in an education individual
retirement account (as defined in section 530(b)(1) of the
Internal Revenue Code of 1986) or under a qualified State
tuition program (as defined in section 529(b)(1) of such
Code).''.
SEC. 226. DEFINITIONS.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended--
(1) by inserting after paragraph (2) the following:
``(3) `assisted person' means any person whose
debts consist primarily of consumer debts and the value
of whose nonexempt property is less than $150,000;'';
(2) by inserting after paragraph (4) the following:
``(4A) `bankruptcy assistance' means any goods or
services sold or otherwise provided to an assisted
person with the express or implied purpose of providing
information, advice, counsel, document preparation, or
filing, or attendance at a creditors' meeting or
appearing in a proceeding on behalf of another or
providing legal representation with respect to a case
or proceeding under this title;''; and
(3) by inserting after paragraph (12) the
following:
``(12A) `debt relief agency' means any person who
provides any bankruptcy assistance to an assisted
person in return for the payment of money or other
valuable consideration, or who is a bankruptcy petition
preparer under section 110, but does not include--
``(A) any person that is an officer,
director, employee, or agent of a person who
provides such assistance or of such preparer;
``(B) a nonprofit organization which is
exempt from taxation under section 501(c)(3) of
the Internal Revenue Code of 1986;
``(C) a creditor of such assisted person,
to the extent that the creditor is assisting
such assisted person to restructure any debt
owed by such assisted person to the creditor;
``(D) a depository institution (as defined
in section 3 of the Federal Deposit Insurance
Act) or any Federal credit union or State
credit union (as those terms are defined in
section 101 of the Federal Credit Union Act),
or any affiliate or subsidiary of such
depository institution or credit union; or
``(E) an author, publisher, distributor, or
seller of works subject to copyright protection
under title 17, when acting in such
capacity.''.
(b) Conforming Amendment.--Section 104(b) of title 11,
United States Code, is amended by inserting ``101(3),'' after
``sections'' each place it appears.
SEC. 227. RESTRICTIONS ON DEBT RELIEF AGENCIES.
(a) Enforcement.--Subchapter II of chapter 5 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 526. Restrictions on debt relief agencies
``(a) A debt relief agency shall not--
``(1) fail to perform any service that such agency
informed an assisted person or prospective assisted
person it would provide in connection with a case or
proceeding under this title;
``(2) make any statement, or counsel or advise any
assisted person or prospective assisted person to make
a statement in a document filed in a case or proceeding
under this title, that is untrue and misleading, or
that upon the exercise of reasonable care, should have
been known by such agency to be untrue or misleading;
``(3) misrepresent to any assisted person or
prospective assisted person, directly or indirectly,
affirmatively or by material omission, with respect
to--
``(i) the services that such agency will
provide to such person; or
``(ii) the benefits and risks that may
result if such person becomes a debtor in a
case under this title; or
``(4) advise an assisted person or prospective
assisted person to incur more debt in contemplation of
such person filing a case under this title or to pay an
attorney or bankruptcy petition preparer fee or charge
for services performed as part of preparing for or
representing a debtor in a case under this title.
``(b) Any waiver by any assisted person of any protection
or right provided under this section shall not be enforceable
against the debtor by any Federal or State court or any other
person, but may be enforced against a debt relief agency.
``(c)(1) Any contract for bankruptcy assistance between a
debt relief agency and an assisted person that does not comply
with the material requirements of this section, section 527, or
section 528 shall be void and may not be enforced by any
Federal or State court or by any other person, other than such
assisted person.
``(2) Any debt relief agency shall be liable to an assisted
person in the amount of any fees or charges in connection with
providing bankruptcy assistance to such person that such debt
relief agency has received, for actual damages, and for
reasonable attorneys' fees and costs if such agency is found,
after notice and a hearing, to have--
``(A) intentionally or negligently failed to comply
with any provision of this section, section 527, or
section 528 with respect to a case or proceeding under
this title for such assisted person;
``(B) provided bankruptcy assistance to an assisted
person in a case or proceeding under this title that is
dismissed or converted to a case under another chapter
of this title because of such agency's intentional or
negligent failure to file any required document
including those specified in section 521; or
``(C) intentionally or negligently disregarded the
material requirements of this title or the Federal
Rules of Bankruptcy Procedure applicable to such
agency.
``(3) In addition to such other remedies as are provided
under State law, whenever the chief law enforcement officer of
a State, or an official or agency designated by a State, has
reason to believe that any person has violated or is violating
this section, the State--
``(A) may bring an action to enjoin such violation;
``(B) may bring an action on behalf of its
residents to recover the actual damages of assisted
persons arising from such violation, including any
liability under paragraph (2); and
``(C) in the case of any successful action under
subparagraph (A) or (B), shall be awarded the costs of
the action and reasonable attorney fees as determined
by the court.
``(4) The district court of the United States 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.
``(d) No provision of this section, section 527, or section
528 shall--
``(1) annul, alter, affect, or exempt any person
subject to such sections from complying with any law of
any State except to the extent that such law is
inconsistent with those sections, and then only to the
extent of the inconsistency; or
``(2) be deemed to limit or curtail the authority
or ability--
``(A) of a State or subdivision or
instrumentality thereof, to determine and
enforce qualifications for the practice of law
under the laws of that State; or
``(B) of a Federal court to determine and
enforce the qualifications for the practice of
law before that court.''.
(b) Conforming Amendment.--The table of sections for
chapter 5 of title 11, United States Code, is amended by
inserting after the item relating to section 525, the
following:
``526. Restrictions on debt relief agencies.''.
SEC. 228. DISCLOSURES.
(a) Disclosures.--Subchapter II of chapter 5 of title 11,
United States Code, as amended by section 227, is amended by
adding at the end the following:
``Sec. 527. Disclosures
``(a) A debt relief agency providing bankruptcy assistance
to an assisted person shall provide--
``(1) the written notice required under section
342(b)(1) of this title; and
``(2) to the extent not covered in the written
notice described in paragraph (1), and not later than 3
business days after the first date on which a debt
relief agency first offers to provide any bankruptcy
assistance services to an assisted person, a clear and
conspicuous written notice advising assisted persons
that--
``(A) all information that the assisted
person is required to provide with a petition
and thereafter during a case under this title
is required to be complete, accurate, and
truthful;
``(B) all assets and all liabilities are
required to be completely and accurately
disclosed in the documents filed to commence
the case, and the replacement value of each
asset as defined in section 506 of this title
must be stated in those documents where
requested after reasonable inquiry to establish
such value;
``(C) current monthly income, the amounts
specified in section 707(b)(2), and, in a case
under chapter 13, disposable income (determined
in accordance with section 707(b)(2), are
required to be stated after reasonable inquiry;
and
``(D) information that an assisted person
provides during their case may be audited
pursuant to this title, and that failure to
provide such information may result in
dismissal of the case under this title or other
sanction including, in some instances, criminal
sanctions.
``(b) A debt relief agency providing bankruptcy assistance
to an assisted person shall provide each assisted person at the
same time as the notices required under subsection (a)(1) with
the following statement, to the extent applicable, or one
substantially similar. The statement shall be clear and
conspicuous and shall be in a single document separate from
other documents or notices provided to the assisted person:
`` `IMPORTANT INFORMATION ABOUT BANKRUPTCY ASSISTANCE
SERVICES FROM AN ATTORNEY OR BANKRUPTCY PETITION PREPARER.
`` `If you decide to seek bankruptcy relief, you can
represent yourself, you can hire an attorney to represent you,
or you can get help in some localities from a bankruptcy
petition preparer who is not an attorney. THE LAW REQUIRES AN
ATTORNEY OR BANKRUPTCY PETITION PREPARER TO GIVE YOU A WRITTEN
CONTRACT SPECIFYING WHAT THE ATTORNEY OR BANKRUPTCY PETITION
PREPARER WILL DO FOR YOU AND HOW MUCH IT WILL COST. Ask to see
the contract before you hire anyone.
`` `The following information helps you understand what
must be done in a routine bankruptcy case to help you evaluate
how much service you need. Although bankruptcy can be complex,
many cases are routine.
`` `Before filing a bankruptcy case, either you or your
attorney should analyze your eligibility for different forms of
debt relief made available by the Bankruptcy Code and which
form of relief is most likely to be beneficial for you. Be sure
you understand the relief you can obtain and its limitations.
To file a bankruptcy case, documents called a Petition,
Schedules and Statement of Financial Affairs, as well as in
some cases a Statement of Intention need to be prepared
correctly and filed with the bankruptcy court. You will have to
pay a filing fee to the bankruptcy court. Once your case
starts, you will have to attend the required first meeting of
creditors where you may be questioned by a court official
called a `trustee' and by creditors.
`` `If you choose to file a chapter 7 case, you may be
asked by a creditor to reaffirm a debt. You may want help
deciding whether to do so and a creditor is not permitted to
coerce you into reaffirming your debts.
`` `If you choose to file a chapter 13 case in which you
repay your creditors what you can afford over 3 to 5 years, you
may also want help with preparing your chapter 13 plan and with
the confirmation hearing on your plan which will be before a
bankruptcy judge.
`` `If you select another type of relief under the
Bankruptcy Code other than chapter 7 or chapter 13, you will
want to find out what needs to be done from someone familiar
with that type of relief.
`` `Your bankruptcy case may also involve litigation. You
are generally permitted to represent yourself in litigation in
bankruptcy court, but only attorneys, not bankruptcy petition
preparers, can give you legal advice.'.
``(c) Except to the extent the debt relief agency provides
the required information itself after reasonably diligent
inquiry of the assisted person or others so as to obtain such
information reasonably accurately for inclusion on the
petition, schedules or statement of financial affairs, a debt
relief agency providing bankruptcy assistance to an assisted
person, to the extent permitted by nonbankruptcy law, shall
provide each assisted person at the time required for the
notice required under subsection (a)(1) reasonably sufficient
information (which shall be provided in a clear and conspicuous
writing) to the assisted person on how to provide all the
information the assisted person is required to provide under
this title pursuant to section 521, including--
``(1) how to value assets at replacement value,
determine current monthly income, the amounts specified
in section 707(b)(2) and, in a chapter 13 case, how to
determine disposable income in accordance with section
707(b)(2) and related calculations;
``(2) how to complete the list of creditors,
including how to determine what amount is owed and what
address for the creditor should be shown; and
``(3) how to determine what property is exempt and
how to value exempt property at replacement value as
defined in section 506 of this title.
``(d) A debt relief agency shall maintain a copy of the
notices required under subsection (a) of this section for 2
years after the date on which the notice is given the assisted
person.''.
(b) Conforming Amendment.--The table of sections for
chapter 5 of title 11, United States Code, as amended by
section 227, is amended by inserting after the item relating to
section 526 the following:
``527. Disclosures.''.
SEC. 229. REQUIREMENTS FOR DEBT RELIEF AGENCIES.
(a) Enforcement.--Subchapter II of chapter 5 of title 11,
United States Code, as amended by sections 227 and 228, is
amended by adding at the end the following:
``Sec. 528. Requirements for debt relief agencies
``(a) A debt relief agency shall--
``(1) not later than 5 business days after the
first date on which such agency provides any bankruptcy
assistance services to an assisted person, but prior to
such assisted person's petition under this title being
filed, execute a written contract with such assisted
person that explains clearly and conspicuously--
``(A) the services such agency will provide
to such assisted person; and
``(B) the fees or charges for such
services, and the terms of payment;
``(2) provide the assisted person with a copy of
the fully executed and completed contract;
``(3) clearly and conspicuously disclose in any
advertisement of bankruptcy assistance services or of
the benefits of bankruptcy directed to the general
public (whether in general media, seminars or specific
mailings, telephonic or electronic messages, or
otherwise) that the services or benefits are with
respect to bankruptcy relief under this title; and
``(4) clearly and conspicuously use the following
statement in such advertisement: `We are a debt relief
agency. We help people file for bankruptcy relief under
the Bankruptcy Code.' or a substantially similar
statement.
``(b)(1) An advertisement of bankruptcy assistance services
or of the benefits of bankruptcy directed to the general public
includes--
``(A) descriptions of bankruptcy assistance in
connection with a chapter 13 plan whether or not
chapter 13 is specifically mentioned in such
advertisement; and
``(B) statements such as `federally supervised
repayment plan' or `Federal debt restructuring help' or
other similar statements that could lead a reasonable
consumer to believe that debt counseling was being
offered when in fact the services were directed to
providing bankruptcy assistance with a chapter 13 plan
or other form of bankruptcy relief under this title.
``(2) An advertisement, directed to the general public,
indicating that the debt relief agency provides assistance with
respect to credit defaults, mortgage foreclosures, eviction
proceedings, excessive debt, debt collection pressure, or
inability to pay any consumer debt shall--
``(A) disclose clearly and conspicuously in such
advertisement that the assistance may involve
bankruptcy relief under this title; and
``(B) include the following statement: `We are a
debt relief agency. We help people file for bankruptcy
relief under the Bankruptcy Code.' or a substantially
similar statement.''.
(b) Conforming Amendment.--The table of sections for
chapter 5 of title 11, United States Code, as amended by
section 227 and 228, is amended by inserting after the item
relating to section 527, the following:
``528. Requirements for debt relief agencies.''.
SEC. 230. GAO STUDY.
(a) Study.--Not later than 270 days after the date of
enactment of this Act, the Comptroller General of the United
States shall conduct a study of the feasibility, effectiveness,
and cost of requiring trustees appointed under title 11, United
States Code, or the bankruptcy courts, to provide to the Office
of Child Support Enforcement promptly after the commencement of
cases by debtors who are individuals under such title, the
names and social security numbers of such debtors for the
purposes of allowing such Office to determine whether such
debtors have outstanding obligations for child support (as
determined on the basis of information in the Federal Case
Registry or other national database).
(b) Report.--Not later than 300 days after the date of
enactment of this Act, the Comptroller General shall submit to
the President pro tempore of the Senate and the Speaker of the
House of Representatives a report containing the results of the
study required by subsection (a).
SEC. 231. PROTECTION OF PERSONALLY IDENTIFIABLE INFORMATION.
(a) Limitation.--Section 363(b)(1) of title 11, United
States Code, is amended by striking the period at the end and
inserting the following:
``, except that if the debtor in connection with offering a
product or a service discloses to an individual a policy
prohibiting the transfer of personally identifiable information
about individuals to persons that are not affiliated with the
debtor and if such policy is in effect on the date of the
commencement of the case, then the trustee may not sell or
lease personally identifiable information to any person
unless--
``(A) such sale or such lease is consistent with
such policy; or
``(B) after appointment of a consumer privacy
ombudsman in accordance with section 332, and after
notice and a hearing, the court approves such sale or
such lease--
``(i) giving due consideration to the
facts, circumstances, and conditions of such
sale or such lease; and
``(ii) finding that no showing was made
that such sale or such lease would violate
applicable nonbankruptcy law.''.
(b) Definition.--Section 101 of title 11, United States
Code, is amended by inserting after paragraph (41) the
following:
``(41A) `personally identifiable information'
means--
``(A) if provided by an individual to the
debtor in connection with obtaining a product
or a service from the debtor primarily for
personal, family, or household purposes--
``(i) the first name (or initial)
and last name of such individual,
whether given at birth or time of
adoption, or resulting from a lawful
change of name;
``(ii) the geographical address of
a physical place of residence of such
individual;
``(iii) an electronic address
(including an e-mail address) of such
individual;
``(iv) a telephone number dedicated
to contacting such individual at such
physical place of residence;
``(v) a social security account
number issued to such individual; or
``(vi) the account number of a
credit card issued to such individual;
or
``(B) if identified in connection with 1 or
more of the items of information specified in
subparagraph (A)--
``(i) a birth date, the number of a
certificate of birth or adoption, or a
place of birth; or
``(ii) any other information
concerning an identified individual
that, if disclosed, will result in
contacting or identifying such
individual physically or
electronically;''.
SEC. 232. CONSUMER PRIVACY OMBUDSMAN.
(a) Consumer Privacy Ombudsman.--Title 11 of the United
States Code is amended by inserting after section 331 the
following:
``Sec. 332. Consumer privacy ombudsman
``(a) If a hearing is required under section 363(b)(1)(B)
of this title, the court shall order the United States trustee
to appoint, not later than 5 days before the commencement of
the hearing, 1 disinterested person (other than the United
States trustee) to serve as the consumer privacy ombudsman in
the case and shall require that notice of such hearing be
timely given to such ombudsman.
``(b) The consumer privacy ombudsman may appear and be
heard at such hearing and shall provide to the court
information to assist the court in its consideration of the
facts, circumstances, and conditions of the proposed sale or
lease of personally identifiable information under section
363(b)(1)(B) of this title. Such information may include
presentation of--
``(1) the debtor's privacy policy;
``(2) the potential losses or gains of privacy to
consumers if such sale or such lease is approved by the
court;
``(3) the potential costs or benefits to consumers
if such sale or such lease is approved by the court;
and
``(4) the potential alternatives that would
mitigate potential privacy losses or potential costs to
consumers.
``(c) A consumer privacy ombudsman shall not disclose any
personally identifiable information obtained by the ombudsman
under this title.''.
(b) Compensation of Consumer Privacy Ombudsman.--Section
330(a)(1) of title 11, United States Code, is amended in the
matter preceding subparagraph (A), by inserting ``a consumer
privacy ombudsman appointed under section 332,'' before ``an
examiner''.
(c) Conforming Amendment.--The table of sections for
subchapter II of chapter 3 of title 11, United States Code, is
amended by adding at the end the following:
``332. Consumer privacy ombudsman.''.
SEC. 233. PROHIBITION ON DISCLOSURE OF NAME OF MINOR CHILDREN.
(a) Prohibition.--Title 11 of the United States Code, as
amended by section 106, is amended by inserting after section
111 the following:
``Sec. 112. Prohibition on disclosure of name of minor children
``The debtor may be required to provide information
regarding a minor child involved in matters under this title
but may not be required to disclose in the public records in
the case the name of such minor child. The debtor may be
required to disclose the name of such minor child in a
nonpublic record that is maintained by the court and made
available by the court for examination by the United States
trustee, the trustee, and the auditor (if any) appointed under
section 586(f) of title 28, in the case. The court, the United
States trustee, the trustee, and such auditor shall not
disclose the name of such minor child maintained in such
nonpublic record.''.
(b) Clerical Amendment.--The table of sections for chapter
1 of title 11, United States Code, as amended by section 106,
is amended by inserting after the item relating to section 111
the following:
``112. Prohibition on disclosure of name of minor children.''.
(c) Conforming Amendment.--Section 107(a) of title 11,
United States Code, is amended by inserting ``and subject to
section 112 of this title'' after ``section''.
TITLE III--DISCOURAGING BANKRUPTCY ABUSE
SEC. 301. REINFORCEMENT OF THE FRESH START.
Section 523(a)(17) of title 11, United States Code, is
amended--
(1) by striking ``by a court'' and inserting ``on a
prisoner by any court'';
(2) by striking ``section 1915(b) or (f)'' and
inserting ``subsection (b) or (f)(2) of section 1915'';
and
(3) by inserting ``(or a similar non-Federal law)''
after ``title 28'' each place it appears.
SEC. 302. DISCOURAGING BAD FAITH REPEAT FILINGS.
Section 362(c) of title 11, United States Code, is
amended--
(1) in paragraph (1), by striking ``and'' at the
end;
(2) in paragraph (2), by striking the period at the
end and inserting a semicolon; and
(3) by adding at the end the following:
``(3) if a single or joint case is filed by or
against debtor who is an individual in a case under
chapter 7, 11, or 13, and if a single or joint case of
the debtor was pending within the preceding 1-year
period but was dismissed, other than a case refiled
under a chapter other than chapter 7 after dismissal
under section 707(b)--
``(A) the stay under subsection (a) with
respect to any action taken with respect to a
debt or property securing such debt or with
respect to any lease shall terminate with
respect to the debtor on the 30th day after the
filing of the later case;
``(B) on the motion of a party in interest
for continuation of the automatic stay and upon
notice and a hearing, the court may extend the
stay in particular cases as to any or all
creditors (subject to such conditions or
limitations as the court may then impose) after
notice and a hearing completed before the
expiration of the 30-day period only if the
party in interest demonstrates that the filing
of the later case is in good faith as to the
creditors to be stayed; and
``(C) for purposes of subparagraph (B), a
case is presumptively filed not in good faith
(but such presumption may be rebutted by clear
and convincing evidence to the contrary)--
``(i) as to all creditors, if--
``(I) more than 1 previous
case under any of chapters 7,
11, and 13 in which the
individual was a debtor was
pending within the preceding 1-
year period;
``(II) a previous case
under any of chapters 7, 11,
and 13 in which the individual
was a debtor was dismissed
within such 1-year period,
after the debtor failed to--
``(aa) file or
amend the petition or
other documents as
required by this title
or the court without
substantial excuse (but
mere inadvertence or
negligence shall not be
a substantial excuse
unless the dismissal
was caused by the
negligence of the
debtor's attorney);
``(bb) provide
adequate protection as
ordered by the court;
or
``(cc) perform the
terms of a plan
confirmed by the court;
or
``(III) there has not been
a substantial change in the
financial or personal affairs
of the debtor since the
dismissal of the next most
previous case under chapter 7,
11, or 13 or any other reason
to conclude that the later case
will be concluded--
``(aa) if a case
under chapter 7, with a
discharge; or
``(bb) if a case
under chapter 11 or 13,
with a confirmed plan
that will be fully
performed; and
``(ii) as to any creditor that
commenced an action under subsection
(d) in a previous case in which the
individual was a debtor if, as of the
date of dismissal of such case, that
action was still pending or had been
resolved by terminating, conditioning,
or limiting the stay as to actions of
such creditor; and
``(4)(A)(i) if a single or joint case is filed by
or against a debtor who is an individual under this
title, and if 2 or more single or joint cases of the
debtor were pending within the previous year but were
dismissed, other than a case refiled under section
707(b), the stay under subsection (a) shall not go into
effect upon the filing of the later case; and
``(ii) on request of a party in interest, the court
shall promptly enter an order confirming that no stay
is in effect;
``(B) if, within 30 days after the filing of the
later case, a party in interest requests the court may
order the stay to take effect in the case as to any or
all creditors (subject to such conditions or
limitations as the court may impose), after notice and
a hearing, only if the party in interest demonstrates
that the filing of the later case is in good faith as
to the creditors to be stayed;
``(C) a stay imposed under subparagraph (B) shall
be effective on the date of entry of the order allowing
the stay to go into effect; and
``(D) for purposes of subparagraph (B), a case is
presumptively not filed in good faith (but such
presumption may be rebutted by clear and convincing
evidence to the contrary)--
``(i) as to all creditors if--
``(I) 2 or more previous cases
under this title in which the
individual was a debtor were pending
within the 1-year period;
``(II) a previous case under this
title in which the individual was a
debtor was dismissed within the time
period stated in this paragraph after
the debtor failed to file or amend the
petition or other documents as required
by this title or the court without
substantial excuse (but mere
inadvertence or negligence shall not be
substantial excuse unless the dismissal
was caused by the negligence of the
debtor's attorney), failed to provide
adequate protection as ordered by the
court, or failed to perform the terms
of a plan confirmed by the court; or
``(III) there has not been a
substantial change in the financial or
personal affairs of the debtor since
the dismissal of the next most previous
case under this title, or any other
reason to conclude that the later case
will not be concluded, if a case under
chapter 7, with a discharge, and if a
case under chapter 11 or 13, with a
confirmed plan that will be fully
performed; or
``(ii) as to any creditor that commenced an
action under subsection (d) in a previous case
in which the individual was a debtor if, as of
the date of dismissal of such case, such action
was still pending or had been resolved by
terminating, conditioning, or limiting the stay
as to action of such creditor.''.
SEC. 303. CURBING ABUSIVE FILINGS.
(a) In General.--Section 362(d) of title 11, United States
Code, is amended--
(1) in paragraph (2), by striking ``or'' at the
end;
(2) in paragraph (3), by striking the period at the
end and inserting ``; or''; and
(3) by adding at the end the following:
``(4) with respect to a stay of an act against real
property under subsection (a), by a creditor whose
claim is secured by an interest in such real estate, if
the court finds that the filing of the bankruptcy
petition was part of a scheme to delay, hinder, and
defraud creditors that involved either--
``(A) transfer of all or part ownership of,
or other interest in, the real property without
the consent of the secured creditor or court
approval; or
``(B) multiple bankruptcy filings affecting
the real property.
If recorded in compliance with applicable State laws governing
notices of interests or liens in real property, an order
entered under this subsection shall be binding in any other
case under this title purporting to affect the real property
filed not later than 2 years after the date of entry of such
order by the court, except that a debtor in a subsequent case
may move for relief from such order based upon changed
circumstances or for good cause shown, after notice and a
hearing. Any Federal, State, or local governmental unit that
accepts notices of interests or liens in real property shall
accept any certified copy of an order described in this
subsection for indexing and recording.''.
(b) Automatic Stay.--Section 362(b) of title 11, United
States Code, as amended by section 224, is amended by inserting
after paragraph (19), the following:
``(20) under subsection (a), of any act to enforce
any lien against or security interest in real property
following the entry of an order under section 362(d)(4)
as to that property in any prior bankruptcy case for a
period of 2 years after entry of such an order, except
that the debtor, in a subsequent case, may move the
court for relief from such order based upon changed
circumstances or for other good cause shown, after
notice and a hearing;
``(21) under subsection (a), of any act to enforce
any lien against or security interest in real
property--
``(A) if the debtor is ineligible under
section 109(g) to be a debtor in a bankruptcy
case; or
``(B) if the bankruptcy case was filed in
violation of a bankruptcy court order in a
prior bankruptcy case prohibiting the debtor
from being a debtor in another bankruptcy
case;''.
SEC. 304. DEBTOR RETENTION OF PERSONAL PROPERTY SECURITY.
Title 11, United States Code, is amended--
(1) in section 521(a), as so designated by section
106--
(A) in paragraph (4), by striking ``, and''
at the end and inserting a semicolon;
(B) in paragraph (5), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following:
``(6) in a case under chapter 7 of this title in
which the debtor is an individual, not retain
possession of personal property as to which a creditor
has an allowed claim for the purchase price secured in
whole or in part by an interest in that personal
property unless the debtor, not later than 45 days
after the first meeting of creditors under section
341(a), either--
``(A) enters into an agreement with the
creditor pursuant to section 524(c) of this
title with respect to the claim secured by such
property; or
``(B) redeems such property from the
security interest pursuant to section 722 of
this title.
If the debtor fails to so act within the 45-day period referred
to in paragraph (6), the stay under section 362(a) of this
title is terminated with respect to the personal property of
the estate or of the debtor which is affected, such property
shall no longer be property of the estate, and the creditor may
take whatever action as to such property as is permitted by
applicable nonbankruptcy law, unless the court determines on
the motion of the trustee filedbefore the expiration of such
45-day period, and after notice and a hearing, that such
property is of consequential value or benefit to the estate,
orders appropriate adequate protection of the creditor's
interest, and orders the debtor to deliver any collateral in
the debtor's possession to the trustee.''; and
(2) in section 722, by inserting ``in full at the
time of redemption'' before the period at the end.
SEC. 305. RELIEF FROM THE AUTOMATIC STAY WHEN THE DEBTOR DOES NOT
COMPLETE INTENDED SURRENDER OF CONSUMER DEBT
COLLATERAL.
Title 11, United States Code, is amended--
(1) in section 362, as amended by section 106--
(A) in subsection (c), by striking ``(e),
and (f)'' and inserting ``(e), (f), and (h)'';
(B) by redesignating subsection (h) as
subsection (k) and transferring such subsection
so as to insert it after subjection (j) as
added by section 106; and
(C) by inserting after subsection (g) the
following:
``(h)(1) In a case in which the debtor is an individual,
the stay provided by subsection (a) is terminated with respect
to personal property of the estate or of the debtor securing in
whole or in part a claim, or subject to an unexpired lease, and
such personal property shall no longer be property of the
estate if the debtor fails within the applicable time set by
section 521(a)(2) of this title--
``(A) to file timely any statement of intention
required under section 521(a)(2) of this title with
respect to that property or to indicate in that
statement that the debtor will either surrender the
property or retain it and, if retaining it, either
redeem the property pursuant to section 722 of this
title, reaffirm the debt it secures pursuant to section
524(c) of this title, or assume the unexpired lease
pursuant to section 365(p) of this title if the trustee
does not do so, as applicable; and
``(B) to take timely the action specified in that
statement of intention, as it may be amended before
expiration of the period for taking action, unless the
statement of intention specifies reaffirmation and the
creditor refuses to reaffirm on the original contract
terms.
``(2) Paragraph (1) does not apply if the court determines,
on the motion of the trustee filed before the expiration of the
applicable time set by section 521(a)(2), after notice and a
hearing, that such property is of consequential value or
benefit to the estate, and orders appropriate adequate
protection of the creditor's interest, and ordersthe debtor to
deliver any collateral in the debtor's possession to the trustee. If
the court does not so determine, the stay provided by subsection (a)
shall terminate upon the conclusion of the proceeding on the motion.'';
and
(2) in section 521, as amended by sections 106 and
225--
(A) in subsection (a)(2) by striking
``consumer'';
(B) in subsection (a)(2)(B)--
(i) by striking ``forty-five days
after the filing of a notice of intent
under this section'' and inserting ``30
days after the first date set for the
meeting of creditors under section
341(a) of this title''; and
(ii) by striking ``forty-five day''
and inserting ``30-day'';
(C) in subsection (a)(2)(C) by inserting
``, except as provided in section 362(h) of
this title'' before the semicolon; and
(D) by adding at the end the following:
``(d) If the debtor fails timely to take the action
specified in subsection (a)(6) of this section, or in
paragraphs (1) and (2) of section 362(h) of this title, with
respect to property which a lessor or bailor owns and has
leased, rented, or bailed to the debtor or as to which a
creditor holds a security interest not otherwise voidable under
section 522(f), 544, 545, 547, 548, or 549 of this title,
nothing in this title shall prevent or limit the operation of a
provision in the underlying lease or agreement which has the
effect of placing the debtor in default under such lease or
agreement by reason of the occurrence, pendency, or existence
of a proceeding under this title or the insolvency of the
debtor. Nothing in this subsection shall be deemed to justify
limiting such a provision in any other circumstance.''.
SEC. 306. GIVING SECURED CREDITORS FAIR TREATMENT IN CHAPTER 13.
(a) In General.--Section 1325(a)(5)(B)(i) of title 11,
United States Code, is amended to read as follows:
``(i) the plan provides that--
``(I) the holder of such claim
retain the lien securing such claim
until the earlier of--
``(aa) the payment of the
underlying debt determined
under nonbankruptcy law; or
``(bb) discharge under
section 1328; and
``(II) if the case under this
chapter is dismissed or converted
without completion of the plan, such
lien shall also be retained by such
holder to the extent recognized by
applicable nonbankruptcy law; and''.
(b) Restoring the Foundation for Secured Credit.--Section
1325(a) of title 11, United States Code, is amended by adding
at the end the following:
``For purposes of paragraph (5), section 506 shall not apply to
a claim described in that paragraph if the creditor has a
purchase money security interest securing the debt that is the
subject of the claim, the debt was incurred within the 910-day
preceding the filing of the petition, and the collateral for
that debt consists of a motor vehicle (as defined in section
30102 of title 49) acquired for the personal use of the debtor,
or if collateral for that debt consists of any other thing of
value, if the debt was incurred during the 1-year period
preceding that filing.''.
(c) Definitions.--Section 101 of title 11, United States
Code, is amended--
(1) by inserting after paragraph (13) the
following:
``(13A) `debtor's principal residence'--
``(A) means a residential structure,
including incidental property, without regard
to whether that structure is attached to real
property; and
``(B) includes an individual condominium or
cooperative unit, a mobile or manufactured
home, or trailer;''; and
(2) by inserting after paragraph (27), the
following:
``(27A) `incidental property' means, with respect
to a debtor's principal residence--
``(A) property commonly conveyed with a
principal residence in the area where the real
estate is located;
``(B) all easements, rights, appurtenances,
fixtures, rents, royalties, mineral rights, oil
or gas rights or profits, water rights, escrow
funds, or insurance proceeds; and
``(C) all replacements or additions;''.
SEC. 307. DOMICILIARY REQUIREMENTS FOR EXEMPTIONS.
Section 522(b)(3) of title 11, United States Code, as so
designated by section 106, is amended--
(1) in subparagraph (A)--
(A) by striking ``180 days'' and inserting
``730 days''; and
(B) by striking ``, or for a longer portion
of such 180-day period than in any other
place'' and inserting ``or if the debtor's
domicile has not been located at a single State
for such 730-day period, the place in which the
debtor's domicile was located for 180 days
immediately preceding the 730-day period or for
a longer portion of such 180-day period than in
any other place''; and
(2) by adding at the end the following:
``If the effect of the domiciliary requirement under
subparagraph (A) is to render the debtor ineligible for any
exemption, the debtor may elect to exempt property that is
specified under subsection (d).''.
SEC. 308. REDUCTION OF HOMESTEAD EXEMPTION FOR FRAUD.
Section 522 of title 11, United States Code, as amended by
section 224, is amended--
(1) in subsection (b)(3)(A), as so designated by
this Act, by inserting ``subject to subsections (o) and
(p),'' before ``any property''; and
(2) by adding at the end the following:
``(o) For purposes of subsection (b)(3)(A), and
notwithstanding subsection (a), the value of an interest in--
``(1) real or personal property that the debtor or
a dependent of the debtor uses as a residence;
``(2) a cooperative that owns property that the
debtor or a dependent of the debtor uses as a
residence;
``(3) a burial plot for the debtor or a dependent
of the debtor; or
``(4) real or personal property that the debtor or
a dependent of the debtor claims as a homestead;
shall be reduced to the extent that such value is attributable
to any portion of any property that the debtor disposed of in
the 10-year period ending on the date of the filing of the
petition with the intent to hinder, delay, or defraud a
creditor and that the debtor could not exempt, or that portion
that the debtor could not exempt, under subsection (b), if on
such date the debtor had held the property so disposed of.''.
SEC. 309. PROTECTING SECURED CREDITORS IN CHAPTER 13 CASES.
(a) Stopping Abusive Conversions From Chapter 13.--Section
348(f)(1) of title 11, United States Code, is amended--
(1) in subparagraph (A), by striking ``and'' at the
end;
(2) in subparagraph (B)--
(A) by striking ``in the converted case,
with allowed secured claims'' and inserting
``only in a case converted to a case under
chapter 11 or 12, but not in a case converted
to a case under chapter 7, with allowed secured
claims in cases under chapters 11 and 12''; and
(B) by striking the period and inserting
``; and''; and
(3) by adding at the end the following:
``(C) with respect to cases converted from chapter
13--
``(i) the claim of any creditor holding
security as of the date of the petition shall
continue to be secured by that security unless
the full amount of such claim determined under
applicable nonbankruptcy law has been paid in
full as of the date of conversion,
notwithstanding any valuation or determination
of the amount of an allowed secured claim made
for the purposes of the case under chapter 13;
and
``(ii) unless a prebankruptcy default has
been fully cured under the plan at the time of
conversion, in any proceeding under this title
or otherwise, the default shall have the effect
given under applicable nonbankruptcy law.''.
(b) Giving Debtors the Ability To Keep Leased Personal
Property by Assumption.--Section 365 of title 11, United States
Code, is amended by adding at the end the following:
``(p)(1) If a lease of personal property is rejected or not
timely assumed by the trustee under subsection (d), the leased
property is no longer property of the estate and the stay under
section 362(a) is automatically terminated.
``(2)(A) If the debtor in a case under chapter 7 is an
individual, the debtor may notify the creditor in writing that
the debtor desires to assume the lease. Upon being so notified,
the creditor may, at its option, notify the debtor that it is
willing to have the lease assumed by the debtor and may
condition such assumption on cure of any outstanding default on
terms set by the contract.
``(B) If, not later than 30 days after notice is provided
under subparagraph (A), the debtor notifies the lessor in
writing that the lease is assumed, the liability under the
lease will be assumed by the debtor and not by the estate.
``(C) The stay under section 362 and the injunction under
section 524(a)(2) shall not be violated by notification of the
debtor and negotiation of cure under this subsection.
``(3) In a case under chapter 11 in which the debtor is an
individual and in a case under chapter 13, if the debtor is the
lessee with respect to personal property and the lease is not
assumed in the plan confirmed by the court, the lease is deemed
rejected as of the conclusion of the hearing on confirmation.
If the lease is rejected, the stay under section 362 and any
stay under section 1301 is automatically terminated with
respect to the property subject to the lease.''.
(c) Adequate Protection of Lessors and Purchase Money
Secured Creditors.--
(1) Confirmation of plan.--Section 1325(a)(5)(B) of
title 11, United States Code, as amended by section
306, is amended--
(A) in clause (i), by striking ``and'' at
the end;
(B) in clause (ii), by striking ``or'' at
the end and inserting ``and''; and
(C) by adding at the end the following:
``(iii) if--
``(I) property to be distributed
pursuant to this subsection is in the
form of periodic payments, such
payments shall be in equal monthly
amounts; and
``(II) the holder of the claim is
secured by personal property, the
amount of such payments shall not be
less than an amount sufficient to
provide to the holder of such claim
adequate protection during the period
of the plan; or''.
(2) Payments.--Section 1326(a) of title 11, United
States Code, is amended to read as follows:
``(a)(1) Unless the court orders otherwise, the debtor
shall commence making payments not later than 30 days after the
date of the filing of the plan or the order for relief,
whichever is earlier, in the amount--
``(A) proposed by the plan to the trustee;
``(B) scheduled in a lease of personal property
directly to the lessor for that portion of the
obligation that becomes due after the order for relief,
reducing the payments under subparagraph (A) by the
amount so paid and providing the trustee with evidence
of such payment, including the amount and date of
payment; and
``(C) that provides adequate protection directly to
a creditor holding an allowed claim secured by personal
property to the extent the claim is attributable to the
purchase of such property by the debtor for that
portion of the obligation that becomes due after the
order for relief, reducing the payments under
subparagraph (A) by the amount so paid and providing
the trustee with evidence of such payment, including
the amount and date of payment.
``(2) A payment made under paragraph (1)(A) shall be
retained by the trustee until confirmation or denial of
confirmation. If a plan is confirmed, the trustee shall
distribute any such payment in accordance with the plan as soon
as is practicable. If a plan is not confirmed, the trustee
shall return any such payments not previously paid and not yet
due and owing to creditors pursuant to paragraph (3) to the
debtor, after deducting any unpaid claim allowed under section
503(b).
``(3) Subject to section 363, the court may, upon notice
and a hearing, modify, increase, or reduce the payments
required under this subsection pending confirmation of a plan.
``(4) Not later than 60 days after the date of filing of a
case under this chapter, a debtor retaining possession of
personal property subject to a lease or securing a claim
attributable in whole or in part to the purchase price of such
property shall provide the lessor or secured creditor
reasonable evidence of the maintenance of any required
insurance coverage with respect to the use or ownership of such
property and continue to do so for so long as the debtor
retains possession of such property.''.
SEC. 310. LIMITATION ON LUXURY GOODS.
Section 523(a)(2)(C) of title 11, United States Code, is
amended to read as follows:
``(C)(i) for purposes of subparagraph (A)--
``(I) consumer debts owed to a
single creditor and aggregating more
than $500 for luxury goods or services
incurred by an individual debtor on or
within 90 days before the order for
relief under this title are presumed to
be nondischargeable; and
``(II) cash advances aggregating
more than $750 that are extensions of
consumer credit under an open end
credit plan obtained by an individual
debtor on or within 70 days before the
order for relief under this title, are
presumed to be nondischargeable; and
``(ii) for purposes of this subparagraph--
``(I) the terms `consumer',
`credit', and `open end credit plan'
have the same meanings as in section
103 of the Truth in Lending Act; and
``(II) the term `luxury goods or
services' does not include goods or
services reasonably necessary for the
support or maintenance of the debtor or
a dependent of the debtor.''.
SEC. 311. AUTOMATIC STAY.
(a) In general.--Section 362(b) of title 11, United States
Code, as amended by sections 224 and 303, is amended by
inserting after paragraph (21), the following:
``(22) subject to subsection (n), under subsection
(a)(3), of the continuation of any eviction, unlawful
detainer action, or similar proceeding by a lessor
against a debtor involving residential property in
which the debtor resides as a tenant under a lease or
rental agreement and with respect to which the lessor
has obtained before the date of the filing of the
bankruptcy petition, a judgment for possession of such
property against the debtor;
``(23) subject to subsection (o), under subsection
(a)(3), of an eviction action that seeks possession of
the residential property in which the debtor resides as
a tenant under a lease or rental agreement based on
endangerment of such property or the illegal use of
controlled substances on such property, but only if the
lessor files with the court, and serves upon the
debtor, a certification under penalty of perjury that
such an eviction action has been filed, or that the
debtor, during the 30-day period preceding the date of
the filing of the certification, has endangered
property or illegally used or allowed to be used a
controlled substance on the property;
``(24) under subsection (a), of any transfer that
is not avoidable under section 544 and that is not
avoidable under section 549;''.
(b) Limitations.--Section 362 of title 11, United States
Code, as amended by sections 106 and 305, is amended by adding
at the end the following:
``(n)(1) Except as otherwise provided in this subsection,
subsection (b)(22) shall apply on the date that is 30 days
after the date on which the bankruptcy petition is filed, if
the debtor files with the petition and serves upon the lessor a
certification under penalty of perjury that--
``(A) under nonbankruptcy law applicable in the
jurisdiction, there are circumstances under which the
debtor would be permitted to cure the entire monetary
default that gave rise to the judgment for possession,
after that judgment for possession was entered; and
``(B) the debtor (or an adult dependent of the
debtor) has deposited with the clerk of the court, any
rent that would become due during the 30-day period
after the filing of the bankruptcy petition.
``(2) If, within the 30-day period after the filing of the
bankruptcy petition, the debtor (or an adult dependent of the
debtor) complies with paragraph (1) and files with the court
and serves upon the lessor a further certification under
penalty of perjury that the debtor (or an adult dependent of
the debtor) has cured, under nonbankrupcty law applicable in
the jurisdiction, the entire monetary default that gave rise to
the judgment under which possession is sought by the lessor,
subsection (b)(22) shall not apply, unless ordered to apply by
the court under paragraph (3).
``(3)(A) If the lessor files an objection to any
certification filed by the debtor under paragraph (1) or (2),
and serves such objection upon the debtor, the court shall hold
a hearing within 10 days after the filing and service of such
objection to determine if the certification filed by the debtor
under paragraph (1) or (2) is true.
``(B) If the court upholds the objection of the lessor
filed under subparagraph (A)--
``(i) subsection (b)(22) shall apply immediately
and relief from the stay provided under subsection
(a)(3) shall not be required to enable the lessor to
complete the process to recover full possession of the
property; and
``(ii) the clerk of the court shall immediately
serve upon the lessor and the debtor a certified copy
of the court's order upholding the lessor's objection.
``(4) If a debtor, in accordance with paragraph (5),
indicates on the petition that there was a judgment for
possession of the residential rental property in which the
debtor resides and does not file a certification under
paragraph (1) or (2)--
``(A) subsection (b)(22) shall apply immediately
upon failure to file such certification, and relief
from the stay provided under subsection (a)(3) shall
not be required to enable the lessor to complete the
process to recover full possession of the property; and
``(B) the clerk of the court shall immediately
serve upon the lessor and the debtor a certified copy
of the docket indicating the absence of a filed
certification and the applicability of the exception to
the stay under subsection (b)(22).
``(5)(A) Where a judgment for possession of residential
property in which the debtor resides as a tenant under a lease
or rental agreement has been obtained by the lessor, the debtor
shall so indicate on the bankruptcy petition and shall provide
the name and address of the lessor that obtained that pre-
petition judgment on the petition and on any certification
filed under this subsection.
``(B) The form of certification filed with the petition, as
specified in this subsection, shall provide for the debtor to
certify, and the debtor shall certify--
``(i) whether a judgment for possession of
residential rental housing in which the debtor resides
has been obtained against the debtor before the filing
of the petition; and
``(ii) whether the debtor is claiming under
paragraph (1) that under nonbankruptcy law applicable
in the jurisdiction, there are circumstances under
which the debtor would be permitted to cure the entire
monetary default that gave rise to the judgment for
possession, after that judgment of possession was
entered, and has made the appropriate deposit with the
court.
``(C) The standard forms (electronic and otherwise) used in
a bankruptcy proceeding shall be amended to reflect the
requirements of this subsection.
``(D) The clerk of the court shall arrange for the prompt
transmittal of the rent deposited in accordance with paragraph
(1)(B) to the lessor.
``(o)(1) Except as otherwise provided in this subsection,
subsection (b)(23) shall apply on the date that is 15 days
after the date on which the lessor files and serves a
certification described in subsection (b)(23).
``(2)(A) If the debtor files with the court an objection to
the truth or legal sufficiency of the certification described
in subsection (b)(23) and serves such objection upon the
lessor, subsection (b)(23) shall not apply, unless ordered to
apply by the court under this subsection.
``(B) If the debtor files and serves the objection under
subparagraph (A), the court shall hold a hearing within 10 days
after the filing and service of such objection to determine if
the situation giving rise to the lessor's certification under
paragraph (1) existed or has been remedied.
``(C) If the debtor can demonstrate to the satisfaction of
the court that the situation giving rise to the lessor's
certification under paragraph (1) did not exist or has been
remedied, the stay provided under subsection (a)(3) shall
remain in effect until the termination of the stay under this
section.
``(D) If the debtor cannot demonstrate to the satisfaction
of the court that the situation giving rise to the lessor's
certification under paragraph (1) did not exist or has been
remedied--
``(i) relief from the stay provided under
subsection (a)(3) shall not be required to enable the
lessor to proceed with the eviction; and
``(ii) the clerk of the court shall immediately
serve upon the lessor and the debtor a certified copy
of the court's order upholding the lessor's
certification.
``(3) If the debtor fails to file, within 15 days, an
objection under paragraph (2)(A)--
``(A) subsection (b)(23) shall apply immediately
upon such failure and relief from the stay provided
under subsection (a)(3) shall not be required to enable
the lessor to complete the process to recover full
possession of the property; and
``(B) the clerk of the court shall immediately
serve upon the lessor and the debtor a certified copy
of the docket indicating such failure.''.
SEC. 312. EXTENSION OF PERIOD BETWEEN BANKRUPTCY DISCHARGES.
Title 11, United States Code, is amended--
(1) in section 727(a)(8), by striking ``six'' and
inserting ``8''; and
(2) in section 1328, by inserting after subsection
(e) the following:
``(f) Notwithstanding subsections (a) and (b), the court
shall not grant a discharge of all debts provided for in the
plan or disallowed under section 502, if the debtor has
received a discharge--
``(1) in a case filed under chapter 7, 11, or 12 of
this title during the 4-year period preceding the date
of the order for relief under this chapter, or
``(2) in a case filed under chapter 13 of this
title during the 2-year period preceding the date of
such order.''.
SEC. 313. DEFINITION OF HOUSEHOLD GOODS AND ANTIQUES.
(a) Definition.--Section 522(f) of title 11, United States
Code, is amended by adding at the end the following:
``(4)(A) Subject to subparagraph (B), for purposes of
paragraph (1)(B), the term `household goods' means--
``(i) clothing;
``(ii) furniture;
``(iii) appliances;
``(iv) 1 radio;
``(v) 1 television;
``(vi) 1 VCR;
``(vii) linens;
``(viii) china;
``(ix) crockery;
``(x) kitchenware;
``(xi) educational materials and educational
equipment primarily for the use of minor dependent
children of the debtor;
``(xii) medical equipment and supplies;
``(xiii) furniture exclusively for the use of minor
children, or elderly or disabled dependents of the
debtor;
``(xiv) personal effects (including the toys and
hobby equipment of minor dependent children and wedding
rings) of the debtor and the dependents of the debtor;
and
``(xv) 1 personal computer and related equipment.
``(B) The term `household goods' does not include--
``(i) works of art (unless by or of the debtor, or
any relative of the debtor);
``(ii) electronic entertainment equipment with a
fair market value of more than $500 in the aggregate
(except 1 television, 1 radio, and 1 VCR);
``(iii) items acquired as antiques with a fair
market value of more than $500 in the aggregate;
``(iv) jewelry with a fair market value of more
than $500 in the aggregate (except wedding rings); and
``(v) a computer (except as otherwise provided for
in this section), motor vehicle (including a tractor or
lawn tractor), boat, or a motorized recreational
device, conveyance, vehicle, watercraft, or
aircraft.''.
(b) Study.--Not later than 2 years after the date of
enactment of this Act, the Director of the Executive Office for
United States Trustees shall submit a report to the Committee
on the Judiciary of the Senate and the Committee on the
Judiciary of the House of Representatives containing its
findings regarding utilization of the definition of household
goods, as defined in section 522(f)(4) of title 11, United
States Code, as added by this section, with respect to the
avoidance of nonpossessory, nonpurchase money security
interests in household goods under section 522(f)(1)(B) of
title 11, United States Code, and the impact that section
522(f)(4) of that title, as added by this section, has had on
debtors and on the bankruptcy courts. Such report may include
recommendations for amendments to section 522(f)(4) of title
11, United States Code, consistent with the Director's
findings.
SEC. 314. DEBT INCURRED TO PAY NONDISCHARGEABLE DEBTS.
(a) In General.--Section 523(a) of title 11, United States
Code, is amended by inserting after paragraph (14) the
following:
``(14A) incurred to pay a tax to a governmental
unit, other than the United States, that would be
nondischargeable under paragraph (1);''.
(b) Discharge Under Chapter 13.--Section 1328(a) of title
11, United States Code, is amended by striking paragraphs (1)
through (3) and inserting the following:
``(1) provided for under section 1322(b)(5);
``(2) of the kind specified in paragraph (2), (3),
(4), (5), (8), or (9) of section 523(a);
``(3) for restitution, or a criminal fine, included
in a sentence on the debtor's conviction of a crime; or
``(4) for restitution, or damages, awarded in a
civil action against the debtor as a result of willful
or malicious injury by the debtor that caused personal
injury to an individual or the death of an
individual.''.
SEC. 315. GIVING CREDITORS FAIR NOTICE IN CHAPTERS 7 AND 13 CASES.
(a) Notice.--Section 342 of title 11, United States Code,
as amended by section 102, is amended--
(1) in subsection (c)--
(A) by inserting ``(1)'' after ``(c)'';
(B) by striking ``, but the failure of such
notice to contain such information shall not
invalidate the legal effect of such notice'';
and
(C) by adding at the end the following:
``(2)(A) If, within the 90 days before the commencement of
a voluntary case, a creditor supplies the debtor in at least 2
communications sent to the debtor with the current account
number of the debtor and the address at which such creditor
requests to receive correspondence, then any notice required by
this title to be sent by the debtor to such creditor shall be
sent to such address and shall include such account number.
(B) If a creditor would be in violation of applicable
nonbankruptcy law by sending any such communication within such
90-day period and if such creditor supplies the debtor in the
last 2 communications with the current account number of the
debtor and the address at which such creditor requests to
receive correspondence, then any notice required by this title
to be sent by the debtor to such creditor shall be sent to such
address and shall include such account number; and
(2) by adding at the end the following:
``(e)(1) In a case under chapter 7 or 13 of this title of a
debtor who is an individual, a creditor at any time may both
file with the court and serve on the debtor a notice of address
to be used to provide notice in such case to such creditor.
``(2) Any notice in such case required to be provided to
such creditor by the debtor or the court later than 5 days
after the court and the debtor receive such creditor's notice
of address, shall be provided to such address.
``(f)(1) An entity may file with any bankruptcy court a
notice of address to be used by all the bankruptcy courts or by
particular bankruptcy courts, as so specified by such entity at
the time such notice is filed, to provide notice to such entity
in all cases under chapters 7 and 13 pending in the courts with
respect to which such notice is filed, in which such entity is
a creditor.
``(2) In any case filed under chapter 7 or 13, any notice
required to be provided by a court with respect to which a
notice is filed under paragraph (1), to such entity later than
30 days after the filing of such notice under paragraph (1)
shall be provided to such address unless with respect to a
particular case a different address is specified in a notice
filed and served in accordance with subsection (e).
``(3) A notice filed under paragraph (1) may be withdrawn
by such entity.
``(g)(1) Notice provided to a creditor by the debtor or the
court other than in accordance with this section (excluding
this subsection) shall not be effective notice until such
notice is brought to the attention of such creditor. If such
creditor designates a person or an organizational subdivision
of such creditor to be responsible for receiving notices under
this title and establishes reasonable procedures so that such
notices receivable by such creditor are to be delivered to such
person or such subdivision, then a notice provided to such
creditor other than in accordance with this section (excluding
this subsection) shall not be considered to have been brought
to the attention of such creditor until such notice is received
by such person or such subdivision.
``(2) A monetary penalty may not be imposed on a creditor
for a violation of a stay in effect under section 362(a) of
this title (including a monetary penalty imposed under section
362(k) of this title) or for failure to comply with section 542
or 543 unless the conduct that is the basis of such violation
or of such failure occurs after such creditor receives notice
effective under this section of the order for relief.''.
(b) Debtor's Duties.--Section 521 of title 11, United
States Code, as amended by sections 106, 225, and 305, is
amended--
(1) in subsection (a), as so designated by section
106, by amending paragraph (1) to read as follows:
``(1) file--
``(A) a list of creditors; and
``(B) unless the court orders otherwise--
``(i) a schedule of assets and
liabilities;
``(ii) a schedule of current income
and current expenditures;
``(iii) a statement of the debtor's
financial affairs and, if section
342(b) applies, a certificate--
``(I) of an attorney whose
name is indicated on the
petition as the attorney for
the debtor, or any bankruptcy
petition preparer signing the
petition under section
110(b)(1), indicating that such
attorney or such bankruptcy
petition preparer delivered to
the debtor the notice required
by section 342(b); or
``(II) if no attorney is so
indicated, and no bankruptcy
petition preparer signed the
petition, of the debtor that
such notice was received and
read by the debtor;
``(iv) copies of all payment
advices or other evidence of payment
received within 60 days before the
filing of the petition, by the debtor
from any employer of the debtor;
``(v) a statement of the amount of
monthly net income, itemized to show
how the amount is calculated; and
``(vi) a statement disclosing any
reasonably anticipated increase in
income or expenditures over the 12-
month period following the date of the
filing of the petition;''; and
(2) by adding at the end the following:
``(e)(1) If the debtor in a case under chapter 7 or 13 is
an individual and if a creditor files with the court at any
time a request to receive a copy of the petition, schedules,
and statement of financial affairs filed by the debtor, then
the court shall make such petition, such schedules, and such
statement available to such creditor.
``(2)(A) The debtor shall provide--
``(i) not later than 7 days before the date first
set for the first meeting of creditors, to the trustee
a copy of the Federal income tax return required under
applicable law (or at the election of the debtor, a
transcript of such return) for the most recent tax year
ending immediately before the commencement of the case
and for which a Federal income tax return was filed;
and
``(ii) at the same time the debtor complies with
clause (i), a copy of such return (or if elected under
clause (i), such transcript) to any creditor that
timely requests such copy.
``(B) If the debtor fails to comply with clause (i) or (ii)
of subparagraph (A), the court shall dismiss the case unless
the debtor demonstrates that the failure to so comply is due to
circumstances beyond the control of the debtor.
``(C) If a creditor requests a copy of such tax return or
such transcript and if the debtor fails to provide a copy of
such tax return or such transcript to such creditor at the time
the debtor provides such tax return or such transcript to the
trustee, then the court shall dismiss the case unless the
debtor demonstrates that the failure to provide a copy of such
tax return or such transcript is due to circumstances beyond
the control of the debtor.
``(3) If a creditor in a case under chapter 13 files with
the court at any time a request to receive a copy of the plan
filed by the debtor, then the court shall make available to
such creditor a copy of such plan--
``(A) at a reasonable cost; and
``(B) not later than 5 days after such request is
filed.
``(f) At the request of the court, the United States
trustee, or any party in interest in a case under chapter 7,
11, or 13, a debtor who is an individual shall file with the
court--
``(1) at the same time filed with the taxing
authority, a copy of each Federal income tax return
required under applicable law (or at the election of
the debtor, a transcript of such tax return) with
respect to each tax year of the debtor ending while the
case is pending under such chapter;
``(2) at the same time filed with the taxing
authority, each Federal income tax return required
under applicable law (or at the election of the debtor,
a transcript of such tax return) that had not been
filed with such authority as of the date of the
commencement of the case and that was subsequently
filed for any tax year of the debtor ending in the 3-
year period ending on the date of the commencement of
the case;
``(3) a copy of each amendment to any Federal
income tax return or transcript filed with the court
under paragraph (1) or (2); and
``(4) in a case under chapter 13--
``(A) on the date that is either 90 days
after the end of such tax year or 1 year after
the date of the commencement of the case,
whichever is later, if a plan is not confirmed
before such later date; and
``(B) annually after the plan is confirmed
and until the case is closed, not later than
the date that is 45 days before the anniversary
of the confirmation of such plan;
a statement, under penalty of perjury, of the income
and expenditures of the debtor during the tax year of
the debtor most recently concluded before such
statement is filed under this paragraph, and of the
monthly income of the debtor, that shows how income,
expenditures, and monthly income are calculated.
``(g)(1) A statement referred to in subsection (f)(4) shall
disclose--
``(A) the amount and sources of the income of the
debtor;
``(B) the identity of any person responsible with
the debtor for the support of any dependent of the
debtor; and
``(C) the identity of any person who contributed,
and the amount contributed, to the household in which
the debtor resides.
``(2) The tax returns, amendments, and statement of income
and expenditures described in subsections (e)(2)(A) and (f)
shall be available to the United States trustee (or the
bankruptcy administrator, if any), the trustee, and any party
in interest for inspection and copying, subject to the
requirements of subsection (h).
``(h)(1) Not later than 180 days after the date of the
enactment of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2002, the Director of the Administrative
Office of the United States Courts shall establish procedures
for safeguarding the confidentiality of any tax information
required to be provided under this section.
``(2) The procedures under paragraph (1) shall include
restrictions on creditor access to tax information that is
required to be provided under this section.
``(3) Not later than 540 days after the date of enactment
of the Bankruptcy Abuse Prevention and Consumer Protection Act
of 2002, the Director of the Administrative Office of the
United States Courts shall prepare and submit to the President
pro tempore of the Senate and the Speaker of the House of
Representatives a report that--
``(A) assesses the effectiveness of the procedures
established under paragraph (1); and
``(B) if appropriate, includes proposed legislation
to--
``(i) further protect the confidentiality
of tax information; and
``(ii) provide penalties for the improper
use by any person of the tax information
required to be provided under this section.
``(i) If requested by the United States trustee or by the
trustee, the debtor shall provide--
``(1) a document that establishes the identity of
the debtor, including a driver's license, passport, or
other document that contains a photograph of the
debtor; or
``(2) such other personal identifying information
relating to the debtor that establishes the identity of
the debtor.''.
SEC. 316. DISMISSAL FOR FAILURE TO TIMELY FILE SCHEDULES OR PROVIDE
REQUIRED INFORMATION.
Section 521 of title 11, United States Code, as amended by
sections 106, 225, 305, and 315, is amended by adding at the
end the following:
``(j)(1) Subject to paragraphs (2) and (4) and
notwithstanding section 707(a), if an individual debtor in a
voluntary case under chapter 7 or 13 fails to file all of the
information required under subsection (a)(1) within 45 days
after the 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) Subject to paragraph (4) and with respect to a case
described in paragraph (1), any party in interest may request
the court to enter an order dismissing the case. If requested,
the court shall enter an order of dismissal not later than 5
days after such request.
``(3) Subject to paragraph (4) and upon request of the
debtor made within 45 days after the filing of the petition
commencing a case described in paragraph (1), the court may
allow the debtor an additional period of not to exceed 45 days
to file the information required under subsection (a)(1) if the
court finds justification for extending the period for the
filing.
``(4) Notwithstanding any other provision of this
subsection, on the motion of the trustee filed before the
expiration of the applicable period of time specified in
paragraph (1), (2), or (3), and after notice and a hearing, the
court may decline to dismiss the case if the court finds that
the debtor attempted in good faith to file all the information
required by subsection (a)(1)(B)(iv) and that the best
interests of creditors would be served by administration of the
case.''.
SEC. 317. ADEQUATE TIME TO PREPARE FOR HEARING ON CONFIRMATION OF THE
PLAN.
Section 1324 of title 11, United States Code, is amended--
(1) by striking ``After'' and inserting the
following:
``(a) Except as provided in subsection (b) and after''; and
(2) by adding at the end the following:
``(b) The hearing on confirmation of the plan may be held
not earlier than 20 days and not later than 45 days after the
date of the meeting of creditors under section 341(a), unless
the court determines that it would be in the best interests of
the creditors and the estate to hold such hearing at an earlier
date and there is no objection to such earlier date.''.
SEC. 318. CHAPTER 13 PLANS TO HAVE A 5-YEAR DURATION IN CERTAIN CASES.
Title 11, United States Code, is amended--
(1) by amending section 1322(d) to read as follows:
``(d)(1) If the current monthly income of the debtor and
the debtor's spouse combined, when multiplied by 12, is not
less than--
``(A) in the case of a debtor in a household of 1
person, the median family income of the applicable
State for 1 earner;
``(B) in the case of a debtor in a household of 2,
3, or 4 individuals, the highest median family income
of the applicable State for a family of the same number
or fewer individuals; or
``(C) in the case of a debtor in a household
exceeding 4 individuals, the highest median family
income of the applicable State for a family of 4 or
fewer individuals, plus $525 per month for each
individual in excess of 4,
the plan may not provide for payments over a period that is
longer than 5 years.
``(2) If the current monthly income of the debtor and the
debtor's spouse combined, when multiplied by 12, is less than--
``(A) in the case of a debtor in a household of 1
person, the median family income of the applicable
State for 1 earner last;
``(B) in the case of a debtor in a household of 2,
3, or 4 individuals, the highest median family income
of the applicable State for a family of the same number
or fewer individuals; or
``(C) in the case of a debtor in a household
exceeding 4 individuals, the highest median family
income of the applicable State for a family of 4 or
fewer individuals, plus $525 per month for each
individual in excess of 4,
the plan may not provide for payments over a period that is
longer than 3 years, unless the court, for cause, approves a
longer period, but the court may not approve a period that is
longer than 5 years.'';
(2) in section 1325(b)(1)(B), by striking ``three-
year period'' and inserting ``applicable commitment
period''; and
(3) in section 1325(b), as amended by section 102,
by adding at the end the following:
``(4) For purposes of this subsection, the `applicable
commitment period'--
``(A) subject to subparagraph (B), shall be--
``(i) 3 years; or
``(ii) not less than 5 years, if the
current monthly income of the debtor and the
debtor's spouse combined, when multiplied by
12, is not less than--
``(I) in the case of a debtor in a
household of 1 person, the median
family income of the applicable State
for 1 earner;
``(II) in the case of a debtor in a
household of 2, 3, or 4 individuals,
the highest median family income of the
applicable State for a family of the
same number or fewer individuals; or
``(III) in the case of a debtor in
a household exceeding 4 individuals,
the highest median family income of the
applicable State for a family of 4 or
fewer individuals, plus $525 per month
for each individual in excess of 4; and
``(B) may be less than 3 or 5 years, whichever is
applicable under subparagraph (A), but only if the plan
provides for payment in full of all allowed unsecured
claims over a shorter period.''; and
(4) in section 1329(c), by striking ``three years''
and inserting ``the applicable commitment period under
section 1325(b)(1)(B)''.
SEC. 319. SENSE OF CONGRESS REGARDING EXPANSION OF RULE 9011 OF THE
FEDERAL RULES OF BANKRUPTCY PROCEDURE.
It is the sense of Congress that rule 9011 of the Federal
Rules of Bankruptcy Procedure (11 U.S.C. App.) should be
modified to include a requirement that all documents (including
schedules), signed and unsigned, submitted to the court or to a
trustee by debtors who represent themselves and debtors who are
represented by attorneys be submitted only after the debtors or
the debtors' attorneys have made reasonable inquiry to verify
that the information contained in such documents is--
(1) well grounded in fact; and
(2) warranted by existing law or a good faith
argument for the extension, modification, or reversal
of existing law.
SEC. 320. PROMPT RELIEF FROM STAY IN INDIVIDUAL CASES.
Section 362(e) of title 11, United States Code, is
amended--
(1) by inserting ``(1)'' after ``(e)''; and
(2) by adding at the end the following:
``(2) Notwithstanding paragraph (1), in a case under
chapter 7, 11, or 13 in which the debtor is an individual, the
stay under subsection (a) shall terminate on the date that is
60 days after a request is made by a party in interest under
subsection (d), unless--
``(A) a final decision is rendered by the court
during the 60-day period beginning on the date of the
request; or
``(B) that 60-day period is extended--
``(i) by agreement of all parties in
interest; or
``(ii) by the court for such specific
period of time as the court finds is required
for good cause, as described in findings made
by the court.''.
SEC. 321. CHAPTER 11 CASES FILED BY INDIVIDUALS.
(a) Property of the Estate.--
(1) In general.--Subchapter I of chapter 11 of
title 11, United States Code, is amended by adding at
the end the following:
``Sec. 1115. Property of the estate
``(a) In a case concerning a debtor who is an individual,
property of the estate includes, in addition to the property
specified in section 541--
``(1) all property of the kind specified in section
541 that the debtor acquires after the commencement of
the case but before the case is closed, dismissed, or
converted to a case under chapter 7, 12, or 13,
whichever occurs first; and
``(2) earnings from services performed by the
debtor after the commencement of the case but before
the case is closed, dismissed, or converted to a case
under chapter 7, 12, or 13, whichever occurs first.''.
``(b) Except as provided in section 1104 or a confirmed
plan or order confirming a plan, the debtor shall remain in
possession of all property of the estate.''.
(2) Clerical amendment.--The table of sections for
subchapter I of chapter 11 of title 11, United States
Code, is amended by adding at the end the following:
``1115. Property of the estate.''.
(b) Contents of Plan.--Section 1123(a) of title 11, United
States Code, is amended--
(1) in paragraph (6), by striking ``and'' at the
end;
(2) in paragraph (7), by striking the period and
inserting ``; and''; and
(3) by adding at the end the following:
``(8) in a case in which the debtor is an
individual, provide for the payment to creditors under
the plan of all or such portion of earnings from
personal services performed by the debtor after the
commencement of the case or other future income of the
debtor as is necessary for the execution of the
plan.''.
(c) Confirmation of Plan.--
(1) Requirements relating to value of property.--
Section 1129(a) of title 11, United States Code, as
amended by section 213, is amended by adding at the end
the following:
``(15) In a case in which the debtor is an
individual and in which the holder of an allowed
unsecured claim objects to the confirmation of the
plan--
``(A) the value, as of the effective date
of the plan, of the property to be distributed
under the plan on account of such claim is not
less than the amount of such claim; or
``(B) the value of the property to be
distributed under the plan is not less than the
projected disposable income of the debtor (as
defined in section 1325(b)(2)) to be received
during the 5-year period beginning on the date
that the first payment is due under the plan,
or during the period for which the plan
provides payments, whichever is longer.''.
(2) Requirement relating to interests in
property.--Section 1129(b)(2)(B)(ii) of title 11,
United States Code, is amended by inserting before the
period at the end the following: ``, except that in a
case in which the debtor is an individual, the debtor
may retain property included in the estate under
section 1115, subject to the requirements of subsection
(a)(14) of this section.''.
(d) Effect of Confirmation.--Section 1141(d) of title 11,
United States Code, is amended--
(1) in paragraph (2), by striking ``The
confirmation of a plan does not discharge an individual
debtor'' and inserting ``A discharge under this chapter
does not discharge a debtor who is an individual''; and
(2) by adding at the end the following:
``(5) In a case in which the debtor is an individual--
``(A) unless after notice and a hearing the court
orders otherwise for cause, confirmation of the plan
does not discharge any debt provided for in the plan
until the court grants a discharge on completion of all
payments under the plan;
``(B) at any time after the confirmation of the
plan, and after notice and a hearing, the court may not
grant a discharge to the debtor who has not completed
payments under the plan unless--
``(i) for each allowed unsecured claim, the
value, as of the effective date of the plan, of
property actually distributed under the plan on
account of that claim is not less than the
amount that would have been paid on such claim
if the estate of the debtor had been liquidated
under chapter 7 of this title on such date; and
``(ii) modification of the plan under
section 1127 of this title is not practicable;
and''.
(e) Modification of Plan.--Section 1127 of title 11, United
States Code, is amended by adding at the end the following:
``(e) If the debtor is an individual, the plan may be
modified at any time after confirmation of the plan but before
the completion of payments under the plan, whether or not the
plan has been substantially consummated, upon request of the
debtor, the trustee, the United States trustee, or the holder
of an allowed unsecured claim, to--
``(1) increase or reduce the amount of payments on
claims of a particular class provided for by the plan;
``(2) extend or reduce the time period for such
payments; or
``(3) alter the amount of the distribution to a
creditor whose claim is provided for by the plan to the
extent necessary to take account of any payment of such
claim made other than under the plan.
``(f)(1) Sections 1121 through 1128 of this title and the
requirements of section 1129 of this title apply to any
modification under subsection (a).
``(2) The plan, as modified, shall become the plan only
after there has been disclosure under section 1125 as the court
may direct, notice and a hearing, and such modification is
approved.''.
SEC. 322. LIMITATIONS ON HOMESTEAD EXEMPTION.
(a) Exemptions.--Section 522 of title 11, United States
Code, as amended by sections 224 and 308, is amended by adding
at the end the following:
``(p)(1)Except as provided in paragraph (2) of this
subsection and sections 544 and 548 of this title, as a result
of electing under subsection (b)(3)(A) to exempt property under
State or local law, a debtor may not exempt any amount of
interest that was acquired by the debtor during the 1215-day
period preceding the filing of the petition which exceeds in
the aggregate $125,000 in value in--
``(A) real or personal property that the debtor or
a dependent of the debtor uses as a residence;
``(B) a cooperative that owns property that the
debtor or a dependent of the debtor uses as a
residence;
``(C) a burial plot for the debtor or a dependent
of the debtor; or
``(D) real or personal property that the debtor or
dependent of the debtor claims as a homestead.
``(2)(A) The limitation under paragraph (1) shall not apply
to an exemption claimed under subsection (b)(3)(A) by a family
farmer for the principal residence of that farmer.
``(B) For purposes of paragraph (1), any amount of such
interest does not include any interest transferred from a
debtor's previous principal residence (which was acquired prior
to the beginning of such 1215-day period) into the debtor's
current principal residence, if the debtor's previous and
current residences are located in the same State.
``(q)(1) As a result of electing under subsection (b)(3)(A)
to exempt property under State or local law, a debtor may not
exempt any amount of an interest in property described in
subparagraphs (A), (B), and (C) of subsection (p) which exceeds
in the aggregate $125,000 if--
``(A) the court determines, after notice and a
hearing, that the debtor has been convicted of a felony
(as defined in section 3156 of title 18), which under
the circumstances, demonstrates that the filing of the
case was an abuse of the provisions of this title; or
``(B) the debtor owes a debt arising from--
``(i) any violation of the Federal
securities laws (as defined in section 3(a)(47)
of the Securities Exchange Act of 1934), any
State securities laws, or any regulation or
order issued under Federal securities laws or
State securities laws;
``(ii) fraud, deceit, or manipulation in a
fiduciary capacity or in connection with the
purchase or sale of any security registered
under section 12 or 15(d) of the Securities
Exchange Act of 1934 or under section 6 of the
Securities Act of 1933;
``(iii) any civil remedy under section 1964
of title 18, United States Code; or
``(iv) any criminal act, intentional tort,
or willful or reckless misconduct that caused
serious physical injury or death to another
individual in the preceding 5 years.
``(2) Paragraph (1) shall not apply to the extent the
amount of an interest in property described in subparagraphs
(A), (B), and (C) of subsection (p) is reasonably necessary for
the support of the debtor and any dependent of the debtor.''.
(b) Adjustment of Dollar Amounts.--Paragraphs (1) and (2)
of section 104(b) of title 11, United States Code, as amended
by section 224, are amended by inserting ``522(p), 522(q),''
after ``522(n),''.
SEC. 323. EXCLUDING EMPLOYEE BENEFIT PLAN PARTICIPANT CONTRIBUTIONS AND
OTHER PROPERTY FROM THE ESTATE.
Section 541(b) of title 11, United States Code, as amended
by section 225, is amended by adding at the end the following:
``(7) any amount--
``(A) withheld by an employer from the
wages of employees for payment as contributions
to--
``(i) an employee benefit plan
subject to title I of the Employee
Retirement Income Security Act of 1974
or under an employee benefit plan which
is a governmental plan under section
414(d) of the Internal Revenue Code of
1986, a deferred compensation plan
under section 457 of the Internal
Revenue Code of 1986, or a tax-deferred
annuity under section 403(b) of the
Internal Revenue Code of 1986, except
that such amount under this clause
shall not constitute disposable income,
as defined in section 1325(b)(2) of
this title; or
``(ii) a health insurance plan
regulated by State law whether or not
subject to such title; or
``(B) received by the employer from
employees for payment as contributions to--
``(i) an employee benefit plan
subject to title I of the Employee
Retirement Income Security Act of 1974
or under an employee benefit plan which
is a governmental plan under section
414(d) of the Internal Revenue Code of
1986, a deferred compensation plan
under section 457 of the Internal
Revenue Code of 1986, or a tax-deferred
annuity under section 403(b) of the
Internal Revenue Code of 1986, except
that such amount under this clause
shall not constitute disposable income,
as defined in section 1325(b)(2) of
this title; or
``(ii) a health insurance plan
regulated by State law whether or not
subject to such title;''.
SEC. 324. EXCLUSIVE JURISDICTION IN MATTERS INVOLVING BANKRUPTCY
PROFESSIONALS.
(a) In General.--Section 1334 of title 28, United States
Code, is amended--
(1) in subsection (b), by striking
``Notwithstanding'' and inserting ``Except as provided
in subsection (e)(2), and notwithstanding''; and
(2) by striking subsection (e) and inserting the
following:
``(e) The district court in which a case under title 11 is
commenced or is pending shall have exclusive jurisdiction--
``(1) of all the property, wherever located, of the
debtor as of the date of commencement of such case, and
of property of the estate; and
``(2) over all claims or causes of action that
involve construction of section 327 of title 11, United
States Code, or rules relating to disclosure
requirements under section 327.''.
(b) Applicability.--This section shall only apply to cases
filed after the date of enactment of this Act.
SEC. 325. UNITED STATES TRUSTEE PROGRAM FILING FEE INCREASE.
(a) Actions Under Chapter 7 or 13 of Title 11, United
States Code.--Section 1930(a) of title 28, United States Code,
is amended by striking paragraph (1) and inserting the
following:
``(1) For a case commenced--
``(A) under chapter 7 of title 11, $160; or
``(B) under chapter 13 of title 11,
$150.''.
(b) United States Trustee System Fund.--Section 589a(b) of
title 28, United States Code, is amended--
(1) by striking paragraph (1) and inserting the
following:
``(1)(A) 40.63 percent of the fees collected under
section 1930(a)(1)(A) of this title in cases commenced
under chapter 7 of title 11; and
``(B) 70.00 percent of the fees collected under
section 1930(a)(1)(B) of this title in cases commenced
under chapter 13 of title 11;'';
(2) in paragraph (2), by striking ``one-half'' and
inserting ``three-fourths''; and
(3) in paragraph (4), by striking ``one-half'' and
inserting ``100 percent''.
(c) Collection and Deposit of Miscellaneous Bankruptcy
Fees.--Section 406(b) of the Judiciary Appropriations Act, 1990
(28 U.S.C. 1931 note) is amended by striking ``pursuant to 28
U.S.C. section 1930(b) and 33.87 per centum of the fees
hereafter collected under 28 U.S.C. section 1930(a)(1) and 25
percent of the fees hereafter collected under 28 U.S.C. section
1930(a)(3) shall be deposited as offsetting receipts to the
fund established under 28 U.S.C. section 1931'' and inserting
``under section 1930(b) of title 28, United States Code, and
31.25 percent of the fees collected under section 1930(a)(1)(A)
of that title, 30.00 percent of the fees collected under
section 1930(a)(1)(B) of that title, and 25 percent of the fees
collected under section 1930(a)(3) of that title shall be
deposited as offsetting receipts to the fund established under
section 1931 of that title''.
SEC. 326. SHARING OF COMPENSATION.
Section 504 of title 11, United States Code, is amended by
adding at the end the following:
``(c) This section shall not apply with respect to sharing,
or agreeing to share, compensation with a bona fide public
service attorney referral program that operates in accordance
with non-Federal law regulating attorney referral services and
with rules of professional responsibility applicable to
attorney acceptance of referrals.''.
SEC. 327. FAIR VALUATION OF COLLATERAL.
Section 506(a) of title 11, United States Code, is amended
by--
(1) inserting ``(1)'' after ``(a)''; and
(2) by adding at the end the following:
``(2) If the debtor is an individual in a case under
chapter 7 or 13, such value with respect to personal property
securing an allowed claim shall be determined based on the
replacement value of such property as of the date of filing the
petition without deduction for costs of sale or marketing. With
respect to property acquired for personal, family, or household
purposes, replacement value shall mean the price a retail
merchant would charge for property of that kind considering the
age and condition of the property at the time value is
determined.''.
SEC. 328. DEFAULTS BASED ON NONMONETARY OBLIGATIONS.
(a) Executory Contracts and Unexpired Leases.--Section 365
of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (1)(A), by striking the
semicolon at the end and inserting the
following: ``other than a default that is a
breach of a provision relating to the
satisfaction of any provision (other than a
penalty rate or penalty provision) relating to
a default arising from any failure to perform
nonmonetary obligations under an unexpired
lease of real property, if it is impossible for
the trustee to cure such default by performing
nonmonetary acts at and after the time of
assumption, except that if such default arises
from a failure to operate in accordance with a
nonresidential real property lease, then such
default shall be cured by performance at and
after the time of assumption in accordance with
such lease, and pecuniary losses resulting from
such default shall be compensated in accordance
with the provisions of this paragraph;''; and
(B) in paragraph (2)(D), by striking
``penalty rate or provision'' and inserting
``penalty rate or penalty provision'';
(2) in subsection (c)--
(A) in paragraph (2), by inserting ``or''
at the end;
(B) in paragraph (3), by striking ``; or''
at the end and inserting a period; and
(C) by striking paragraph (4);
(3) in subsection (d)--
(A) by striking paragraphs (5) through (9);
and
(B) by redesignating paragraph (10) as
paragraph (5); and
(4) in subsection (f)(1) by striking ``; except
that'' and all that follows through the end of the
paragraph and inserting a period.
(b) Impairment of Claims or Interests.--Section 1124(2) of
title 11, United States Code, is amended--
(1) in subparagraph (A), by inserting ``or of a
kind that section 365(b)(2) of this title expressly
does not require to be cured'' before the semicolon at
the end;
(2) in subparagraph (C), by striking ``and'' at the
end;
(3) by redesignating subparagraph (D) as
subparagraph (E); and
(4) by inserting after subparagraph (C) the
following:
``(D) if such claim or such interest arises
from any failure to perform a nonmonetary
obligation, other than a default arising from
failure to operate a nonresidential real
property lease subject to section 365(b)(1)(A),
compensates the holder of such claim or such
interest (other than the debtor or an insider)
for any actual pecuniary loss incurred by such
holder as a result of such failure; and''.
SEC. 329. CLARIFICATION OF POSTPETITION WAGES AND BENEFITS.
Section 503(b)(1)(A) of title 11, United States Code, is
amended to read as follows:
``(A) the actual, necessary costs and expenses of
preserving the estate including--
``(i) wages, salaries, or commissions for services
rendered after the commencement of the case; and
``(ii) wages and benefits awarded pursuant to a
judicial proceeding or a proceeding of the National
Labor Relations Board as back pay attributable to any
period of time occurring after commencement of the case
under this title, as a result of a violation of Federal
or State law by the debtor, without regard to the time
of the occurrence of unlawful conduct on which such
award is based or to whether any services were
rendered, if the court determines that payment of wages
and benefits by reason of the operation of this clause
will not substantially increase the probability of
layoff or termination of current employees, or of
nonpayment of domestic support obligations, during the
case under this title;''.
SEC. 330. NONDISCHARGEABILITY OF DEBTS INCURRED THROUGH VIOLATIONS OF
LAWS RELATING TO THE PROVISION OF LAWFUL GOODS AND
SERVICES.
(a) Debts Incurred Through Violations of Law Relating to
the Provision of Lawful Goods and Services.--Section 523(a) of
title 11, United States Code, as amended by section 224, is
amended--
(1) in paragraph (18) by striking ``or'' at the
end;
(2) in paragraph (19) by striking the period at the
end and inserting ``; or''; and
(3) by adding at the end the following:
``(20) that results from any judgment, order,
consent order, or decree entered in any Federal or
State court, or contained in any settlement agreement
entered into by the debtor (including any court-ordered
damages, fine, penalty, or attorney fee or cost owed by
the debtor), that arises from--
``(A) the violation by the debtor of any
Federal or State statutory law, including but
not limited to violations of title 18, that
results from intentional actions of the debtor
that--
``(i) by force or threat of force
or by physical obstruction,
intentionally injure, intimidate, or
interfere with or attempt to injure,
intimidate or interfere with any person
because that person is or has been, or
in order to intimidate such person or
any other person or any class of
persons from, obtaining or providing
lawful goods or services;
``(ii) by force or threat of force
or by physical obstruction,
intentionally injure, intimidate, or
interfere with or attempt to injure,
intimidate or interfere with any person
lawfully exercising or seeking to
exercise the First Amendment right of
religious freedom at a place of
religious worship; or
``(iii) intentionally damage or
destroy the property of a facility, or
attempt to do so, because such facility
provides lawful goods or services, or
intentionally damage or destroy the
property of a place of religious
worship; or
``(B) a violation of a court order or
injunction that protects access to a facility
that or a person who provides lawful goods or
services or the provision of lawful goods or
services if--
``(i) such violation is intentional
or knowing; or
``(ii) such violation occurs after
a court has found that the debtor
previously violated--
``(I) such court order or
such injunction; or
``(II) any other court
order or injunction that
protects access to the same
facility or the same person;
except that nothing in this paragraph shall be
construed to affect any expressive conduct (including
peaceful picketing, peaceful prayer, or other peaceful
demonstration) protected from legal prohibition by the
first amendment to the Constitution of the United
States.''.
(b) Restitution.--Section 523(a)(13) of title 11, United
States Code, is amended by inserting ``or under the criminal
law of a State'' after ``title 18''.
SEC. 331. DELAY OF DISCHARGE DURING PENDENCY OF CERTAIN PROCEEDINGS.
(a) Chapter 7.--Section 727(a) of title 11, United States
Code, as amended by section 106, is amended--
(1) in paragraph (10), by striking ``or'' at the
end;
(2) in paragraph (11) by striking the period at the
end and inserting ``; or''; and
(3) by inserting after paragraph (11) the
following:
``(12) the court after notice and a hearing held
not more than 10 days before the date of entry of the
order granting the discharge finds that there is
reasonable cause to believe that--
``(A) section 522(q)(1) may be applicable
to the debtor; and
``(B) there is pending any proceeding in
which the debtor may be found guilty of a
felony of the kind described in section
522(q)(1)(A) or liable for a debt of the kind
described in section 522(q)(1)(B); or''.
(b) Chapter 11.--Section 1141(d) of title 11, United States
Code, as amended by section 321, is amended by adding at the
end the following:
``(C) unless after notice and a hearing
held not more than 10 days before the date of
entry of the order granting the discharge, the
court finds that there is no reasonable cause
to believe that--
``(i) section 522(q)(1) may be
applicable to the debtor; and
``(ii) there is pending any
proceeding in which the debtor may be
found guilty of a felony of the kind
described in section 522(q)(1)(A) or
liable for a debt of the kind described
in section 522(q)(1)(B).''.
(c) Chapter 12.--Section 1228 of title 11, United States
Code, is amended--
(1) in subsection (a) by striking ``As'' and
inserting ``Subject to subsection (d), as'',
(2) in subsection (b) by striking ``At'' and
inserting ``Subject to subsection (d), at'', and
(3) by adding at the end the following:
``(f) The court may not grant a discharge under this
chapter unless the court after notice and a hearing held not
more than 10 days before the date of entry of the order
granting the discharge finds that there is no reasonable cause
to believe that--
``(1) section 522(q)(1) may be applicable to the
debtor; and
``(2) there is pending any proceeding in which the
debtor may be found guilty of a felony of the kind
described in section 522(q)(1)(A) or liable for a debt
of the kind described in section 522(q)(1)(B).''.
(d) Chapter 13.--Section 1328 of title 11, United States
Code, as amended by section 106, is amended--
(1) in subsection (a) by striking ``As'' and
inserting ``Subject to subsection (d), as'',
(2) in subsection (b) by striking ``At'' and
inserting ``Subject to subsection (d), at'', and
(3) by adding at the end the following:
``(h) The court may not grant a discharge under this
chapter unless the court after notice and a hearing held not
more than 10 days before the date of entry of the order
granting the discharge finds that there is no reasonable cause
to believe that--
``(1) section 522(q)(1) may be applicable to the
debtor; and
``(2) there is pending any proceeding in which the
debtor may be found guilty of a felony of the kind
described in section 522(q)(1)(A) or liable for a debt
of the kind described in section 522(q)(1)(B).''.
TITLE IV--GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS
Subtitle A--General Business Bankruptcy Provisions
SEC. 401. ADEQUATE PROTECTION FOR INVESTORS.
(a) Definition.--Section 101 of title 11, United States
Code, is amended by inserting after paragraph (48) the
following:
``(48A) `securities self regulatory organization'
means either a securities association registered with
the Securities and Exchange Commission under section
15A of the Securities Exchange Act of 1934 or a
national securities exchange registered with the
Securities and Exchange Commission under section 6 of
the Securities Exchange Act of 1934;''.
(b) Automatic Stay.--Section 362(b) of title 11, United
States Code, as amended by sections 224, 303, and 311, is
amended by inserting after paragraph (24) the following:
``(25) under subsection (a), of--
``(A) the commencement or continuation of
an investigation or action by a securities self
regulatory organization to enforce such
organization's regulatory power;
``(B) the enforcement of an order or
decision, other than for monetary sanctions,
obtained in an action by the securities self
regulatory organization to enforce such
organization's regulatory power; or
``(C) any act taken by the securities self
regulatory organization to delist, delete, or
refuse to permit quotation of any stock that
does not meet applicable regulatory
requirements;''.
SEC. 402. MEETINGS OF CREDITORS AND EQUITY SECURITY HOLDERS.
Section 341 of title 11, United States Code, is amended by
adding at the end the following:
``(e) Notwithstanding subsections (a) and (b), the court,
on the request of a party in interest and after notice and a
hearing, for cause may order that the United States trustee not
convene a meeting of creditors or equity security holders if
the debtor has filed a plan as to which the debtor solicited
acceptances prior to the commencement of the case.''.
SEC. 403. PROTECTION OF REFINANCE OF SECURITY INTEREST.
Subparagraphs (A), (B), and (C) of section 547(e)(2) of
title 11, United States Code, are each amended by striking
``10'' each place it appears and inserting ``30''.
SEC. 404. EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
(a) In General.--Section 365(d)(4) of title 11, United
States Code, is amended to read as follows:
``(4)(A) Subject to subparagraph (B), an unexpired lease of
nonresidential real property under which the debtor is the
lessee shall be deemed rejected, and the trustee shall
immediately surrender that nonresidential real property to the
lessor, if the trustee does not assume or reject the unexpired
lease by the earlier of--
``(i) the date that is 120 days after the date of
the order for relief; or
``(ii) the date of the entry of an order confirming
a plan.
``(B)(i) The court may extend the period determined under
subparagraph (A), prior to the expiration of the 120-day
period, for 90 days on the motion of the trustee or lessor for
cause.
``(ii) If the court grants an extension under clause (i),
the court may grant a subsequent extension only upon prior
written consent of the lessor in each instance.''.
(b) Exception.--Section 365(f)(1) of title 11, United
States Code, is amended by striking ``subsection'' the first
place it appears and inserting ``subsections (b) and''.
SEC. 405. CREDITORS AND EQUITY SECURITY HOLDERS COMMITTEES.
(a) Appointment.--Section 1102(a) of title 11, United
States Code, is amended by adding at the end the following:
``(4) On request of a party in interest and after notice
and a hearing, the court may order the United States trustee to
change the membership of a committee appointed under this
subsection, if the court determines that the change is
necessary to ensure adequate representation of creditors or
equity security holders. The court may order the United States
trustee to increase the number of members of a committee to
include a creditor that is a small business concern (as
described in section 3(a)(1) of the Small Business Act, if the
court determines that the creditor holds claims (of the kind
represented by the committee) the aggregate amount of which, in
comparison to the annual gross revenue of that creditor, is
disproportionately large.''.
(b) Information.--Section 1102(b) of title 11, United
States Code, is amended by adding at the end the following:
``(3) A committee appointed under subsection (a) shall--
``(A) provide access to information for creditors
who--
``(i) hold claims of the kind represented
by that committee; and
``(ii) are not appointed to the committee;
``(B) solicit and receive comments from the
creditors described in subparagraph (A); and
``(C) be subject to a court order that compels any
additional report or disclosure to be made to the
creditors described in subparagraph (A).''.
SEC. 406. AMENDMENT TO SECTION 546 OF TITLE 11, UNITED STATES CODE.
Section 546 of title 11, United States Code, is amended--
(1) by redesignating the second subsection (g) (as
added by section 222(a) of Public Law 103-394) as
subsection (i);
(2) in subsection (i), as so redesignated, by
inserting ``and subject to the prior rights of holders
of security interests in such goods or the proceeds of
such goods'' after ``consent of a creditor''; and
(3) by adding at the end the following:
``(j)(1) Notwithstanding paragraphs (2) and (3) of section
545, the trustee may not avoid a warehouseman's lien for
storage, transportation, or other costs incidental to the
storage and handling of goods.
``(2) The prohibition under paragraph (1) shall be applied
in a manner consistent with any State statute applicable to
such lien that is similar to section 7-209 of the Uniform
Commercial Code, as in effect on the date of enactment of the
Bankruptcy Abuse Prevention and Consumer Protection Act of
2002, or any successor to such section 7-209.''.
SEC. 407. AMENDMENTS TO SECTION 330(A) OF TITLE 11, UNITED STATES CODE.
Section 330(a) of title 11, United States Code, is
amended--
(1) in paragraph (3)--
(A) by striking ``(A) In'' and inserting
``In''; and
(B) by inserting ``to an examiner, trustee
under chapter 11, or professional person''
after ``awarded''; and
(2) by adding at the end the following:
``(7) In determining the amount of reasonable compensation
to be awarded to a trustee, the court shall treat such
compensation as a commission, based on section 326 of this
title.''.
SEC. 408. POSTPETITION DISCLOSURE AND SOLICITATION.
Section 1125 of title 11, United States Code, is amended by
adding at the end the following:
``(g) Notwithstanding subsection (b), an acceptance or
rejection of the plan may be solicited from a holder of a claim
or interest if such solicitation complies with applicable
nonbankruptcy law and if such holder was solicited before the
commencement of the case in a manner complying with applicable
nonbankruptcy law.''.
SEC. 409. PREFERENCES.
Section 547(c) of title 11, United States Code, is
amended--
(1) by striking paragraph (2) and inserting the
following:
``(2) to the extent that such transfer was in
payment of a debt incurred by the debtor in the
ordinary course of business or financial affairs of the
debtor and the transferee, and such transfer was--
``(A) made in the ordinary course of
business or financial affairs of the debtor and
the transferee; or
``(B) made according to ordinary business
terms;'';
(2) in paragraph (8), by striking the period at the
end and inserting ``; or''; and
(3) by adding at the end the following:
``(9) if, in a case filed by a debtor whose debts
are not primarily consumer debts, the aggregate value
of all property that constitutes or is affected by such
transfer is less than $5,000.''.
SEC. 410. VENUE OF CERTAIN PROCEEDINGS.
Section 1409(b) of title 28, United States Code, is amended
by inserting ``, or a nonconsumer debt against a noninsider of
less than $10,000,'' after ``$5,000''.
SEC. 411. PERIOD FOR FILING PLAN UNDER CHAPTER 11.
Section 1121(d) of title 11, United States Code, is
amended--
(1) by striking ``On'' and inserting ``(1) Subject
to paragraph (2), on''; and
(2) by adding at the end the following:
``(2)(A) The 120-day period specified in paragraph (1) may
not be extended beyond a date that is 18 months after the date
of the order for relief under this chapter.
``(B) The 180-day period specified in paragraph (1) may not
be extended beyond a date that is 20 months after the date of
the order for relief under this chapter.''.
SEC. 412. FEES ARISING FROM CERTAIN OWNERSHIP INTERESTS.
Section 523(a)(16) of title 11, United States Code, is
amended--
(1) by striking ``dwelling'' the first place it
appears;
(2) by striking ``ownership or'' and inserting
``ownership,'';
(3) by striking ``housing'' the first place it
appears; and
(4) by striking ``but only'' and all that follows
through ``such period,'' and inserting ``or a lot in a
homeowners association, for as long as the debtor or
the trustee has a legal, equitable, or possessory
ownership interest in such unit, such corporation, or
such lot,''.
SEC. 413. CREDITOR REPRESENTATION AT FIRST MEETING OF CREDITORS.
Section 341(c) of title 11, United States Code, is amended
by inserting at the end the following: ``Notwithstanding any
local court rule, provision of a State constitution, any other
Federal or State law that is not a bankruptcy law, or other
requirement that representation at the meeting of creditors
under subsection (a) be by an attorney, a creditor holding a
consumer debt or any representative of the creditor (which may
include an entity or an employee of an entity and may be a
representative for more than 1 creditor) shall be permitted to
appear at and participate in the meeting of creditors in a case
under chapter 7 or 13, either alone or in conjunction with an
attorney for the creditor. Nothing in this subsection shall be
construed to require any creditor to be represented by an
attorney at any meeting of creditors.''.
SEC. 414. DEFINITION OF DISINTERESTED PERSON.
Section 101(14) of title 11, United States Code, is amended
to read as follows:
``(14) `disinterested person' means a person that--
``(A) is not a creditor, an equity security
holder, or an insider;
``(B) is not and was not, within 2 years
before the date of the filing of the petition,
a director, officer, or employee of the debtor;
and
``(C) does not have an interest materially
adverse to the interest of the estate or of any
class of creditors or equity security holders,
by reason of any direct or indirect
relationship to, connection with, or interest
in, the debtor, or for any other reason;''.
SEC. 415. FACTORS FOR COMPENSATION OF PROFESSIONAL PERSONS.
Section 330(a)(3) of title 11, United States Code, is
amended--
(1) in subparagraph (D), by striking ``and'' at the
end;
(2) by redesignating subparagraph (E) as
subparagraph (F); and
(3) by inserting after subparagraph (D) the
following:
``(E) with respect to a professional person,
whether the person is board certified or otherwise has
demonstrated skill and experience in the bankruptcy
field; and''.
SEC. 416. APPOINTMENT OF ELECTED TRUSTEE.
Section 1104(b) of title 11, United States Code, is
amended--
(1) by inserting ``(1)'' after ``(b)''; and
(2) by adding at the end the following:
``(2)(A) If an eligible, disinterested trustee is elected
at a meeting of creditors under paragraph (1), the United
States trustee shall file a report certifying that election.
``(B) Upon the filing of a report under subparagraph (A)--
``(i) the trustee elected under paragraph (1) shall
be considered to have been selected and appointed for
purposes of this section; and
``(ii) the service of any trustee appointed under
subsection (d) shall terminate.
``(C) The court shall resolve any dispute arising out of an
election described in subparagraph (A).''.
SEC. 417. UTILITY SERVICE.
Section 366 of title 11, United States Code, is amended--
(1) in subsection (a), by striking ``subsection
(b)'' and inserting ``subsections (b) and (c)''; and
(2) by adding at the end the following:
``(c)(1)(A) For purposes of this subsection, the term
`assurance of payment' means--
``(i) a cash deposit;
``(ii) a letter of credit;
``(iii) a certificate of deposit;
``(iv) a surety bond;
``(v) a prepayment of utility consumption; or
``(vi) another form of security that is mutually
agreed on between the utility and the debtor or the
trustee.
``(B) For purposes of this subsection an administrative expense
priority shall not constitute an assurance of payment.
``(2) Subject to paragraphs (3) and (4), with respect to a
case filed under chapter 11, a utility referred to in
subsection (a) may alter, refuse, or discontinue utility
service, if during the 30-day period beginning on the date of
filing of the petition, the utility does not receive from the
debtor or the trustee adequate assurance of payment for utility
service that is satisfactory to the utility.
``(3)(A) On request of a party in interest and after notice
and a hearing, the court may order modification of the amount
of an assurance of payment under paragraph (2).
``(B) In making a determination under this paragraph
whether an assurance of payment is adequate, the court may not
consider--
``(i) the absence of security before the date of
filing of the petition;
``(ii) the payment by the debtor of charges for
utility service in a timely manner before the date of
filing of the petition; or
``(iii) the availability of an administrative
expense priority.
``(4) Notwithstanding any other provision of law, with
respect to a case subject to this subsection, a utility may
recover or set off against a security deposit provided to the
utility by the debtor before the date of filing of the petition
without notice or order of the court.''.
SEC. 418. BANKRUPTCY FEES.
Section 1930 of title 28, United States Code, is amended--
(1) in subsection (a), by striking
``Notwithstanding section 1915 of this title, the'' and
inserting ``The''; and
(2) by adding at the end the following:
``(f)(1) Under the procedures prescribed by the Judicial
Conference of the United States, the district court or the
bankruptcy court may waive the filing fee in a case under
chapter 7 of title 11 for an individual if the court determines
that such individual has income less than 150 percent of the
income official poverty line (as defined by the Office of
Management and Budget, and revised annually in accordance with
section 673(2) of the Omnibus Budget Reconciliation Act of
1981) applicable to a family of the size involved and is unable
to pay that fee in installments. For purposes of this
paragraph, the term `filing fee' means the filing required by
subsection (a), or any other fee prescribed by the Judicial
Conference under subsections (b) and (c) that is payable to the
clerk upon the commencement of a case under chapter 7.
``(2) The district court or the bankruptcy court may waive
for such debtors other fees prescribed under subsections (b)
and (c).
``(3) This subsection does not restrict the district court
or the bankruptcy court from waiving, in accordance with
Judicial Conference policy, fees prescribed under this section
for other debtors and creditors.''.
SEC. 419. MORE COMPLETE INFORMATION REGARDING ASSETS OF THE ESTATE.
(a) In General.--
(1) Disclosure.--The Advisory Committee on
Bankruptcy Rules of the Judicial Conference of the
United States, after consideration of the views of the
Director of the Executive Office for United States
Trustees, shall propose for adoption amended Federal
Rules of Bankruptcy Procedure and Official Bankruptcy
Forms directing debtors under chapter 11 of title 11,
United States Code, to disclose the information
described in paragraph (2) by filing and serving
periodic financial and other reports designed to
provide such information.
(2) Information.--The information referred to in
paragraph (1) is the value, operations, and
profitability of any closely held corporation,
partnership, or of any other entity in which the debtor
holds a substantial or controlling interest.
(b) Purpose.--The purpose of the rules and reports under
subsection (a) shall be to assist parties in interest taking
steps to ensure that the debtor's interest in any entity
referred to in subsection (a)(2) is used for the payment of
allowed claims against debtor.
Subtitle B--Small Business Bankruptcy Provisions
SEC. 431. FLEXIBLE RULES FOR DISCLOSURE STATEMENT AND PLAN.
Section 1125 of title 11, United States Code, is amended--
(1) in subsection (a)(1), by inserting before the
semicolon ``and in determining whether a disclosure
statement provides adequate information, the court
shall consider the complexity of the case, the benefit
of additional information to creditors and other
parties in interest, and the cost of providing
additional information''; and
(2) by striking subsection (f), and inserting the
following:
``(f) Notwithstanding subsection (b), in a small business
case--
``(1) the court may determine that the plan itself
provides adequate information and that a separate
disclosure statement is not necessary;
``(2) the court may approve a disclosure statement
submitted on standard forms approved by the court or
adopted under section 2075 of title 28; and
``(3)(A) the court may conditionally approve a
disclosure statement subject to final approval after
notice and a hearing;
``(B) acceptances and rejections of a plan may be
solicited based on a conditionally approved disclosure
statement if the debtor provides adequate information
to each holder of a claim or interest that is
solicited, but a conditionally approved disclosure
statement shall be mailed not later than 20 days before
the date of the hearing on confirmation of the plan;
and
``(C) the hearing on the disclosure statement may
be combined with the hearing on confirmation of a
plan.''.
SEC. 432. DEFINITIONS.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended by striking paragraph (51C) and inserting the
following:
``(51C) `small business case' means a case filed
under chapter 11 of this title in which the debtor is a
small business debtor;
``(51D) `small business debtor'--
``(A) subject to subparagraph (B), means a
person engaged in commercial or business
activities (including any affiliate of such
person that is also a debtor under this title
and excluding a person whose primary activity
is the business of owning or operating real
property or activities incidental thereto) that
has aggregate noncontingent, liquidated secured
and unsecured debts as of the date of the
petition or the order for relief in an amount
not more than $2,000,000 (excluding debts owed
to 1 or more affiliates or insiders) for a case
in which the United States trustee has not
appointed under section 1102(a)(1) a committee
of unsecured creditors or where the court has
determined that the committee of unsecured
creditors is not sufficiently active and
representative to provide effective oversight
of the debtor; and
``(B) does not include any member of a
group of affiliated debtors that has aggregate
noncontingent liquidated secured and unsecured
debts in an amount greater than $2,000,000
(excluding debt owed to 1 or more affiliates or
insiders);''.
(b) Conforming Amendment.--Section 1102(a)(3) of title 11,
United States Code, is amended by inserting ``debtor'' after
``small business''.
(c) Adjustment of Dollar Amounts.--Section 104(b) of title
11, United States Code, as amended by section 226, is amended
by inserting ``101(51D),'' after ``101(3),'' each place it
appears.
SEC. 433. STANDARD FORM DISCLOSURE STATEMENT AND PLAN.
Within a reasonable period of time after the date of
enactment of this Act, the Advisory Committee on Bankruptcy
Rules of the Judicial Conference of the United States shall
propose for adoption standard form disclosure statements and
plans of reorganization for small business debtors (as defined
in section 101 of title 11, United States Code, as amended by
this Act), designed to achieve a practical balance between--
(1) the reasonable needs of the courts, the United
States trustee, creditors, and other parties in
interest for reasonably complete information; and
(2) economy and simplicity for debtors.
SEC. 434. UNIFORM NATIONAL REPORTING REQUIREMENTS.
(a) Reporting Required.--
(1) In general.--Chapter 3 of title 11, United
States Code, is amended by inserting after section 307
the following:
``Sec. 308. Debtor reporting requirements
``(a) For purposes of this section, the term
`profitability' means, with respect to a debtor, the amount of
money that the debtor has earned or lost during current and
recent fiscal periods.
``(b) A small business debtor shall file periodic financial
and other reports containing information including--
``(1) the debtor's profitability;
``(2) reasonable approximations of the debtor's
projected cash receipts and cash disbursements over a
reasonable period;
``(3) comparisons of actual cash receipts and
disbursements with projections in prior reports;
``(4)(A) whether the debtor is--
``(i) in compliance in all material
respects with postpetition requirements imposed
by this title and the Federal Rules of
Bankruptcy Procedure; and
``(ii) timely filing tax returns and other
required government filings and paying taxes
and other administrative expenses when due;
``(B) if the debtor is not in compliance with the
requirements referred to in subparagraph (A)(i) or
filing tax returns and other required government
filings and making the payments referred to in
subparagraph (A)(ii), what the failures are and how, at
what cost, and when the debtor intends to remedy such
failures; and
``(C) such other matters as are in the best
interests of the debtor and creditors, and in the
public interest in fair and efficient procedures under
chapter 11 of this title.''.
(2) Clerical amendment.--The table of sections for
chapter 3 of title 11, United States Code, is amended
by inserting after the item relating to section 307 the
following:
``308. Debtor reporting requirements.''.
(b) Effective Date.--The amendments made by subsection (a)
shall take effect 60 days after the date on which rules are
prescribed under section 2075 of title 28, United States Code,
to establish forms to be used to comply with section 308 of
title 11, United States Code, as added by subsection (a).
SEC. 435. UNIFORM REPORTING RULES AND FORMS FOR SMALL BUSINESS CASES.
(a) Proposal of Rules and Forms.--The 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 expenses when
due.
(b) Purpose.--The rules and forms proposed under subsection
(a) shall be designed to achieve a practical balance among--
(1) the reasonable needs of the bankruptcy court,
the United States trustee, creditors, and other parties
in interest for reasonably complete information;
(2) the small business debtor's interest that
required reports be easy and inexpensive to complete;
and
(3) the interest of all parties that the required
reports help the small business debtor to understand
the small business debtor's financial condition and
plan the small business debtor's future.
SEC. 436. DUTIES IN SMALL BUSINESS CASES.
(a) Duties in Chapter 11 Cases.--Subchapter I of chapter 11
of title 11, United States Code, as amended by section 321, is
amended by adding at the end the following:
``Sec. 1116. Duties of trustee or debtor in possession in small
business cases
``In a small business case, a trustee or the debtor in
possession, in addition to the duties provided in this title
and as otherwise required by law, shall--
``(1) append to the voluntary petition or, in an
involuntary case, file not later than 7 days after the
date of the order for relief--
``(A) its most recent balance sheet,
statement of operations, cash-flow statement,
Federal income tax return; or
``(B) a statement made under penalty of
perjury that no balance sheet, statement of
operations, or cash-flow statement has been
prepared and no Federal tax return has been
filed;
``(2) attend, through its senior management
personnel and counsel, meetings scheduled by the court
or the United States trustee, including initial debtor
interviews, scheduling conferences, and meetings of
creditors convened under section 341 unless the court
waives that requirement after notice and a hearing,
upon a finding of extraordinary and compelling
circumstances;
``(3) timely file all schedules and statements of
financial affairs, unless the court, after notice and a
hearing, grants an extension, which shall not extend
such time period to a date later than 30 days after the
date of the order for relief, absent extraordinary and
compelling circumstances;
``(4) file all postpetition financial and other
reports required by the Federal Rules of Bankruptcy
Procedure or by local rule of the district court;
``(5) subject to section 363(c)(2), maintain
insurance customary and appropriate to the industry;
``(6)(A) timely file tax returns and other required
government filings; and
``(B) subject to section 363(c)(2), timely pay all
taxes entitled to administrative expense priority
except those being contested by appropriate proceedings
being diligently prosecuted; and
``(7) allow the United States trustee, or a
designated representative of the United States trustee,
to inspect the debtor's business premises, books, and
records at reasonable times, after reasonable prior
written notice, unless notice is waived by the
debtor.''.
(b) Clerical Amendment.--The table of sections for chapter
11 of title 11, United States Code, as amended by section 321,
is amended by inserting after the item relating to section 1115
the following:
``1116. Duties of trustee or debtor in possession in small business
cases.''.
SEC. 437. PLAN FILING AND CONFIRMATION DEADLINES.
Section 1121 of title 11, United States Code, is amended by
striking subsection (e) and inserting the following:
``(e) In a small business case--
``(1) only the debtor may file a plan until after
180 days after the date of the order for relief, unless
that period is--
``(A) extended as provided by this
subsection, after notice and a hearing; or
``(B) the court, for cause, orders
otherwise;
``(2) the plan, and any necessary disclosure
statement, shall be filed not later than 300 days after
the date of the order for relief; and
``(3) the time periods specified in paragraphs (1)
and (2), and the time fixed in section 1129(e) within
which the plan shall be confirmed, may be extended only
if--
``(A) the debtor, after providing notice to
parties in interest (including the United
States trustee), demonstrates by a
preponderance of the evidence that it is more
likely than not that the court will confirm a
plan within a reasonable period of time;
``(B) a new deadline is imposed at the time
the extension is granted; and
``(C) the order extending time is signed
before the existing deadline has expired.''.
SEC. 438. PLAN CONFIRMATION DEADLINE.
Section 1129 of title 11, United States Code, is amended by
adding at the end the following:
``(e) In a small business case, the court shall confirm a
plan that complies with the applicable provisions of this title
and that is filed in accordance with section 1121(e) not later
than 45 days after such plan is filed unless the time for
confirmation is extended in accordance with section
1121(e)(3).''.
SEC. 439. DUTIES OF THE UNITED STATES TRUSTEE.
Section 586(a) of title 28, United States Code, is
amended--
(1) in paragraph (3)--
(A) in subparagraph (G), by striking
``and'' at the end;
(B) by redesignating subparagraph (H) as
subparagraph (I); and
(C) by inserting after subparagraph (G) the
following:
``(H) in small business cases (as defined
in section 101 of title 11), performing the
additional duties specified in title 11
pertaining to such cases; and'';
(2) in paragraph (5), by striking ``and'' at the
end;
(3) in paragraph (6), by striking the period at the
end and inserting a semicolon; and
(4) by adding at the end the following:
``(7) in each of such small business cases--
``(A) conduct an initial debtor interview
as soon as practicable after the entry of order
for relief but before the first meeting
scheduled under section 341(a) of title 11, at
which time the United States trustee shall--
``(i) begin to investigate the
debtor's viability;
``(ii) inquire about the debtor's
business plan;
``(iii) explain the debtor's
obligations to file monthly operating
reports and other required reports;
``(iv) attempt to develop an agreed
scheduling order; and
``(v) inform the debtor of other
obligations;
``(B) if determined to be appropriate and
advisable, visit the appropriate business
premises of the debtor and ascertain the state
of the debtor's books and records and verify
that the debtor has filed its tax returns; and
``(C) review and monitor diligently the
debtor's activities, to identify as promptly as
possible whether the debtor will be unable to
confirm a plan; and
``(8) in any case in which the United States
trustee finds material grounds for any relief under
section 1112 of title 11, the United States trustee
shall apply promptly after making that finding to the
court for relief.''.
SEC. 440. SCHEDULING CONFERENCES.
Section 105(d) of title 11, United States Code, is
amended--
(1) in the matter preceding paragraph (1), by
striking ``, may''; and
(2) by striking paragraph (1) and inserting the
following:
``(1) shall hold such status conferences as are
necessary to further the expeditious and economical
resolution of the case; and''.
SEC. 441. SERIAL FILER PROVISIONS.
Section 362 of title 11, United States Code, as amended by
sections 106, 305, and 311, is amended--
(1) in subsection (k), as so redesignated by
section 305--
(A) by striking ``An'' and inserting ``(1)
Except as provided in paragraph (2), an''; and
(B) by adding at the end the following:
``(2) If such violation is based on an action taken by an
entity in the good faith belief that subsection (h) applies to
the debtor, the recovery under paragraph (1) of this subsection
against such entity shall be limited to actual damages.''; and
(2) by adding at the end the following:
``(n)(1) Except as provided in paragraph (2), subsection
(a) does not apply in a case in which the debtor--
``(A) is a debtor in a small business case pending
at the time the petition is filed;
``(B) was a debtor in a small business case that
was dismissed for any reason by an order that became
final in the 2-year period ending on the date of the
order for relief entered with respect to the petition;
``(C) was a debtor in a small business case in
which a plan was confirmed in the 2-year period ending
on the date of the order for relief entered with
respect to the petition; or
``(D) is an entity that has acquired substantially
all of the assets or business of a small business
debtor described in subparagraph (A), (B), or (C),
unless such entity establishes by a preponderance of
the evidence that such entity acquired substantially
all of the assets or business of such small business
debtor in good faith and not for the purpose of evading
this paragraph.
``(2) Paragraph (1) does not apply--
``(A) to an involuntary case involving no collusion
by the debtor with creditors; or
``(B) to the filing of a petition if--
``(i) the debtor proves by a preponderance
of the evidence that the filing of that
petition resulted from circumstances beyond the
control of the debtor not foreseeable at the
time the case then pending was filed; and
``(ii) it is more likely than not that the
court will confirm a feasible plan, but not a
liquidating plan, within a reasonable period of
time.''.
SEC. 442. EXPANDED GROUNDS FOR DISMISSAL OR CONVERSION AND APPOINTMENT
OF TRUSTEE.
(a) Expanded Grounds for Dismissal or Conversion.--Section
1112 of title 11, United States Code, is amended by striking
subsection (b) and inserting the following:
``(b)(1) Except as provided in paragraph (2) of this
subsection, subsection (c) of this section, and section
1104(a)(3), on request of a party in interest, and after notice
and a hearing, absent unusual circumstances specifically
identified by the court that establish that the requested
conversion or dismissal is not in the best interests of
creditors and the estate, the court shall convert a case under
this chapter to a case under chapter 7 or dismiss a case under
this chapter, whichever is in the best interests of creditors
and the estate, if the movant establishes cause.
``(2) The relief provided in paragraph (1) shall not be
granted absent unusual circumstances specifically identified by
the court that establish that such relief is not in the best
interests of creditors and the estate, if the debtor or another
party in interest objects and establishes that--
``(A) there is a reasonable likelihood that a plan
will be confirmed within the timeframes established in
sections 1121(e) and 1129(e) of this title, or if such
sections do not apply, within a reasonable period of
time; and
``(B) the grounds for granting such relief include
an act or omission of the debtor other than under
paragraph (4)(A)--
``(i) for which there exists a reasonable
justification for the act or omission; and
``(ii) that will be cured within a
reasonable period of time fixed by the court.
``(3) The court shall commence the hearing on a motion
under this subsection not later than 30 days after filing of
the motion, and shall decide the motion not later than 15 days
after commencement of such hearing, unless the movant expressly
consents to a continuance for a specific period of time or
compelling circumstances prevent the court from meeting the
time limits established by this paragraph.
``(4) For purposes of this subsection, the term `cause'
includes--
``(A) substantial or continuing loss to or
diminution of the estate and the absence of a
reasonable likelihood of rehabilitation;
``(B) gross mismanagement of the estate;
``(C) failure to maintain appropriate insurance
that poses a risk to the estate or to the public;
``(D) unauthorized use of cash collateral
substantially harmful to 1 or more creditors;
``(E) failure to comply with an order of the court;
``(F) unexcused failure to satisfy timely any
filing or reporting requirement established by this
title or by any rule applicable to a case under this
chapter;
``(G) failure to attend the meeting of creditors
convened under section 341(a) or an examination ordered
under rule 2004 of the Federal Rules of Bankruptcy
Procedure without good cause shown by the debtor;
``(H) failure timely to provide information or
attend meetings reasonably requested by the United
States trustee or the bankruptcy administrator;
``(I) failure timely to pay taxes owed after the
date of the order for relief or to file tax returns due
after the order for relief;
``(J) failure to file a disclosure statement, or to
file or confirm a plan, within the time fixed by this
title or by order of the court;
``(K) failure to pay any fees or charges required
under chapter 123 of title 28;
``(L) revocation of an order of confirmation under
section 1144;
``(M) inability to effectuate substantial
consummation of a confirmed plan;
``(N) material default by the debtor with respect
to a confirmed plan;
``(O) termination of a confirmed plan by reason of
the occurrence of a condition specified in the plan;
and
``(P) failure of the debtor to pay any domestic
support obligation that first becomes payable after the
date on which the petition is filed.
``(5) The court shall commence the hearing on a motion
under this subsection not later than 30 days after filing of
the motion, and shall decide the motion not later than 15 days
after commencement of such hearing, unless the movant expressly
consents to a continuance for a specific period of time or
compelling circumstances prevent the court from meeting the
time limits established by this paragraph.''.
(b) Additional Grounds for Appointment of Trustee.--Section
1104(a) of title 11, United States Code, is amended--
(1) in paragraph (1), by striking ``or'' at the
end;
(2) in paragraph (2), by striking the period at the
end and inserting ``; or''; and
(3) by adding at the end the following:
``(3) if grounds exist to convert or dismiss the
case under section 1112, but the court determines that
the appointment of a trustee or an examiner is in the
best interests of creditors and the estate.''.
SEC. 443. STUDY OF OPERATION OF TITLE 11, UNITED STATES CODE, WITH
RESPECT TO SMALL BUSINESSES.
Not later than 2 years after the date of enactment of this
Act, the Administrator of the Small Business Administration, in
consultation with the Attorney General, the Director of the
Executive Office for United States Trustees, and the Director
of the Administrative Office of the United States Courts,
shall--
(1) conduct a study to determine--
(A) the internal and external factors that
cause small businesses, especially sole
proprietorships, to become debtors in cases
under title 11, United States Code, and that
cause certain small businesses to successfully
complete cases under chapter 11 of such title;
and
(B) how Federal laws relating to bankruptcy
may be made more effective and efficient in
assisting small businesses to remain viable;
and
(2) submit to the President pro tempore of the
Senate and the Speaker of the House of Representatives
a report summarizing that study.
SEC. 444. PAYMENT OF INTEREST.
Section 362(d)(3) of title 11, United States Code, is
amended--
(1) by inserting ``or 30 days after the court
determines that the debtor is subject to this
paragraph, whichever is later'' after ``90-day
period)''; and
(2) by striking subparagraph (B) and inserting the
following:
``(B) the debtor has commenced monthly
payments that--
``(i) may, in the debtor's sole
discretion, notwithstanding section
363(c)(2), be made from rents or other
income generated before or after the
commencement of the case by or from the
property to each creditor whose claim
is secured by such real estate (other
than a claim secured by a judgment lien
or by an unmatured statutory lien); and
``(ii) are in an amount equal to
interest at the then applicable
nondefault contract rate of interest on
the value of the creditor's interest in
the real estate; or''.
SEC. 445. PRIORITY FOR ADMINISTRATIVE EXPENSES.
Section 503(b) of title 11, United States Code, is
amended--
(1) in paragraph (5), by striking ``and'' at the
end;
(2) in paragraph (6), by striking the period at the
end and inserting a semicolon; and
(3) by adding at the end the following:
``(7) with respect to a nonresidential real
property lease previously assumed under section 365,
and subsequently rejected, a sum equal to all monetary
obligations due, excluding those arising from or
relating to a failure to operate or a penalty
provision, for the period of 2 years following the
later of the rejection date or the date of actual
turnover of the premises, without reduction or setoff
for any reason whatsoever except for sums actually
received or to be received from 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);''.
SEC. 446. DUTIES WITH RESPECT TO A DEBTOR WHO IS A PLAN ADMINISTRATOR
OF AN EMPLOYEE BENEFIT PLAN.
(a) In General.--Section 521(a) of title 11, United States
Code, as amended by section 106, is amended--
(1) in paragraph (4), by striking ``and'' at the
end;
(2) in paragraph (5), by striking the period at the
end and inserting ``; and''; and
(3) by adding at the end the following:
``(6) unless a trustee is serving in the case, if
at the time of filing the debtor served as the
administrator (as defined in section 3 of the Employee
Retirement Income Security Act of 1974 of an employee
benefit plan, continue to perform the obligations
required of the administrator.''.
(b) Duties of Trustees.--Section 704(a) of title 11, United
States Code, as amended by sections 102 and 219, is amended--
(1) in paragraph (9), by striking ``and'' at the
end;
(2) in paragraph (10), by striking the period at
the end; and
(3) by adding at the end the following:
``(11) if, at the time of the commencement of the
case, the debtor served as the administrator (as
defined in section 3 of the Employee Retirement Income
Security Act of 1974) of an employee benefit plan,
continue to perform the obligations required of the
administrator; and''.
(c) Conforming Amendment.--Section 1106(a)(1) of title 11,
United States Code, is amended to read as follows:
``(1) perform the duties of the trustee, as
specified in paragraphs (2), (5), (7), (8), (9), (10),
and (11) of section 704;''.
SEC. 447. APPOINTMENT OF COMMITTEE OF RETIRED EMPLOYEES.
Section 1114(d) of title 11, United States Code, is
amended--
(1) by striking ``appoint'' and inserting ``order
the appointment of'', and
(2) by adding at the end the following: ``The
United States trustee shall appoint any such
committee.''.
TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS
SEC. 501. PETITION AND PROCEEDINGS RELATED TO PETITION.
(a) Technical Amendment Relating to Municipalities.--
Section 921(d) of title 11, United States Code, is amended by
inserting ``notwithstanding section 301(b)'' before the period
at the end.
(b) Conforming Amendment.--Section 301 of title 11, United
States Code, is amended--
(1) by inserting ``(a)'' before ``A voluntary'';
and
(2) by striking the last sentence and inserting the
following:
``(b) The commencement of a voluntary case under a chapter
of this title constitutes an order for relief under such
chapter.''.
SEC. 502. APPLICABILITY OF OTHER SECTIONS TO CHAPTER 9.
Section 901(a) of title 11, United States Code, is
amended--
(1) by inserting ``555, 556,'' after ``553,''; and
(2) by inserting ``559, 560, 561, 562'' after
``557,''.
TITLE VI--BANKRUPTCY DATA
SEC. 601. IMPROVED BANKRUPTCY STATISTICS.
(a) In General.--Chapter 6 of title 28, United States Code,
is amended by adding at the end the following:
``Sec. 159. Bankruptcy statistics
``(a) The clerk of the district court, or the clerk of the
bankruptcy court if one is certified pursuant to section 156(b)
of this title, shall collect statistics regarding debtors who
are individuals with primarily consumer debts seeking relief
under chapters 7, 11, and 13 of title 11. Those statistics
shall be in a standardized format prescribed by the Director of
the Administrative Office of the United States Courts (referred
to in this section as the `Director').
``(b) The Director shall--
``(1) compile the statistics referred to in
subsection (a);
``(2) make the statistics available to the public;
and
``(3) not later than June 1, 2005, and annually
thereafter, prepare, and submit to Congress a report
concerning the information collected under subsection
(a) that contains an analysis of the information.
``(c) The compilation required under subsection (b) shall--
``(1) be itemized, by chapter, with respect to
title 11;
``(2) be presented in the aggregate and for each
district; and
``(3) include information concerning--
``(A) the total assets and total
liabilities of the debtors described in
subsection (a), and in each category of assets
and liabilities, as reported in the schedules
prescribed pursuant to section 2075 of this
title and filed by those debtors;
``(B) the current monthly income, average
income, and average expenses of those debtors
as reported on the schedules and statements
that each such debtor files under sections 521
and 1322 of title 11;
``(C) the aggregate amount of debt
discharged in cases filed during the reporting
period, determined as the difference between
the total amount of debt and obligations of a
debtor reported on the schedules and the amount
of such debt reported in categories which are
predominantly nondischargeable;
``(D) the average period of time between
the filing of the petition and the closing of
the case for cases closed during the reporting
period;
``(E) for cases closed during the reporting
period--
``(i) the number of cases in which
a reaffirmation was filed; and
``(ii)(I) the total number of
reaffirmations filed;
``(II) of those cases in which a
reaffirmation was filed, the number of
cases in which the debtor was not
represented by an attorney; and
``(III) of those cases in which a
reaffirmation was filed, the number of
cases in which the reaffirmation was
approved by the court;
``(F) with respect to cases filed under
chapter 13 of title 11, for the reporting
period--
``(i)(I) the number of cases in
which a final order was entered
determining the value of property
securing a claim in an amount less than
the amount of the claim; and
``(II) the number of final orders
entered determining the value of
property securing a claim;
``(ii) the number of cases
dismissed, the number of cases
dismissed for failure to make payments
under the plan, the number of cases
refiled after dismissal, and the number
of cases in which the plan was
completed, separately itemized with
respect to the number of modifications
made before completion of the plan, if
any; and
``(iii) the number of cases in
which the debtor filed another case
during the 6-year period preceding the
filing;
``(G) the number of cases in which
creditors were fined for misconduct and any
amount of punitive damages awarded by the court
for creditor misconduct; and
``(H) the number of cases in which
sanctions under rule 9011 of the Federal Rules
of Bankruptcy Procedure were imposed against
debtor's attorney or damages awarded under such
Rule.''.
(b) Clerical Amendment.--The table of sections for chapter
6 of title 28, United States Code, is amended by adding at the
end the following:
``159. Bankruptcy statistics.''.
(c) Effective Date.--The amendments made by this section
shall take effect 18 months after the date of enactment of this
Act.
SEC. 602. UNIFORM RULES FOR THE COLLECTION OF BANKRUPTCY DATA.
(a) Amendment.--Chapter 39 of title 28, United States Code,
is amended by adding at the end the following:
``Sec. 589b. Bankruptcy data
``(a) Rules.--The Attorney General shall, within a
reasonable time after the effective date of this section, issue
rules requiring uniform forms for (and from time to time
thereafter to appropriately modify and approve)--
``(1) final reports by trustees in cases under
chapters 7, 12, and 13 of title 11; and
``(2) periodic reports by debtors in possession or
trustees in cases under chapter 11 of title 11.
``(b) Reports.--Each report referred to in subsection (a)
shall be designed (and the requirements as to place and manner
of filing shall be established) so as to facilitate compilation
of data and maximum possible access of the public, both by
physical inspection at one or more central filing locations,
and by electronic access through the Internet or other
appropriate media.
``(c) Required Information.--The information required to be
filed in the reports referred to in subsection (b) shall be
that which is in the best interests of debtors and creditors,
and in the public interest in reasonable and adequate
information to evaluate the efficiency and practicality of the
Federal bankruptcy system. In issuing rules proposing the forms
referred to in subsection (a), the Attorney General shall
strike the best achievable practical balance between--
``(1) the reasonable needs of the public for
information about the operational results of the
Federal bankruptcy system;
``(2) economy, simplicity, and lack of undue burden
on persons with a duty to file reports; and
``(3) appropriate privacy concerns and safeguards.
``(d) Final Reports.--The uniform forms for final reports
required under subsection (a) for use by trustees under
chapters 7, 12, and 13 of title 11 shall, in addition to such
other matters as are required by law or as the Attorney General
in the discretion of the Attorney General shall propose,
include with respect to a case under such title--
``(1) information about the length of time the case
was pending;
``(2) assets abandoned;
``(3) assets exempted;
``(4) receipts and disbursements of the estate;
``(5) expenses of administration, including for use
under section 707(b), actual costs of administering
cases under chapter 13 of title 11;
``(6) claims asserted;
``(7) claims allowed; and
``(8) distributions to claimants and claims
discharged without payment,
in each case by appropriate category and, in cases under
chapters 12 and 13 of title 11, date of confirmation of the
plan, each modification thereto, and defaults by the debtor in
performance under the plan.
``(e) Periodic Reports.--The uniform forms for periodic
reports required under subsection (a) for use by trustees or
debtors in possession under chapter 11 of title 11 shall, in
addition to such other matters as are required by law or as the
Attorney General in the discretion of the Attorney General
shall propose, include--
``(1) information about the standard industry
classification, published by the Department of
Commerce, for the businesses conducted by the debtor;
``(2) length of time the case has been pending;
``(3) number of full-time employees as of the date
of the order for relief and at the end of each
reporting period since the case was filed;
``(4) cash receipts, cash disbursements and
profitability of the debtor for the most recent period
and cumulatively since the date of the order for
relief;
``(5) compliance with title 11, whether or not tax
returns and tax payments since the date of the order
for relief have been timely filed and made;
``(6) all professional fees approved by the court
in the case for the most recent period and cumulatively
since the date of the order for relief (separately
reported, for the professional fees incurred by or on
behalf of the debtor, between those that would have
been incurred absent a bankruptcy case and those not);
and
``(7) plans of reorganization filed and confirmed
and, with respect thereto, by class, the recoveries of
the holders, expressed in aggregate dollar values and,
in the case of claims, as a percentage of total claims
of the class allowed.''.
(b) Clerical Amendment.--The table of sections for chapter
39 of title 28, United States Code, is amended by adding at the
end the following:
``589b. Bankruptcy data.''.
SEC. 603. AUDIT PROCEDURES.
(a) In General.--
(1) Establishment of procedures.--The Attorney
General (in judicial districts served by United States
trustees) and the Judicial Conference of the United
States (in judicial districts served by bankruptcy
administrators) shall establish procedures to determine
the accuracy, veracity, and completeness of petitions,
schedules, and other information which the debtor is
required to provide under sections 521 and 1322 of
title 11, United States Code, and, if applicable,
section 111 of such title, in cases filed under chapter
7 or 13 of such title in which the debtor is an
individual. Such audits shall be in accordance with
generally accepted auditing standards and performed by
independent certified public accountants or independent
licensed public accountants, provided that the Attorney
General and the Judicial Conference, as appropriate,
may develop alternative auditing standards not later
than 2 years after the date of enactment of this Act.
(2) Procedures.--Those procedures required by
paragraph (1) shall--
(A) establish a method of selecting
appropriate qualified persons to contract to
perform those audits;
(B) establish a method of randomly
selecting cases to be audited, except that not
less than 1 out of every 250 cases in each
Federal judicial district shall be selected for
audit;
(C) require audits for schedules of income
and expenses which reflect greater than average
variances from the statistical norm of the
district in which the schedules were filed if
those variances occur by reason of higher
income or higher expenses than the statistical
norm of the district in which the schedules
were filed; and
(D) establish procedures for providing, not
less frequently than annually, public
information concerning the aggregate results of
such audits including the percentage of cases,
by district, in which a material misstatement
of income or expenditures is reported.
(b) Amendments.--Section 586 of title 28, United States
Code, is amended--
(1) in subsection (a), by striking paragraph (6)
and inserting the following:
``(6) make such reports as the Attorney General
directs, including the results of audits performed
under section 603(a) of the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2002;''; and
(2) by adding at the end the following:
``(f)(1) The United States trustee for each district is
authorized to contract with auditors to perform audits in cases
designated by the United States trustee, in accordance with the
procedures established under section 603(a) of the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2002.
``(2)(A) The report of each audit referred to in paragraph
(1) shall be filed with the court and transmitted to the United
States trustee. Each report shall clearly and conspicuously
specify any material misstatement of income or expenditures or
of assets identified by the person performing the audit. In any
case in which a material misstatement of income or expenditures
or of assets has been reported, the clerk of the district court
(or the clerk of the bankruptcy court if one is certified under
section 156(b) of this title) shall give notice of the
misstatement to the creditors in the case.
``(B) If a material misstatement of income or expenditures
or of assets is reported, the United States trustee shall--
``(i) report the material misstatement, if
appropriate, to the United States Attorney pursuant to
section 3057 of title 18; and
``(ii) if advisable, take appropriate action,
including but not limited to commencing an adversary
proceeding to revoke the debtor's discharge pursuant to
section 727(d) of title 11.''.
(c) Amendments to Section 521 of Title 11, U.S.C.--Section
521(a) of title 11, United States Code, as so designated by
section 106, is amended in each of paragraphs (3) and (4) by
inserting ``or an auditor appointed under section 586(f) of
title 28'' after ``serving in the case''.
(d) Amendments to Section 727 of Title 11, U.S.C.--Section
727(d) of title 11, United States Code, is amended--
(1) in paragraph (2), by striking ``or'' at the
end;
(2) in paragraph (3), by striking the period at the
end and inserting ``; or''; and
(3) by adding at the end the following:
``(4) the debtor has failed to explain
satisfactorily--
``(A) a material misstatement in an audit
referred to in section 586(f) of title 28; or
``(B) a failure to make available for
inspection all necessary accounts, papers,
documents, financial records, files, and all
other papers, things, or property belonging to
the debtor that are requested for an audit
referred to in section 586(f) of title 28.''.
(e) Effective Date.--The amendments made by this section
shall take effect 18 months after the date of enactment of this
Act.
SEC. 604. SENSE OF CONGRESS REGARDING AVAILABILITY OF BANKRUPTCY DATA.
It is the sense of Congress that--
(1) the national policy of the United States should
be that all data held by bankruptcy clerks in
electronic form, to the extent such data reflects only
public records (as defined in section 107 of title 11,
United States Code), should be released in a usable
electronic form in bulk to the public, subject to such
appropriate privacy concerns and safeguards as Congress
and the Judicial Conference of the United States may
determine; and
(2) there should be established a bankruptcy data
system in which--
(A) a single set of data definitions and
forms are used to collect data nationwide; and
(B) data for any particular bankruptcy case
are aggregated in the same electronic record.
TITLE VII--BANKRUPTCY TAX PROVISIONS
SEC. 701. TREATMENT OF CERTAIN LIENS.
(a) Treatment of Certain Liens.--Section 724 of title 11,
United States Code, is amended--
(1) in subsection (b), in the matter preceding
paragraph (1), by inserting ``(other than to the extent
that there is a properly perfected unavoidable tax lien
arising in connection with an ad valorem tax on real or
personal property of the estate)'' after ``under this
title'';
(2) in subsection (b)(2), by inserting ``(except
that such expenses, other than claims for wages,
salaries, or commissions which arise after the filing
of a petition, shall be limited to expenses incurred
under chapter 7 of this title and shall not include
expenses incurred under chapter 11 of this title)''
after ``507(a)(1)''; and
(3) by adding at the end the following:
``(e) Before subordinating a tax lien on real or personal
property of the estate, the trustee shall--
``(1) exhaust the unencumbered assets of the
estate; and
``(2) in a manner consistent with section 506(c),
recover from property securing an allowed secured claim
the reasonable, necessary costs and expenses of
preserving or disposing of that property.
``(f) Notwithstanding the exclusion of ad valorem tax liens
under this section and subject to the requirements of
subsection (e), the following may be paid from property of the
estate which secures a tax lien, or the proceeds of such
property:
``(1) Claims for wages, salaries, and commissions
that are entitled to priority under section 507(a)(4).
``(2) Claims for contributions to an employee
benefit plan entitled to priority under section
507(a)(5).''.
(b) Determination of Tax Liability.--Section 505(a)(2) of
title 11, United States Code, is amended--
(1) in subparagraph (A), by striking ``or'' at the
end;
(2) in subparagraph (B), by striking the period at
the end and inserting ``; or''; and
(3) by adding at the end the following:
``(C) the amount or legality of any amount arising
in connection with an ad valorem tax on real or
personal property of the estate, if the applicable
period for contesting or redetermining that amount
under any law (other than a bankruptcy law) has
expired.''.
SEC. 702. TREATMENT OF FUEL TAX CLAIMS.
Section 501 of title 11, United States Code, is amended by
adding at the end the following:
``(e) A claim arising from the liability of a debtor for
fuel use tax assessed consistent with the requirements of
section 31705 of title 49 may be filed by the base jurisdiction
designated pursuant to the International Fuel Tax Agreement (as
defined in section 31701 of title 49) and, if so filed, shall
be allowed as a single claim.''.
SEC. 703. NOTICE OF REQUEST FOR A DETERMINATION OF TAXES.
Section 505(b) of title 11, United States Code, is
amended--
(1) in the first sentence, by inserting ``at the
address and in the manner designated in paragraph (1)''
after ``determination of such tax'';
(2) by striking ``(1) upon payment'' and inserting
``(A) upon payment'';
(3) by striking ``(A) such governmental unit'' and
inserting ``(i) such governmental unit'';
(4) by striking ``(B) such governmental unit'' and
inserting ``(ii) such governmental unit'';
(5) by striking ``(2) upon payment'' and inserting
``(B) upon payment'';
(6) by striking ``(3) upon payment'' and inserting
``(C) upon payment'';
(7) by striking ``(b)'' and inserting ``(2)''; and
(8) by inserting before paragraph (2), as so
designated, the following:
``(b)(1)(A) The clerk shall maintain a listing under which
a Federal, State, or local governmental unit responsible for
the collection of taxes within the district may--
``(i) designate an address for service of requests
under this subsection; and
``(ii) describe where further information
concerning additional requirements for filing such
requests may be found.
``(B) If a governmental unit referred to in subparagraph
(A) does not designate an address and provide that address to
the clerk under that subparagraph, any request made under this
subsection may be served at the address for the filing of a tax
return or protest with the appropriate taxing authority of that
governmental unit.''.
SEC. 704. RATE OF INTEREST ON TAX CLAIMS.
(a) In General.--Subchapter I of chapter 5 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 511. Rate of interest on tax claims
``(a) If any provision of this title requires the payment
of interest on a tax claim or on an administrative expense tax,
or the payment of interest to enable a creditor to receive the
present value of the allowed amount of a tax claim, the rate of
interest shall be the rate determined under applicable
nonbankruptcy law.
``(b) In the case of taxes paid under a confirmed plan
under this title, the rate of interest shall be determined as
of the calendar month in which the plan is confirmed.''.
(b) Clerical Amendment.--The table of sections for
subchapter 1 of chapter 5 of title 11, United States Code, is
amended by adding at the end the following:
``511. Rate of interest on tax claims.''.
SEC. 705. PRIORITY OF TAX CLAIMS.
Section 507(a)(8) of title 11, United States Code, is
amended--
(1) in subparagraph (A)--
(A) in the matter preceding clause (i), by
inserting ``for a taxable year ending on or
before the date of the filing of the petition''
after ``gross receipts'';
(B) in clause (i), by striking ``for a
taxable year ending on or before the date of
the filing of the petition''; and
(C) by striking clause (ii) and inserting
the following:
``(ii) assessed within 240 days
before the date of the filing of the
petition, exclusive of--
``(I) any time during which
an offer in compromise with
respect to that tax was pending
or in effect during that 240-
day period, plus 30 days; and
``(II) any time during
which a stay of proceedings
against collections was in
effect in a prior case under
this title during that 240-day
period, plus 90 days.''; and
(2) by adding at the end the following:
``An otherwise applicable time period specified in this
paragraph shall be suspended for any period during
which a governmental unit is prohibited under
applicable nonbankruptcy law from collecting a tax as a
result of a request by the debtor for a hearing and an
appeal of any collection action taken or proposed
against the debtor, plus 90 days; plus any time during
which the stay of proceedings was in effect in a prior
case under this title or during which collection was
precluded by the existence of 1 or more confirmed plans
under this title, plus 90 days.''.
SEC. 706. PRIORITY PROPERTY TAXES INCURRED.
Section 507(a)(8)(B) of title 11, United States Code, is
amended by striking ``assessed'' and inserting ``incurred''.
SEC. 707. NO DISCHARGE OF FRAUDULENT TAXES IN CHAPTER 13.
Section 1328(a)(2) of title 11, United States Code, as
amended by section 314, is amended by striking ``paragraph''
and inserting ``section 507(a)(8)(C) or in paragraph (1)(B),
(1)(C),''.
SEC. 708. NO DISCHARGE OF FRAUDULENT TAXES IN CHAPTER 11.
Section 1141(d) of title 11, United States Code, as amended
by section 321, is amended by adding at the end the following:
``(6) Notwithstanding paragraph (1), the confirmation of a
plan does not discharge a debtor that is a corporation from any
debt--
``(A) of a kind specified in paragraph (2)(A) or
(2)(B) of section 523(a) that is owed to a domestic
governmental unit, or owed to a person as the result of
an action filed under subchapter III of chapter 37 of
title 31 or any similar State statute; or
``(B) for a tax or customs duty with respect to
which the debtor--
``(i) made a fraudulent return; or
``(ii) willfully attempted in any manner to
evade or to defeat such tax or such customs
duty.''.
SEC. 709. STAY OF TAX PROCEEDINGS LIMITED TO PREPETITION TAXES.
Section 362(a)(8) of title 11, United States Code, is
amended by striking ``the debtor'' and inserting ``a corporate
debtor's tax liability for a taxable period the bankruptcy
court may determine or concerning the tax liability of a debtor
who is an individual for a taxable period ending before the
order for relief under this title''.
SEC. 710. PERIODIC PAYMENT OF TAXES IN CHAPTER 11 CASES.
Section 1129(a)(9) of title 11, United States Code, is
amended--
(1) in subparagraph (B), by striking ``and'' at the
end;
(2) in subparagraph (C), by striking ``deferred
cash payments,'' and all that follows through the end
of the subparagraph, and inserting ``regular
installment payments in cash--
``(i) of a total value, as of the
effective date of the plan, equal to
the allowed amount of such claim;
``(ii) over a period ending not
later than 5 years after the date of
the entry of the order for relief under
section 301, 302, or 303; and
``(iii) in a manner not less
favorable than the most favored
nonpriority unsecured claim provided
for by the plan (other than cash
payments made to a class of creditors
under section 1122(b)); and''; and
(3) by adding at the end the following:
``(D) with respect to a secured claim which
would otherwise meet the description of an
unsecured claim of a governmental unit under
section 507(a)(8), but for the secured status
of that claim, the holder of that claim will
receive on account of that claim, cash
payments, in the same manner and over the same
period, as prescribed in subparagraph (C).''.
SEC. 711. AVOIDANCE OF STATUTORY TAX LIENS PROHIBITED.
Section 545(2) of title 11, United States Code, is amended
by inserting before the semicolon at the end the following: ``,
except in any case in which a purchaser is a purchaser
described in section 6323 of the Internal Revenue Code of 1986,
or in any other similar provision of State or local law''.
SEC. 712. PAYMENT OF TAXES IN THE CONDUCT OF BUSINESS.
(a) Payment of Taxes Required.--Section 960 of title 28,
United States Code, is amended--
(1) by inserting ``(a)'' before ``Any''; and
(2) by adding at the end the following: ]
``(b) A tax under subsection (a) shall be paid on or before
the due date of the tax under applicable nonbankruptcy law,
unless--
``(1) the tax is a property tax secured by a lien
against property that is abandoned within a reasonable
period of time after the lien attaches by the trustee
of a bankruptcy estate under section 554 of title 11;
or
``(2) payment of the tax is excused under a
specific provision of title 11.
``(c) In a case pending under chapter 7 of title 11,
payment of a tax may be deferred until final distribution is
made under section 726 of title 11, if--
``(1) the tax was not incurred by a trustee duly
appointed under chapter 7 of title 11; or
``(2) before the due date of the tax, an order of
the court makes a finding of probable insufficiency of
funds of the estate to pay in full the administrative
expenses allowed under section 503(b) of title 11 that
have the same priority in distribution under section
726(b) of title 11 as the priority of that tax.''.
(b) Payment of Ad Valorem Taxes Required.--Section
503(b)(1)(B)(i) of title 11, United States Code, is amended by
inserting ``whether secured or unsecured, including property
taxes for which liability is in rem, in personam, or both,''
before ``except''.
(c) Request for Payment of Administrative Expense Taxes
Eliminated.--Section 503(b)(1) of title 11, United States Code,
is amended--
(1) in subparagraph (B), by striking ``and'' at the
end;
(2) in subparagraph (C), by adding ``and'' at the
end; and
(3) by adding at the end the following:
``(D) notwithstanding the requirements of
subsection (a), a governmental unit shall not be
required to file a request for the payment of an
expense described in subparagraph (B) or (C), as a
condition of its being an allowed administrative
expense;''.
(d) Payment of Taxes and Fees as Secured Claims.--Section
506 of title 11, United States Code, is amended--
(1) in subsection (b), by inserting ``or State
statute'' after ``agreement''; and
(2) in subsection (c), by inserting ``, including
the payment of all ad valorem property taxes with
respect to the property'' before the period at the end.
SEC. 713. TARDILY FILED PRIORITY TAX CLAIMS.
Section 726(a)(1) of title 11, United States Code, is
amended by striking ``before the date on which the trustee
commences distribution under this section;'' and inserting the
following: ``on or before the earlier of--
``(A) the date that is 10 days after the
mailing to creditors of the summary of the
trustee's final report; or
``(B) the date on which the trustee
commences final distribution under this
section;''.
SEC. 714. INCOME TAX RETURNS PREPARED BY TAX AUTHORITIES.
Section 523(a) of title 11, United States Code, as amended
by sections 215 and 224, is amended--
(1) in paragraph (1)(B)--
(A) in the matter preceding clause (i), by
inserting ``or equivalent report or notice,''
after ``a return,'';
(B) in clause (i), by inserting ``or
given'' after ``filed''; and
(C) in clause (ii)--
(i) by inserting ``or given'' after
``filed''; and
(ii) by inserting ``, report, or
notice'' after ``return''; and
(2) by adding at the end the following:
``For purposes of this subsection, the term `return' means a
return that satisfies the requirements of applicable
nonbankruptcy law (including applicable filing requirements).
Such term includes a return prepared pursuant to section
6020(a) of the Internal Revenue Code of 1986, or similar State
or local law, or a written stipulation to a judgment or a final
order entered by a nonbankruptcy tribunal, but does not include
a return made pursuant to section 6020(b) of the Internal
Revenue Code of 1986, or a similar State or local law.''.
SEC. 715. DISCHARGE OF THE ESTATE'S LIABILITY FOR UNPAID TAXES.
Section 505(b)(2) of title 11, United States Code, as
amended by section 703, is amended by inserting ``the estate,''
after ``misrepresentation,''.
SEC. 716. REQUIREMENT TO FILE TAX RETURNS TO CONFIRM CHAPTER 13 PLANS.
(a) Filing of Prepetition Tax Returns Required for Plan
Confirmation.--Section 1325(a) of title 11, United States Code,
as amended by sections 102, 213, and 306, is amended by
inserting after paragraph (8) the following:
``(9) the debtor has filed all applicable Federal,
State, and local tax returns as required by section
1308.''.
(b) Additional Time Permitted for Filing Tax Returns.--
(1) In general.--Subchapter I of chapter 13 of
title 11, United States Code, is amended by adding at
the end the following:
``Sec. 1308. Filing of prepetition tax returns
``(a) Not later than the day before the date on which the
meeting of the creditors is first scheduled to be held under
section 341(a), if the debtor was required to file a tax return
under applicable nonbankruptcy law, the debtor shall file with
appropriate tax authorities all tax returns for all taxable
periods ending during the 4-year period ending on the date of
the filing of the petition.
``(b)(1) Subject to paragraph (2), if the tax returns
required by subsection (a) have not been filed by the date on
which the meeting of creditors is first scheduled to be held
under section 341(a), the trustee may hold open that meeting
for a reasonable period of time to allow the debtor an
additional period of time to file any unfiled returns, but such
additional period of time shall not extend beyond--
``(A) for any return that is past due as of the
date of the filing of the petition, the date that is
120 days after the date of that meeting; or
``(B) for any return that is not past due as of the
date of the filing of the petition, the later of--
``(i) the date that is 120 days after the
date of that meeting; or
``(ii) the date on which the return is due
under the last automatic extension of time for
filing that return to which the debtor is
entitled, and for which request is timely made,
in accordance with applicable nonbankruptcy
law.
``(2) After notice and a hearing, and order entered before
the tolling of any applicable filing period determined under
this subsection, if the debtor demonstrates by a preponderance
of the evidence that the failure to file a return as required
under this subsection is attributable to circumstances beyond
the control of the debtor, the court may extend the filing
period established by the trustee under this subsection for--
``(A) a period of not more than 30 days for returns
described in paragraph (1); and
``(B) a period not to extend after the applicable
extended due date for a return described in paragraph
(2).
``(c) For purposes of this section, the term `return'
includes a return prepared pursuant to subsection (a) or (b) of
section 6020 of the Internal Revenue Code of 1986, or a similar
State or local law, or a written stipulation to a judgment or a
final order entered by a nonbankruptcy tribunal.''.
(2) Conforming amendment.--The table of sections
for subchapter I of chapter 13 of title 11, United
States Code, is amended by adding at the end the
following:
``1308. Filing of prepetition tax returns.''.
(c) Dismissal or Conversion on Failure To Comply.--Section
1307 of title 11, United States Code, is amended--
(1) by redesignating subsections (e) and (f) as
subsections (f) and (g), respectively; and
(2) by inserting after subsection (d) the
following:
``(e) Upon the failure of the debtor to file a tax return
under section 1308, on request of a party in interest or the
United States trustee and after notice and a hearing, the court
shall dismiss a case or convert a case under this chapter to a
case under chapter 7 of this title, whichever is in the best
interest of the creditors and the estate.''.
(d) Timely Filed Claims.--Section 502(b)(9) of title 11,
United States Code, is amended by inserting before the period
at the end the following: ``, and except that in a case under
chapter 13, a claim of a governmental unit for a tax with
respect to a return filed under section 1308 shall be timely if
the claim is filed on or before the date that is 60 days after
the date on which such return was filed as required''.
(e) Rules for Objections to Claims and to Confirmation.--It
is the sense of Congress that the Advisory Committee on
Bankruptcy Rules of the Judicial Conference of the United
States should, as soon as practicable after the date of
enactment of this Act, propose for adoption amended Federal
Rules of Bankruptcy Procedure which provide that--
(1) notwithstanding the provisions of Rule 3015(f),
in cases under chapter 13 of title 11, United States
Code, an objection to the confirmation of a plan filed
by a governmental unit on or before the date that is 60
days after the date on which the debtor files all tax
returns required under sections 1308 and 1325(a)(7) of
title 11, United States Code, shall be treated for all
purposes as if such objection had been timely filed
before such confirmation; and
(2) in addition to the provisions of Rule 3007, in
a case under chapter 13 of title 11, United States
Code, no objection to a claim for a tax with respect to
which a return is required to be filed under section
1308 of title 11, United States Code, shall be filed
until such return has been filed as required.
SEC. 717. STANDARDS FOR TAX DISCLOSURE.
Section 1125(a)(1) of title 11, United States Code, is
amended--
(1) by inserting ``including a discussion of the
potential material Federal tax consequences of the plan
to the debtor, any successor to the debtor, and a
hypothetical investor typical of the holders of claims
or interests in the case,'' after ``records''; and
(2) by striking ``a hypothetical reasonable
investor typical of holders of claims or interests''
and inserting ``such a hypothetical investor''.
SEC. 718. SETOFF OF TAX REFUNDS.
Section 362(b) of title 11, United States Code, as amended
by sections 224, 303, 311, and 401, is amended by inserting
after paragraph (25) the following:
``(26) under subsection (a), of the setoff under
applicable nonbankruptcy law of an income tax refund,
by a governmental unit, with respect to a taxable
period that ended before the order for relief against
an income tax liability for a taxable period that also
ended before the order for relief, except that in any
case in which the setoff of an income tax refund is not
permitted under applicable nonbankruptcy law because of
a pending action to determine the amount or legality of
a tax liability, the governmental unit may hold the
refund pending the resolution of the action, unless the
court, on the motion of the trustee and after notice
and a hearing, grants the taxing authority adequate
protection (within the meaning of section 361) for the
secured claim of that authority in the setoff under
section 506(a);''.
SEC. 719. SPECIAL PROVISIONS RELATED TO THE TREATMENT OF STATE AND
LOCAL TAXES.
(a) In General.--
(1) Special provisions.--Section 346 of title 11,
United States Code, is amended to read as follows:
``Sec. 346. Special provisions related to the treatment of State and
local taxes
``(a) Whenever the Internal Revenue Code of 1986 provides
that a separate taxable estate or entity is created in a case
concerning a debtor under this title, and the income, gain,
loss, deductions, and credits of such estate shall be taxed to
or claimed by the estate, a separate taxable estate is also
created for purposes of any State and local law imposing a tax
on or measured by income and such income, gain, loss,
deductions, and credits shall be taxed to or claimed by the
estate and may not be taxedto or claimed by the debtor. The
preceding sentence shall not apply if the case is dismissed. The
trustee shall make tax returns of income required under any such State
or local law.
``(b) Whenever the Internal Revenue Code of 1986 provides
that no separate taxable estate shall be created in a case
concerning a debtor under this title, and the income, gain,
loss, deductions, and credits of an estate shall be taxed to or
claimed by the debtor, such income, gain, loss, deductions, and
credits shall be taxed to or claimed by the debtor under a
State or local law imposing a tax on or measured by income and
may not be taxed to or claimed by the estate. The trustee shall
make such tax returns of income of corporations and of
partnerships as are required under any State or local law, but
with respect to partnerships, shall make said returns only to
the extent such returns are also required to be made under such
Code. The estate shall be liable for any tax imposed on such
corporation or partnership, but not for any tax imposed on
partners or members.
``(c) With respect to a partnership or any entity treated
as a partnership under a State or local law imposing a tax on
or measured by income that is a debtor in a case under this
title, any gain or loss resulting from a distribution of
property from such partnership, or any distributive share of
any income, gain, loss, deduction, or credit of a partner or
member that is distributed, or considered distributed, from
such partnership, after the commencement of the case, is gain,
loss, income, deduction, or credit, as the case may be, of the
partner or member, and if such partner or member is a debtor in
a case under this title, shall be subject to tax in accordance
with subsection (a) or (b).
``(d) For purposes of any State or local law imposing a tax
on or measured by income, the taxable period of a debtor in a
case under this title shall terminate only if and to the extent
that the taxable period of such debtor terminates under the
Internal Revenue Code of 1986.
``(e) The estate in any case described in subsection (a)
shall use the same accounting method as the debtor used
immediately before the commencement of the case, if such method
of accounting complies with applicable nonbankruptcy tax law.
``(f) For purposes of any State or local law imposing a tax
on or measured by income, a transfer of property from the
debtor to the estate or from the estate to the debtor shall not
be treated as a disposition for purposes of any provision
assigning tax consequences to a disposition, except to the
extent that such transfer is treated as a disposition under the
Internal Revenue Code of 1986.
``(g) Whenever a tax is imposed pursuant to a State or
local law imposing a tax on or measured by income pursuant to
subsection (a) or (b), such tax shall be imposed at rates
generally applicable to the same types of entities under such
State or local law.
``(h) The trustee shall withhold from any payment of claims
for wages, salaries, commissions, dividends, interest, or other
payments, or collect, any amount required to be withheld or
collected under applicable State or local tax law, and shall
pay such withheld or collected amount to the appropriate
governmental unit at the time and in the manner required by
such tax law, and with the same priority as the claim from
which such amount was withheld or collected was paid.
``(i)(1) To the extent that any State or local law imposing
a tax on or measured by income provides for the carryover of
any tax attribute from one taxable period to a subsequent
taxable period, the estate shall succeed to such tax attribute
in any case in which such estate is subject to tax under
subsection (a).
``(2) After such a case is closed or dismissed, the debtor
shall succeed to any tax attribute to which the estate
succeeded under paragraph (1) to the extent consistent with the
Internal Revenue Code of 1986.
``(3) The estate may carry back any loss or tax attribute
to a taxable period of the debtor that ended before the order
for relief under this title to the extent that--
``(A) applicable State or local tax law provides
for a carryback in the case of the debtor; and
``(B) the same or a similar tax attribute may be
carried back by the estate to such a taxable period of
the debtor under the Internal Revenue Code of 1986.
``(j)(1) For purposes of any State or local law imposing a
tax on or measured by income, income is not realized by the
estate, the debtor, or a successor to the debtor by reason of
discharge of indebtedness in a case under this title, except to
the extent, if any, that such income is subject to tax under
the Internal Revenue Code of 1986.
``(2) Whenever the Internal Revenue Code of 1986 provides
that the amount excluded from gross income in respect of the
discharge of indebtedness in a case under this title shall be
applied to reduce the tax attributes of the debtor or the
estate, a similar reduction shall be made under any State or
local law imposing a tax on or measured by income to the extent
such State or local law recognizes such attributes. Such State
or local law may also provide for the reduction of other
attributes to the extent that the full amount of income from
the discharge of indebtedness has not been applied.
``(k)(1) Except as provided in this section and section
505, the time and manner of filing tax returns and the items of
income, gain, loss, deduction, and credit of any taxpayer shall
be determined under applicable nonbankruptcy law.
``(2) For Federal tax purposes, the provisions of this
section are subject to the Internal Revenue Code of 1986 and
other applicable Federal nonbankruptcy law.''.
(2) Clerical Amendment.--The table of sections for
chapter 3 of title 11, United States Code, is amended
by striking the item relating to section 346 and
inserting the following:
``346. Special provisions related to the treatment of State and local
taxes.''.
(b) Conforming Amendments.--Title 11 of the United States
Code is amended--
(1) by striking section 728;
(2) in the table of sections for chapter 7 by
striking the item relating to section 728;
(3) in section 1146--
(A) by striking subsections (a) and (b);
and
(B) by redesignating subsections (c) and
(d) as subsections (a) and (b), respectively;
and
(4) in section 1231--
(A) by striking subsections (a) and (b);
and
(B) by redesignating subsections (c) and
(d) as subsections (a) and (b), respectively.
SEC. 720. DISMISSAL FOR FAILURE TO TIMELY FILE TAX RETURNS.
Section 521 of title 11, United States Code, as amended by
sections 106, 225, 305, 315, and 316, is amended by adding at
the end the following:
``(k)(1) Notwithstanding any other provision of this title,
if the debtor fails to file a tax return that becomes due after
the commencement of the case or to properly obtain an extension
of the due date for filing such return, the taxing authority
may request that the court enter an order converting or
dismissing the case.
``(2) If the debtor does not file the required return or
obtain the extension referred to in paragraph (1) within 90
days after a request is filed by the taxing authority under
that paragraph, the court shall convert or dismiss the case,
whichever is in the best interests of creditors and the
estate.''.
TITLE VIII--ANCILLARY AND OTHER CROSS-BORDER CASES
SEC. 801. AMENDMENT TO ADD CHAPTER 15 TO TITLE 11, UNITED STATES CODE.
(a) In General.--Title 11, United States Code, is amended
by inserting after chapter 13 the following:
``CHAPTER 15--ANCILLARY AND OTHER CROSS-BORDER CASES
``Sec.
``1501. Purpose and scope of application.
``SUBCHAPTER I--GENERAL PROVISIONS
``1502. Definitions.
``1503. International obligations of the United States.
``1504. Commencement of ancillary case.
``1505. Authorization to act in a foreign country.
``1506. Public policy exception.
``1507. Additional assistance.
``1508. Interpretation.
``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT
``1509. Right of direct access.
``1510. Limited jurisdiction.
``1511. Commencement of case under section 301 or 303.
``1512. Participation of a foreign representative in a case under this
title.
``1513. Access of foreign creditors to a case under this title.
``1514. Notification to foreign creditors concerning a case under this
title.
``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF
``1515. Application for recognition.
``1516. Presumptions concerning recognition.
``1517. Order granting recognition.
``1518. Subsequent information.
``1519. Relief that may be granted upon filing petition for recognition.
``1520. Effects of recognition of a foreign main proceeding.
``1521. Relief that may be granted upon recognition.
``1522. Protection of creditors and other interested persons.
``1523. Actions to avoid acts detrimental to creditors.
``1524. Intervention by a foreign representative.
``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES
``1525. Cooperation and direct communication between the court and
foreign courts or foreign representatives.
``1526. Cooperation and direct communication between the trustee and
foreign courts or foreign representatives.
``1527. Forms of cooperation.
``SUBCHAPTER V--CONCURRENT PROCEEDINGS
``1528. Commencement of a case under this title after recognition of a
foreign main proceeding.
``1529. Coordination of a case under this title and a foreign
proceeding.
``1530. Coordination of more than 1 foreign proceeding.
``1531. Presumption of insolvency based on recognition of a foreign main
proceeding.
``1532. Rule of payment in concurrent proceedings.
``Sec. 1501. Purpose and scope of application
``(a) The purpose of this chapter is to incorporate the
Model Law on Cross-Border Insolvency so as to provide effective
mechanisms for dealing with cases of cross-border insolvency
with the objectives of--
``(1) cooperation between--
``(A) courts of the United States, United
States trustees, trustees, examiners, debtors,
and debtors in possession; and
``(B) the courts and other competent
authorities of foreign countries involved in
cross-border insolvency cases;
``(2) greater legal certainty for trade and
investment;
``(3) fair and efficient administration of cross-
border insolvencies that protects the interests of all
creditors, and other interested entities, including the
debtor;
``(4) protection and maximization of the value of
the debtor's assets; and
``(5) facilitation of the rescue of financially
troubled businesses, thereby protecting investment and
preserving employment.
``(b) This chapter applies where--
``(1) assistance is sought in the United States by
a foreign court or a foreign representative in
connection with a foreign proceeding;
``(2) assistance is sought in a foreign country in
connection with a case under this title;
``(3) a foreign proceeding and a case under this
title with respect to the same debtor are taking place
concurrently; or
``(4) creditors or other interested persons in a
foreign country have an interest in requesting the
commencement of, or participating in, a case or
proceeding under this title.
``(c) This chapter does not apply to--
``(1) a proceeding concerning an entity, other than
a foreign insurance company, identified by exclusion in
section 109(b);
``(2) an individual, or to an individual and such
individual's spouse, who have debts within the limits
specified in section 109(e) and who are citizens of the
United States or aliens lawfully admitted for permanent
residence in the United States; or
``(3) an entity subject to a proceeding under the
Securities Investor Protection Act of 1970, a
stockbroker subject to subchapter III of chapter 7 of
this title, or a commodity broker subject to subchapter
IV of chapter 7 of this title.
``(d) The court may not grant relief under this chapter
with respect to any deposit, escrow, trust fund, or other
security required or permitted under any applicable State
insurance law or regulation for the benefit of claim holders in
the United States.
``SUBCHAPTER I--GENERAL PROVISIONS
``Sec. 1502. Definitions
``For the purposes of this chapter, the term--
``(1) `debtor' means an entity that is the subject
of a foreign proceeding;
``(2) `establishment' means any place of operations
where the debtor carries out a nontransitory economic
activity;
``(3) `foreign court' means a judicial or other
authority competent to control or supervise a foreign
proceeding;
``(4) `foreign main proceeding' means a foreign
proceeding taking place in the country where the debtor
has the center of its main interests;
``(5) `foreign nonmain proceeding' means a foreign
proceeding, other than a foreign main proceeding,
taking place in a country where the debtor has an
establishment;
``(6) `trustee' includes a trustee, a debtor in
possession in a case under any chapter of this title,
or a debtor under chapter 9 of this title;
``(7) `recognition' means the entry of an order
granting recognition of a foreign main proceeding or
foreign nonmain proceeding under this chapter; and
``(8) `within the territorial jurisdiction of the
United States', when used with reference to property of
a debtor, refers to tangible property located within
the territory of the United States and intangible
property deemed under applicable nonbankruptcy law to
be located within that territory, including any
property subject to attachment or garnishment that may
properly be seized or garnished by an action in a
Federal or State court in the United States.
``Sec. 1503. International obligations of the United States
``To the extent that this chapter conflicts with an
obligation of the United States arising out of any treaty or
other form of agreement to which it is a party with one or more
other countries, the requirements of the treaty or agreement
prevail.
``Sec. 1504. Commencement of ancillary case
``A case under this chapter is commenced by the filing of a
petition for recognition of a foreign proceeding under section
1515.
``Sec. 1505. Authorization to act in a foreign country
``A trustee or another entity (including an examiner) may
be authorized by the court to act in a foreign country on
behalf of an estate created under section 541. An entity
authorized to act under this section may act in any way
permitted by the applicable foreign law.
``Sec. 1506. Public policy exception
``Nothing in this chapter prevents the court from refusing
to take an action governed by this chapter if the action would
be manifestly contrary to the public policy of the United
States.
``Sec. 1507. Additional assistance
``(a) Subject to the specific limitations stated elsewhere
in this chapter the court, if recognition is granted, may
provide additional assistance to a foreign representative under
this title or under other laws of the United States.
``(b) In determining whether to provide additional
assistance under this title or under other laws of the United
States, the court shall consider whether such additional
assistance, consistent with the principles of comity, will
reasonably assure--
``(1) just treatment of all holders of claims
against or interests in the debtor's property;
``(2) protection of claim holders in the United
States against prejudice and inconvenience in the
processing of claims in such foreign proceeding;
``(3) prevention of preferential or fraudulent
dispositions of property of the debtor;
``(4) distribution of proceeds of the debtor's
property substantially in accordance with the order
prescribed by this title; and
``(5) if appropriate, the provision of an
opportunity for a fresh start for the individual that
such foreign proceeding concerns.
``Sec. 1508. Interpretation
``In interpreting this chapter, the court shall consider
its international origin, and the need to promote an
application of this chapter that is consistent with the
application of similar statutes adopted by foreign
jurisdictions.
``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT
``Sec. 1509. Right of direct access
``(a) A foreign representative may commence a case under
section 1504 by filing directly with the court a petition for
recognition of a foreign proceeding under section 1515.
``(b) If the court grants recognition under section 1515,
and subject to any limitations that the court may impose
consistent with the policy of this chapter--
``(1) the foreign representative has the capacity
to sue and be sued in a court in the United States;
``(2) the foreign representative may apply directly
to a court in the United States for appropriate relief
in that court; and
``(3) a court in the United States shall grant
comity or cooperation to the foreign representative.
``(c) A request for comity or cooperation by a foreign
representative in a court in the United States other than the
court which granted recognition shall be accompanied by a
certified copy of an order granting recognition under section
1517.
``(d) If the court denies recognition under this chapter,
the court may issue any appropriate order necessary to prevent
the foreign representative from obtaining comity or cooperation
from courts in the United States.
``(e) Whether or not the court grants recognition, and
subject to sections 306 and 1510, a foreign representative is
subject to applicable nonbankruptcy law.
``(f) Notwithstanding any other provision of this section,
the failure of a foreign representative to commence a case or
to obtain recognition under this chapter does not affect any
right the foreign representative may have to sue in a court in
the United States to collect or recover a claim which is the
property of the debtor.
``Sec. 1510. Limited jurisdiction
``The sole fact that a foreign representative files a
petition under section 1515 does not subject the foreign
representative to the jurisdiction of any court in the United
States for any other purpose.
``Sec. 1511. Commencement of case under section 301 or 303
``(a) Upon recognition, a foreign representative may
commence--
``(1) an involuntary case under section 303; or
``(2) a voluntary case under section 301 or 302, if
the foreign proceeding is a foreign main proceeding.
``(b) The petition commencing a case under subsection (a)
must be accompanied by a certified copy of an order granting
recognition. The court where the petition for recognition has
been filed must be advised of the foreign representative's
intent to commence a case under subsection (a) prior to such
commencement.
``Sec. 1512. Participation of a foreign representative in a case under
this title
``Upon recognition of a foreign proceeding, the foreign
representative in the recognized proceeding is entitled to
participate as a party in interest in a case regarding the
debtor under this title.
``Sec. 1513. Access of foreign creditors to a case under this title
``(a) Foreign creditors have the same rights regarding the
commencement of, and participation in, a case under this title
as domestic creditors.
``(b)(1) Subsection (a) does not change or codify present
law as to the priority of claims under section 507 or 726 of
this title, except that the claim of a foreign creditor under
those sections shall not be given a lower priority than that of
general unsecured claims without priority solely because the
holder of such claim is a foreign creditor.
``(2)(A) Subsection (a) and paragraph (1) do not change or
codify present law as to the allowability of foreign revenue
claims or other foreign public law claims in a proceeding under
this title.
``(B) Allowance and priority as to a foreign tax claim or
other foreign public law claim shall be governed by any
applicable tax treaty of the United States, under the
conditions and circumstances specified therein.
``Sec. 1514. Notification to foreign creditors concerning a case under
this title
``(a) Whenever in a case under this title notice is to be
given to creditors generally or to any class or category of
creditors, such notice shall also be given to the known
creditors generally, or to creditors in the notified class or
category, that do not have addresses in the United States. The
court may order that appropriate steps be taken with a view to
notifying any creditor whose address is not yet known.
``(b) Such notification to creditors with foreign addresses
described in subsection (a) shall be given individually, unless
the court considers that, under the circumstances, some other
form of notification would be more appropriate. No letter or
other formality is required.
``(c) When a notification of commencement of a case is to
be given to foreign creditors, the notification shall--
``(1) indicate the time period for filing proofs of
claim and specify the place for their filing;
``(2) indicate whether secured creditors need to
file their proofs of claim; and
``(3) contain any other information required to be
included in such a notification to creditors under this
title and the orders of the court.
``(d) Any rule of procedure or order of the court as to
notice or the filing of a claim shall provide such additional
time to creditors with foreign addresses as is reasonable under
the circumstances.
``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF
``Sec. 1515. Application for recognition
``(a) A foreign representative applies to the court for
recognition of the foreign proceeding in which the foreign
representative has been appointed by filing a petition for
recognition.
``(b) A petition for recognition shall be accompanied by--
``(1) a certified copy of the decision commencing
the foreign proceeding and appointing the foreign
representative;
``(2) a certificate from the foreign court
affirming the existence of the foreign proceeding and
of the appointment of the foreign representative; or
``(3) in the absence of evidence referred to in
paragraphs (1) and (2), any other evidence acceptable
to the court of the existence of the foreign proceeding
and of the appointment of the foreign representative.
``(c) A petition for recognition shall also be accompanied
by a statement identifying all foreign proceedings with respect
to the debtor that are known to the foreign representative.
``(d) The documents referred to in paragraphs (1) and (2)
of subsection (b) shall be translated into English. The court
may require a translation into English of additional documents.
``Sec. 1516. Presumptions concerning recognition
``(a) If the decision or certificate referred to in section
1515(b) indicates that the foreign proceeding is a foreign
proceeding and that the person or body is a foreign
representative, the court is entitled to so presume.
``(b) The court is entitled to presume that documents
submitted in support of the petition for recognition are
authentic, whether or not they have been legalized.
``(c) In the absence of evidence to the contrary, the
debtor's registered office, or habitual residence in the case
of an individual, is presumed to be the center of the debtor's
main interests.
``Sec. 1517. Order granting recognition
``(a) Subject to section 1506, after notice and a hearing,
an order recognizing a foreign proceeding shall be entered if--
``(1) the foreign proceeding for which recognition
is sought is a foreign main proceeding or foreign
nonmain proceeding within the meaning of section 1502;
``(2) the foreign representative applying for
recognition is a person or body; and
``(3) the petition meets the requirements of
section 1515.
``(b) The foreign proceeding shall be recognized--
``(1) as a foreign main proceeding if it is taking
place in the country where the debtor has the center of
its main interests; or
``(2) as a foreign nonmain proceeding if the debtor
has an establishment within the meaning of section 1502
in the foreign country where the proceeding is pending.
``(c) A petition for recognition of a foreign proceeding
shall be decided upon at the earliest possible time. Entry of
an order recognizing a foreign proceeding constitutes
recognition under this chapter.
``(d) The provisions of this subchapter do not prevent
modification or termination of recognition if it is shown that
the grounds for granting it were fully or partially lacking or
have ceased to exist, but in considering such action the court
shall give due weight to possible prejudice to parties that
have relied upon the order granting recognition. The case under
this chapter may be closed in the manner prescribed under
section 350.
``Sec. 1518. Subsequent information
``From the time of filing the petition for recognition of
the foreign proceeding, the foreign representative shall file
with the court promptly a notice of change of status
concerning--
``(1) any substantial change in the status of the
foreign proceeding or the status of the foreign
representative's appointment; and
``(2) any other foreign proceeding regarding the
debtor that becomes known to the foreign
representative.
``Sec. 1519. Relief that may be granted upon filing petition for
recognition
``(a) From the time of filing a petition for recognition
until the court rules on the petition, the court may, at the
request of the foreign representative, where relief is urgently
needed to protect the assets of the debtor or the interests of
the creditors, grant relief of a provisional nature,
including--
``(1) staying execution against the debtor's
assets;
``(2) entrusting the administration or realization
of all or part of the debtor's assets located in the
United States to the foreign representative or another
person authorized by the court, including an examiner,
in order to protect and preserve the value of assets
that, by their nature or because of other
circumstances, are perishable, susceptible to
devaluation or otherwise in jeopardy; and
``(3) any relief referred to in paragraph (3), (4),
or (7) of section 1521(a).
``(b) Unless extended under section 1521(a)(6), the relief
granted under this section terminates when the petition for
recognition is granted.
``(c) It is a ground for denial of relief under this
section that such relief would interfere with the
administration of a foreign main proceeding.
``(d) The court may not enjoin a police or regulatory act
of a governmental unit, including a criminal action or
proceeding, under this section.
``(e) The standards, procedures, and limitations applicable
to an injunction shall apply to relief under this section.
``(f) The exercise of rights not subject to the stay
arising under section 362(a) pursuant to paragraph (6), (7),
(17), or (27) of section 362(b) or pursuant to section 362(n)
shall not be stayed by any order of a court or administrative
agency in any proceeding under this chapter.
``Sec. 1520. Effects of recognition of a foreign main proceeding
``(a) Upon recognition of a foreign proceeding that is a
foreign main proceeding--
``(1) sections 361 and 362 apply with respect to
the debtor and that property of the debtor that is
within the territorial jurisdiction of the United
States;
``(2) sections 363, 549, and 552 of this title
apply to a transfer of an interest of the debtor in
property that is within the territorial jurisdiction of
the United States to the same extent that the sections
would apply to property of an estate;
``(3) unless the court orders otherwise, the
foreign representative may operate the debtor's
business and may exercise the rights and powers of a
trustee under and to the extent provided by sections
363 and 552; and
``(4) section 552 applies to property of the debtor
that is within the territorial jurisdiction of the
United States.
``(b) Subsection (a) does not affect the right to commence
an individual action or proceeding in a foreign country to the
extent necessary to preserve a claim against the debtor.
``(c) Subsection (a) does not affect the right of a foreign
representative or an entity to file a petition commencing a
case under this title or the right of any party to file claims
or take other proper actions in such a case.
``Sec. 1521. Relief that may be granted upon recognition
``(a) Upon recognition of a foreign proceeding, whether
main or nonmain, where necessary to effectuate the purpose of
this chapter and to protect the assets of the debtor or the
interests of the creditors, the court may, at the request of
the foreign representative, grant any appropriate relief,
including--
``(1) staying the commencement or continuation of
an individual action or proceeding concerning the
debtor's assets, rights, obligations or liabilities to
the extent they have not been stayed under section
1520(a);
``(2) staying execution against the debtor's assets
to the extent it has not been stayed under section
1520(a);
``(3) suspending the right to transfer, encumber or
otherwise dispose of any assets of the debtor to the
extent this right has not been suspended under section
1520(a);
``(4) providing for the examination of witnesses,
the taking of evidence or the delivery of information
concerning the debtor's assets, affairs, rights,
obligations or liabilities;
``(5) entrusting the administration or realization
of all or part of the debtor's assets within the
territorial jurisdiction of the United States to the
foreign representative or another person, including an
examiner, authorized by the court;
``(6) extending relief granted under section
1519(a); and
``(7) granting any additional relief that may be
available to a trustee, except for relief available
under sections 522, 544, 545, 547, 548, 550, and
724(a).
``(b) Upon recognition of a foreign proceeding, whether
main or nonmain, the court may, at the request of the foreign
representative, entrust the distribution of all or part of the
debtor's assets located in the United States to the foreign
representative or another person, including an examiner,
authorized by the court, provided that the court is satisfied
that the interests of creditors in the United States are
sufficiently protected.
``(c) In granting relief under this section to a
representative of a foreign nonmain proceeding, the court must
be satisfied that the relief relates to assets that, under the
law of the United States, should be administered in the foreign
nonmain proceeding or concerns information required in that
proceeding.
``(d) The court may not enjoin a police or regulatory act
of a governmental unit, including a criminal action or
proceeding, under this section.
``(e) The standards, procedures, and limitations applicable
to an injunction shall apply to relief under paragraphs (1),
(2), (3), and (6) of subsection (a).
``(f) The exercise of rights not subject to the stay
arising under section 362(a) pursuant to paragraph (6), (7),
(17), or (27) of section 362(b) or pursuant to section 362(n)
shall not be stayed by any order of a court or administrative
agency in any proceeding under this chapter.
``Sec. 1522. Protection of creditors and other interested persons
``(a) The court may grant relief under section 1519 or
1521, or may modify or terminate relief under subsection (c),
only if the interests of the creditors and other interested
entities, including the debtor, are sufficiently protected.
``(b) The court may subject relief granted under section
1519 or 1521, or the operation of the debtor's business under
section 1520(a)(3) of this title, to conditions it considers
appropriate, including the giving of security or the filing of
a bond.
``(c) The court may, at the request of the foreign
representative or an entity affected by relief granted under
section 1519 or 1521, or at its own motion, modify or terminate
such relief.
``(d) Section 1104(d) shall apply to the appointment of an
examiner under this chapter. Any examiner shall comply with the
qualification requirements imposed on a trustee by section 322.
``Sec. 1523. Actions to avoid acts detrimental to creditors
``(a) Upon recognition of a foreign proceeding, the foreign
representative has standing in a case concerning the debtor
pending under another chapter of this title to initiate actions
under sections 522, 544, 545, 547, 548, 550, 553, and 724(a).
``(b) When the foreign proceeding is a foreign nonmain
proceeding, the court must be satisfied that an action under
subsection (a) relates to assets that, under United States law,
should be administered in the foreign nonmain proceeding.
``Sec. 1524. Intervention by a foreign representative
``Upon recognition of a foreign proceeding, the foreign
representative may intervene in any proceedings in a State or
Federal court in the United States in which the debtor is a
party.
``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES
``Sec. 1525. Cooperation and direct communication between the court and
foreign courts or foreign representatives
``(a) Consistent with section 1501, the court shall
cooperate to the maximum extent possible with foreign courts or
foreign representatives, either directly or through the
trustee.
``(b) The court is entitled to communicate directly with,
or to request information or assistance directly from, foreign
courts or foreign representatives, subject to the rights of
parties in interest to notice and participation.
``Sec. 1526. Cooperation and direct communication between the trustee
and foreign courts or foreign representatives
``(a) Consistent with section 1501, the trustee or other
person, including an examiner, authorized by the court, shall,
subject to the supervision of the court, cooperate to the
maximum extent possible with foreign courts or foreign
representatives.
``(b) The trustee or other person, including an examiner,
authorized by the court is entitled, subject to the supervision
of the court, to communicate directly with foreign courts or
foreign representatives.
``Sec. 1527. Forms of cooperation
``Cooperation referred to in sections 1525 and 1526 may be
implemented by any appropriate means, including--
``(1) appointment of a person or body, including an
examiner, to act at the direction of the court;
``(2) communication of information by any means
considered appropriate by the court;
``(3) coordination of the administration and
supervision of the debtor's assets and affairs;
``(4) approval or implementation of agreements
concerning the coordination of proceedings; and
``(5) coordination of concurrent proceedings
regarding the same debtor.
``SUBCHAPTER V--CONCURRENT PROCEEDINGS
``Sec. 1528. Commencement of a case under this title after recognition
of a foreign main proceeding
``After recognition of a foreign main proceeding, a case
under another chapter of this title may be commenced only if
the debtor has assets in the United States. The effects of such
case shall be restricted to the assets of the debtor that are
within the territorial jurisdiction of the United States and,
to the extent necessary to implement cooperation and
coordination under sections 1525, 1526, and 1527, to other
assets of the debtor that are within the jurisdiction of the
court under sections 541(a) of this title, and 1334(e) of title
28, to the extent that such other assets are not subject to the
jurisdiction and control of a foreign proceeding that has been
recognized under this chapter.
``Sec. 1529. Coordination of a case under this title and a foreign
proceeding
``If a foreign proceeding and a case under another chapter
of this title are taking place concurrently regarding the same
debtor, the court shall seek cooperation and coordination under
sections 1525, 1526, and 1527, and the following shall apply:
``(1) If the case in the United States is taking
place at the time the petition for recognition of the
foreign proceeding is filed--
``(A) any relief granted under section 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) If a case in the United States under this
title commences after recognition, or after the filing
of the petition for recognition, of the foreign
proceeding--
``(A) any relief in effect under section
1519 or 1521 shall be reviewed by the court and
shall be modified or terminated if inconsistent
with the case in the United States; and
``(B) if the foreign proceeding is a
foreign main proceeding, the stay and
suspension referred to in section 1520(a) shall
be modified or terminated if inconsistent with
the relief granted in the case in the United
States.
``(3) In granting, extending, or modifying relief
granted to a representative of a foreign nonmain
proceeding, the court must be satisfied that the relief
relates to assets that, under the laws of the United
States, should be administered in the foreign nonmain
proceeding or concerns information required in that
proceeding.
``(4) In achieving cooperation and coordination
under sections 1528 and 1529, the court may grant any
of the relief authorized under section 305.
``Sec. 1530. Coordination of more than 1 foreign proceeding
``In matters referred to in section 1501, with respect to
more than 1 foreign proceeding regarding the debtor, the court
shall seek cooperation and coordination under sections 1525,
1526, and 1527, and the following shall apply:
``(1) Any relief granted under section 1519 or 1521
to a representative of a foreign nonmain proceeding
after recognition of a foreign main proceeding must be
consistent with the foreign main proceeding.
``(2) If a foreign main proceeding is recognized
after recognition, or after the filing of a petition
for recognition, of a foreign nonmain proceeding, any
relief in effect under section 1519 or 1521 shall be
reviewed by the court and shall be modified or
terminated if inconsistent with the foreign main
proceeding.
``(3) If, after recognition of a foreign nonmain
proceeding, another foreign nonmain proceeding is
recognized, the court shall grant, modify, or terminate
relief for the purpose of facilitating coordination of
the proceedings.
``Sec. 1531. Presumption of insolvency based on recognition of a
foreign main proceeding
``In the absence of evidence to the contrary, recognition
of a foreign main proceeding is, for the purpose of commencing
a proceeding under section 303, proof that the debtor is
generally not paying its debts as such debts become due.
``Sec. 1532. Rule of payment in concurrent proceedings
``Without prejudice to secured claims or rights in rem, a
creditor who has received payment with respect to its claim in
a foreign proceeding pursuant to a law relating to insolvency
may not receive a payment for the same claim in a case under
any other chapter of this title regarding the debtor, so long
as the payment to other creditors of the same class is
proportionately less than the payment the creditor has already
received.''.
(b) Clerical Amendment.--The table of chapters for title
11, United States Code, is amended by inserting after the item
relating to chapter 13 the following:
``15. Ancillary and Other Cross-Border Cases.....................1501''.
SEC. 802. OTHER AMENDMENTS TO TITLES 11 AND 28, UNITED STATES CODE.
(a) Applicability of Chapters.--Section 103 of title 11,
United States Code, is amended--
(1) in subsection (a), by inserting before the
period the following: ``, and this chapter, sections
307, 362(n), 555 through 557, and 559 through 562 apply
in a case under chapter 15''; and
(2) by adding at the end the following:
``(k) Chapter 15 applies only in a case under such chapter,
except that--
``(1) sections 1505, 1513, and 1514 apply in all
cases under this title; and
``(2) section 1509 applies whether or not a case
under this title is pending.''.
(b) Definitions.--Section 101 of title 11, United States
Code, is amended by striking paragraphs (23) and (24) and
inserting the following:
``(23) `foreign proceeding' means a collective
judicial or administrative proceeding in a foreign
country, including an interim proceeding, under a law
relating to insolvency or adjustment of debt in which
proceeding the assets and affairs of the debtor are
subject to control or supervision by a foreign court,
for the purpose of reorganization or liquidation;
``(24) `foreign representative' means a person or
body, including a person or body appointed on an
interim basis, authorized in a foreign proceeding to
administer the reorganization or the liquidation of the
debtor's assets or affairs or to act as a
representative of the foreign proceeding;''.
(c) Amendments to Title 28, United States Code.--
(1) Procedures.--Section 157(b)(2) of title 28,
United States Code, is amended--
(A) in subparagraph (N), by striking
``and'' at the end;
(B) in subparagraph (O), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following:
``(P) recognition of foreign proceedings and other
matters under chapter 15 of title 11.''.
(2) Bankruptcy cases and proceedings.--Section
1334(c) of title 28, United States Code, is amended by
striking ``Nothing in'' and inserting ``Except with
respect to a case under chapter 15 of title 11, nothing
in''.
(3) Duties of trustees.--Section 586(a)(3) of title
28, United States Code, is amended by striking ``or
13'' and inserting ``13, or 15''.
(4) Venue of cases ancillary to foreign
proceedings.--Section 1410 of title 28, United States
Code, is amended to read as follows:
``Sec. 1410. Venue of cases ancillary to foreign proceedings
``A case under chapter 15 of title 11 may be commenced in
the district court of the United States for the district--
``(1) in which the debtor has its principal place
of business or principal assets in the United States;
``(2) if the debtor does not have a place of
business or assets in the United States, in which there
is pending against the debtor an action or proceeding
in a Federal or State court; or
``(3) in a case other than those specified in
paragraph (1) or (2), in which venue will be consistent
with the interests of justice and the convenience of
the parties, having regard to the relief sought by the
foreign representative.''.
(d) Other Sections of Title 11.--Title 11 of the United
States Code is amended--
(1) in section 109(b), by striking paragraph (3)
and inserting the following:
``(3)(A) a foreign insurance company, engaged in
such business in the United States; or
``(B) a foreign bank, savings bank, cooperative
bank, savings and loan association, building and loan
association, or credit union, that has a branch or
agency (as defined in section 1(b) of the International
Banking Act of 1978 in the United States.'';
(2) in section 303, by striking subsection (k);
(3) by striking section 304;
(4) in the table of sections for chapter 3 by
striking the item relating to section 304;
(5) in section 306 by striking ``, 304,'' each
place it appears;
(6) in section 305(a) by striking paragraph (2) and
inserting the following:
``(2)(A) a petition under section 1515 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.''; and
(7) in section 508--
(A) by striking subsection (a); and
(B) in subsection (b), by striking ``(b)''.
TITLE IX--FINANCIAL CONTRACT PROVISIONS
SEC. 901. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS OR RECEIVERS
OF INSURED DEPOSITORY INSTITUTIONS.
(a) Definition of Qualified Financial Contract.--Section
11(e)(8)(D) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)) is amended--
(1) by striking ``subsection--'' and inserting
``subsection, the following definitions shall apply:'';
and
(2) in clause (i), by inserting ``, resolution, or
order'' after ``any similar agreement that the
Corporation determines by regulation''.
(b) Definition of Securities Contract.--Section
11(e)(8)(D)(ii) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(ii)) is amended to read as follows:
``(ii) Securities contract.--The
term `securities contract'--
``(I) means a contract for
the purchase, sale, or loan of
a security, a certificate of
deposit, a mortgage loan, or
any interest in a mortgage
loan, a group or index of
securities, certificates of
deposit, or mortgage loans or
interests therein (including
any interest therein or based
on the value thereof) or any
option on any of the foregoing,
including any option to
purchase or sell any such
security, certificate of
deposit, mortgage loan,
interest, group or index, or
option, and including any
repurchase or reverse
repurchase transaction on any
such security, certificate of
deposit, mortgage loan,
interest, group or index, or
option;
``(II) does not include any
purchase, sale, or repurchase
obligation under a
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
agreement within the meaning of
such term;
``(III) means any option
entered into on a national
securities exchange relating to
foreign currencies;
``(IV) means the guarantee
by or to any securities
clearing agency of any
settlement of cash, securities,
certificates of deposit,
mortgage loans or interests
therein, group or index of
securities, certificates of
deposit, or mortgage loans or
interests therein (including
any interest therein or based
on the value thereof) or option
on any of the foregoing,
including any option to
purchase or sell any such
security, certificate of
deposit, mortgage loan,
interest, group or index, or
option;
``(V) means any margin
loan;
``(VI) means any other
agreement or transaction that
is similar to any agreement or
transaction referred to in this
clause;
``(VII) means any
combination of the agreements
or transactions referred to in
this clause;
``(VIII) means any option
to enter into any agreement or
transaction referred to in this
clause;
``(IX) means a master
agreement that provides for an
agreement or transaction
referred to in subclause (I),
(III), (IV), (V), (VI), (VII),
or (VIII), together with all
supplements to any such master
agreement, without regard to
whether the master agreement
provides for an agreement or
transaction that is not a
securities contract under this
clause, except that the master
agreement shall be considered
to be a securities contract
under this clause only with
respect to each agreement or
transaction under the master
agreement that is referred to
in subclause (I), (III), (IV),
(V), (VI), (VII), or (VIII);
and
``(X) means any security
agreement or arrangement or
other credit enhancement
related to any agreement or
transaction referred to in this
clause, including any guarantee
or reimbursement obligation in
connection with any agreement
or transaction referred to in
this clause.''.
(c) Definition of Commodity Contract.--Section
11(e)(8)(D)(iii) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(iii)) is amended to read as follows:
``(iii) Commodity contract.--The
term `commodity contract' means--
``(I) with respect to a
futures commission merchant, a
contract for the purchase or
sale of a commodity for future
delivery on, or subject to the
rules of, a contract market or
board of trade;
``(II) with respect to a
foreign futures commission
merchant, a foreign future;
``(III) with respect to a
leverage transaction merchant,
a leverage transaction;
``(IV) with respect to a
clearing organization, a
contract for the purchase or
sale of a commodity for future
delivery on, or subject to the
rules of, a contract market or
board of trade that is cleared
by such clearing organization,
or commodity option traded on,
or subject to the rules of, a
contract market or board of
trade that is cleared by such
clearing organization;
``(V) with respect to a
commodity options dealer, a
commodity option;
``(VI) any other agreement
or transaction that is similar
to any agreement or transaction
referred to in this clause;
``(VII) any combination of
the agreements or transactions
referred to in this clause;
``(VIII) any option to
enter into any agreement or
transaction referred to in this
clause;
``(IX) a master agreement
that provides for an agreement
or transaction referred to in
subclause (I), (II), (III),
(IV), (V), (VI), (VII), or
(VIII), together with all
supplements to any such master
agreement, without regard to
whether the master agreement
provides for an agreement or
transaction that is not a
commodity contract under this
clause, except that the master
agreement shall be considered
to be a commodity contract
under this clause only with
respect to each agreement or
transaction under the master
agreement that is referred to
in subclause (I), (II), (III),
(IV), (V), (VI), (VII), or
(VIII); or
``(X) any security
agreement or arrangement or
other credit enhancement
related to any agreement or
transaction referred to in this
clause, including any guarantee
or reimbursement obligation in
connection with any agreement
or transaction referred to in
this clause.''.
(d) Definition of Forward Contract.--Section
11(e)(8)(D)(iv) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(iv)) is amended to read as follows:
``(iv) Forward contract.--The term
`forward contract' means--
``(I) a contract (other
than a commodity contract) for
the purchase, sale, or transfer
of a commodity or any similar
good, article, service, right,
or interest which is presently
or in the future becomes the
subject of dealing in the
forward contract trade, or
product or byproduct thereof,
with a maturity date more than
2 days after the date the
contract is entered into,
including, a repurchase
transaction, reverse repurchase
transaction, consignment,
lease, swap, hedge transaction,
deposit, loan, option,
allocated transaction,
unallocated transaction, or any
other similar agreement;
``(II) any combination of
agreements or transactions
referred to in subclauses (I)
and (III);
``(III) any option to enter
into any agreement or
transaction referred to in
subclause (I) or (II);
``(IV) a master agreement
that provides for an agreement
or transaction referred to in
subclauses (I), (II), or (III),
together with all supplements
to any such master agreement,
without regard to whether the
master agreement provides for
an agreement or transaction
that is not a forward contract
under this clause, except that
the master agreement shall be
considered to be a forward
contract under this clause only
with respect to each agreement
or transaction under the master
agreement that is referred to
in subclause (I), (II), or
(III); or
``(V) any security
agreement or arrangement or
other credit enhancement
related to any agreement or
transaction referred to in
subclause (I), (II), (III), or
(IV), including any guarantee
or reimbursement obligation in
connection with any agreement
or transaction referred to in
any such subclause.''.
(e) Definition of Repurchase Agreement.--Section
11(e)(8)(D)(v) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(v)) is amended to read as follows:
``(v) Repurchase agreement.--The
term `repurchase agreement' (which
definition also applies to a reverse
repurchase agreement)--
``(I) means an agreement,
including related terms, which
provides for the transfer of
one or more certificates of
deposit, mortgage-related
securities (as such term is
defined in the Securities
Exchange Act of 1934), mortgage
loans, interests in mortgage-
related securities or mortgage
loans, eligible bankers'
acceptances, qualified foreign
government securities or
securities that are direct
obligations of, or that are
fully guaranteed by, the United
States or any agency of the
United States against the
transfer of funds by the
transferee of such certificates
of deposit, eligible bankers'
acceptances, securities,
mortgage loans, or interests
with a simultaneous agreement
by such transferee to transfer
to the transferor thereof
certificates of deposit,
eligible bankers' acceptances,
securities, mortgage loans, or
interests as described above,
at a date certain not later
than 1 year after such
transfers or on demand, against
the transfer of funds, or any
other similar agreement;
``(II) does not include any
repurchase obligation under a
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
participation within the
meaning of such term;
``(III) means any
combination of agreements or
transactions referred to in
subclauses (I) and (IV);
``(IV) means any option to
enter into any agreement or
transaction referred to in
subclause (I) or (III);
``(V) means a master
agreement that provides for an
agreement or transaction
referred to in subclause (I),
(III), or (IV), together with
all supplements to any such
master agreement, without
regard to whether the master
agreement provides for an
agreement or transaction that
is not a repurchase agreement
under this clause, except that
the master agreement shall be
considered to be a repurchase
agreement under this subclause
only with respect to each
agreement or transaction under
the master agreement that is
referred to in subclause (I),
(III), or (IV); and
``(VI) means any security
agreement or arrangement or
other credit enhancement
related to any agreement or
transaction referred to in
subclause (I), (III), (IV), or
(V), including any guarantee or
reimbursement obligation in
connection with any agreement
or transaction referred to in
any such subclause.
For purposes of this clause, the term
`qualified foreign government security'
means a security that is a direct
obligation of, or that is fully
guaranteed by, thecentral government of
a member of the Organization for Economic Cooperation and Development
(as determined by regulation or order adopted by the appropriate
Federal banking authority).''.
(f) Definition of Swap Agreement.--Section 11(e)(8)(D)(vi)
of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(vi)) is amended to read as follows:
``(vi) Swap agreement.--The term
`swap agreement' means--
``(I) any agreement,
including the terms and
conditions incorporated by
reference in any such
agreement, which is an interest
rate swap, option, future, or
forward agreement, including a
rate floor, rate cap, rate
collar, cross-currency rate
swap, and basis swap; a spot,
same day-tomorrow, tomorrow-
next, forward, or other foreign
exchange or precious metals
agreement; a currency swap,
option, future, or forward
agreement; an equity index or
equity swap, option, future, or
forward agreement; a debt index
or debt swap, option, future,
or forward agreement; a total
return, credit spread or credit
swap, option, future, or
forward agreement; a commodity
index or commodity swap,
option, future, or forward
agreement; or a weather swap,
weather derivative, or weather
option;
``(II) any agreement or
transaction that is similar to
any other agreement or
transaction referred to in this
clause and that is of a type
that has been, is presently, or
in the future becomes, the
subject of recurrent dealings
in the swap markets (including
terms and conditions
incorporated by reference in
such agreement) and that is a
forward, swap, future, or
option on one or more rates,
currencies, commodities, equity
securities or other equity
instruments, debt securities or
other debt instruments,
quantitative measures
associated with an occurrence,
extent of an occurrence, or
contingency associated with a
financial, commercial, or
economic consequence, or
economic or financial indices
or measures of economic or
financial risk or value;
``(III) any combination of
agreements or transactions
referred to in this clause;
``(IV) any option to enter
into any agreement or
transaction referred to in this
clause;
``(V) a master agreement
that provides for an agreement
or transaction referred to in
subclause (I), (II), (III), or
(IV), together with all
supplements to any such master
agreement, without regard to
whether the master agreement
contains an agreement or
transaction that is not a swap
agreement under this clause,
except that the master
agreement shall be considered
to be a swap agreement under
this clause only with respect
to each agreement or
transaction under the master
agreement that is referred to
in subclause (I), (II), (III),
or (IV); and
``(VI) any security
agreement or arrangement or
other credit enhancement
related to any agreements or
transactions referred to in
subclause (I), (II), (III),
(IV), or (V), including any
guarantee or reimbursement
obligation in connection with
any agreement or transaction
referred to in any such
subclause.
Such term is applicable for purposes of
this subsection only and shall not be
construed or applied so as to challenge
or affect the characterization,
definition, or treatment of any swap
agreement under any other statute,
regulation, or rule, including the
Securities Act of 1933, the Securities
Exchange Act of 1934, the Public
Utility Holding Company Act of 1935,
the Trust Indenture Act of 1939, the
Investment Company Act of 1940, the
Investment Advisers Act of 1940, the
Securities Investor Protection Act of
1970, the Commodity Exchange Act, the
Gramm-Leach-Bliley Act, and the Legal
Certainty for Bank Products Act of
2000.''.
(g) Definition of Transfer.--Section 11(e)(8)(D)(viii) of
the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(viii)) is amended to read as follows:
``(viii) Transfer.--The term
`transfer' means every mode, direct or
indirect, absolute or conditional,
voluntary or involuntary, of disposing
of or parting with property or with an
interest in property, including
retention of title as a security
interest and foreclosure of the
depository institution's equity of
redemption.''.
(h) Treatment of Qualified Financial Contracts.--Section
11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)) is amended--
(1) in subparagraph (A)--
(A) by striking ``paragraph (10)'' and
inserting ``paragraphs (9) and (10)'';
(B) in clause (i), by striking ``to cause
the termination or liquidation'' and inserting
``such person has to cause the termination,
liquidation, or acceleration''; and
(C) by striking clause (ii) and inserting
the following:
``(ii) any right under any security
agreement or arrangement or other
credit enhancement related to one or
more qualified financial contracts
described in clause (i);''; and
(2) in subparagraph (E), by striking clause (ii)
and inserting the following:
``(ii) any right under any security
agreement or arrangement or other
credit enhancement related to one or
more qualified financial contracts
described in clause (i);''.
(i) Avoidance of Transfers.--Section 11(e)(8)(C)(i) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(C)(i)) is
amended by inserting ``section 5242 of the Revised Statutes of
the United States or any other Federal or State law relating to
the avoidance of preferential or fraudulent transfers,'' before
``the Corporation''.
SEC. 902. AUTHORITY OF THE CORPORATION WITH RESPECT TO FAILED AND
FAILING INSTITUTIONS.
(a) In General.--Section 11(e)(8) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)(8)) is amended--
(1) in subparagraph (E), by striking ``other than
paragraph (12) of this subsection, subsection (d)(9)''
and inserting ``other than subsections (d)(9) and
(e)(10)''; and
(2) by adding at the end the following new
subparagraphs:
``(F) Clarification.--No provision of law
shall be construed as limiting the right or
power of the Corporation, or authorizing any
court or agency to limit or delay, in any
manner, the right or power of the Corporation
to transfer any qualified financial contract in
accordance with paragraphs (9) and (10) of this
subsection or to disaffirm or repudiate any
such contract in accordance with subsection
(e)(1) of this section.
``(G) Walkaway clauses not effective.--
``(i) In general.--Notwithstanding
the provisions of subparagraphs (A) and
(E), and sections 403 and 404 of the
Federal Deposit Insurance Corporation
Improvement Act of 1991, no walkaway
clause shall be enforceable in a
qualified financial contract of an
insured depository institution in
default.
``(ii) Walkaway clause defined.--
For purposes of this subparagraph, the
term `walkaway clause' means a
provision in a qualified financial
contract that, after calculation of a
value of a party's position or an
amount due to or from 1 of the parties
in accordance with its terms upon
termination, liquidation, or
acceleration of the qualified financial
contract, either does not create a
payment obligation of a party or
extinguishes a payment obligation of a
party in whole or in part solely
because of such party's status as a
nondefaulting party.''.
(b) Technical and Conforming Amendment.--Section
11(e)(12)(A) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(12)(A)) is amended by inserting ``or the exercise of
rights or powers by'' after ``the appointment of''.
SEC. 903. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED FINANCIAL
CONTRACTS.
(a) Transfers of Qualified Financial Contracts to Financial
Institutions.--Section 11(e)(9) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)(9)) is amended to read as
follows:
``(9) Transfer of qualified financial contracts.--
``(A) In general.--In making any transfer
of assets or liabilities of a depository
institution in default which includes any
qualified financial contract, the conservator
or receiver for such depository institution
shall either--
``(i) transfer to one financial
institution, other than a financial
institution for which a conservator,
receiver, trustee in bankruptcy, or
other legal custodian has been
appointed or which is otherwise the
subject of a bankruptcy or insolvency
proceeding--
``(I) all qualified
financial contracts between any
person or any affiliate of such
person and the depository
institution in default;
``(II) all claims of such
person or any affiliate of such
person against such depository
institution under any such
contract (other than any claim
which, under the terms of any
such contract, is subordinated
to the claims of general
unsecured creditors of such
institution);
``(III) all claims of such
depository institution against
such person or any affiliate of
such person under any such
contract; and
``(IV) all property
securing or any other credit
enhancement for any contract
described in subclause (I) or
any claim described in
subclause (II) or (III) under
any such contract; or
``(ii) transfer none of the
qualified financial contracts, claims,
property or other credit enhancement
referred to in clause (i) (with respect
to such person and any affiliate of
such person).
``(B) Transfer to foreign bank, foreign
financial institution, or branch or agency of a
foreign bank or financial institution.--In
transferring any qualified financial contracts
and related claims and property under
subparagraph (A)(i), the conservator or
receiver for the depository institution shall
not make such transfer to a foreign bank,
financial institution organized under the laws
of a foreign country, or a branch or agency of
a foreign bank or financial institution unless,
under the law applicable to such bank,
financial institution, branch or agency, to the
qualified financial contracts, and to any
netting contract, any security agreement or
arrangement or other credit enhancement related
to one or more qualified financial contracts,
the contractual rights of the parties to such
qualified financial contracts, netting
contracts, security agreements or arrangements,
or other credit enhancements are enforceable
substantially to the same extent as permitted
under this section.
``(C) Transfer of contracts subject to the
rules of a clearing organization.--In the event
that a conservator or receiver transfers any
qualified financial contract and related
claims, property, and credit enhancements
pursuant to subparagraph (A)(i) and such
contract is cleared by or subject to the rules
of a clearing organization, the clearing
organization shall not be required to accept
the transferee as a member by virtue of the
transfer.
``(D) Definitions.--For purposes of this
paragraph, the term `financial institution'
means a broker or dealer, a depository
institution, a futures commission merchant, or
any other institution, as determined by the
Corporation by regulation to be a financial
institution, and the term `clearing
organization' has the same meaning as in
section 402 of the Federal Deposit Insurance
Corporation Improvement Act of 1991.''.
(b) Notice to Qualified Financial Contract
Counterparties.--Section 11(e)(10)(A) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)(10)(A)) is amended in the
material immediately following clause (ii) by striking ``the
conservator'' and all that follows through the period and
inserting the following: ``the conservator or receiver shall
notify any person who is a party to any such contract of such
transfer by 5:00 p.m. (eastern time) on the business day
following the date of the appointment of the receiver in the
case of a receivership, or the business day following such
transfer in the case of a conservatorship.''.
(c) Rights Against Receiver and Treatment of Bridge
Banks.--Section 11(e)(10) of the FederalDeposit Insurance Act
(12 U.S.C. 1821(e)(10)) is amended--
(1) by redesignating subparagraph (B) as
subparagraph (D); and
(2) by inserting after subparagraph (A) the
following new subparagraphs:
``(B) Certain rights not enforceable.--
``(i) Receivership.--A person who
is a party to a qualified financial
contract with an insured depository
institution may not exercise any right
that such person has to terminate,
liquidate, or net such contract under
paragraph (8)(A) of this subsection or
section 403 or 404 of the Federal
Deposit Insurance Corporation
Improvement Act of 1991, solely by
reason of or incidental to the
appointment of a receiver for the
depository institution (or the
insolvency or financial condition of
the depository institution for which
the receiver has been appointed)--
``(I) until 5:00 p.m.
(eastern time) on the business
day following the date of the
appointment of the receiver; or
``(II) after the person has
received notice that the
contract has been transferred
pursuant to paragraph (9)(A).
``(ii) Conservatorship.--A person
who is a party to a qualified financial
contract with an insured depository
institution may not exercise any right
that such person has to terminate,
liquidate, or net such contract under
paragraph (8)(E) of this subsection or
section 403 or 404 of the Federal
Deposit Insurance Corporation
Improvement Act of 1991, solely by
reason of or incidental to the
appointment of a conservator for the
depository institution (or the
insolvency or financial condition of
the depository institution for which
the conservator has been appointed).
``(iii) Notice.--For purposes of
this paragraph, the Corporation as
receiver or conservator of an insured
depository institution shall be deemed
to have notified a person who is a
party to a qualified financial contract
with such depository institution if the
Corporation has taken steps reasonably
calculated to provide notice to such
person by the time specified in
subparagraph (A).
``(C) Treatment of bridge banks.--The
following institutions shall not be considered
to be a financial institution for which a
conservator, receiver, trustee in bankruptcy,
or other legal custodian has been appointed or
which is otherwise the subject of a bankruptcy
or insolvency proceeding for purposes of
paragraph (9):
``(i) A bridge bank.
``(ii) A depository institution
organized by the Corporation, for which
a conservator is appointed either--
``(I) immediately upon the
organization of the
institution; or
``(II) at the time of a
purchase and assumption
transaction between the
depository institution and the
Corporation as receiver for a
depository institution in
default.''.
SEC. 904. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION OF
QUALIFIED FINANCIAL CONTRACTS.
Section 11(e) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)) is amended--
(1) by redesignating paragraphs (11) through (15)
as paragraphs (12) through (16), respectively;
(2) by inserting after paragraph (10) the following
new paragraph:
``(11) Disaffirmance or repudiation of qualified
financial contracts.--In exercising the rights of
disaffirmance or repudiation of a conservator or
receiver with respect to any qualified financial
contract to which an insured depository institution is
a party, the conservator or receiver for such
institution shall either--
``(A) disaffirm or repudiate all qualified
financial contracts between--
``(i) any person or any affiliate
of such person; and
``(ii) the depository institution
in default; or
``(B) disaffirm or repudiate none of the
qualified financial contracts referred to in
subparagraph (A) (with respect to such person
or any affiliate of such person).''; and
(3) by adding at the end the following new
paragraph:
``(17) Savings clause.--The meanings of terms used
in this subsection are applicable for purposes of this
subsection only, and shall not be construed or applied
so as to challenge or affect the characterization,
definition, or treatment of any similar terms under any
other statute, regulation, or rule, including the
Gramm-Leach-Bliley Act, the Legal Certainty for Bank
Products Act of 2000, the securities laws (as that term
is defined in section 3(a)(47) of the Securities
Exchange Act of 1934), and the Commodity Exchange
Act.''.
SEC. 905. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.
Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(8)(D)(vii)) is amended to read as
follows:
``(vii) Treatment of master
agreement as one agreement.--Any master
agreement for any contract or agreement
described in any preceding clause of
this subparagraph (or any master
agreement for such master agreement or
agreements), together with all
supplements to such master agreement,
shall be treated as a single agreement
and a single qualified financial
contract. If a master agreement
contains provisions relating to
agreements or transactions that are not
themselves qualified financial
contracts, the master agreement shall
be deemed to be a qualified financial
contract only with respect to those
transactions that are themselves
qualified financial contracts.''.
SEC. 906. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF
1991.
(a) Definitions.--Section 402 of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4402)
is amended--
(1) in paragraph (2)--
(A) in subparagraph (A)(ii), by inserting
before the semicolon ``, or is exempt from such
registration by order of the Securities and
Exchange Commission''; and
(B) in subparagraph (B), by inserting
before the period ``, that has been granted an
exemption under section 4(c)(1) of the
Commodity Exchange Act, or that is a
multilateral clearing organization (as defined
in section 408 of this Act)'';
(2) in paragraph (6)--
(A) by redesignating subparagraphs (B)
through (D) as subparagraphs (C) through (E),
respectively;
(B) by inserting after subparagraph (A) the
following new subparagraph:
``(B) an uninsured national bank or an
uninsured State bank that is a member of the
Federal Reserve System, if the national bank or
State member bank is not eligible to make
application to become an insured bank under
section 5 of the Federal Deposit Insurance
Act;''; and
(C) by amending subparagraph (C), so
redesignated, to read as follows:
``(C) a branch or agency of a foreign bank,
a foreign bank and any branch or agency of the
foreign bank, or the foreign bank that
established the branch or agency, as those
terms are defined in section 1(b) of the
International Banking Act of 1978;'';
(3) in paragraph (11), by inserting before the
period ``and any other clearing organization withwhich
such clearing organization has a netting contract'';
(4) by amending paragraph (14)(A)(i) to read as
follows:
``(i) means a contract or agreement
between 2 or more financial
institutions, clearing organizations,
or members that provides for netting
present or future payment obligations
or payment entitlements (including
liquidation or close out values
relating to such obligations or
entitlements) among the parties to the
agreement; and''; and
(5) by adding at the end the following new
paragraph:
``(15) Payment.--The term `payment' means a payment
of United States dollars, another currency, or a
composite currency, and a noncash delivery, including a
payment or delivery to liquidate an unmatured
obligation.''.
(b) Enforceability of Bilateral Netting Contracts.--Section
403 of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (12 U.S.C. 4403) is amended--
(1) by striking subsection (a) and inserting the
following:
``(a) General Rule.--Notwithstanding any other provision of
State or Federal law (other than paragraphs (8)(E), (8)(F), and
(10)(B) of section 11(e) of the Federal Deposit Insurance Act
or any order authorized under section 5(b)(2) of the Securities
Investor Protection Act of 1970), the covered contractual
payment obligations and the covered contractual payment
entitlements between any 2 financial institutions shall be
netted in accordance with, and subject to the conditions of,
the terms of any applicable netting contract (except as
provided in section 561(b)(2) of title 11, United States
Code).''; and
(2) by adding at the end the following new
subsection:
``(f) Enforceability of Security Agreements.--The
provisions of any security agreement or arrangement or other
credit enhancement related to one or more netting contracts
between any 2 financial institutions shall be enforceable in
accordance with their terms (except as provided in section
561(b)(2) of title 11, United States Code), and shall not be
stayed, avoided, or otherwise limited by any State or Federal
law (other than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance Act and section
5(b)(2) of the Securities Investor Protection Act of 1970).''.
(c) Enforceability of Clearing Organization Netting
Contracts.--Section 404 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4404) is
amended--
(1) by striking subsection (a) and inserting the
following:
``(a) General Rule.--Notwithstanding any other provision of
State or Federal law (other than paragraphs (8)(E), (8)(F), and
(10)(B) of section 11(e) of the Federal Deposit Insurance Act
and any order authorized under section 5(b)(2) of the
Securities Investor Protection Act of 1970), the covered
contractual payment obligations and the covered contractual
payment entitlements of a member of a clearing organization to
and from all other members of a clearing organization shall be
netted in accordance with and subject to the conditions of any
applicable netting contract (except as provided in section
561(b)(2) of title 11, United States Code).''; and
(2) by adding at the end the following new
subsection:
``(h) Enforceability of Security Agreements.--The
provisions of any security agreement or arrangement or other
credit enhancement related to one or more netting contracts
between any 2 members of a clearing organization shall be
enforceable in accordance with their terms (except as provided
in section 561(b)(2) of title 11, United States Code), and
shall not be stayed, avoided, or otherwise limited by any State
or Federal law (other than paragraphs (8)(E), (8)(F), and
(10)(B) of section 11(e) of the Federal Deposit Insurance Act
and section 5(b)(2) of the Securities Investor Protection Act
of 1970).''.
(d) Enforceability of Contracts With Uninsured National
Banks, Uninsured Federal Branches and Agencies, Certain
Uninsured State Member Banks, and Edge Act Corporations.--The
Federal Deposit Insurance Corporation Improvement Act of 1991
(12 U.S.C. 4401 et seq.) is amended--
(1) by redesignating section 407 as section 407A;
and
(2) by inserting after section 406 the following
new section:
``SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL BANKS,
UNINSURED FEDERAL BRANCHES AND AGENCIES, CERTAIN
UNINSURED STATE MEMBER BANKS, AND EDGE ACT
CORPORATIONS.
``(a) In General.--Notwithstanding any other provision of
law, paragraphs (8), (9), (10), and (11) of section 11(e) of
the Federal Deposit Insurance Act shall apply to an uninsured
national bank or uninsured Federal branch or Federal agency, a
corporation chartered under section 25A of the Federal Reserve
Act, or an uninsured State member bank which operates, or
operates as, a multilateral clearing organization pursuant to
section 409 of this Act, except that for such purpose--
``(1) any reference to the `Corporation as
receiver' or `the receiver or the Corporation' shall
refer to the receiver appointed by the Comptroller of
the Currency in the case of an uninsured national bank
or uninsured Federal branch or agency, or to the
receiver appointed by the Board of Governors of the
Federal Reserve System in the case of a corporation
chartered under section 25A of the Federal Reserve Act
or an uninsured State member bank;
``(2) any reference to the `Corporation' (other
than in section 11(e)(8)(D) of such Act), the
`Corporation, whether acting as such or as conservator
or receiver', a `receiver', or a `conservator' shall
refer to the receiver or conservator appointed by the
Comptroller of the Currency in the case of an uninsured
national bank or uninsured Federal branch or agency, or
to the receiver or conservator appointed by the Board
of Governors of the Federal Reserve System in the case
of a corporation chartered under section 25A of the
Federal Reserve Act or an uninsured State member bank;
and
``(3) any reference to an `insured depository
institution' or `depository institution' shall refer to
an uninsured national bank, an uninsured Federal branch
or Federal agency, a corporation chartered under
section 25A of the Federal Reserve Act, or an uninsured
State member bank which operates, or operates as, a
multilateral clearing organization pursuant to section
409 of this Act.
``(b) Liability.--The liability of a receiver or
conservator of an uninsured national bank, uninsured Federal
branch or agency, a corporation chartered under section 25A of
the Federal Reserve Act, or an uninsured State member bank
which operates, or operates as, a multilateral clearing
organization pursuant to section 409 of this Act, shall be
determined in the same manner and subject to the same
limitations that apply to receivers and conservators of insured
depository institutions under section 11(e) of the Federal
Deposit Insurance Act.
``(c) Regulatory Authority.--
``(1) In general.--The Comptroller of the Currency
in the case of an uninsured national bank or uninsured
Federal branch or agency and the Board of Governors of
the Federal Reserve System in the case of a corporation
chartered under section 25A of the Federal Reserve Act,
or an uninsured State member bank that operates, or
operates as, a multilateral clearing organization
pursuant to section 409 of this Act, in consultation
with the Federal Deposit Insurance Corporation, may
each promulgate regulations solely to implement this
section.
``(2) Specific requirement.--In promulgating
regulations, limited solely to implementing paragraphs
(8), (9), (10), and (11) of section 11(e) of the
Federal Deposit Insurance Act, the Comptroller of the
Currency and the Board of Governors of the Federal
Reserve System each shall ensure that the regulations
generally are consistent with the regulations and
policies of the Federal Deposit Insurance Corporation
adopted pursuant to the Federal Deposit Insurance Act.
``(d) Definitions.--For purposes of this section, the terms
`Federal branch', `Federal agency', and `foreign bank' have the
same meanings as in section 1(b) of the International Banking
Act of 1978.''.
SEC. 907. BANKRUPTCY LAW AMENDMENTS.
(a) Definitions of Forward Contract, Repurchase Agreement,
Securities Clearing Agency, Swap Agreement, Commodity Contract,
and Securities Contract.--Title 11, United States Code, is
amended--
(1) in section 101--
(A) in paragraph (25)--
(i) by striking ``means a
contract'' and inserting ``means--
``(A) a contract'';
(ii) by striking ``, or any
combination thereof or option
thereon;'' and inserting ``, or any
other similar agreement;''; and
(iii) by adding at the end the
following:
``(B) any combination of agreements or
transactions referred to in subparagraphs (A)
and (C);
``(C) any option to enter into an agreement
or transaction referred to in subparagraph (A)
or (B);
``(D) a master agreement that provides for
an agreement or transaction referred to in
subparagraph (A), (B), or (C), together with
all supplements to any such master agreement,
without regard to whether such master agreement
provides for an agreement or transaction that
is not a forward contract under this paragraph,
except that such master agreement shall be
considered to be a forward contract under this
paragraph only with respect to each agreement
or transaction under such master agreement that
is referred to in subparagraph (A), (B), or
(C); or
``(E) any security agreement or
arrangement, or other credit enhancement
related to any agreement or transaction
referred to in subparagraph (A), (B), (C), or
(D), including any guarantee or reimbursement
obligation by or to a forward contract merchant
or financial participant in connection with any
agreement or transaction referred to in any
such subparagraph, but not to exceed the
damages in connection with any such agreement
or transaction, measured in accordance with
section 562 of this title;'';
(B) in paragraph (46), by striking ``on any
day during the period beginning 90 days before
the date of'' and inserting ``at any time
before'';
(C) by amending paragraph (47) to read as
follows:
``(47) `repurchase agreement' (which definition
also applies to a reverse repurchase agreement)--
``(A) means--
``(i) an agreement, including
related terms, which provides for the
transfer of one or more certificates of
deposit, mortgage related securities
(as defined in section 3 of the
Securities Exchange Act of 1934),
mortgage loans, interests in mortgage
related securities or mortgage loans,
eligible bankers' acceptances,
qualified foreign government securities
(defined as a security that is a direct
obligation of, or that is fully
guaranteed by, the central government
of a member of the Organization for
Economic Cooperation and Development),
or securities that are direct
obligations of, or that are fully
guaranteed by, the United States or any
agency of the United States against the
transfer of funds by the transferee of
such certificates of deposit, eligible
bankers' acceptances, securities,
mortgage loans, or interests, with a
simultaneous agreement by such
transferee to transfer to the
transferor thereof certificates of
deposit, eligible bankers' acceptance,
securities, mortgage loans, or
interests of the kind described in this
clause, at a date certain not later
than 1 year after such transfer or on
demand, against the transfer of funds;
``(ii) any combination of
agreements or transactions referred to
in clauses (i) and (iii);
``(iii) an option to enter into an
agreement or transaction referred to in
clause (i) or (ii);
``(iv) a master agreement that
provides for an agreement or
transaction referred to in clause (i),
(ii), or (iii), together with all
supplements to any such master
agreement, without regard to whether
such master agreement provides for an
agreement or transaction that is not a
repurchase agreement under this
paragraph, except that such master
agreement shall be considered to be a
repurchase agreement under this
paragraph only with respect to each
agreement or transaction under the
master agreement that is referred to in
clause (i), (ii), or (iii); or
``(v) any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in clause (i), (ii), (iii),
or (iv), including any guarantee or
reimbursement obligation by or to a
repo participant or financial
participant in connection with any
agreement or transaction referred to in
any such clause, but not to exceed the
damages in connection with any such
agreement or transaction, measured in
accordance with section 562 of this
title; and
``(B) does not include a repurchase
obligation under a participation in a
commercial mortgage loan;'';
(D) in paragraph (48), by inserting ``, or
exempt from such registration under such
section pursuant to an order of the Securities
and Exchange Commission,'' after ``1934''; and
(E) by amending paragraph (53B) to read as
follows:
``(53B) `swap agreement'--
``(A) means--
``(i) any agreement, including the
terms and conditions incorporated by
reference in such agreement, which is--
``(I) an interest rate
swap, option, future, or
forward agreement, including a
rate floor, rate cap, rate
collar, cross-currency rate
swap, and basis swap;
``(II) a spot, same day-
tomorrow, tomorrow-next,
forward, or other foreign
exchange or precious metals
agreement;
``(III) a currency swap,
option, future, or forward
agreement;
``(IV) an equity index or
equity swap, option, future, or
forward agreement;
``(V) a debt index or debt
swap, option, future, or
forward agreement;
``(VI) a total return,
credit spread or credit swap,
option, future, or forward
agreement;
``(VII) a commodity index
or a commodity swap, option,
future, or forward agreement;
or
``(VIII) a weather swap,
weather derivative, or weather
option;
``(ii) any agreement or transaction
that is similar to any other agreement
or transaction referred to in this
paragraph and that--
``(I) is of a type that has
been, is presently, or in the
future becomes, the subject of
recurrent dealings in the swap
markets (including terms and
conditions incorporated by
reference therein); and
``(II) is a forward, swap,
future, or option on one or
more rates, currencies,
commodities, equity securities,
or other equity instruments,
debt securities or other debt
instruments, quantitative
measures associated with an
occurrence, extent of an
occurrence, or contingency
associated with a financial,
commercial, or economic
consequence, or economic or
financial indices or measures
of economic or financial risk
or value;
``(iii) any combination of
agreements or transactions referred to
in this subparagraph;
``(iv) any option to enter into an
agreement or transaction referred to in
this subparagraph;
``(v) a master agreement that
provides for an agreement or
transaction referred to in clause (i),
(ii), (iii), or (iv), together with all
supplements to any such master
agreement, and without regard to
whether the master agreement contains
an agreement or transaction that is not
a swap agreement under this paragraph,
except that the master agreement shall
be considered to be a swap agreement
under this paragraph only with respect
to each agreement or transaction under
the master agreement that is referred
to in clause (i), (ii), (iii), or (iv);
or
``(vi) any security agreement or
arrangement or other credit enhancement
related to any agreements or
transactions referred to in clause (i)
through (v), including any guarantee or
reimbursement obligation by or to a
swap participant or financial
participant in connection with any
agreement or transaction referred to in
any such clause, but not to exceed the
damages in connection with any such
agreement or transaction, measured in
accordance with section 562 of this
title; and
``(B) is applicable for purposes of this
title only, and shall not be construed or
applied so as to challenge or affect the
characterization, definition, or treatment of
any swap agreement under any other statute,
regulation, or rule, including the Securities
Act of 1933, the Securities Exchange Act of
1934, the Public Utility Holding Company Act of
1935, the Trust Indenture Act of 1939, the
Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Securities Investor
Protection Act of 1970, the Commodity Exchange
Act, the Gramm-Leach-Bliley Act, and the Legal
Certainty for Bank Products Act of 2000;'';
(2) in section 741(7), by striking paragraph (7)
and inserting the following:
``(7) `securities contract'--
``(A) means--
``(i) a contract for the purchase,
sale, or loan of a security, a
certificate of deposit, a mortgage loan
or any interest in a mortgage loan, a
group or index of securities,
certificates of deposit, or mortgage
loans or interests therein (including
an interest therein or based on the
value thereof), or option on any of the
foregoing, including an option to
purchase or sell any such security,
certificate of deposit, mortgage loan,
interest, group or index, or option,
and including any repurchase or reverse
repurchase transaction on any such
security, certificate of deposit,
mortgage loan, interest, group or
index, or option;
``(ii) any option entered into on a
national securities exchange relating
to foreign currencies;
``(iii) the guarantee by or to any
securities clearing agency of a
settlement of cash, securities,
certificates of deposit, mortgage loans
or interests therein, group or index of
securities, or mortgage loans or
interests therein (including any
interest therein or based on the value
thereof), or option on any of the
foregoing, including an option to
purchase or sell any such security,
certificate of deposit, mortgage loan,
interest, group or index, or option;
``(iv) any margin loan;
``(v) any other agreement or
transaction that is similar to an
agreement or transaction referred to in
this subparagraph;
``(vi) any combination of the
agreements or transactions referred to
in this subparagraph;
``(vii) any option to enter into
any agreement or transaction referred
to in this subparagraph;
``(viii) a master agreement that
provides for an agreement or
transaction referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii),
together with all supplements to any
such master agreement, without regard
to whether the master agreement
provides for an agreement or
transaction that is not a securities
contract under this subparagraph,
except that such master agreement shall
be considered to be a securities
contract under this subparagraph only
with respect to each agreement or
transaction under such master agreement
that is referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii);
or
``(ix) any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in this subparagraph,
including any guarantee or
reimbursement obligation by or to a
stockbroker, securities clearing
agency, financial institution, or
financial participant in connection
with any agreement or transaction
referred to in this subparagraph, but
not to exceed the damages in connection
with any such agreement or transaction,
measured in accordance with section 562
of this title; and
``(B) does not include any purchase, sale,
or repurchase obligation under a participation
in a commercial mortgage loan;''; and
(3) in section 761(4)--
(A) by striking ``or'' at the end of
subparagraph (D); and
(B) by adding at the end the following:
``(F) any other agreement or transaction
that is similar to an agreement or transaction
referred to in this paragraph;
``(G) any combination of the agreements or
transactions referred to in this paragraph;
``(H) any option to enter into an agreement
or transaction referred to in this paragraph;
``(I) a master agreement that provides for
an agreement or transaction referred to in
subparagraph (A), (B), (C), (D), (E), (F), (G),
or (H), together with all supplements to such
master agreement, without regard to whether the
master agreement provides for an agreement or
transaction that is not a commodity contract
under this paragraph, except that the master
agreement shall be considered to be a commodity
contract under this paragraph only with respect
to each agreement or transaction under the
master agreement that is referred to in
subparagraph (A), (B), (C), (D), (E), (F), (G),
or (H); or
``(J) any security agreement or arrangement
or other credit enhancement related to any
agreement or transaction referred to in this
paragraph, including any guarantee or
reimbursement obligation by or to a commodity
broker or financial participant in connection
with any agreement or transaction referred to
in this paragraph, but not to exceed the
damages in connection with any such agreement
or transaction, measured in accordance with
section 562 of this title;''.
(b) Definitions of Financial Institution, Financial
Participant, and Forward Contract Merchant.--Section 101 of
title 11, United States Code, is amended--
(1) by striking paragraph (22) and inserting the
following:
``(22) `financial institution' means--
``(A) a Federal reserve bank, or an entity
(domestic or foreign) that is a commercial or
savings bank, industrial savings bank, savings
and loan association, trust company, or
receiver or conservator for such entity and,
when any such Federal reserve bank, receiver,
conservator or entity is acting as agent or
custodian for a customer in connection with a
securities contract (as defined in section 741)
such customer; or
``(B) in connection with a securities
contract (as defined in section 741) an
investment company registered under the
Investment Company Act of 1940;'';
(2) by inserting after paragraph (22) the
following:
``(22A) `financial participant' means--
``(A) an entity that, at the time it enters
into a securities contract, commodity contract,
swap agreement, repurchase agreement, or
forward contract, or at the time of the filing
of the petition, has one or more agreements or
transactions described in paragraph (1), (2),
(3), (4), (5), or (6) of section 561(a) with
the debtor or any other entity (other than an
affiliate) of a total gross dollar value of not
less than $1,000,000,000 in notional or actual
principal amount outstanding on any day during
the previous 15-month period, or has gross
mark-to-market positions of not less than
$100,000,000 (aggregated across counterparties)
in one or more such agreements or transactions
with the debtor or any other entity (other than
an affiliate) on any day during the previous
15-month period; or
``(B) a clearing organization (as defined
in section 402 of the Federal Deposit Insurance
Corporation Improvement Act of 1991);''; and
(3) by striking paragraph (26) and inserting the
following:
``(26) `forward contract merchant' means a Federal
reserve bank, or an entity the business of which
consists in whole or in part of entering into forward
contracts as or with merchants in a commodity (as
defined in section 761) or any similar good, article,
service, right, or interest which is presently or in
the future becomes the subject of dealing in the
forward contract trade;''.
(c) Definition of Master Netting Agreement and Master
Netting Agreement Participant.--Section 101 of title 11, United
States Code, is amended by inserting after paragraph (38) the
following new paragraphs:
``(38A) `master netting agreement'--
``(A) means an agreement providing for the
exercise of rights, including rights of
netting, setoff, liquidation, termination,
acceleration, or close out, under or in
connection with one or more contracts that are
described in any one or more of paragraphs (1)
through (5) of section 561(a), or any security
agreement or arrangement or other credit
enhancement related to one or more of the
foregoing, including any guarantee or
reimbursement obligation related to 1 or more
of the foregoing; and
``(B) if the agreement contains provisions
relating to agreements or transactions that are
not contracts described in paragraphs (1)
through (5) of section 561(a), shall be deemed
to be a master netting agreement only with
respect to those agreements or transactions
that are described in any one or more of
paragraphs (1) through (5) of section 561(a);
``(38B) `master netting agreement participant'
means an entity that, at any time before the filing of
the petition, is a party to an outstanding master
netting agreement with the debtor;''.
(d) Swap Agreements, Securities Contracts, Commodity
Contracts, Forward Contracts, Repurchase Agreements, and Master
Netting Agreements Under the Automatic-Stay.--
(1) In general.--Section 362(b) of title 11, United
States Code, as amended by sections 224, 303, 311, 401,
and 718, is amended--
(A) in paragraph (6), by inserting
``, pledged to, under the control of,'' after
``held by'';
(B) in paragraph (7), by inserting
``, pledged to, under the control of,'' after
``held by'';
(C) by striking paragraph (17) and
inserting the following:
``(17) under subsection (a), of the setoff by a
swap participant or financial participant of a mutual
debt and claim under or in connection with one or more
swap agreements that constitutes the setoff of a claim
against the debtor for any payment or other transfer of
property due from the debtor under or in connection
with any swap agreement against any payment due to the
debtor from the swap participant or financial
participant under or in connection with any swap
agreement or against cash, securities, or other
property held by, pledged to, under the control of, or
due from such swap participant or financial participant
to margin, guarantee, secure, or settle any swap
agreement;''; and
(D) by inserting after paragraph (26) the
following:
``(27) under subsection (a), of the setoff by a
master netting agreement participant of a mutual debt
and claim under or in connection with one or more
master netting agreements or any contract or agreement
subject to such agreements that constitutes the setoff
of a claim against the debtor for any payment or other
transfer of property due from the debtor under or in
connection with such agreements or any contract or
agreement subject to such agreements against any
payment due to the debtor from such master netting
agreement participant under or in connection with such
agreements or any contract or agreement subject to such
agreements or against cash, securities, or other
property held by, pledged to, under the control of, or
due from such master netting agreement participant to
margin, guarantee, secure, or settle such agreements or
any contract or agreement subject to such agreements,
to the extent that such participant is eligible to
exercise such offset rights under paragraph (6), (7),
or (17) for each individual contract covered by the
master netting agreement in issue.''.
(2) Limitation.--Section 362 of title 11, United
States Code, as amended by sections 106, 305, 311, and
441, is amended by adding at the end the following:
``(o) The exercise of rights not subject to the stay
arising under subsection (a) pursuant to paragraph (6), (7),
(17), or (27) of subsection (b) shall not be stayed by any
order of a court or administrative agency in any proceeding
under this title.''.
(e) Limitation of Avoidance Powers Under Master Netting
Agreement.--Section 546 of title 11, United States Code, is
amended--
(1) in subsection (g) (as added by section 103 of
Public Law 101-311)--
(A) by striking ``under a swap agreement'';
(B) by striking ``in connection with a swap
agreement'' and inserting ``under or in
connection with any swap agreement''; and
(C) by inserting ``or financial
participant'' after ``swap participant'' each
place such term appears; and
(2) by adding at the end the following:
``(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B),
and 548(b) the trustee may not avoid a transfer made by or to a
master netting agreement participant under or in connection
with any master netting agreement or any individual contract
covered thereby that is made before the commencement of the
case, except under section 548(a)(1)(A) and except to the
extent that the trustee could otherwise avoid such a transfer
made under an individual contract covered by such master
netting agreement.''.
(f) Fraudulent Transfers of Master Netting Agreements.--
Section 548(d)(2) of title 11, United States Code, is amended--
(1) in subparagraph (C), by striking ``and'' at the
end;
(2) in subparagraph (D), by striking the period and
inserting ``; and''; and
(3) by adding at the end the following new
subparagraph:
``(E) a master netting agreement participant that
receives a transfer in connection with a master netting
agreement or any individual contract covered thereby
takes for value to the extent of such transfer, except
that, with respect to a transfer under any individual
contract covered thereby, to the extent that such
master netting agreement participant otherwise did not
take (or is otherwise not deemed to have taken) such
transfer for value.''.
(g) Termination or Acceleration of Securities Contracts.--
Section 555 of title 11, United States Code, is amended--
(1) by amending the section heading to read as
follows:
``Sec. 555. Contractual right to liquidate, terminate, or accelerate a
securities contract'';
and
(2) in the first sentence, by striking
``liquidation'' and inserting ``liquidation,
termination, or acceleration''.
(h) Termination or Acceleration of Commodities or Forward
Contracts.--Section 556 of title 11, United States Code, is
amended--
(1) by amending the section heading to read as
follows:
``Sec. 556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract'';
(2) in the first sentence, by striking
``liquidation'' and inserting ``liquidation,
termination, or acceleration''; and
(3) in the second sentence, by striking ``As used''
and all that follows through ``right,'' and inserting
``As used in this section, the term `contractual right'
includes a right set forth in a rule or bylaw of a
derivatives clearing organization (as defined in the
Commodity Exchange Act), a multilateral clearing
organization (as defined in the Federal Deposit
Insurance Corporation Improvement Act of 1991), a
national securities exchange, a national securities
association, a securities clearing agency, a contract
market designated under the Commodity Exchange Act, a
derivatives transaction execution facility registered
under the Commodity Exchange Act, or a board of trade
(as defined in the Commodity Exchange Act) or in a
resolution of the governing board thereof and a
right,''.
(i) Termination or Acceleration of Repurchase Agreements.--
Section 559 of title 11, United States Code, is amended--
(1) by amending the section heading to read as
follows:
``Sec. 559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement'';
(2) in the first sentence, by striking
``liquidation'' and inserting ``liquidation,
termination, or acceleration''; and
(3) in the third sentence, by striking ``As used''
and all that follows through ``right,'' and inserting
``As used in this section, the term `contractual right'
includes a right set forth in a rule or bylaw of a
derivatives clearing organization (as defined in the
Commodity Exchange Act), a multilateral clearing
organization (as defined in the Federal Deposit
Insurance Corporation Improvement Act of 1991), a
national securities exchange, a national securities
association, a securities clearing agency, a contract
market designated under the Commodity Exchange Act, a
derivatives transaction execution facility registered
under the Commodity Exchange Act, or a board of trade
(as defined in the Commodity Exchange Act) or in a
resolution of the governing board thereof and a
right,''.
(j) Liquidation, Termination, or Acceleration of Swap
Agreements.--Section 560 of title 11, United States Code, is
amended--
(1) by amending the section heading to read as
follows:
``Sec. 560. Contractual right to liquidate, terminate, or accelerate a
swap agreement'';
(2) in the first sentence, by striking
``termination of a swap agreement'' and inserting
``liquidation, termination, or acceleration of one or
more swap agreements'';
(3) by striking ``in connection with any swap
agreement'' and inserting ``in connection with the
termination, liquidation, or acceleration of one or
more swap agreements''; and
(4) in the second sentence, by striking ``As used''
and all that follows through ``right,'' and inserting
``As used in this section, the term `contractual right'
includes a right set forth in a rule or bylaw of a
derivatives clearing organization (as defined in the
Commodity Exchange Act), a multilateral clearing
organization (as defined in the Federal Deposit
Insurance Corporation Improvement Act of 1991), a
national securities exchange, a national securities
association, a securities clearing agency, a contract
market designated under the Commodity Exchange Act, a
derivatives transaction execution facility registered
under the Commodity Exchange Act, or a board of trade
(as defined in the Commodity Exchange Act) or in a
resolution of the governing board thereof and a
right,''.
(k) Liquidation, Termination, Acceleration, or Offset Under
a Master Netting Agreement and Across Contracts.--
(1) In general.--Title 11, United States Code, is
amended by inserting after section 560 the following:
``Sec. 561. Contractual right to terminate, liquidate, accelerate, or
offset under a master netting agreement and across
contracts; proceedings under chapter 15
``(a) Subject to subsection (b), the exercise of any
contractual right, because of a condition of the kind specified
in section 365(e)(1), to cause the termination, liquidation, or
acceleration of or to offset or net termination values, payment
amounts, or other transfer obligations arising under or in
connection with one or more (or the termination, liquidation,
or acceleration of one or more)--
``(1) securities contracts, as defined in section
741(7);
``(2) commodity contracts, as defined in section
761(4);
``(3) forward contracts;
``(4) repurchase agreements;
``(5) swap agreements; or
``(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by operation
of any provision of this title or by any order of a court or
administrative agency in any proceeding under this title.
``(b)(1) A party may exercise a contractual right described
in subsection (a) to terminate, liquidate, or accelerate only
to the extent that such party could exercise such a right under
section 555, 556, 559, or 560 for each individual contract
covered by the master netting agreement in issue.
``(2) If a debtor is a commodity broker subject to
subchapter IV of chapter 7--
``(A) a party may not net or offset an obligation
to the debtor arising under, or in connection with, a
commodity contract traded on or subject to the rules of
a contract market designated under the Commodity
Exchange Act or a derivatives transaction execution
facility registered under the Commodity Exchange Act
against any claim arising under, or in connection with,
other instruments, contracts, or agreements listed in
subsection (a) except to the extent that the party has
positive net equity in the commodity accounts at the
debtor, as calculated under such subchapter; and
``(B) another commodity broker may not net or
offset an obligation to the debtor arising under, or in
connection with, a commodity contract entered into or
held on behalf of a customer of the debtor and traded
on or subject to the rules of a contract market
designated under the Commodity Exchange Act or a
derivatives transaction execution facility registered
under the Commodity Exchange Act against any claim
arising under, or in connection with, other
instruments, contracts, or agreements listed in
subsection (a).
``(3) No provision of subparagraph (A) or (B) of paragraph
(2) shall prohibit the offset of claims and obligations that
arise under--
``(A) a cross-margining agreement or similar
arrangement that has been approved by the Commodity
Futures Trading Commission or submitted to the
Commodity Futures Trading Commission under paragraph
(1) or (2) of section 5c(c) of the Commodity Exchange
Act and has not been abrogated or rendered ineffective
by the Commodity Futures Trading Commission; or
``(B) any other netting agreement between a
clearing organization (as defined in section 761) and
another entity that has been approved by the Commodity
Futures Trading Commission.
``(c) As used in this section, the term `contractual right'
includes a right set forth in a rule or bylaw of a derivatives
clearing organization (as defined in the Commodity Exchange
Act), a multilateral clearing organization (as defined in the
Federal Deposit Insurance Corporation Improvement Act of 1991),
a national securities exchange, a national securities
association, a securities clearing agency, a contract market
designated under the Commodity Exchange Act, a derivatives
transaction execution facility registered under the Commodity
Exchange Act, or a board of trade (as defined in the Commodity
Exchange Act) or in a resolution of the governing board
thereof, and a right, whether or not evidenced in writing,
arising under common law, under law merchant, or by reason of
normal business practice.
``(d) Any provisions of this title relating to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, or master netting agreements shall
apply in a case under chapter 15, so that enforcement of
contractual provisions of such contracts and agreements in
accordance with their terms will not be stayed or otherwise
limited by operation of any provision of this title or by order
of a court in any case under this title, and to limit avoidance
powers to the same extent as in a proceeding under chapter 7 or
11 of this title (such enforcement not to be limited based on
the presence or absence of assets of the debtor in the United
States).''.
(2) Conforming amendment.--The table of sections
for chapter 5 of title 11, United States Code, is
amended by inserting after the item relating to section
560 the following:
``561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across contracts;
proceedings under chapter 15.''.
(l) Commodity Broker Liquidations.--Title 11, United States
Code, is amended by inserting after section 766 the following:
``Sec. 767. Commodity broker liquidation and forward contract
merchants, commodity brokers, stockbrokers,
financial institutions, financial participants,
securities clearing agencies, swap participants,
repo participants, and master netting agreement
participants
``Notwithstanding any other provision of this title, the
exercise of rights by a forward contract merchant, commodity
broker, stockbroker, financial institution, financial
participant, securities clearing agency, swap participant, repo
participant, or master netting agreement participant under this
title shall not affect the priority of any unsecured claim it
may have after the exercise of such rights.''.
(m) Stockbroker Liquidations.--Title 11, United States
Code, is amended by inserting after section 752 the following:
``Sec. 753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, financial participants, securities
clearing agencies, swap participants, repo
participants, and master netting agreement
participants
``Notwithstanding any other provision of this title, the
exercise of rights by a forward contract merchant, commodity
broker, stockbroker, financial institution, securities clearing
agency, swap participant, repo participant, financial
participant, or master netting agreement participant under this
title shall not affect the priority of any unsecured claim it
may have after the exercise of such rights.''.
(n) Setoff.--Section 553 of title 11, United States Code,
is amended--
(1) in subsection (a)(2)(B)(ii), by inserting
before the semicolon the following: ``(except for a
setoff of a kind described in section 362(b)(6),
362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560,
or 561)'';
(2) in subsection (a)(3)(C), by inserting before
the period the following: ``(except for a setoff of a
kind described in section 362(b)(6), 362(b)(7),
362(b)(17), 362(b)(27), 555, 556, 559, 560, or 561 of
this title)''; and
(3) in subsection (b)(1), by striking
``362(b)(14),'' and inserting ``362(b)(17), 362(b)(27),
555, 556, 559, 560, 561,''.
(o) Securities Contracts, Commodity Contracts, and Forward
Contracts.--Title 11, United States Code, is amended--
(1) in section 362(b)(6), by striking ``financial
institutions,'' each place such term appears and
inserting ``financial institution, financial
participant,'';
(2) in sections 362(b)(7) and 546(f), by inserting
``or financial participant'' after ``repo participant''
each place such term appears;
(3) in section 546(e), by inserting ``financial
participant,'' after ``financial institution,'';
(4) in section 548(d)(2)(B), by inserting
``financial participant,'' after ``financial
institution,'';
(5) in section 548(d)(2)(C), by inserting ``or
financial participant'' after ``repo participant'';
(6) in section 548(d)(2)(D), by inserting ``or
financial participant'' after ``swap participant'';
(7) in section 555--
(A) by inserting ``financial participant,''
after ``financial institution,''; and
(B) by striking the second sentence and
inserting the following: ``As used in this
section, the term `contractual right' includes
a right set forth in a rule or bylaw of a
derivatives clearing organization (as defined
in the Commodity Exchange Act), a multilateral
clearing organization (as defined in the
Federal Deposit Insurance Corporation
Improvement Act of 1991), a national securities
exchange, a national securities association, a
securities clearing agency, a contract market
designated under the Commodity Exchange Act, a
derivatives transaction execution facility
registered under the Commodity Exchange Act, or
a board of trade (as defined in the Commodity
Exchange Act), or in a resolution of the
governing board thereof, and a right, whether
or not in writing, arising under common law,
under law merchant, or by reason of normal
business practice'';
(8) in section 556, by inserting ``, financial
participant,'' after ``commodity broker'';
(9) in section 559, by inserting ``or financial
participant'' after ``repo participant'' each place
such term appears; and
(10) in section 560, by inserting ``or financial
participant'' after ``swap participant''.
(p) Conforming Amendments.--Title 11, United States Code,
is amended--
(1) in the table of sections for chapter 5--
(A) by amending the items relating to
sections 555 and 556 to read as follows:
``555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
``556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract.'';
and
(B) by amending the items relating to
sections 559 and 560 to read as follows:
``559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
``560. Contractual right to liquidate, terminate, or accelerate a swap
agreement.'';
and
(2) in the table of sections for chapter 7--
(A) by inserting after the item relating to
section 766 the following:
``767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
financial participants, securities clearing agencies, swap
participants, repo participants, and master netting agreement
participants.'';
and
(B) by inserting after the item relating to
section 752 the following:
``753. Stockbroker liquidation and forward contract merchants, commodity
brokers, stockbrokers, financial institutions, financial
participants, securities clearing agencies, swap participants,
repo participants, and master netting agreement
participants.''.
SEC. 908. RECORDKEEPING REQUIREMENTS.
Section 11(e)(8) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)) is amended by adding at the end the
following new subparagraph:
``(H) Recordkeeping requirements.--The
Corporation, in consultation with the
appropriate Federal banking agencies, may
prescribe regulations requiring more detailed
recordkeeping by any insured depository
institution with respect to qualified financial
contracts (including market valuations) only if
such insured depository institution is in a
troubled condition (as such term is defined by
the Corporation pursuant to section 32).''.
SEC. 909. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION REQUIREMENT.
Section 13(e)(2) of the Federal Deposit Insurance Act (12
U.S.C. 1823(e)(2)) is amended to read as follows:
``(2) Exemptions from contemporaneous execution
requirement.--An agreement to provide for the lawful
collateralization of--
``(A) deposits of, or other credit
extension by, a Federal, State, or local
governmental entity, or of any depositor
referred to in section 11(a)(2), including an
agreement to provide collateral in lieu of a
surety bond;
``(B) bankruptcy estate funds pursuant to
section 345(b)(2) of title 11, United States
Code;
``(C) extensions of credit, including any
overdraft, from a Federal reserve bank or
Federal home loan bank; or
``(D) one or more qualified financial
contracts, as defined in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph
(1)(B) solely because such agreement was not executed
contemporaneously with the acquisition of the
collateral or because of pledges, delivery, or
substitution of the collateral made in accordance with
such agreement.''.
SEC. 910. DAMAGE MEASURE.
(a) In General.--Title 11, United States Code, is amended--
(1) by inserting after section 561, as added by
section 907, the following:
``Sec. 562. Timing of damage measurement in connection with swap
agreements, securities contracts, forward
contracts, commodity contracts, repurchase
agreements, and master netting agreements
``(a) If the trustee rejects a swap agreement, securities
contract (as defined in section 741), forward contract,
commodity contract (as defined in section 761), repurchase
agreement, or master netting agreement pursuant to section
365(a), or if a forward contract merchant, stockbroker,
financial institution, securities clearing agency, repo
participant, financial participant, master netting agreement
participant, or swap participant liquidates, terminates, or
accelerates such contract or agreement, damages shall be
measured as of the earlier of--
``(1) the date of such rejection; or
``(2) the date or dates of such liquidation,
termination, or acceleration.
``(b) If there are not any commercially reasonable
determinants of value as of any date referred to in paragraph
(1) or (2) of subsection (a), damages shall be measured as of
the earliest subsequent date or dates on which there are
commercially reasonable determinants of value.
``(c) For the purposes of subsection (b), if damages are
not measured as of the date or dates of rejection, liquidation,
termination, or acceleration, and the forward contract
merchant, stockbroker, financial institution, securities
clearing agency, repo participant, financial participant,
master netting agreement participant, or swap participant or
the trustee objects to the timing of the measurement of
damages--
``(1) the trustee, in the case of an objection by a
forward contract merchant, stockbroker, financial
institution, securities clearing agency, repo
participant, financial participant, master netting
agreement participant, or swap participant; or
``(2) the forward contract merchant, stockbroker,
financial institution, securities clearing agency, repo
participant, financial participant, master netting
agreement participant, or swap participant, in the case
of an objection by the trustee,
has the burden of proving that there were no commercially
reasonable determinants of value as of such date or dates.'';
and
(2) in the table of sections for chapter 5, by
inserting after the item relating to section 561 (as
added by section 907) the following new item:
``562. Timing of damage measure in connection with swap agreements,
securities contracts, forward contracts, commodity contracts,
repurchase agreements, or master netting agreements.''.
(b) Claims Arising From Rejection.--Section 502(g) of title
11, United States Code, is amended--
(1) by inserting ``(1)'' after ``(g)''; and
(2) by adding at the end the following:
``(2) A claim for damages calculated in accordance with
section 562 of this title shall be allowed under subsection
(a), (b), or (c), or disallowed under subsection (d) or (e), as
if such claim had arisen before the date of the filing of the
petition.''.
SEC. 911. SIPC STAY.
Section 5(b)(2) of the Securities Investor Protection Act
of 1970 (15 U.S.C. 78eee(b)(2)) is amended by adding at the end
the following new subparagraph:
``(C) Exception from stay.--
``(i) Notwithstanding section 362
of title 11, United States Code,
neither the filing of an application
under subsection (a)(3) nor any order
or decree obtained by SIPC from the
court shall operate as a stay of any
contractual rights of a creditor to
liquidate, terminate, or accelerate a
securities contract, commodity
contract, forward contract, repurchase
agreement, swap agreement, or master
netting agreement, as those terms are
defined in sections 101, 741, and 761
of title 11, United States Code, to
offset or net termination values,
payment amounts, or other transfer
obligations arising under or in
connection with one or more of such
contracts or agreements, or to
foreclose on any cash collateral
pledged by the debtor, whether or not
with respect to one or more of such
contracts or agreements.
``(ii) Notwithstanding clause (i),
such application, order, or decree may
operate as a stay of the foreclosure
on, or disposition of, securities
collateral pledged by the debtor,
whether or not with respect to one or
more of such contracts or agreements,
securities sold by the debtor under a
repurchase agreement, or securities
lent under a securities lending
agreement.
``(iii) As used in this
subparagraph, the term `contractual
right' includes a right set forth in a
rule or bylaw of a national securities
exchange, a national securities
association, or a securities clearing
agency, a right set forth in a bylaw of
a clearing organization or contract
market or in a resolution of the
governing board thereof, and a right,
whether or not in writing, arising
under common law, under law merchant,
or by reason of normal business
practice.''.
TITLE X--PROTECTION OF FAMILY FARMERS AND FAMILY FISHERMEN
SEC. 1001. PERMANENT REENACTMENT OF CHAPTER 12.
(a) Reenactment.--
(1) In general.--Chapter 12 of title 11, United
States Code, as reenacted by section 149 of division C
of the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (Public Law 105-277), is
hereby reenacted, and as here reenacted is amended by
this Act.
(2) Effective date.--Subsection (a) shall take
effect on the date of the enactment of this Act.
(b) Conforming Amendment.--Section 302 of the Bankruptcy
Judges, United States Trustees, and Family Farmer Bankruptcy
Act of 1986 (28 U.S.C. 581 note) is amended by striking
subsection (f).
SEC. 1002. DEBT LIMIT INCREASE.
Section 104(b) of title 11, United States Code, as amended
by section 226, is amended by inserting ``101(18),'' after
``101(3),'' each place it appears.
SEC. 1003. CERTAIN CLAIMS OWED TO GOVERNMENTAL UNITS.
(a) Contents of Plan.--Section 1222(a)(2) of title 11,
United States Code, is amended to read as follows:
``(2) provide for the full payment, in deferred
cash payments, of all claims entitled to priority under
section 507, unless--
``(A) the claim is a claim owed to a
governmental unit that arises as a result of
the sale, transfer, exchange, or other
disposition of any farm asset used in the
debtor's farming operation, in which case the
claim shall be treated as an unsecured claim
that is not entitled to priority under section
507, but the debt shall be treated in such
manner only if the debtor receives a discharge;
or
``(B) the holder of a particular claim
agrees to a different treatment of that
claim;''.
(b) Special Notice Provisions.--Section 1231(b) of title
11, United States Code, as so designated by section 719, is
amended by striking ``a State or local governmental unit'' and
inserting ``any governmental unit''.
(c) Effective Date; Application of Amendments.--This
section and the amendments made by this section shall take
effect on the date of the enactment of this Act and shall not
apply with respect to cases commenced under title 11 of the
United States Code before such date.
SEC. 1004. DEFINITION OF FAMILY FARMER.
Section 101(18) of title 11, United States Code, is
amended--
(1) in subparagraph (A)--
(A) by striking ``$1,500,000'' and
inserting ``$3,237,000''; and
(B) by striking ``80'' and inserting
``50''; and
(2) in subparagraph (B)(ii)--
(A) by striking ``$1,500,000'' and
inserting ``$3,237,000''; and
(B) by striking ``80'' and inserting
``50''.
SEC. 1005. ELIMINATION OF REQUIREMENT THAT FAMILY FARMER AND SPOUSE
RECEIVE OVER 50 PERCENT OF INCOME FROM FARMING
OPERATION IN YEAR PRIOR TO BANKRUPTCY.
Section 101(18)(A) of title 11, United States Code, is
amended by striking ``for the taxable year preceding the
taxable year'' and inserting the following:
``for--
``(i) the taxable year preceding; or
``(ii) each of the 2d and 3d taxable years
preceding;
the taxable year''.
SEC. 1006. PROHIBITION OF RETROACTIVE ASSESSMENT OF DISPOSABLE INCOME.
(a) Confirmation of Plan.--Section 1225(b)(1) of title 11,
United States Code, is amended--
(1) in subparagraph (A) by striking ``or'' at the
end;
(2) in subparagraph (B) by striking the period at
the end and inserting ``; or''; and
(3) by adding at the end the following:
``(C) the value of the property to be distributed
under the plan in the 3-year period, or such longer
period as the court may approve under section 1222(c),
beginning on the date that the first distribution is
due under the plan is not less than the debtor's
projected disposable income for such period.''.
(b) Modification of Plan.--Section 1229 of title 11, United
States Code, is amended by adding at the end the following:
``(d) A plan may not be modified under this section--
``(1) to increase the amount of any payment due
before the plan as modified becomes the plan;
``(2) by anyone except the debtor, based on an
increase in the debtor's disposable income, to increase
the amount of payments to unsecured creditors required
for a particular month so that the aggregate of such
payments exceeds the debtor's disposable income for
such month; or
``(3) in the last year of the plan by anyone except
the debtor, to require payments that would leave the
debtor with insufficient funds to carry on the farming
operation after the plan is completed.''.
SEC. 1007. FAMILY FISHERMEN.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended--
(1) by inserting after paragraph (7) the following:
``(7A) `commercial fishing operation' means--
``(A) the catching or harvesting of fish,
shrimp, lobsters, urchins, seaweed, shellfish,
or other aquatic species or products of such
species; or
``(B) for purposes of section 109 and
chapter 12, aquaculture activities consisting
of raising for market any species or product
described in subparagraph (A);
``(7B) `commercial fishing vessel' means a vessel
used by a family fisherman to carry out a commercial
fishing operation;''; and
(2) by inserting after paragraph (19) the
following:
``(19A) `family fisherman' means--
``(A) an individual or individual and
spouse engaged in a commercial fishing
operation--
``(i) whose aggregate debts do not
exceed $1,500,000 and not less than 80
percent of whose aggregate
noncontingent, liquidated debts
(excluding a debt for the principal
residence of such individual or such
individual and spouse, unless such debt
arises out of a commercial fishing
operation), on the date the case is
filed, arise out of a commercial
fishing operation owned or operated by
such individual or such individual and
spouse; and
``(ii) who receive from such
commercial fishing operation more than
50 percent of such individual's or such
individual's and spouse's gross income
for the taxable year preceding the
taxable year in which the case
concerning such individual or such
individual and spouse was filed; or
``(B) a corporation or partnership--
``(i) in which more than 50 percent
of the outstanding stock or equity is
held by--
``(I) 1 family that
conducts the commercial fishing
operation; or
``(II) 1 family and the
relatives of the members of
such family, and such family or
such relatives conduct the
commercial fishing operation;
and
``(ii)(I) more than 80 percent of
the value of its assets consists of
assets related to the commercial
fishing operation;
``(II) its aggregate debts do not
exceed $1,500,000 and not less than 80
percent of its aggregate noncontingent,
liquidated debts (excluding a debt for
1 dwelling which is owned by such
corporation or partnership and which a
shareholder or partner maintains as a
principal residence, unless such debt
arises out of a commercial fishing
operation), on the date the case is
filed, arise out of a commercial
fishing operation owned or operated by
such corporation or such partnership;
and
``(III) if such corporation issues
stock, such stock is not publicly
traded;
``(19B) `family fisherman with regular annual
income' means a family fisherman whose annual income is
sufficiently stable and regular to enable such family
fisherman to make payments under a plan under chapter
12 of this title;''.
(b) Who May Be a Debtor.--Section 109(f) of title 11,
United States Code, is amended by inserting ``or family
fisherman'' after ``family farmer''.
(c) Chapter 12.--Chapter 12 of title 11, United States
Code, is amended--
(1) in the chapter heading, by inserting ``OR
FISHERMAN'' after ``FAMILY FARMER'';
(2) in section 1203, by inserting ``or commercial
fishing operation'' after ``farm''; and
(3) in section 1206, by striking ``if the property
is farmland or farm equipment'' and inserting ``if the
property is farmland, farm equipment, or property used
to carry out a commercial fishing operation (including
a commercial fishing vessel)''.
(d) Clerical Amendment.--In the table of chapters for title
11, United States Code, the item relating to chapter 12, is
amended to read as follows:
``12. Adjustments of Debts of a Family Farmer or Family Fisherman
with Regular Annual Income.........................1201''.
(e) Applicability.--Nothing in this section shall change,
affect, or amend the Fishery Conservation and Management Act of
1976 (16 U.S.C. 1801, et seq.).
TITLE XI--HEALTH CARE AND EMPLOYEE BENEFITS
SEC. 1101. DEFINITIONS.
(a) Health Care Business Defined.--Section 101 of title 11,
United States Code, as amended by section 306, is amended--
(1) by redesignating paragraph (27A) as paragraph
(27B); and
(2) by inserting after paragraph (27) the
following:
``(27A) `health care business'--
``(A) means any public or private entity
(without regard to whether that entity is
organized for profit or not for profit) that is
primarily engaged in offering to the general
public facilities and services for--
``(i) the diagnosis or treatment of
injury, deformity, or disease; and
``(ii) surgical, drug treatment,
psychiatric, or obstetric care; and
``(B) includes--
``(i) any--
``(I) general or
specialized hospital;
``(II) ancillary
ambulatory, emergency, or
surgical treatment facility;
``(III) hospice;
``(IV) home health agency;
and
``(V) other health care
institution that is similar to
an entity referred to in
subclause (I), (II), (III), or
(IV); and
``(ii) any long-term care facility,
including any--
``(I) skilled nursing
facility;
``(II) intermediate care
facility;
``(III) assisted living
facility;
``(IV) home for the aged;
``(V) domiciliary care
facility; and
``(VI) health care
institution that is related to
a facility referred to in
subclause (I), (II), (III),
(IV), or (V), if that
institution is primarily
engaged in offering room,
board, laundry, or personal
assistance with activities of
daily living and incidentals to
activities of daily living;''.
(b) Patient and Patient Records Defined.--Section 101 of
title 11, United States Code, is amended by inserting after
paragraph (40) the following:
``(40A) `patient' means any person who obtains or
receives services from a health care business;
``(40B) `patient records' means any written
document relating to a patient or a record recorded in
a magnetic, optical, or other form of electronic
medium;''.
(c) Rule of Construction.--The amendments made by
subsection (a) of this section shall not affect the
interpretation of section 109(b) of title 11, United States
Code.
SEC. 1102. DISPOSAL OF PATIENT RECORDS.
(a) In General.--Subchapter III of chapter 3 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 351. Disposal of patient records
``If a health care business commences a case under chapter
7, 9, or 11, and the trustee does not have a sufficient amount
of funds to pay for the storage of patient records in the
manner required under applicable Federal or State law, the
following requirements shall apply:
``(1) The trustee shall--
``(A) promptly publish notice, in 1 or more
appropriate newspapers, that if patient records
are not claimed by the patient or an insurance
provider (if applicable law permits the
insurance provider to make that claim) by the
date that is 365 days after the date of that
notification, the trustee will destroy the
patient records; and
``(B) during the first 180 days of the 365-
day period described in subparagraph (A),
promptly attempt to notify directly each
patient that is the subject of the patient
records and appropriate insurance carrier
concerning the patient records by mailing to
the most recent known address of that patient,
or a family member or contact person for that
patient, and to the appropriate insurance
carrier an appropriate notice regarding the
claiming or disposing of patient records.
``(2) If, after providing the notification under
paragraph (1), patient records are not claimed during
the 365-day period described under that paragraph, the
trustee shall mail, by certified mail, at the end of
such 365-day period a written request to each
appropriate Federal agency to request permission from
that agency to deposit the patient records with that
agency, except that no Federal agency is required to
accept patient records under this paragraph.
``(3) If, following the 365-day period described in
paragraph (2) and after providing the notification
under paragraph (1), patient records are not claimed by
a patient or insurance provider, or request is not
granted by a Federal agency to deposit such records
with that agency, the trustee shall destroy those
records by--
``(A) if the records are written, shredding
or burning the records; or
``(B) if the records are magnetic, optical,
or other electronic records, by otherwise
destroying those records so that those records
cannot be retrieved.''.
(b) Clerical Amendment.--The table of sections for
subchapter III of chapter 3 of title 11, United States Code, is
amended by adding at the end the following:
``351. Disposal of patient records.''.
SEC. 1103. ADMINISTRATIVE EXPENSE CLAIM FOR COSTS OF CLOSING A HEALTH
CARE BUSINESS AND OTHER ADMINISTRATIVE EXPENSES.
Section 503(b) of title 11, United States Code, as amended
by section 445, is amended by adding at the end the following:
``(8) the actual, necessary costs and expenses of
closing a health care business incurred by a trustee or
by a Federal agency (as defined in section 551(1) of
title 5) or a department or agency of a State or
political subdivision thereof, including any cost or
expense incurred--
``(A) in disposing of patient records in
accordance with section 351; or
``(B) in connection with transferring
patients from the health care business that is
in the process of being closed to another
health care business; and''.
SEC. 1104. APPOINTMENT OF OMBUDSMAN TO ACT AS PATIENT ADVOCATE.
(a) Ombudsman To Act as Patient Advocate.--
(1) Appointment of ombudsman.--Title 11, United
States Code, as amended by section 232, is amended by
inserting after section 332 the following:
``Sec. 333. Appointment of patient care ombudsman
``(a)(1) If the debtor in a case under chapter 7, 9, or 11
is a health care business, the court shall order, not later
than 30 days after the commencement of the case, the
appointment of an ombudsman to monitor the quality of patient
care and to represent the interests of the patients of the
health care business unless the court finds that the
appointment of such ombudsman is not necessary for the
protection of patients under the specific facts of the case.
``(2)(A) If the court orders the appointment of an
ombudsman under paragraph (1), the United States trustee shall
appoint 1 disinterested person (other than the United States
trustee) to serve as such ombudsman.
``(B) If the debtor is a health care business that provides
long-term care, then the United States trustee may appoint the
State Long-Term Care Ombudsman appointed under the Older
Americans Act of 1965 for the State in which the case is
pending to serve as the ombudsman required by paragraph (1).
``(C) If the United States trustee does not appoint a State
Long-Term Care Ombudsman under subparagraph (B), the court
shall notify the State Long-Term Care Ombudsman appointed under
the Older Americans Act of 1965 for the State in which the case
is pending, of the name and address of the person who is
appointed under subparagraph (A).
``(b) An ombudsman appointed under subsection (a) shall--
``(1) monitor the quality of patient care provided
to patients of the debtor, to the extent necessary
under the circumstances, including interviewing
patients and physicians;
``(2) not later than 60 days after the date of
appointment, and not less frequently than at 60-day
intervals thereafter, report to the court, at a hearing
or in writing, regarding the quality of patient care
provided to patients of the debtor; and
``(3) if such ombudsman determines that the quality
of patient care provided to patients of the debtor is
declining significantly or is otherwise being
materially compromised, file with the court a motion or
a written report, with notice to the parties in
interest immediately upon making such determination.
``(c)(1) An ombudsman appointed under subsection (a) shall
maintain any information obtained by such ombudsman under this
section that relates to patients (including information
relating to patient records) as confidential information. Such
ombudsman may not review confidential patient records unless
the court approves such review in advance and imposes
restrictions on such ombudsman to protect the confidentiality
of such records.
``(2) An ombudsman appointed under subsection (a)(2)(B)
shall have access to patient records consistent with authority
of such ombudsman under the Older Americans Act of 1965 and
under non-Federal laws governing the State Long-Term Care
Ombudsman program.''.
(2) Clerical amendment.--The table of sections for
subchapter II of chapter 3 of title 11, United States
Code, as amended by section 232, is amended by adding
at the end the following:
``333. Appointment of ombudsman.''.
(b) Compensation of Ombudsman.--Section 330(a)(1) of title
11, United States Code, is amended--
(1) in the matter preceding subparagraph (A), by
inserting ``an ombudsman appointed under section 333,
or'' before ``a professional person''; and
(2) in subparagraph (A), by inserting
``ombudsman,'' before ``professional person''.
SEC. 1105. DEBTOR IN POSSESSION; DUTY OF TRUSTEE TO TRANSFER PATIENTS.
(a) In General.--Section 704(a) of title 11, United States
Code, as amended by sections 102, 219, and 446, is amended by
adding at the end the following:
``(12) use all reasonable and best efforts to
transfer patients from a health care business that is
in the process of being closed to an appropriate health
care business that--
``(A) is in the vicinity of the health care
business that is closing;
``(B) provides the patient with services
that are substantially similar to those
provided by the health care business that is in
the process of being closed; and
``(C) maintains a reasonable quality of
care.''.
(b) Conforming Amendment.--Section 1106(a)(1) of title 11,
United States Code, as amended by section 446, is amended by
striking ``and (11)'' and inserting ``(11), and (12)''.
SEC. 1106. EXCLUSION FROM PROGRAM PARTICIPATION NOT SUBJECT TO
AUTOMATIC STAY.
Section 362(b) of title 11, United States Code, is amended
by inserting after paragraph (27), as amended by sections 224,
303, 311, 401, 718, and 907, the following:
``(28) under subsection (a), of the exclusion by
the Secretary of Health and Human Services of the
debtor from participation in the medicare program or
any other Federal health care program (as defined in
section 1128B(f) of the Social Security Act pursuant to
title XI of such Act or title XVIII of such Act.''.
TITLE XII--TECHNICAL AMENDMENTS
SEC. 1201. DEFINITIONS.
Section 101 of title 11, United States Code, as
hereinbefore amended by this Act, is amended--
(1) by striking ``In this title--'' and inserting
``In this title the following definitions shall
apply:'';
(2) in each paragraph, by inserting ``The term''
after the paragraph designation;
(3) in paragraph (35)(B), by striking ``paragraphs
(21B) and (33)(A)'' and inserting ``paragraphs (23) and
(35)'';
(4) in each of paragraphs (35A), (38), and (54A),
by striking ``; and'' at the end and inserting a
period;
(5) in paragraph (51B)--
(A) by inserting ``who is not a family
farmer'' after ``debtor'' the first place it
appears; and
(B) by striking ``thereto having
aggregate'' and all that follows through the
end of the paragraph and inserting a semicolon;
(6) by striking paragraph (54) and inserting the
following:
``(54) The term `transfer' means--
``(A) the creation of a lien;
``(B) the retention of title as a security
interest;
``(C) the foreclosure of a debtor's equity
of redemption; or
``(D) each mode, direct or indirect,
absolute or conditional, voluntary or
involuntary, of disposing of or parting with--
``(i) property; or
``(ii) an interest in property;'';
(7) by indenting the left margin of paragraph (54A)
2 ems to the right; and
(8) in each of paragraphs (1) through (35), in each
of paragraphs (36), (37), (38A), (38B) and (39A), and
in each of paragraphs (40) through (55), by striking
the semicolon at the end and inserting a period.
SEC. 1202. ADJUSTMENT OF DOLLAR AMOUNTS.
Section 104 of title 11, United States Code, is amended by
inserting ``522(f)(3),'' after ``522(d),'' each place it
appears.
SEC. 1203. EXTENSION OF TIME.
Section 108(c)(2) of title 11, United States Code, is
amended by striking ``922'' and all that follows through
``or'', and inserting ``922, 1201, or''.
SEC. 1204. TECHNICAL AMENDMENTS.
Title 11, United States Code, is amended--
(1) in section 109(b)(2), by striking ``subsection
(c) or (d) of''; and
(2) in section 552(b)(1), by striking ``product''
each place it appears and inserting ``products''.
SEC. 1205. PENALTY FOR PERSONS WHO NEGLIGENTLY OR FRAUDULENTLY PREPARE
BANKRUPTCY PETITIONS.
Section 110(j)(4) of title 11, United States Code, as so
redesignated by section 221, is amended by striking
``attorney's'' and inserting ``attorneys' ''.
SEC. 1206. LIMITATION ON COMPENSATION OF PROFESSIONAL PERSONS.
Section 328(a) of title 11, United States Code, is amended
by inserting ``on a fixed or percentage fee basis,'' after
``hourly basis,''.
SEC. 1207. EFFECT OF CONVERSION.
Section 348(f)(2) of title 11, United States Code, is
amended by inserting ``of the estate'' after ``property'' the
first place it appears.
SEC. 1208. ALLOWANCE OF ADMINISTRATIVE EXPENSES.
Section 503(b)(4) of title 11, United States Code, is
amended by inserting ``subparagraph (A), (B), (C), (D), or (E)
of'' before ``paragraph (3)''.
SEC. 1209. EXCEPTIONS TO DISCHARGE.
Section 523, and of title 11, United States Code, as
amended by sections 215 and 314, is amended--
(1) by transferring paragraph (15), as added by
section 304(e) of Public Law 103-394 (108 Stat. 4133),
so as to insert such paragraph after subsection
(a)(14A);
(2) in subsection (a)(9), by striking ``motor
vehicle'' and inserting ``motor vehicle, vessel, or
aircraft''; and
(3) in subsection (e), by striking ``a insured''
and inserting ``an insured''.
SEC. 1210. EFFECT OF DISCHARGE.
Section 524(a)(3) of title 11, United States Code, is
amended by striking ``section 523'' and all that follows
through ``or that'' and inserting ``section 523, 1228(a)(1), or
1328(a)(1), or that''.
SEC. 1211. PROTECTION AGAINST DISCRIMINATORY TREATMENT.
Section 525(c) of title 11, United States Code, is
amended--
(1) in paragraph (1), by inserting ``student''
before ``grant'' the second place it appears; and
(2) in paragraph (2), by striking ``the program
operated under part B, D, or E of'' and inserting ``any
program operated under''.
SEC. 1212. PROPERTY OF THE ESTATE.
Section 541(b)(4)(B)(ii) of title 11, United States Code,
is amended by inserting ``365 or'' before ``542''.
SEC. 1213. PREFERENCES.
(a) In General.--Section 547 of title 11, United States
Code, as amended by section 201, is amended--
(1) in subsection (b), by striking ``subsection
(c)'' and inserting ``subsections (c) and (i)''; and
(2) by adding at the end the following:
``(i) If the trustee avoids under subsection (b) a transfer
made between 90 days and 1 year before the date of the filing
of the petition, by the debtor to an entity that is not an
insider for the benefit of a creditor that is an insider, such
transfer shall be considered to be avoided under this section
only with respect to the creditor that is an insider.''.
(b) Applicability.--The amendments made by this section
shall apply to any case that is pending or commenced on or
after the date of enactment of this Act.
SEC. 1214. POSTPETITION TRANSACTIONS.
Section 549(c) of title 11, United States Code, is
amended--
(1) by inserting ``an interest in'' after
``transfer of'' each place it appears;
(2) by striking ``such property'' and inserting
``such real property''; and
(3) by striking ``the interest'' and inserting
``such interest''.
SEC. 1215. DISPOSITION OF PROPERTY OF THE ESTATE.
Section 726(b) of title 11, United States Code, is amended
by striking ``1009,''.
SEC. 1216. GENERAL PROVISIONS.
Section 901(a) of title 11, United States Code, is amended
by inserting ``1123(d),'' after ``1123(b),''.
SEC. 1217. ABANDONMENT OF RAILROAD LINE.
Section 1170(e)(1) of title 11, United States Code, is
amended by striking ``section 11347'' and inserting ``section
11326(a)''.
SEC. 1218. CONTENTS OF PLAN.
Section 1172(c)(1) of title 11, United States Code, is
amended by striking ``section 11347'' and inserting ``section
11326(a)''.
SEC. 1219. BANKRUPTCY CASES AND PROCEEDINGS.
Section 1334(d) of title 28, United States Code, is
amended--
(1) by striking ``made under this subsection'' and
inserting ``made under subsection (c)''; and
(2) by striking ``This subsection'' and inserting
``Subsection (c) and this subsection''.
SEC. 1220. KNOWING DISREGARD OF BANKRUPTCY LAW OR RULE.
Section 156(a) of title 18, United States Code, is
amended--
(1) in the first undesignated paragraph--
(A) by inserting ``(1) the term'' before ``
`bankruptcy''; and
(B) by striking the period at the end and
inserting ``; and''; and
(2) in the second undesignated paragraph--
(A) by inserting ``(2) the term'' before ``
`document''; and
(B) by striking ``this title'' and
inserting ``title 11''.
SEC. 1221. TRANSFERS MADE BY NONPROFIT CHARITABLE CORPORATIONS.
(a) Sale of Property of Estate.--Section 363(d) of title
11, United States Code, is amended by striking ``only'' and all
that follows through the end of the subsection and inserting
``only--
``(1) in accordance with applicable nonbankruptcy
law that governs the transfer of property by a
corporation or trust that is not a moneyed, business,
or commercial corporation or trust; and
``(2) to the extent not inconsistent with any
relief granted under subsection (c), (d), (e), or (f)
of section 362.''.
(b) Confirmation of Plan for Reorganization.--Section
1129(a) of title 11, United States Code, as amended by sections
213, 321, and 331, is amended by adding at the end the
following:
``(17) All transfers of property of the plan shall
be made in accordance with any applicable provisions of
nonbankruptcy law that govern the transfer of property
by a corporation or trust that is not a moneyed,
business, or commercial corporation or trust.''.
(c) Transfer of Property.--Section 541 of title 11, United
States Code, as amended by section 225, is amended by adding at
the end the following:
``(f) Notwithstanding any other provision of this title,
property that is held by a debtor that is a corporation
described in section 501(c)(3) of the Internal Revenue Code of
1986 and exempt from tax under section 501(a) of such Code may
be transferred to an entity that is not such a corporation, but
only under the same conditions as would apply if the debtor had
not filed a case under this title.''.
(d) Applicability.--The amendments made by this section
shall apply to a case pending under title 11, United States
Code, on the date of enactment of this Act, or filed under that
title on or after that date of enactment, except that the court
shall not confirm a plan under chapter 11 of title 11, United
States Code, without considering whether this section would
substantially affect the rights of a party in interest who
first acquired rights with respect to the debtor after the date
of the petition. The parties who may appear and be heard in a
proceeding under this section include the attorney general of
the State in which the debtor is incorporated, was formed, or
does business.
(e) Rule of Construction.--Nothing in this section shall be
construed to require the court in which a case under chapter 11
of title 11, United States Code, is pending to remand or refer
any proceeding, issue, or controversy to any other court or to
require the approval of any other court for the transfer of
property.
SEC. 1222. PROTECTION OF VALID PURCHASE MONEY SECURITY INTERESTS.
Section 547(c)(3)(B) of title 11, United States Code, is
amended by striking ``20'' and inserting ``30''.
SEC. 1223. BANKRUPTCY JUDGESHIPS.
(a) Short Title.--This section may be cited as the
``Bankruptcy Judgeship Act of 2002''.
(b) Temporary Judgeships.--
(1) Appointments.--The following bankruptcy judges
shall be appointed in the manner prescribed in section
152(a)(1) of title 28, United States Code, for the
appointment of bankruptcy judges provided for in
section 152(a)(2) of such title:
(A) One additional bankruptcy judge for the
eastern district of California.
(B) Three additional bankruptcy judges for
the central district of California.
(C) Four additional bankruptcy judges for
the district of Delaware.
(D) Two additional bankruptcy judges for
the southern district of Florida.
(E) One additional bankruptcy judge for the
southern district of Georgia.
(F) Three additional bankruptcy judges for
the district of Maryland.
(G) One additional bankruptcy judge for the
eastern district of Michigan.
(H) One additional bankruptcy judge for the
southern district of Mississippi.
(I) One additional bankruptcy judge for the
district of New Jersey.
(J) One additional bankruptcy judge for the
eastern district of New York.
(K) One additional bankruptcy judge for the
northern district of New York.
(L) One additional bankruptcy judge for the
southern district of New York.
(M) One additional bankruptcy judge for the
eastern district of North Carolina.
(N) One additional bankruptcy judge for the
eastern district of Pennsylvania.
(O) One additional bankruptcy judge for the
middle district of Pennsylvania.
(P) One additional bankruptcy judge for the
district of Puerto Rico.
(Q) One additional bankruptcy judge for the
western district of Tennessee.
(R) One additional bankruptcy judge for the
eastern district of Virginia.
(S) One additional bankruptcy judge for the
district of South Carolina.
(T) One additional bankruptcy judge for the
district of Nevada.
(2) Vacancies.--
(A) Districts with single appointments.--
Except as provided in subparagraphs (B), (C),
(D), and (E), the first vacancy occurring in
the office of bankruptcy judge in each of the
judicial districts set forth in paragraph (1)--
(i) occurring 5 years or more after
the appointment date of the bankruptcy
judge appointed under paragraph (1) to
such office; and
(ii) resulting from the death,
retirement, resignation, or removal of
a bankruptcy judge;
shall not be filled.
(B) Central district of california.--The
1st, 2d, and 3d vacancies in the office of
bankruptcy judge in the central district of
California--
(i) occurring 5 years or more after
the respective 1st, 2d, and 3d
appointment dates of the bankruptcy
judges appointed under paragraph
(1)(B); and
(ii) resulting from the death,
retirement, resignation, or removal of
a bankruptcy judge;
shall not be filled.
(C) District of delaware.--The 1st, 2d, 3d,
and 4th vacancies in the office of bankruptcy
judge in the district of Delaware--
(i) occurring 5 years or more after
the respective 1st, 2d, 3d, and 4th
appointment dates of the bankruptcy
judges appointed under paragraph
(1)(F); and
(ii) resulting from the death,
retirement, resignation, or removal of
a bankruptcy judge;
shall not be filled.
(D) Southern district of florida.--The 1st
and 2d vacancies in the office of bankruptcy
judge in the southern district of Florida--
(i) occurring 5 years or more after
the respective 1st and 2d appointment
dates of the bankruptcy judges
appointed under paragraph (1)(D); and
(ii) resulting from the death,
retirement, resignation, or removal of
a bankruptcy judge;
shall not be filled.
(E) District of maryland.--The 1st, 2d, and
3d vacancies in the office of bankruptcy judge
in the district of Maryland--
(i) occurring 5 years or more after
the respective 1st, 2d, and 3d
appointment dates of the bankruptcy
judges appointed under paragraph
(1)(F); and
(ii) resulting from the death,
retirement, resignation, or removal of
a bankruptcy judge;
shall not be filled.
(c) Extensions.--
(1) In general.--The temporary office of bankruptcy
judges authorized for the northern district of Alabama,
the district of Delaware, the district of Puerto Rico,
and the eastern district of Tennessee under paragraphs
(1), (3), (7), and (9) of section 3(a) of the
Bankruptcy Judgeship Act of 1992 (28 U.S.C. 152 note)
are extended until the first vacancy occurring in the
office of a bankruptcy judge in the applicable district
resulting from the death, retirement, resignation, or
removal of a bankruptcy judge and occurring 5 years
after the date of the enactment of this Act.
(2) Applicability of other provisions.--All other
provisions of section 3 of the Bankruptcy Judgeship Act
of 1992 (28 U.S.C. 152 note) remain applicable to the
temporary office of bankrupcy judges referred to in
this subsection.
(d) Technical Amendments.--Section 152(a) of title 28,
United States Code, is amended--
(1) in paragraph (1), by striking the first
sentence and inserting the following: ``Each bankruptcy
judge to be appointed for a judicial district, as
provided in paragraph (2), shall be appointed by the
court of appeals of the United States for the circuit
in which such district is located.''; and
(2) in paragraph (2)--
(A) in the item relating to the middle
district of Georgia, by striking ``2'' and
inserting ``3''; and
(B) in the collective item relating to the
middle and southern districts of Georgia, by
striking ``Middle and Southern . . . . . . 1''.
(e) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
SEC. 1224. COMPENSATING TRUSTEES.
Section 1326 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (1), by striking ``and'';
(B) in paragraph (2), by striking the
period at the end and inserting ``; and''; and
(C) by adding at the end the following:
``(3) if a chapter 7 trustee has been allowed
compensation due to the conversion or dismissal of the
debtor's prior case pursuant to section 707(b), and
some portion of that compensation remains unpaid in a
case converted to this chapter or in the case dismissed
under section 707(b) and refiled under this chapter,
the amount of any such unpaid compensation, which shall
be paid monthly--
``(A) by prorating such amount over the
remaining duration of the plan; and
``(B) by monthly payments not to exceed the
greater of--
``(i) $25; or
``(ii) the amount payable to
unsecured nonpriority creditors, as
provided by the plan, multiplied by 5
percent, and the result divided by the
number of months in the plan.''; and
(2) by adding at the end the following:
``(d) Notwithstanding any other provision of this title--
``(1) compensation referred to in subsection (b)(3)
is payable and may be collected by the trustee under
that paragraph, even if such amount has been discharged
in a prior proceeding under this title; and
``(2) such compensation is payable in a case under
this chapter only to the extent permitted by subsection
(b)(3).''.
SEC. 1225. AMENDMENT TO SECTION 362 OF TITLE 11, UNITED STATES CODE.
Section 362(b)(18) of title 11, United States Code, is
amended to read as follows:
``(18) under subsection (a) of the creation or
perfection of a statutory lien for an ad valorem
property tax, or a special tax or special assessment on
real property whether or not ad valorem, imposed by a
governmental unit, if such tax or assessment comes due
after the filing of the petition;''.
SEC. 1226. JUDICIAL EDUCATION.
The Director of the Federal Judicial Center, in
consultation with the Director of the Executive Office for
United States Trustees, shall develop materials and conduct
such training as may be useful to courts in implementing this
Act and the amendments made by this Act, including the
requirements relating to the means test and reaffirmations
under section 707(b) of title 11, United States Code, as
amended by this Act.
SEC. 1227. RECLAMATION.
(a) Rights and Powers of the Trustee.--Section 546(c) of
title 11, United States Code, is amended to read as follows:
``(c)(1) Except as provided in subsection (d) of this
section and subsection (c) of section 507, and subject to the
prior rights of holders of security interests in such goods or
the proceeds thereof, the rights and powers of the trustee
under sections 544(a), 545, 547, and 549 are subject to the
right of a seller of goods that has sold goods to the debtor,
in the ordinary course of such seller's business, to reclaim
such goods if the debtor has received such goods while
insolvent, within 45 days before the date of the commencement
of a case under this title, but such seller may not reclaim
such goods unless such seller demands in writing reclamation of
such goods--
``(A) not later than 45 days after the date of
receipt of such goods by the debtor; or
``(B) not later than 20 days after the date of
commencement of the case, if the 45-day period expires
after the commencement of the case.
``(2) If a seller of goods fails to provide notice in the
manner described in paragraph (1), the seller still may assert
the rights contained in section 503(b)(9).''.
(b) Administrative Expenses.--Section 503(b) of title 11,
United States Code, as amended by sections 445 and 1103, is
amended by adding at the end the following:
``(9) the value of any goods received by the debtor
within 20 days before the date of commencement of a
case under this title in which the goods have been sold
to the debtor in the ordinary course of such debtor's
business.''.
SEC. 1228. PROVIDING REQUESTED TAX DOCUMENTS TO THE COURT.
(a) Chapter 7 Cases.--The court shall not grant a discharge
in the case of an individual seeking bankruptcy under chapter 7
of title 11, United States Code, unless requested tax documents
have been provided to the court.
(b) Chapter 11 and Chapter 13 Cases.--The court shall not
confirm a plan of reorganization in the case of an individual
under chapter 11 or 13 of title 11, United States Code, unless
requested tax documents have been filed with the court.
(c) Document Retention.--The court shall destroy documents
submitted in support of a bankruptcy claim not sooner than 3
years after the date of the conclusion of a bankruptcy case
filed by an individual under chapter 7, 11, or 13 of title 11,
United States Code. In the event of a pending audit or
enforcement action, the court may extend the time for
destruction of such requested tax documents.
SEC. 1229. ENCOURAGING CREDITWORTHINESS.
(a) Sense of the Congress.--It is the sense of the Congress
that--
(1) certain lenders may sometimes offer credit to
consumers indiscriminately, without taking steps to
ensure that consumers are capable of repaying the
resulting debt, and in a manner which may encourage
certain consumers to accumulate additional debt; and
(2) resulting consumer debt may increasingly be a
major contributing factor to consumer insolvency.
(b) Study Required.--The Board of Governors of the Federal
Reserve System (hereafter in this section referred to as the
``Board'') shall conduct a study of--
(1) consumer credit industry practices of
soliciting and extending credit--
(A) indiscriminately;
(B) without taking steps to ensure that
consumers are capable of repaying the resulting
debt; and
(C) in a manner that encourages consumers
to accumulate additional debt; and
(2) the effects of such practices on consumer debt
and insolvency.
(c) Report and Regulations.--Not later than 12 months after
the date of enactment of this Act, the Board--
(1) shall make public a report on its findings with
respect to the indiscriminate solicitation and
extension of credit by the credit industry;
(2) may issue regulations that would require
additional disclosures to consumers; and
(3) may take any other actions, consistent with its
existing statutory authority, that the Board finds
necessary to ensure responsible industrywide practices
and to prevent resulting consumer debt and insolvency.
SEC. 1230. PROPERTY NO LONGER SUBJECT TO REDEMPTION.
Section 541(b) of title 11, United States Code, as amended
by sections 225 and 323, is amended by adding at the end the
following:
``(8) subject to subchapter III of chapter 5, any
interest of the debtor in property where the debtor
pledged or sold tangible personal property (other than
securities or written or printed evidences of
indebtedness or title) as collateral for a loan or
advance of money given by a person licensed under law
to make such loans or advances, where--
``(A) the tangible personal property is in
the possession of the pledgee or transferee;
``(B) the debtor has no obligation to repay
the money, redeem the collateral, or buy back
the property at a stipulated price; and
``(C) neither the debtor nor the trustee
have exercised any right to redeem provided
under the contract or State law, in a timely
manner as provided under State law and section
108(b) of this title; or''.
SEC. 1231. TRUSTEES.
(a) Suspension and Termination of Panel Trustees and
Standing Trustees.--Section 586(d) of title 28, United States
Code, is amended--
(1) by inserting ``(1)'' after ``(d)''; and
(2) by adding at the end the following:
``(2) A trustee whose appointment under subsection (a)(1)
or under subsection (b) is terminated or who ceases to be
assigned to cases filed under title 11, United States Code, may
obtain judicial review of the final agency decision by
commencing an action in the district court of the United States
for the district for which the panel to which the trustee is
appointed under subsection (a)(1), or in the district court of
the United States for the district in which the trustee is
appointed under subsection (b) resides, after first exhausting
all available administrative remedies, which if the trustee so
elects, shall also include an administrative hearing on the
record. Unless the trustee elects to have an administrative
hearing on the record, the trustee shall be deemed to have
exhausted all administrative remedies for purposes of this
paragraph if the agency fails to make a final agency decision
within 90 days after the trustee requests administrative
remedies. The Attorney General shall prescribe procedures to
implement this paragraph. The decision of the agency shall be
affirmed by the district court unless it is unreasonable and
without cause based on the administrative record before the
agency.''.
(b) Expenses of Standing Trustees.--Section 586(e) of title
28, United States Code, is amended by adding at the end the
following:
``(3) After first exhausting all available administrative
remedies, an individual appointed under subsection (b) may
obtain judicial review of final agency action to deny a claim
of actual, necessary expenses under this subsection by
commencing an action in the district court of the United States
for the district where the individual resides. The decision of
the agency shall be affirmed by the district court unless it is
unreasonable and without cause based upon the administrative
record before the agency.
``(4) The Attorney General shall prescribe procedures to
implement this subsection.''.
SEC. 1232. BANKRUPTCY FORMS.
Section 2075 of title 28, United States Code, is amended by
adding at the end the following:
``The bankruptcy rules promulgated under this section shall
prescribe a form for the statement required under section
707(b)(2)(C) of title 11 and may provide general rules on the
content of such statement.''.
SEC. 1233. DIRECT APPEALS OF BANKRUPTCY MATTERS TO COURTS OF APPEALS.
(a) Appeals.--Section 158 of title 28, United States Code,
is amended--
(1) in subsection (c)(1), by striking ``Subject to
subsection (b),'' and inserting ``Subject to
subsections (b) and (d)(2),''; and
(2) in subsection (d)--
(A) by inserting ``(1)'' after ``(d)''; and
(B) by adding at the end the following:
``(2)(A) The appropriate court of appeals shall have
jurisdiction of appeals described in the first sentence of
subsection (a) if the bankruptcy court, the district court, or
the bankruptcy appellate panel involved, acting on its own
motion or on the request of a party to the judgment, order, or
decree described in such first sentence, or all the appellants
and appellees (if any) acting jointly, certify that--
``(i) the judgment, order, or decree involves a
question of law as to which there is no controlling
decision of the court of appeals for the circuit or of
the Supreme Court of the United States, or involves a
matter of public importance;
``(ii) the judgment, order, or decree involves a
question of law requiring resolution of conflicting
decisions; or
``(iii) an immediate appeal from the judgment,
order, or decree may materially advance the progress of
the case or proceeding in which the appeal is taken;
and if the court of appeals authorizes the direct appeal of the
judgment, order, or decree.
``(B) If the bankruptcy court, the district court, or the
bankruptcy appellate panel--
``(i) on its own motion or on the request of a
party, determines that a circumstance specified in
clause (i), (ii), or (iii) of subparagraph (A) exists;
or
``(ii) receives a request made by a majority of the
appellants and a majority of appellees (if any) to make
the certification described in subparagraph (A);
then the bankruptcy court, the district court, or the
bankruptcy appellate panel shall make the certification
described in subparagraph (A).
``(C) The parties may supplement the certification with a
short statement of the basis for the certification.
``(D) An appeal under this paragraph does not stay any
proceeding of the bankruptcy court, the district court, or the
bankruptcy appellate panel from which the appeal is taken,
unless the respective bankruptcy court, district court, or
bankruptcy appellate panel, or the court of appeals in which
the appeal in pending, issues a stay of such proceeding pending
the appeal.
``(E) Any request under subparagraph (B) for certification
shall be made not later than 60 days after the entry of the
judgment, order, or decree.''.
(b) Procedural Rules.--
(1) Temporary application.--A provision of this
subsection shall apply to appeals under section
158(d)(2) of title 28, United States Code, until a rule
of practice and procedure relating to such provision
and such appeals is promulgated or amended under
chapter 131 of such title.
(2) Certification.--A district court, a bankruptcy
court, or a bankruptcy appellate panel may make a
certification under section 158(d)(2) of title 28,
United States Code, only with respect to matters
pending in the respective bankruptcy court, district
court, or bankruptcy appellate panel.
(3) Procedure.--Subject to any other provision of
this subsection, an appeal authorized by the court of
appeals under section 158(d)(2)(A) of title 28, United
States Code, shall be taken in the manner prescribed in
subdivisions (a)(1), (b), (c), and (d) of rule 5 of the
Federal Rules of Appellate Procedure. For purposes of
subdivision (a)(1) of rule 5--
(A) a reference in such subdivision to a
district court shall be deemed to include a
reference to a bankruptcy court and a
bankruptcy appellate panel, as appropriate;
(B) a reference in such subdivision to the
parties requesting permission to appeal to be
served with the petition shall be deemed to
include a reference to the parties to the
judgment, order, or decree from which the
appeal is taken.
(4) Filing of petition with attachment.--A petition
requesting permission to appeal, that is based on a
certification made under subparagraph (A) or (B) of
section 158(d)(2) shall--
(A) be filed with the circuit clerk not
later than 10 days after the certification is
entered on the docket of the bankruptcy court,
the district court, or the bankruptcy appellate
panel from which the appeal is taken; and
(B) have attached a copy of such
certification.
(5) References in rule 5.--For purposes of rule 5
of the Federal Rules of Appellate Procedure--
(A) a reference in such rule to a district
court shall be deemed to include a reference to
a bankruptcy court and to a bankruptcy
appellate panel; and
(B) a reference in such rule to a district
clerk shall be deemed to include a reference to
a clerk of a bankruptcy court and to a clerk of
a bankruptcy appellate panel.
(6) Application of rules.--The Federal Rules of
Appellate Procedure shall apply in the courts of
appeals with respect to appeals authorized under
section 158(d)(2)(A), to the extent relevant and as if
such appeals were taken from final judgments, orders,
or decrees of the district courts or bankruptcy
appellate panels exercising appellate jurisdiction
under subsection (a) or (b) of section 158 of title 28,
United States Code.
SEC. 1234. INVOLUNTARY CASES.
(a) Amendments.--Section 303 of title 11, United States
Code, is amended--
(1) in subsection (b)(1), by--
(A) inserting ``as to liability or amount''
after ``bona fide dispute''; and
(B) striking ``if such claims'' and
inserting ``if such noncontingent, undisputed
claims''; and
(2) in subsection (h)(1), by inserting ``as to
liability or amount'' before the semicolon at the end.
(b) Effective Date; Application of Amendments.--This
section and the amendments made by this section shall take
effect on the date of the enactment of this Act and shall not
apply with respect to cases commenced under title 11 of the
United States Code before such date.
SEC. 1235. FEDERAL ELECTION LAW FINES AND PENALTIES AS NONDISCHARGEABLE
DEBT.
Section 523(a) of title 11, United States Code, as amended
by section 314, is amended by inserting after paragraph (14A)
the following:
``(14B) incurred to pay fines or penalties imposed
under Federal election law;''.
TITLE XIII--CONSUMER CREDIT DISCLOSURE
SEC. 1301. ENHANCED DISCLOSURES UNDER AN OPEN END CREDIT PLAN.
(a) Minimum Payment Disclosures.--Section 127(b) of the
Truth in Lending Act (15 U.S.C. 1637(b)) is amended by adding
at the end the following:
``(11)(A) In the case of an open end credit plan
that requires a minimum monthly payment of not more
than 4 percent of the balance on which finance charges
are accruing, the following statement, located on the
front of the billing statement, disclosed clearly and
conspicuously: `Minimum Payment Warning: Making only
the minimum payment will increase the interest you pay
and the time it takes to repay your balance. For
example, making only the typical 2% minimum monthly
payment on a balance of $1,000 at an interest rate of
17% would take 88 months to repay the balance in full.
For an estimate of the time it would take to repay your
balance, making only minimum payments, call this toll-
free number: ____________.' (the blank space to be
filled in by the creditor).
``(B) In the case of an open end credit plan that
requires a minimum monthly payment of more than 4
percent of the balance on which finance charges are
accruing, the following statement, in a prominent
location on the front of the billing statement,
disclosed clearly and conspicuously: `Minimum Payment
Warning: Making only the required minimum payment will
increase the interest you pay and the time it takes to
repay your balance. Making atypical 5% minimum monthly
payment on a balance of $300 at an interest rate of 17% would take 24
months to repay the balance in full. For an estimate of the time it
would take to repay your balance, making only minimum monthly payments,
call this toll-free number: ____________.' (the blank space to be
filled in by the creditor).
``(C) Notwithstanding subparagraphs (A) and (B), in
the case of a creditor with respect to which compliance
with this title is enforced by the Federal Trade
Commission, the following statement, in a prominent
location on the front of the billing statement,
disclosed clearly and conspicuously: `Minimum Payment
Warning: Making only the required minimum payment will
increase the interest you pay and the time it takes to
repay your balance. For example, making only the
typical 5% minimum monthly payment on a balance of $300
at an interest rate of 17% would take 24 months to
repay the balance in full. For an estimate of the time
it would take to repay your balance, making only
minimum monthly payments, call the Federal Trade
Commission at this toll-free number: ____________.'
(the blank space to be filled in by the creditor). A
creditor who is subject to this subparagraph shall not
be subject to subparagraph (A) or (B).
``(D) Notwithstanding subparagraph (A), (B), or
(C), in complying with any such subparagraph, a
creditor may substitute an example based on an interest
rate that is greater than 17 percent. Any creditor that
is subject to subparagraph (B) may elect to provide the
disclosure required under subparagraph (A) in lieu of
the disclosure required under subparagraph (B).
``(E) The Board shall, by rule, periodically
recalculate, as necessary, the interest rate and
repayment period under subparagraphs (A), (B), and (C).
``(F)(i) The toll-free telephone number disclosed
by a creditor or the Federal Trade Commission under
subparagraph (A), (B), or (G), as appropriate, may be a
toll-free telephone number established and maintained
by the creditor or the Federal Trade Commission, as
appropriate, or may be a toll-free telephone number
established and maintained by a third party for use by
the creditor or multiple creditors or the Federal Trade
Commission, as appropriate. The toll-free telephone
number may connect consumers to an automated device
through which consumers may obtain information
described in subparagraph (A), (B), or (C), by
inputting information using a touch-tone telephone or
similar device, if consumers whose telephones are not
equipped to use such automated device are provided the
opportunity to be connected to an individual from whom
the information described in subparagraph (A), (B), or
(C), as applicable, may be obtained. A person that
receives a request for information described in
subparagraph (A), (B), or (C) from an obligor through
the toll-free telephone number disclosed under
subparagraph (A), (B), or (C), as applicable, shall
disclose in response to such request only the
information set forth in the table promulgated by the
Board under subparagraph (H)(i).
``(ii)(I) The Board shall establish and maintain
for a period not to exceed 24 months following the
effective date of the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2002, a toll-free telephone
number, or provide a toll-free telephone number
established and maintained by a third party, for use by
creditors that are depository institutions (as defined
in section 3 of the Federal Deposit Insurance Act),
including a Federal credit union or State credit union
(as defined in section 101 of the Federal Credit Union
Act, with total assets not exceeding $250,000,000. The
toll-free telephone number may connect consumers to an
automated device through which consumers may obtain
information described in subparagraph (A) or (B), as
applicable, by inputting information using a touch-tone
telephone or similar device, if consumers whose
telephones are not equipped to use such automated
device are provided the opportunity to be connected to
an individual from whom the information described in
subparagraph (A) or (B), as applicable, may be
obtained. A person that receives a request for
information described in subparagraph (A) or (B) from
an obligor through the toll-free telephone number
disclosed under subparagraph (A) or (B), as applicable,
shall disclose in response to such request only the
information set forth in the table promulgated by the
Board under subparagraph (H)(i). The dollar amount
contained in this subclause shall be adjusted according
to an indexing mechanism established by the Board.
``(II) Not later than 6 months prior to the
expiration of the 24-month period referenced in
subclause (I), the Board shall submit to the Committee
on Banking, Housing, and Urban Affairs of the Senate
and the Committee on Financial Services of the House of
Representatives a report on the program described in
subclause (I).
``(G) The Federal Trade Commission shall establish
and maintain a toll-free number for the purpose of
providing to consumers the information required to be
disclosed under subparagraph (C).
``(H) The Board shall--
``(i) establish a detailed table
illustrating the approximate number of months
that it would take to repay an outstanding
balance if a consumer pays only the required
minimum monthly payments and if no other
advances are made, which table shall clearly
present standardized information to be used to
disclose the information required to be
disclosed under subparagraph (A), (B), or (C),
as applicable;
``(ii) establish the table required under
clause (i) by assuming--
``(I) a significant number of
different annual percentage rates;
``(II) a significant number of
different account balances;
``(III) a significant number of
different minimum payment amounts; and
``(IV) that only minimum monthly
payments are made and no additional
extensions of credit are obtained; and
``(iii) promulgate regulations that provide
instructional guidance regarding the manner in
which the information contained in the table
established under clause (i) should be used in
responding to the request of an obligor for any
information required to be disclosed under
subparagraph (A), (B), or (C).
``(I) The disclosure requirements of this paragraph
do not apply to any charge card account, the primary
purpose of which is to require payment of charges in
full each month.
``(J) A creditor that maintains a toll-free
telephone number for the purpose of providing customers
with the actual number of months that it will take to
repay the customer's outstanding balance is not subject
to the requirements of subparagraph (A) or (B).
``(K) A creditor that maintains a toll-free
telephone number for the purpose of providing customers
with the actual number of months that it will take to
repay an outstanding balance shall include the
following statement on each billing statement: `Making
only the minimum payment will increase the interest you
pay and the time it takes to repay your balance. For
more information, call this toll-free number:
________.' (the blank space to be filled in by the
creditor).''.
(b) Regulatory Implementation.--
(1) In general.--The Board of Governors of the
Federal Reserve System (hereafter in this title
referred to as the ``Board'') shall promulgate
regulations implementing the requirements of section
127(b)(11) of the Truth in Lending Act, as added by
subsection (a) of this section.
(2) Effective date.--Section 127(b)(11) of the
Truth in Lending Act, as added by subsection (a) of
this section, and the regulations issued under
paragraph (1) of this subsection shall not take effect
until the later of--
(A) 18 months after the date of enactment
of this Act; or
(B) 12 months after the publication of such
final regulations by the Board.
(c) Study of Financial Disclosures.--
(1) In general.--The Board may conduct a study to
determine the types of information available to
potential borrowers from consumer credit lending
institutions regarding factors qualifying potential
borrowers for credit, repayment requirements, and the
consequences of default.
(2) Factors for consideration.--In conducting a
study under paragraph (1), the Board should, in
consultation with the other Federal banking agencies
(as defined in section 3 of the Federal Deposit
Insurance Act), the National Credit Union
Administration, and the Federal Trade Commission,
consider the extent to which--
(A) consumers, in establishing new credit
arrangements, are aware of their existing
payment obligations, the need to consider those
obligations in deciding to take on new credit,
and how taking on excessive credit can result
in financial difficulty;
(B) minimum periodic payment features
offered in connection with open end credit
plans impact consumer default rates;
(C) consumers make only the required
minimum payment under open end credit plans;
(D) consumers are aware that making only
required minimum payments will increase the
cost and repayment period of an open end credit
obligation; and
(E) the availability of low minimum payment
options is a cause of consumers experiencing
financial difficulty.
(3) Report to congress.--Findings of the Board in
connection with any study conducted under this
subsection shall be submitted to Congress. Such report
shall also include recommendations for legislative
initiatives, if any, of the Board, based on its
findings.
SEC. 1302. ENHANCED DISCLOSURE FOR CREDIT EXTENSIONS SECURED BY A
DWELLING.
(a) Open End Credit Extensions.--
(1) Credit applications.--Section 127A(a)(13) of
the Truth in Lending Act (15 U.S.C. 1637a(a)(13)) is
amended--
(A) by striking ``consultation of tax
adviser.--A statement that the'' and inserting
the following: ``tax deductibility.--A
statement that--
``(A) the''; and
(B) by striking the period at the end and
inserting the following: ``; and
``(B) in any case in which the extension of
credit exceeds the fair market value (as
defined under the Internal Revenue Code of
1986) of the dwelling, the interest on the
portion of the credit extension that is greater
than the fair market value of the dwelling is
not tax deductible for Federal income tax
purposes.''.
(2) Credit advertisements.--Section 147(b) of the
Truth in Lending Act (15 U.S.C. 1665b(b)) is amended--
(A) by striking ``If any'' and inserting
the following:
``(1) In general.--If any''; and
(B) by adding at the end the following:
``(2) Credit in excess of fair market value.--Each
advertisement described in subsection (a) that relates
to an extension of credit that may exceed the fair
market value of the dwelling, and which advertisement
is disseminated in paper form to the public or through
the Internet, as opposed to by radio or television,
shall include a clear and conspicuous statement that--
``(A) the interest on the portion of the
credit extension that is greater than the fair
market value of the dwelling is not tax
deductible for Federal income tax purposes; and
``(B) the consumer should consult a tax
adviser for further information regarding the
deductibility of interest and charges.''.
(b) Non-Open End Credit Extensions.--
(1) Credit applications.--Section 128 of the Truth
in Lending Act (15 U.S.C. 1638) is amended--
(A) in subsection (a), by adding at the end
the following:
``(15) In the case of a consumer credit transaction
that is secured by the principal dwelling of the
consumer, in which the extension of credit may exceed
the fair market value of the dwelling, a clear and
conspicuous statement that--
``(A) the interest on the portion of the
credit extension that is greater than the fair
market value of the dwelling is not tax
deductible for Federal income tax purposes; and
``(B) the consumer should consult a tax
adviser for further information regarding the
deductibility of interest and charges.''; and
(B) in subsection (b), by adding at the end
the following:
``(3) In the case of a credit transaction described in
paragraph (15) of subsection (a), disclosures required by that
paragraph shall be made to the consumer at the time of
application for such extension of credit.''.
(2) Credit advertisements.--Section 144 of the
Truth in Lending Act (15 U.S.C. 1664) is amended by
adding at the end the following:
``(e) Each advertisement to which this section applies that
relates to a consumer credit transaction that is secured by the
principal dwelling of a consumer in which the extension of
credit may exceed the fair market value of the dwelling, and
which advertisement is disseminated in paper form to the public
or through the Internet, as opposed to by radio or television,
shall clearly and conspicuously state that--
``(1) the interest on the portion of the credit
extension that is greater than the fair market value of
the dwelling is not tax deductible for Federal income
tax purposes; and
``(2) the consumer should consult a tax adviser for
further information regarding the deductibility of
interest and charges.''.
(c) Regulatory Implementation.--
(1) In general.--The Board shall promulgate
regulations implementing the amendments made by this
section.
(2) Effective date.--Regulations issued under
paragraph (1) shall not take effect until the later
of--
(A) 12 months after the date of enactment
of this Act; or
(B) 12 months after the date of publication
of such final regulations by the Board.
SEC. 1303. DISCLOSURES RELATED TO ``INTRODUCTORY RATES''.
(a) Introductory Rate Disclosures.--Section 127(c) of the
Truth in Lending Act (15 U.S.C. 1637(c)) is amended by adding
at the end the following:
``(6) Additional notice concerning `introductory
rates'.--
``(A) In general.--Except as provided in
subparagraph (B), an application or
solicitation to open a credit card account and
all promotional materials accompanying such
application or solicitation for which a
disclosure is required under paragraph (1), and
that offers a temporary annual percentage rate
of interest, shall--
``(i) use the term `introductory'
in immediate proximity to each listing
of the temporary annual percentage rate
applicable to such account, which term
shall appear clearly and conspicuously;
``(ii) if the annual percentage
rate of interest that will apply after
the end of the temporary rate period
will be a fixed rate, state in a clear
and conspicuous manner in a prominent
location closely proximate to the first
listing of the temporary annual
percentage rate (other than a listing
of the temporary annual percentage rate
in the tabular format described in
section 122(c)), the time period in
which the introductory period will end
and the annual percentage rate that
will apply after the end of the
introductory period; and
``(iii) if the annual percentage
rate that will apply after the end of
the temporary rate period will vary in
accordance with an index, state in a
clear and conspicuous manner in a
prominent location closely proximate to
the first listing of the temporary
annual percentage rate (other than a
listing in the tabular format
prescribed by section 122(c)), the time
period in which the introductory period
will end and the rate that will apply
after that, based on an annual
percentage rate that was in effect
within 60 days before the date of
mailing the application or
solicitation.
``(B) Exception.--Clauses (ii) and (iii) of
subparagraph (A) do not apply with respect to
any listing of a temporary annual percentage
rate on an envelope or other enclosure in which
an application or solicitation to open a credit
card account is mailed.
``(C) Conditions for introductory rates.--
An application or solicitation to open a credit
card account for which a disclosure is required
under paragraph (1), and that offers a
temporary annual percentage rate of interest
shall, if that rate of interest is revocable
under any circumstance or upon any event,
clearly and conspicuously disclose, in a
prominent manner on or with such application or
solicitation--
``(i) a general description of the
circumstances that may result in the
revocation of the temporary annual
percentage rate; and
``(ii) if the annual percentage
rate that will apply upon the
revocation of the temporary annual
percentage rate--
``(I) will be a fixed rate,
the annual percentage rate that
will apply upon the revocation
of the temporary annual
percentage rate; or
``(II) will vary in
accordance with an index, the
rate that will apply after the
temporary rate, based on an
annual percentage rate that was
in effect within 60 days before
the date of mailing the
application or solicitation.
``(D) Definitions.--In this paragraph--
``(i) the terms `temporary annual
percentage rate of interest' and
`temporary annual percentage rate' mean
any rate of interest applicable to a
credit card account for an introductory
period of less than 1 year, if that
rate is less than an annual percentage
rate that was in effect within 60 days
before the date of mailing the
application or solicitation; and
``(ii) the term `introductory
period' means the maximum time period
for which the temporary annual
percentage rate may be applicable.
``(E) Relation to other disclosure
requirements.--Nothing in this paragraph may be
construed to supersede subsection (a) of
section 122, or any disclosure required by
paragraph (1) or any other provision of this
subsection.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate
regulations implementing the requirements of section
127(c)(6) of the Truth in Lending Act, as added by this
section.
(2) Effective date.--Section 127(c)(6) of the Truth
in Lending Act, as added by this section, and
regulations issued under paragraph (1) of this
subsection shall not take effect until the later of--
(A) 12 months after the date of enactment
of this Act; or
(B) 12 months after the date of publication
of such final regulations by the Board.
SEC. 1304. INTERNET-BASED CREDIT CARD SOLICITATIONS.
(a) Internet-Based Solicitations.--Section 127(c) of the
Truth in Lending Act (15 U.S.C. 1637(c)) is amended by adding
at the end the following:
``(7) Internet-based solicitations.--
``(A) In general.--In any solicitation to
open a credit card account for any person under
an open end consumer credit plan using the
Internet or other interactive computer service,
the person making the solicitation shall
clearly and conspicuously disclose--
``(i) the information described in
subparagraphs (A) and (B) of paragraph
(1); and
``(ii) the information described in
paragraph (6).
``(B) Form of disclosure.--The disclosures
required by subparagraph (A) shall be--
``(i) readily accessible to
consumers in close proximity to the
solicitation to open a credit card
account; and
``(ii) updated regularly to reflect
the current policies, terms, and fee
amounts applicable to the credit card
account.
``(C) Definitions.--For purposes of this
paragraph--
``(i) the term `Internet' means the
international computer network of both
Federal and non-Federal interoperable
packet switched data networks; and
``(ii) the term `interactive
computer service' means any information
service, system, or access software
provider that provides or enables
computer access by multiple users to a
computer server, including specifically
a service or system that provides
access to the Internet and such systems
operated or services offered by
libraries or educational
institutions.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate
regulations implementing the requirements of section
127(c)(7) of the Truth in Lending Act, as added by this
section.
(2) Effective date.--The amendment made by
subsection (a) and the regulations issued under
paragraph (1) of this subsection shall not take effect
until the later of--
(A) 12 months after the date of enactment
of this Act; or
(B) 12 months after the date of publication
of such final regulations by the Board.
SEC. 1305. DISCLOSURES RELATED TO LATE PAYMENT DEADLINES AND PENALTIES.
(a) Disclosures Related to Late Payment Deadlines and
Penalties.--Section 127(b) of the Truth in Lending Act (15
U.S.C. 1637(b)) is amended by adding at the end the following:
``(12) If a late payment fee is to be imposed due
to the failure of the obligor to make payment on or
before a required payment due date, the following shall
be stated clearly and conspicuously on the billing
statement:
``(A) The date on which that payment is due
or, if different, the earliest date on which a
late payment fee may be charged.
``(B) The amount of the late payment fee to
be imposed if payment is made after such
date.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate
regulations implementing the requirements of section
127(b)(12) of the Truth in Lending Act, as added by
this section.
(2) Effective date.--The amendment made by
subsection (a) and regulations issued under paragraph
(1) of this subsection shall not take effect until the
later of--
(A) 12 months after the date of enactment
of this Act; or
(B) 12 months after the date of publication
of such final regulations by the Board.
SEC. 1306. PROHIBITION ON CERTAIN ACTIONS FOR FAILURE TO INCUR FINANCE
CHARGES.
(a) Prohibition on Certain Actions for Failure To Incur
Finance Charges.--Section 127 of the Truth in Lending Act (15
U.S.C. 1637) is amended by adding at the end the following:
``(h) Prohibition on Certain Actions for Failure To Incur
Finance Charges.--A creditor of an account under an open end
consumer credit plan may not terminate an account prior to its
expiration date solely because the consumer has not incurred
finance charges on the account. Nothing in this subsection
shall prohibit a creditor from terminating an account for
inactivity in 3 or more consecutive months.''.
(b) Regulatory Implementation.--
(1) In general.--The Board shall promulgate
regulations implementing the requirements of section
127(h) of the Truth in Lending Act, as added by this
section.
(2) Effective date.--The amendment made by
subsection (a) and regulations issued under paragraph
(1) of this subsection shall not take effect until the
later of--
(A) 12 months after the date of enactment
of this Act; or
(B) 12 months after the date of publication
of such final regulations by the Board.
SEC. 1307. DUAL USE DEBIT CARD.
(a) Report.--The Board may conduct a study of, and present
to Congress a report containing its analysis of, consumer
protections under existing law to limit the liability of
consumers for unauthorized use of a debit card or similar
access device. Such report, if submitted, shall include
recommendations for legislative initiatives, if any, of the
Board, based on its findings.
(b) Considerations.--In preparing a report under subsection
(a), the Board may include--
(1) the extent to which section 909 of the
Electronic Fund Transfer Act (15 U.S.C. 1693g), as in
effect at the time of the report, and the implementing
regulations promulgated by the Board to carry out that
section provide adequate unauthorized use liability
protection for consumers;
(2) the extent to which any voluntary industry
rules have enhanced or may enhance the level of
protection afforded consumers in connection with such
unauthorized use liability; and
(3) whether amendments to the Electronic Fund
Transfer Act (15 U.S.C. 1693 et seq.), or revisions to
regulations promulgated by the Board to carry out that
Act, are necessary to further address adequate
protection for consumers concerning unauthorized use
liability.
SEC. 1308. STUDY OF BANKRUPTCY IMPACT OF CREDIT EXTENDED TO DEPENDENT
STUDENTS.
(a) Study.--
(1) In general.--The Board shall conduct a study
regarding the impact that the extension of credit
described in paragraph (2) has on the rate of
bankruptcy cases filed under title 11, United States
Code.
(2) Extension of credit.--The extension of credit
described in this paragraph is the extension of credit
to individuals who are--
(A) claimed as dependents for purposes of
the Internal Revenue Code of 1986; and
(B) enrolled within 1 year of successfully
completing all required secondary education
requirements and on a full-time basis, in
postsecondary educational institutions.
(b) Report.--Not later than 1 year after the date of
enactment of this Act, the Board shall submit to the Senate and
the House of Representatives a report summarizing the results
of the study conducted under subsection (a).
SEC. 1309. CLARIFICATION OF CLEAR AND CONSPICUOUS.
(a) Regulations.--Not later than 6 months after the date of
enactment of this Act, the Board, in consultation with the
other Federal banking agencies (as defined in section 3 of the
Federal Deposit Insurance Act), the National Credit Union
Administration Board, and the Federal Trade Commission, shall
promulgate regulations to provide guidance regarding the
meaning of the term ``clear and conspicuous'', as used in
subparagraphs (A), (B), and (C) of section 127(b)(11) and
clauses (ii) and (iii) of section 127(c)(6)(A) of the Truth in
Lending Act.
(b) Examples.--Regulations promulgated under subsection (a)
shall include examples of clear and conspicuous model
disclosures for the purposes of disclosures required by the
provisions of the Truth in Lending Act referred to in
subsection (a).
(c) Standards.--In promulgating regulations under this
section, the Board shall ensure that the clear and conspicuous
standard required for disclosures made under the provisions of
the Truth in Lending Act referred to in subsection (a) can be
implemented in a manner which results in disclosures which are
reasonably understandable and designed to call attention to the
nature and significance of the information in the notice.
TITLE XIV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS
SEC. 1401. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) Effective Date.--Except as otherwise provided in this
Act, this Act and the amendments made by this Act shall take
effect 180 days after the date of enactment of this Act.
(b) Application of Amendments.--
(1) In general.--Except as otherwise provided in
this Act and paragraph (2), the amendments made by this
Act shall not apply with respect to cases commenced
under title 11, United States Code, before the
effective date of this Act.
(2) Limitations on homestead exemption.--The
amendments made by sections 308 and 322 shall apply
with respect to cases commenced under title 11, United
States Code, on or after the date of the enactment of
this Act.
And the Senate agree to the same.
From the Committee on the Judiciary, for
consideration of the House bill and the Senate
amendment, and modifications committed to
conference:
F. James Sensenbrenner,
Henry J. Hyde,
George W. Gekas,
Lamar Smith,
Steve Chabot,
Bob Barr,
Rick Boucher,
From the Committee on Financial Services, for
consideration of secs. 901-906, 907A-909, 911,
and 1301-1309 of the House bill, and secs. 901-
906, 907A-909, 911, 913-4, and title XIII of
the Senate amendment, and modifications
committed to conference:
Michael G. Oxley,
Spencer Bachus,
From the Committee on Energy and Commerce, for
consideration of title XIV of the Senate
amendment, and modifications committed to
conference:
Billy Tauzin,
Joe Barton,
From the Committee on Education and the
Workforce, for consideration of sec. 1403 of
the Senate amendment, and modifications
committed to conference:
John Boehner,
Michael N. Castle,
Managers on the Part of the House.
Patrick Leahy,
Joe Biden,
Charles Schumer,
Orrin Hatch,
Chuck Grassley,
Jon Kyl,
Mike DeWine,
Jeff Sessions,
Mitch McConnell,
Managers on the Part of the Senate.
JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE
The managers on the part of the House and the Senate at
the conference on the disagreeing votes of the two Houses on
the amendment of the Senate to the bill, H.R. 333, the
Bankruptcy Abuse Prevention and Consumer Protection Act of
2002, submit the following joint statement to the House and the
Senate in explanation of the effect of the action agreed upon
by the managers and recommended in the accompanying conference
report:
The Senate amendment struck all of the House bill after
the enacting clause and inserted a substitute text.
The House recedes from its disagreement to the amendment
of the Senate with an amendment that is a substitute for the
House bill and the Senate amendment. The differences between
the House bill, the Senate amendment, and the substitute agreed
to in conference are noted below, except for clerical
corrections, conforming changes made necessary by agreements
reached by the conferees, and minor drafting and clerical
changes.
Sec. 1. Short title; references; table of contents
The short title of this measure is the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2002.
Title I--Needs-Based Bankruptcy
Sec. 101. Conversion
Section 101 is identical to section 101 of the House bill
and the Senate amendment. Under current law, section 706(c) of
the Bankruptcy Code provides that a court may not convert a
chapter 7 case unless the debtor requests such conversion.
Section 101 of the conference report amends this provision to
allow a chapter 7 case to be converted to a case under chapter
12 or chapter 13 on request or consent of the debtor.
Sec. 102. Dismissal or conversion
Section 102 of the conference report reflects a
compromise between section 102 of the House bill and the Senate
amendment, although many of the components of this provision
are derived from identical counterparts in the House bill and
the Senate amendment.
This provision implements the conference report's
principal consumer bankruptcy reforms: needs-based debt relief.
Under section 707(b) of the Bankruptcy Code, a chapter 7 case
filed by a debtor who is an individual may be dismissed for
substantial abuse only on motion of the court or the United
States Trustee. It specifically prohibits such dismissal at the
suggestion of any party in interest.
Section 102 of the conference report revises current law
in several significant respects. First, it amends section
707(b) of the Bankruptcy Code to permit--in addition to the
court and the United States trustee--a trustee, bankruptcy
administrator, or a party in interest to seek dismissal or
conversion of a chapter 7 case to one under chapter 11 or 13 on
consent of the debtor, under certain circumstances. In
addition, section 102 of the conference report changes the
current standard for dismissal from ``substantial abuse'' to
``abuse''. Section 102 of the conference report further amends
Bankruptcy Code section 707(b) to mandate a presumption of
abuse if the debtor's current monthly income (reduced by
certain specified amounts) when multiplied by 60 is not less
than the lesser of 25 percent of the debtor's nonpriority
unsecured claims or $6,000 (whichever is greater), or $10,000.
To determine whether the presumption of abuse applies
under section 707(b) of the Bankruptcy Code, section 102(a) of
the conference report specifies certain monthly expense amounts
that are to be deducted from the debtor's ``current monthly
income'' (a defined term). The House bill and the Senate
amendment contain similar, but not identical provisions with
respect to these expenses. Section 102(a) incorporates those
provisions that are identical in both bills. These include the
following expense items:
the applicable monthly expenses for the debtor as
well as for the debtor's dependents and spouse in a
joint case (if the spouse is not otherwise a dependent)
specified under the Internal Revenue Service's National
Standards (with provision for an additional 5 percent
for food and clothing if the debtor can demonstrate
that such additional amount is reasonable and
necessary) and the IRS Local Standards;
the actual monthly expenses for the debtor, the
debtor's dependents, and the debtor's spouse in a joint
case (if the spouse is not otherwise a dependent) for
the categories specified by the Internal Revenue
Service as Other Necessary Expenses;
reasonably necessary expenses incurred to maintain
the safety of the debtor and the debtor's family from
family violence as specified in section 309 of the
Family Violence Prevention and Services Act or other
applicable federal law, with provision for the
confidentiality of these expenses;
the debtor's average monthly payments on account of
secured debts and priority claims as explained below;
and
if the debtor is eligible to be a debtor under
chapter 13, the actual administrative expenses of
administering a chapter 13 plan for the district in
which the debtor resides, up to 10 percent of projected
plan payments, as determined under schedules issued by
the Executive Office for United States Trustees.
With respect to secured debts, Section 102(a)(2)(C) of
the conference report specifies that the debtor's average
monthly payments on account of secured debts is calculated as
the sum of the following divided by 60: (1) all amounts
scheduled as contractually due to secured creditors for each
month of the 60-month period following filing of the case; and
(2) any additional payments necessary, in filing a plan under
chapter 13, to maintain possession of the debtor's primary
residence, motor vehicle or other property necessary for the
support of the debtor and the debtor's dependents, that serves
as collateral for secured debts. This provision is identical to
section 102(a)(2)(C) of the House bill and the Senate
amendment.
With respect to priority claims, section 102(a)(2)(C) of
the conference report specifies that the debtor's expenses for
payment of such claims (including child support and alimony
claims) is calculated as the total of such debts divided by 60.
This provision is identical to section 102(a)(2)(C) of the
House bill and the Senate amendment.
Although the House bill and the Senate amendment contain
identical provisions permitting a debtor, if applicable, to
deduct from current monthly income the continuation of actual
expenses paid by the debtor that are reasonable and necessary
for the care and support of an elderly, chronically ill, or
disabled household member or member of the debtor's immediate
family (providing such individual is unable to pay for these
expenses), the bills differ with respect to their respective
definitions of ``immediate family''. The conference report
adopts the Senate amendment's position that the term includes,
in addition to other specified entities, the debtor's children
and grandchildren.
Likewise, both the House bill and the Senate amendment
permit the debtor to deduct the actual expenses for each
dependent child of a debtor to attend a private or public
elementary or secondary school of up to $1,500 per child if the
debtor: (1) documents such expenses, and (2) provides a
detailed explanation of why such expenses are reasonable and
necessary. The conference report adopts the Senate amendment's
additional requirement that the debtor explain why such
expenses are not already accounted for under any of the
Internal Revenue Service National and Local Standards, and
Other Expenses categories as identified in section
707(b)(2)(I), as amended.
In addition, the conference report adopts the Senate
amendment provision permitting a debtor to claim additional
housing and utilities allowances based on the debtor's actual
home energy expenses if the debtor documents such expenses and
demonstrates that they are reasonable and necessary. The House
bill has no comparable provision.
While the conference report replaces the current law's
presumption in favor of granting relief requested by a chapter
7 debtor with a presumption of abuse (if applicable under the
income and expense analysis previously described), this
presumption may be rebutted only under certain circumstances.
Section 102(a)(2)(C) of the conference report amends Bankruptcy
Code section 707(b) to provide that the presumption of abuse
may be rebutted only if: (1) the debtor demonstrates special
circumstances that justify additional expenses or adjustments
of current monthly income for which there is no reasonable
alternative; and (2) the additional expenses or adjustments
cause the product of the debtor's current monthly income
(reduced by the specified expenses) when multiplied by 60 to be
less than the lesser of 25 percent of the debtor's nonpriority
unsecured claims, or $6,000 (whichever is greater); or $10,000.
In addition, the debtor must itemize and document each
additional expense or income adjustment as well as provide a
detailed explanation of the special circumstances that make
such expense or adjustment necessary and reasonable. In
addition, the debtor must attest under oath to the accuracy of
any information provided to demonstrate that such additional
expense or adjustment is required. This provision is identical
to section 102(a)(2)(C) of the House bill and the Senate
amendment.
To implement these needs-based reforms, the conference
report, in section 102(a)(2)(C), requires the debtor to file,
as part of the schedules of current income and current
expenditures, a statement of current monthly income. This
statement must show: (1) the calculations that determine
whether a presumption of abuse arises under section 707(b) (as
amended), and (2) how each amount is calculated. This provision
is identical to section 102(a)(2)(C) of the House bill and the
Senate amendment.
In a case where the presumption of abuse does not apply
or has been rebutted, section 102(a)(2)(C) of the conference
report amends Bankruptcy Code section 707(b) to require a court
to consider whether: (1) the debtor filed the chapter 7 case in
bad faith; or (2) the totality of the circumstances of the
debtor's financial situation demonstrates abuse, including
whether the debtor wants to reject a personal services contract
and the debtor's financial need for such rejection. This
provision is identical to section 102(a)(2)(C) of the House
bill and the Senate amendment.
Under section 102(a)(2)(C) of the conference report, a
court may on its own initiative or on motion of a party in
interest in accordance with rule 9011 of the Federal Rules of
Bankruptcy Procedure, order a debtor's attorney to reimburse
the trustee for all reasonable costs incurred in prosecuting a
section 707(b) motion if: (1) a trustee files such motion; (2)
the motion is granted; and (3) the court finds that the action
of the debtor's attorney in filing the case under chapter 7
violated rule 9011. If the court determines that the debtor's
attorney violated rule 9011, it may on its own initiative or on
motion of a party in interest in accordance with such rule,
order the assessment of an appropriate civil penalty against
debtor's counsel and the payment of such penalty to the
trustee, United States trustee, or bankruptcy administrator.
This provision represents a compromise among House and Senate
conferees. It differs from its antecedents in section
102(a)(2)(C) of the House bill and the Senate amendment in that
it changes the mandatory standard to a discretionary standard
and clarifies that a motion for costs or the imposition of a
civil penalty must be made by a party in interest or by the
court itself in accordance with rule 9011.
Section 102(a)(2)(C) of the conference report provides
that the signature of an attorney on a petition, pleading or
written motion shall constitute a certification that the
attorney has: (1) performed a reasonable investigation into the
circumstances that gave rise to such document; and (2)
determined that such document is well-grounded in fact and
warranted by existing law or a good faith argument for the
extension, modification, or reversal of existing law and does
not constitute an abuse under section 707(b)(1). In addition,
such attorney's signature on the petition shall constitute a
certification that the attorney has no knowledge after an
inquiry that the information in the schedules filed with the
petition is incorrect. This provision is identical to section
102(a)(2)(C) of the House bill and the Senate amendment.
Section 102(a)(2)(C) of the conference report amends
section 707(b) of the Bankruptcy Code to permit a court on its
own initiative or a party in interest in accordance with rule
9011 of the Federal Rules of Bankruptcy Procedure to award
reasonable costs (including reasonable attorneys' fees) in
contesting a motion filed by a party in interest (other than a
trustee, United States trustee or bankruptcy administrator) if
the court: (i) does not grant the section 707(b) motion; and
(ii) finds that either the movant violated rule 9011, or the
attorney (if any) who filed the motion did not comply with
subparagraph (4)(C) and the section 707(b) motion was made
solely for the purpose of coercing a debtor into waiving a
right guaranteed under the Bankruptcy Code to such debtor. An
exception applies with respect to a movant that is a ``small
business'' with a claim in an aggregate amount of less than
$1,000. A small business, for purposes of this provision, is
defined as an unincorporated business, partnership,
corporation, association or organization with less than 25
full-time employees that is engaged in commercial or business
activity. The number of employees of a wholly owned subsidiary
includes the employees of the parent and any other subsidiary
corporation of the parent. Section 102(a)(2)(C) represents a
compromise among House and Senate conferees. It differs from
its antecedents in section 102(a)(2)(C) of the House bill and
the Senate amendment in that it changes the mandatory standard
to a discretionary standard and clarifies that the motion for
costs must be made by aparty in interest or by the court. The
use of the phraseology in this provision, ``in accordance with rule
9011 of the Federal Rules of Bankruptcy Procedure'', is intended to
indicate that the procedures for the motion of a party in interest or a
court acting on its own initiative are the procedures outlined in rule
9011(c).
The conference report includes two ``safe harbors'' with
respect to its needs-based reforms. Section 102(a)(2)(C) of the
conference report amends Bankruptcy Code section 707(b) to
allow only a judge, United States trustee, or bankruptcy
administrator to file a section 707(b) motion (based on the
debtor's ability to repay, bad faith, or the totality of the
circumstances) if the chapter 7 debtor's current monthly income
(or in a joint case, the income of the debtor and the debtor's
spouse) falls below the state median family income for a family
of equal or lesser size (adjusted for larger sized families),
or the state median family income for one earner in the case of
a one-person household. This provision is substantively
identical to section 102(a)(2)(C) of the House bill and the
Senate amendment.
The conference report's second safe harbor only pertains
to a motion under section 707(b)(2), that is, a motion to
dismiss based on a debtor's ability to repay. Section
102(a)(2)(C) represents a compromise between the House and the
Senate positions. The House provision prohibits a judge, United
States trustee, trustee, bankruptcy administrator or other
party in interest from filing such motion if the debtor's
income falls below the state median family income for a family
of equal or lesser size (adjusted for larger sized families),
or the state median family income for one earner in the case of
a one-person household. The Senate amendment takes into
consideration the spouse's income only in a joint case.
Section 102(a)(2)(C) of the conference report does not
consider the nonfiling spouse's income if the debtor and the
debtor's spouse are separated under applicable nonbankruptcy
law, or the debtor and the debtor's spouse are living separate
and apart, other than for the purpose of evading section
707(b)(2). The debtor must file a statement under penalty of
perjury specifying that he or she meets one of these criteria.
In addition, the statement must disclose the aggregate (or best
estimate) of the amount of any cash or money payments received
from the debtor's spouse attributed to the debtor's current
monthly income.
Section 102(b) of the conference report amends section
101 of the Bankruptcy Code to define ``current monthly income''
as the average monthly income that the debtor receives (or in a
joint case, the debtor and debtor's spouse receive) from all
sources, without regard to whether it is taxable income, in a
specified six-month period preceding the filing of the
bankruptcy case. The conference report adopts the Senate
amendment's provision specifying that the six-month period is
determined as ending on the last day of the calendar month
immediately preceding the filing of the bankruptcy case, if the
debtor files the statement of current income required by
Bankruptcy Code section 521. If the debtor does not file such
schedule, the court determines the date on which current income
is calculated.
The term, ``current monthly income'', pursuant to section
102(b) of the conference report, includes any amount paid by
any entity other than the debtor (or, in a joint case, the
debtor and the debtor's spouse if not otherwise a dependent) on
a regular basis for the household expenses of the debtor or the
debtor's dependents (and, the debtor's spouse in a joint case,
if not otherwise a dependent). It excludes Social Security Act
benefits and payments to victims of war crimes or crimes
against humanity on account of their status as victims of such
crimes. In addition, the conference report provides that
current monthly income does not include payments to victims of
international or domestic terrorism as defined in section 2331
of title 18 of the United States Code on account of their
status as victims of such terrorism. This provision with
respect to victims of terrorism reflects a compromise among the
conferees. It has no counterpart in either the House bill or
the Senate amendment.
Section 102(c) of the conference report is substantively
similar in part to its House and the Senate counterparts. The
provision amends section 704 of the Bankruptcy Code to require
the United States trustee or bankruptcy administrator in a
chapter 7 case where the debtor is an individual to: (1) review
all materials filed by the debtor; and (2) file a statement
with the court (within 10 days following the meeting of
creditors held pursuant to section 341 of the Bankruptcy Code)
as to whether or not the debtor's case should be presumed to be
an abuse under section 707(b). The court must provide a copy of
such statement to all creditors within 5 days after its filing.
Within 30 days of the filing of such statement, the United
States trustee or bankruptcy administrator must file either:
(1) a motion under section 707(b); or (2) a statement setting
forth the reasons why such motion is not appropriate in any
case where the debtor's filing should be presumed to be an
abuse and the debtor's current monthly income exceeds certain
thresholds. Section 102(c) of the conference report does not
include a provision contained in the House bill and Senate
amendment that permits a United States trustee or bankruptcy
administrator to decline to file a section 707(b)(2) motion
(pertaining to the debtor's ability to repay) under certain
circumstances.
In a chapter 7 case where the presumption of abuse
applies under section 707(b), section 102(d) of the conference
report amends Bankruptcy Code section 342 to require the clerk
to provide written notice to all creditors within ten days
after commencement of the case stating that the presumption of
abuse applies in such case. This provision is substantively
identical to section 102(d) of the House bill and the Senate
amendment.
Section 102(e) of the conference report provides that
nothing in the Bankruptcy Code limits the ability of a creditor
to give information to a judge (except for information
communicated ex parte, unless otherwise permitted by applicable
law), United States trustee, bankruptcy administrator, or
trustee. This provision is substantively identical to section
102(e) of the House bill and the Senate amendment.
Section 102(f) of the conference report adds a provision
to Bankruptcy Code section 707 to permit the court to dismiss a
chapter 7 case filed by a debtor who is an individual on motion
by a victim of a crime of violence (as defined in section 16 of
title 18 of the United States Code) or a drug trafficking crime
(as defined in section 924(c)(2) of title 18 of the United
States Code). The case may be dismissed if the debtor was
convicted of such crime and dismissal is in the best interest
of the victims, unless the debtor establishes by a
preponderance of the evidence that the filing of the case is
necessary to satisfy a claim for a domestic support obligation.
This provision is substantively identical to section 102(f) of
the House bill and the Senate amendment.
Section 102(g) of the conference report amends section
1325(a) of the Bankruptcy Code to require the court, as a
condition of confirming a chapter 13 plan, to find that the
debtor's action in filing the case was in good faith. This
provision is substantively identical to section 102(g) of the
House bill and the Senate amendment.
Section 102(h) of the conference report amends section
1325(b)(1) of the Bankruptcy Code to specify that the court
must find, in confirming a chapter 13 plan to which there has
been an objection, that the debtor's disposable income will be
paid to unsecured creditors. It alsoamends section 1325(b)(2)'s
definition of disposable income. As defined under this provision, the
term means income received by the debtor (other than child support
payments, foster care payments, or certain disability payments for a
dependent child) less amounts reasonably necessary to be expended for:
(1) the maintenance or support of the debtor or the debtor's dependent;
(2) a domestic support obligation that first becomes due after the case
is filed; (3) charitable contributions (as defined in section
548(d)(3)) to a qualified religious or charitable entity or
organization (as defined in section 548(d)(4)) in an amount that does
not exceed 15 percent of the debtor's gross income for the year in
which the contributions are made; and (4) if the debtor is engaged in
business, the payment of expenditures necessary for the continuation,
preservation, and operation of the business. As amended, section
1325(b)(3) provides that the amounts reasonably necessary to be
expended under section 1325(b)(2) are determined in accordance with
section 707(b)(2)(A) and (B) if the debtor's income exceeds certain
monetary thresholds. This provision is substantively identical to
section 102(h) of the House bill and the Senate amendment.
Section 102(i) of the conference report adopts the
Senate's position in section 102(i) of the Senate amendment,
which has no counterpart in the House bill. Section 102(i)
amends Bankruptcy Code section 1329(a) to require the amounts
paid under a confirmed chapter 13 plan to be reduced by the
actual amount expended by the debtor to purchase health
insurance for the debtor and the debtor's dependents (if those
dependents do not otherwise have such insurance) if the debtor
documents the cost of such insurance and demonstrates such
expense is reasonable and necessary, and the amount is not
otherwise allowed for purposes of determining disposable income
under section 1325(b). If the debtor previously paid for health
insurance, the debtor must demonstrate that the amount is not
materially greater than the amount the debtor previously paid.
If the debtor did not previously have such insurance, the
amount is not materially larger than the reasonable cost that
would be incurred by a debtor having similar characteristics.
Upon request of any party in interest, the debtor must file
proof that a health insurance policy was purchased.
Section 102(j) of the conference report represents a
compromise between the House and Senate conferees and has no
antecedent in either the House bill or Senate amendment. The
provision amends section 104 of the Bankruptcy Code to provide
for the periodic adjustment of monetary amounts specified in
sections 707(b) and 1325(b)(3) of the Bankruptcy Code, as
amended by this Act.
Section 102(k) adds to section 101 of the Bankruptcy Code
a definition of ``median family income.'' This provision
represents a compromise between the House and Senate conferees
and has no antecedent in either the House bill or Senate
amendment.
Sec. 103. Sense of Congress and study
Section 103(a) of the conference report expresses the
sense of Congress that the Secretary of the Treasury has the
authority to alter the Internal Revenue Service expense
standards to set guidelines for repayment plans as needed to
accommodate their use under section 707(b) of the Bankruptcy
Code, as amended. Section 103(b) requires the Executive Office
for United States Trustees to submit a report within 2 years
from the date of the Act's enactment regarding the utilization
of the Internal Revenue Service guidelines for determining the
current monthly expenses of a debtor under section 707(b) and
the impact that the application of these standards has had on
debtors and the bankruptcy courts. The report may include
recommendations for amendments to the Bankruptcy Code that are
consistent with the report's findings. This provision is
substantially identical to section 103 of the House bill and
the Senate amendment.
Sec. 104. Notice of alternatives
Section 104 of the conference report amends section
342(b) of the Bankruptcy Code to require the clerk, before the
commencement of a bankruptcy case by an individual whose debts
are primarily consumer debts, to supply such individual with a
written notice containing: (1) a brief description of chapters
7, 11, 12, and 13 and the general purpose, benefits, and costs
of proceeding under each of these chapters; (2) the types of
services available from credit counseling agencies; (3) a
statement advising that 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 (4) a statement
warning that all information supplied by a debtor in connection
with the case is subject to examination by the Attorney
General. This provision is substantially identical to section
104 of the House bill and the Senate amendment.
Sec. 105. Debtor financial management training test program
Section 105 of the conference report requires the
Director of the Executive Office for United States Trustees to:
(1) consult with a wide range of debtor education experts who
operate financial management education programs; and (2)
develop a financial management training curriculum and
materials that can be used to teach individual debtors how to
manage their finances better. The Director must select six
judicial districts to test the effectiveness of the financial
management training curriculum and materials for an 18-month
period beginning not later than 270 days after the Act's
enactment date. For these six districts, the curricula and
materials must be used as the instructional personal financial
management course required under Bankruptcy Code section 111.
Over the period of the study, the Director must evaluate the
effectiveness of: (1) the curriculum and materials; and (2) a
sample of existing consumer education programs (such as those
described in the Report of the National Bankruptcy Review
Commission) that are representative of consumer education
programs sponsored by the credit industry, chapter 13 trustees,
and consumer counseling groups. Not later than three months
after concluding such evaluation, the Director must submit to
Congress a report with findings regarding the effectiveness and
cost of the curricula, materials, and programs. This provision
is substantially identical to section 105 of the House bill and
the Senate amendment.
Sec. 106. Credit counseling
Section 106(a) of the conference report amends section
109 of the Bankruptcy Code to require an individual--as a
condition of eligibility for bankruptcy relief--to receive
credit counseling within the 180-day period preceding the
filing of a bankruptcy case by such individual. The credit
counseling must be provided by an approved nonprofit budget and
credit counseling agency consisting of either an individual or
group briefing (which may be conducted telephonically or via
the Internet) that outlined opportunities for available credit
counseling and assisted the individual in performing a budget
analysis. This requirement does not apply to a debtor who
resides in a district where the United States trustee or
bankruptcy administrator has determined that approved nonprofit
budget and credit counseling agencies in that district are
notreasonably able to provide adequate services to such individuals.
Although such determination must be reviewed annually, the United
States trustee or bankruptcy administrator may disapprove a nonprofit
budget and credit counseling agency at any time.
A debtor may be temporarily exempted from this
requirement if he or she submits to the court a certification
that: (1) describes exigent circumstances meriting a waiver of
this requirement; (2) states that the debtor requested credit
counseling services from an approved nonprofit budget and
credit counseling agency, but was unable to obtain such
services within the five-day period beginning on the date the
debtor made the request; and (3) is 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, unless the court,
for cause, extends this period up to an additional 15 days.
This provision is substantively identical to section 106(a) of
the House bill and the Senate amendment.
Section 106(b) of the conference report amends section
727(a) of the Bankruptcy Code to deny a discharge to a chapter
7 debtor who fails to complete a personal financial management
instructional course. This provision, however, does not apply
if the debtor resides in a district where the United States
trustee or bankruptcy administrator has determined that the
approved instructional courses in that district are not
adequate. Such determination must be reviewed annually by the
United States trustee or bankruptcy administrator. This
provision is substantively identical to section 106(b) of the
House bill and the Senate amendment.
Section 106(c) of the conference report amends section
1328 of the Bankruptcy Code to deny a discharge to a chapter 13
debtor who fails to complete a personal financial management
instructional course. This requirement does not apply if the
debtor resides in a district where the United States trustee or
bankruptcy administrator has determined that the approved
instructional courses in that district are not adequate. Such
determination must be reviewed annually by the United States
trustee or bankruptcy administrator. This provision is
substantively identical to section 106(c) of the House bill and
the Senate amendment.
Section 106(d) of the conference report amends section
521 of the Bankruptcy Code to require a debtor who is an
individual to file with the court: (1) a certificate from an
approved nonprofit budget and credit counseling agency
describing the services it provided the debtor pursuant to
section 109(h); and (2) a copy of the repayment plan, if any,
that was developed by the agency pursuant to section 109(h).
This provision is substantively identical to section 106(d) of
the House bill and the Senate amendment.
Section 106(e) of the conference report is substantively
identical to section 106(e) of the House bill and the Senate
amendment. It adds section 111 to the Bankruptcy Code requiring
the clerk to maintain a publically available list of approved:
(1) credit counseling agencies that provide the services
described in section 109(h) of the Bankruptcy Code; and (2)
personal financial management instructional courses. Section
106(e) further provides that the United States trustee or
bankruptcy administrator may only approve an agency or course
provider under this provision pursuant to certain specified
criteria. If such agency or provider course is approved, the
approval may only be for a probationary period of up to six
months. At the conclusion of the probationary period, the
United States trustee or bankruptcy administrator may only
approve such agency or instructional course for an additional
one-year period and, thereafter for successive one-year
periods, which has demonstrated during such period that it met
the standards set forth in this provision and can satisfy such
standards in the future.
Within 30 days after any final decision occurring after
the expiration of the initial probationary period or after any
subsequent two-year period, an interested person may seek
judicial review of such decision in the appropriate United
States district court. In addition, the district court, at any
time, may investigate the qualifications of a credit counseling
agency and request the production of documents to ensure the
agency's integrity and effectiveness. The district court may
remove a credit counseling agency that does not meet the
specified qualifications from the approved list. The United
States trustee or bankruptcy administrator must notify the
clerk that a credit counseling agency or instructional course
is no longer approved and the clerk must remove such entity
from the approved list.
Section 106(e) prohibits a credit counseling agency from
providing information to a credit reporting agency as to
whether an individual debtor has received or sought personal
financial management instruction. A credit counseling agency
that willfully or negligently fails to comply with any
requirement under the Bankruptcy Code with respect to a debtor
shall be liable to the debtor for damages in an amount equal
to: (1) actual damages sustained by the debtor as a result of
the violation; and (2) any court costs or reasonable attorneys'
fees incurred in an action to recover such damages.
Section 106(f) of the conference report amends section
362 of the Bankruptcy Code to provide that if a chapter 7, 11,
or 13 case is dismissed due to the creation of a debt repayment
plan, the presumption that a case was not filed in good faith
under section 362(c)(3) shall not apply to any subsequent
bankruptcy case commenced by the debtor. It also provides that
the court, on request of a party in interest, must issue an
order under section 362(c) confirming that the automatic stay
has terminated. This provision is substantively identical to
section 106(f) of the House bill and the Senate amendment.
Sec. 107. Schedules of reasonable and necessary expenses
For purposes of section 707(b) of the Bankruptcy Code,
section 107 of the conference report requires the Director of
the Executive Office for United States Trustees to issue
schedules of reasonable and necessary administrative expenses
(including reasonable attorneys' fees) relating to the
administration of a chapter 13 plan for each judicial district
not later than 180 days after the date of enactment of the Act.
This provision is substantively identical to section 107 of the
House bill and the Senate amendment.
Title II--Enhanced Consumer Protection
SUBTITLE A--PENALTIES FOR ABUSIVE CREDITOR PRACTICES
Sec. 201. Promotion of alternative dispute resolution
Section 201 of the conference report is substantively
identical to section 201 of the House bill and the Senate
amendment. Subsection (a) amends section 502 of the Bankruptcy
Code to permit the court, after a hearing on motion of the
debtor, to reduce a claim based in whole on an unsecured
consumer debt by up to 20 percent if: (1) the claim was filed
by a creditor who unreasonably refused to negotiate a
reasonable alternative repayment schedule proposed by an
approved credit counseling agency on behalf of the debtor; (2)
the debtor's offer was made at least 60 days before the filing
of the case; (3) the offer provided for payment of at least 60
percent of the debt over a period not exceeding the loan's
repayment period or a reasonable extension thereof; and (4) no
part of the debt is nondischargeable. The debtor has the burden
ofproving by clear and convincing evidence that: (1) the
creditor unreasonably refused to consider the debtor's proposal; and
(2) the proposed alternative repayment schedule was made prior to the
expiration of the 60-day period. Section 201(b) amends section 547 of
the Bankruptcy Code to prohibit the avoidance as a preferential
transfer a payment by a debtor to a creditor pursuant to an alternative
repayment plan created by an approved credit counseling agency.
Sec. 202. Effect of discharge
Section 202 of the conference report amends section 524
of the Bankruptcy Code in two respects. First, it provides that
the willful failure of a creditor to credit payments received
under a confirmed chapter 11, 12, or 13 plan constitutes a
violation of the discharge injunction if the creditor's action
to collect and failure to credit payments in the manner
required by the plan caused material injury to the debtor. This
provision does not apply if the order confirming the plan is
revoked, the plan is in default, or the creditor has not
received payments required to be made under the plan in the
manner prescribed by the plan. Second, section 202 amends
section 524 of the Bankruptcy Code to provide that the
discharge injunction does not apply to a creditor having a
claim secured by an interest in real property that is the
debtor's principal residence if the creditor communicates with
the debtor in the ordinary course of business between the
creditor and the debtor and such communication is limited to
seeking or obtaining periodic payments associated with a valid
security interest in lieu of the pursuit of in rem relief to
enforce the lien. Section 202 is substantively identical to
section 202 of the House bill and the Senate amendment.
Sec. 203. Discouraging abuse of reaffirmation practices
Section 203 of the conference report effectuates a
comprehensive overhaul of the law applicable to reaffirmation
agreements. It is substantively identical to section 203 of the
House bill and the Senate amendment.
Section 203(a) amends section 524 of the Bankruptcy Code
to mandate that certain specified disclosures be provided to a
debtor at or before the time he or she signs a reaffirmation
agreement. These specified disclosures, which are the only
disclosures required in connection with a reaffirmation
agreement, must be in writing and be made clearly and
conspicuously. In addition, the disclosure must include certain
advisories and explanations. At the election of the creditor,
the disclosure statement may include a repayment schedule. If
the debtor is represented by counsel, section 203(a) mandates
that the attorney file a certification stating that the
agreement represents a fully informed and voluntary agreement
by the debtor, that the agreement does not impose an undue
hardship on the debtor or any dependent of the debtor, and that
the attorney fully advised the debtor of the legal effect and
consequences of such agreement as well as of any default
thereunder. In those instances where the presumption of undue
hardship applies, the attorney must also certify that the
debtor is able to make the payments required under the
reaffirmation agreement. Further, the debtor must submit a
statement setting forth the debtor's monthly income and actual
current monthly expenditures. If the debtor is represented by
counsel and the debt being reaffirmed is owed to a credit
union, a modified version of this statement may be used.
Notwithstanding any other provision of the Bankruptcy
Code, section 203(a) permits a creditor to accept payments from
a debtor: (1) before and after the filing of a reaffirmation
agreement with the court; or (2) pursuant to a reaffirmation
agreement that the creditor believes in good faith to be
effective. It further provides that the requirements specified
in subsections (c)(2) and (k) of section 524 are satisfied if
the disclosures required by these provisions are given in good
faith.
Where the amount of the scheduled payments due on the
reaffirmed debt (as disclosed in the debtor's statement)
exceeds the debtor's available income, it is presumed for 60
days from the date on which the reaffirmation agreement is
filed with the court that the agreement presents an undue
hardship. The court must review such presumption, which can be
rebutted by the debtor by a written statement explaining the
additional sources of funds that would enable the debtor to
make the required payments on the reaffirmed debt. If the
presumption is not rebutted to the satisfaction of the court,
the court may disapprove the reaffirmation agreement. No
reaffirmation agreement may be disapproved without notice and
hearing to the debtor and creditor. The hearing must be
concluded before the entry of the debtor's discharge. The
requirements set forth in this paragraph do not apply to
reaffirmation agreements if the creditor is a credit union, as
defined.
Section 203(b) amends title 18 of the United States Code
to require the Attorney General to designate a United States
Attorney for each judicial district and to appoint a Federal
Bureau of Investigation agent for each field office to have
primary law enforcement responsibilities for violations of
sections 152 and 157 of title 18 with respect to abusive
reaffirmation agreements and materially fraudulent statements
in bankruptcy schedules that are intentionally false or
misleading. In addition, section 203(b) provides that the
designated United States Attorney has primary responsibility
with respect to bankruptcy investigations under section 3057 of
title 18. Section 203(b) further provides that the bankruptcy
courts must establish procedures for referring any case in
which a materially fraudulent bankruptcy schedule has been
filed.
Sec. 204. Preservation of claims and defenses upon sale of predatory
loans
Section 204 of the conference report adds a provision to
section 363 of the Bankruptcy Code with respect to sales of any
interest in a consumer transaction that is subject to the Truth
in Lending Act or any interest in a consumer credit contract
(as defined in section 433.1 of title 16 of the Code of Federal
Regulations). It provides that the purchaser of such interest
through a bankruptcy sale under section 363 remains subject to
all claims and defenses that are related to such assets to the
same extent as that person would be subject to if the sale was
not conducted under section 363. Section 204 of the conference
report is derived from section 204 of the Senate amendment.
There is no counterpart to this provision in the House bill.
Sec. 205. GAO Study on reaffirmation process
Section 205 of the conference report directs the
Comptroller General of the United States to report to Congress
on how consumers are treated in connection with the
reaffirmation agreement process. This report must include: (1)
the policies and activities of creditors with respect to
reaffirmation agreements; and (2) whether such consumers are
fully, fairly, and consistently informed of their rights under
the Bankruptcy Code. The report, which must be completed not
later than 18 months after the date of enactment of this Act,
may include recommendations for legislation to address any
abusive or coercive tactics found in connection with the
reaffirmation process. Section 205 is derived from section 205
of the Senateamendment. There is no counterpart to this
provision in the House bill.
SUBTITLE B--PRIORITY CHILD SUPPORT
Sec. 211. Definition of domestic support obligation
Section 211 of the conference report amends section 101
of the Bankruptcy Code to define a domestic support obligation
as a debt that accrues pre- or postpetition (including interest
that accrues pursuant to applicable nonbankruptcy law) and is
owed to or recoverable by: (1) a spouse, former spouse, or
child of the debtor, or such child's parent, legal guardian, or
responsible relative; or (2) 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), without regard to whether
such debt is expressly so designated. It must be established or
subject to establishment either pre- or postpetition pursuant
to: (1) a separation agreement, divorce decree, or property
settlement agreement; (2) an order of a court of record; or (3)
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
211 is identical to section 211 of the House bill and the
Senate amendment.
Sec. 212. Priorities for claims for domestic support obligations
Section 212 of the conference report amends section
507(a) of the Bankruptcy Code to accord first priority in
payment to allowed unsecured claims for domestic support
obligations that, as of the petition date, are owed to or
recoverable by a spouse, former spouse, or child of the debtor,
or the parent, legal guardian, or responsible relative of such
child, without regard to whether such claim is filed by the
claimant or by a governmental unit on behalf of such claimant,
on the condition that funds received by such unit under this
provision be applied and distributed in accordance with
nonbankruptcy law. Subject to these claims, section 212 accords
the same payment priority to allowed unsecured claims for
domestic support obligations that, as of the petition date,
were assigned by a spouse, former spouse, child of the debtor,
or such child's parent, legal guardian, or responsible relative
to a governmental unit (unless the claimant assigned the claim
voluntarily for the purpose of collecting the debt), or are
owed directly to or recoverable by a governmental unit under
applicable nonbankruptcy law, on the condition that funds
received by such unit under this provision be applied and
distributed in accordance with nonbankruptcy law. Where a
trustee administers assets that may be available for payment of
domestic support obligations under section 507(a)(1) (as
amended), administrative expenses of the trustee allowed under
section 503(b)(1)(A), (2) and (6) of the Bankruptcy Code must
be paid before such claims to the extent the trustee
administers assets that are otherwise available for the payment
of these claims. Section 212 is similar to section 212 of the
House bill and the Senate amendment. The principal difference
is the conference report's provision for the payment of trustee
administrative expenses.
Sec. 213. Requirements to obtain confirmation and discharge in cases
involving domestic support obligations
Section 213 is substantively identical to section 213 of
the House bill and the Senate amendment. With respect to
chapter 11 cases, section 213(1) adds a condition for
confirmation of a plan. It amends section 1129(a) of the
Bankruptcy Code to provide that if a chapter 11 debtor is
required by judicial or administrative order or statute to pay
a domestic support obligation, then the debtor must pay all
amounts payable under such order or statute that became payable
postpetition as a prerequisite for confirmation.
With respect to chapter 12 cases, section 213(2) of the
conference report amends section 1208(c) of the Bankruptcy Code
to provide that the failure of a debtor to pay any domestic
support obligation that first becomes payable postpetition is
cause for conversion or dismissal of the case. Section 213(3)
amends Bankruptcy Code section 1222(a) to permit a chapter 12
debtor to propose a plan that provides for less than full
payment of all amounts owed for a claim entitled to priority
under Bankruptcy Code section 507(a)(1)(B) if all of the
debtor's projected disposable income for a five-year period is
applied to make payments under the plan. Section 213(4) of the
conference report amends Bankruptcy Code section 1222(b) to
permit a chapter 12 debtor to propose a plan that pays
postpetition interest on claims that are nondischargeable under
Section 1228(a), but only to the extent that the debtor has
disposable income available to pay such interest after payment
of all allowed claims in full. Section 213(5) amends Bankruptcy
Code section 1225(a) to provide that if a chapter 12 debtor is
required by judicial or administrative order or statute to pay
a domestic support obligation, then the debtor must pay such
obligations pursuant to such order or statute that became
payable postpetition as a condition of confirmation. Section
213(6) amends section Bankruptcy Code section 1228(a) to
condition the granting of a chapter 12 discharge upon the
debtor's payment of certain postpetition domestic support
obligations.
With respect to chapter 13 cases, section 213(7) of the
conference report amends Bankruptcy Code section 1307(c) to
provide that the failure of a debtor to pay any domestic
support obligation that first becomes payable postpetition is
cause for conversion or dismissal of the debtor's case. Section
213(8) amends Bankruptcy Code section 1322(a) to permit a
chapter 13 debtor to propose a plan that pays less than the
full amount of a claim entitled to priority under Bankruptcy
Code section 507(a)(1)(B) if the plan provides that all of the
debtor's projected disposable income over a five-year period
will be applied to make payments under the plan. Section 213(9)
amends Bankruptcy Code section 1322(b) to permit a chapter 13
debtor to propose a plan that pays postpetition interest on
nondischargeable debts under section 1328(a), but only to the
extent that the debtor has disposable income available to pay
such interest after payment in full of all allowed claims.
Section 213(10) amends Bankruptcy Code section 1325(a) to
provide that if a chapter 13 debtor is required by judicial or
administrative order or statute to pay a domestic support
obligation, then the debtor must pay all such obligations
pursuant to such order or statute that became payable
postpetition as a condition of confirmation. Section 213(11)
amends Bankruptcy Code section 1328(a) to condition the
granting of a chapter 13 discharge on the debtor's payment of
certain postpetition domestic support obligations.
Sec. 214. Exceptions to automatic stay in domestic support proceedings
Under current law, section 362(b)(2) of the Bankruptcy
Code excepts from the automatic stay the commencement or
continuation of an action or proceeding: (1) for the
establishment of paternity; or (2) the establishment or
modification of an order for alimony, maintenance or support.
It also permits the collection of such obligations from
property that is not property ofthe estate. Section 214 makes
several revisions to Bankruptcy Code section 362(b)(2). First, it
replaces the reference to ``alimony, maintenance or support'' with
``domestic support obligations''. Second, it adds to section 362(b)(2)
actions or proceedings concerning: (1) child custody or visitation; (2)
the dissolution of a marriage (except to the extent such proceeding
seeks division of property that is property of the estate); and (3)
domestic violence. Third, it permits the withholding of income that is
property of the estate or property of the debtor for payment of a
domestic support obligation under a judicial or administrative order as
well as the withholding, suspension, or restriction of a driver's
license, or a professional, occupational or recreational license under
state law, pursuant to section 466(a)(16) of the Social Security Act.
Fourth, it authorizes the reporting of overdue support owed by a parent
to any consumer reporting agency pursuant to section 466(a)(7) of the
Social Security Act. Fifth, it permits the interception of tax refunds
as authorized by sections 464 and 466(a)(3) of the Social Security Act
or analogous state law. Sixth, it allows medical obligations, as
specified under title IV of the Social Security Act, to be enforced
notwithstanding the automatic stay. Section 214 is substantively
identical to section 214 of the House bill and the Senate amendment.
Sec. 215. Nondischargeability of certain debts for alimony,
maintenance, and support
Section 215 of the conference report amends Bankruptcy
Code section 523(a)(5) to provide that a ``domestic support
obligation'' (as defined in section 211 of the conference
report) is nondischargeable and eliminates Bankruptcy Code
section 523(a)(18). Section 215(2) amends Bankruptcy Code
section 523(c) to delete the reference to section 523(a)(15) in
that provision. Section 215(3) amends section 523(a)(15) to
provide that obligations to a spouse, former spouse, or a child
of the debtor (not otherwise described in section 523(a)(5))
incurred in connection with a divorce or separation or related
action are nondischargeable irrespective of the debtor's
inability to pay such debts. Section 215 is substantively
identical to section 215 of the House bill and the Senate
amendment.
Sec. 216. Continued liability of property
Section 216(1) of the conference report amends section
522(c) of the Bankruptcy Code to make exempt property liable
for nondischargeable domestic support obligations
notwithstanding any contrary provision of applicable
nonbankruptcy law. Section 216(2) and (3) make conforming
amendments to sections 522(f)(1)(A) and 522(g)(2) of the
Bankruptcy Code. Section 216 is substantively identical to
section 216 of the House bill and the Senate amendment.
Sec. 217. Protection of domestic support claims against preferential
transfer motions
Section 217 of the conference report makes a conforming
amendment to Bankruptcy Code section 547(c)(7) to provide that
a bona fide payment of a debt for a domestic support obligation
may not be avoided as a preferential transfer. This provision
is substantively identical to section 217 of the House bill and
the Senate amendment.
Sec. 218. Disposable income defined
Section 218 of the conference report amends section
1225(b)(2)(A) of the Bankruptcy Code to provide that disposable
income in a chapter 12 case does not include payments for
postpetition domestic support obligations. This provision is
substantively identical to section 218 of the House bill. Its
Senate counterpart included a duplicative amendment to section
1325(b)(2)(A) of the Bankruptcy Code that therefore was deleted
from section 218 of the conference report.
Sec. 219. Collection of child support
Section 219 amends sections 704, 1106, 1202, and 1302 of
the Bankruptcy Code to require trustees in chapter 7, 11, 12,
and 13 cases to provide certain types of notices to child
support claimants and governmental enforcement agencies. This
provision is substantively derived from section 219 of the
House bill and the Senate amendment. In addition to including a
provision from the Senate amendment requiring chapter 12
trustees to give notice of the claim to the claimant, section
219 extends this requirement to chapter 7, 11 and 13 trustees
as well. In addition, the conference report conforms internal
statutory cross references to Bankruptcy Code section
523(a)(14A) and deletes the reference to Bankruptcy Code
section 523(a)(14) with respect to chapter 13, as this
provision is inapplicable to that chapter.
Section 219(a) requires a chapter 7 trustee to provide
written notice to a domestic support claimant of the right to
use the services of a state child support enforcement agency
established under sections 464 and 466 of the Social Security
Act in the state where the claimant resides for assistance in
collecting child support during and after the bankruptcy case.
The notice must include the agency's address and telephone
number as well as explain the claimant's right to payment under
the applicable chapter of the Bankruptcy Code. In addition, the
trustee mustprovide written notice to the claimant and the
agency of such claim and include the name, address, and telephone
number of the child support claimant. At the time the debtor is granted
a discharge, the trustee must notify both the child support claimant
and the agency that the debtor was granted a discharge as well as
supply them with the debtor's last known address, the last known name
and address of the debtor's employer, and the name of each creditor
holding a debt that is not discharged under section 523(a)(2), (4) or
(14A) or holding a debt that was reaffirmed pursuant to Bankruptcy Code
section 524. A claimant or agency may request the debtor's last known
address from a creditor holding a debt that is not discharged under
section 523(a)(2), (4) or (14A) or that is reaffirmed pursuant to
section 524 of the Bankruptcy Code. A creditor who discloses such
information, however, is not liable to the debtor or any other person
by reason of such disclosure. Subsections (b), (c), and (d) of section
219 of the conference report impose comparable requirements for chapter
11, 12, and 13 trustees.
Sec. 220. Nondischargeability of certain educational benefits and loans
Section 220 of the conference report amends section
523(a)(8) of the Bankruptcy Code to provide that a debt for a
qualified education loan (as defined in section 221(e)(1) of
the Internal Revenue Code) is nondischargeable, unless
excepting such debt from discharge would impose an undue
hardship on the debtor and the debtor's dependents. This
provision is substantively identical to section 220 of the
House bill and the Senate amendment.
SUBTITLE C--OTHER CONSUMER PROTECTIONS
Sec. 221. Amendments to discourage abusive bankruptcy filings
Section 221 of the conference report is substantively
identical to section 221 of the House bill and the Senate
amendment. It makes a series of amendments to section 110 of
the Bankruptcy Code. First, section 221 clarifies that the
definition of a bankruptcy petition preparer does not include
an attorney for a debtor or an employee of an attorney under
the direct supervision of such attorney. Second, it amends
subsections (b) and (c) of section 110 to provide that if a
bankruptcy petition preparer is not an individual, then an
officer, principal, responsible person, or partner of the
preparer must sign certain documents filed in connection with
the bankruptcy case as well as state the person's name and
address on such documents. Third, it requires a bankruptcy
petition preparer to give the debtor written notice (as
prescribed by the Judicial Conference of the United States)
explaining that the preparer is not an attorney and may not
practice law or give legal advice. The notice may include
examples of legal advice that a preparer may not provide. Such
notice must be signed by the preparer under penalty of perjury
and the debtor and be filed with any document for filing.
Fourth, the petition preparer is prohibited from giving legal
advice, including with respect to certain specified items.
Fifth, it permits the Supreme Court to promulgate rules or the
Judicial Conference of the United States to issue guidelines
for setting the maximum fees that a bankruptcy petition
preparer may charge for services. Sixth, section 221 requires
the preparer to notify the debtor of such maximum fees.
Seventh, it specifies that the bankruptcy petition preparer
must certify that it complied with this notification
requirement. Eighth, it requires the court to order the
turnover of any fees in excess of the value of the services
rendered by the preparer within the 12-month period preceding
the bankruptcy filing. Ninth, section 221 provides that all
fees charged by a preparer may be forfeited if the preparer
fails to comply with certain requirements specified in
Bankruptcy Code section 110, as amended by this provision.
Tenth, it allows a debtor to exempt fees recovered under this
provision pursuant to Bankruptcy Code section 522(b). Eleventh,
it specifically authorizes the court to enjoin a bankruptcy
petition preparer who has violated a court order issued under
section 110. Twelfth, it generally revises section 110's
penalty provisions and specifies that such penalties are to be
paid to a special fund of the United States trustee for the
purpose of funding the enforcement of section 110 on a national
basis. With respect to Bankruptcy Administrator districts, the
funds are to be deposited as offsetting receipts pursuant to
section 1931 of title 28 of the United States Code.
Sec. 222. Sense of Congress
Section 222 of the conference report expresses the sense
of Congress that the states should develop personal finance
curricula for use in elementary and secondary schools. This
provision is substantively identical to section 222 of the
House bill and the Senate amendment.
Sec. 223. Additional amendments to title 11, United States Code
Section 223 of the conference report amends section
507(a) of the Bankruptcy Code to accord a tenth-level priority
to claims for death or personal injuries resulting from the
debtor's operation of a motor vehicle or vessel while
intoxicated. This provision is substantively identical to
section 223 of the House bill and the Senate amendment.
Sec. 224. Protection of retirement savings in bankruptcy
Section 224 of the conference report is substantively
identical to section 224 of the House bill and the Senate
amendment. Subsection (a) amends section 522 of the Bankruptcy
Code to permit a debtor to exempt certain retirement funds to
the extent those monies 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 and that have received a
favorable determination pursuant to Internal Revenue Code
section 7805 that is in effect as of the date of the
commencement of the case. If the retirement monies are in a
retirement fund that has not received a favorable
determination, those monies 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. If the
retirement fund fails to be in substantial compliance with
applicable requirements of the Internal Revenue Code, the
debtor may claim the retirement funds as exempt if he or she is
not materially responsible for such failure. This section also
applies to certain direct transfers and rollover distributions.
In addition, this provision ensures that the specified
retirement funds are exempt under state as well as federal law.
Section 224(b) amends section 362(b) of the Bankruptcy
Code to except from the automatic stay 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(c) 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 subject to Internal Revenue Code
section 72(p) or with respect to a loan from certain
thriftsavings plans. Section 224(b) further provides that this
exception may not be used to cause 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 to be construed to be a claim or debt
within the meaning of the Bankruptcy Code.
Section 224(c) amends Bankruptcy Code section 523(a) to
except from discharge any amount owed by the debtor to a
pension, profit-sharing, stock bonus, or other plan established
under Internal Revenue Code section 401, 403, 408, 408A, 414,
457, or 501(c) under a loan authorized under section 408(b)(1)
of the Employee Retirement Income Security Act of 1974 or
subject to Internal Revenue Code section 72(p) or with respect
to a loan from certain thrift savings plans. Section 224(c)
further provides that this exception to discharge may not be
used to cause 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 to be construed to be a claim or debt
within the meaning of the Bankruptcy Code.
Section 224(d) amends Bankruptcy Code section 1322 to
provide that a chapter 13 plan may not materially alter the
terms of a loan described in section 362(b)(19) and that any
amounts required to repay such loan shall not constitute
``disposable income'' under section 1325 of the Bankruptcy
Code.
Section 224(e) amends section 522 of the Bankruptcy Code
to impose a $1 million cap (periodically adjusted pursuant to
section 104 of the Bankruptcy Code to reflect changes in the
Consumer Price Index) on the value of the debtor's interest in
an individual retirement account established under either
section 408 or 408A of the Internal Revenue Code (other than a
simplified employee pension account under section 408(k) or a
simple retirement account under section 408(p) of the Internal
Revenue Code) that a debtor may claim as exempt property. This
limit applies without regard to amounts attributable to
rollover contributions made pursuant to section 402(c),
402(e)(6), 403(a)(4), 403(a)(5), or 403(b)(8) of the Internal
Revenue Code and earnings thereon. The cap may be increased if
required in the interest of justice.
Sec. 225. Protection of education savings in bankruptcy
Section 225 of the conference report is substantively
identical to section 225 of the House bill and the Senate
amendment. Subsection (a) amends section 541 of the Bankruptcy
Code to provide that funds placed not later than 365 days
before the filing of the bankruptcy case in a education
individual retirement account are not property of the estate if
certain criteria are met. First, the designated beneficiary of
such account must be a child, stepchild, grandchild or step-
grandchild of the debtor for the taxable year during which
funds were placed in the account. A legally adopted child or a
foster child, under certain circumstances, may also qualify as
a designated beneficiary. Second, such funds may not be pledged
or promised to an entity in connection with any extension of
credit and they may not be excess contributions (as described
in section 4973(e) of the Internal Revenue Code). Funds
deposited between 720 days and 365 days before the filing date
are protected to the extent they do not exceed $5,000. Similar
criteria apply with respect to funds used to purchase a tuition
credit or certificate or to funds contributed to a qualified
state tuition plan under section 529(b)(1)(A) of the Internal
Revenue Code. Section 225(b) amends Bankruptcy Code section 521
to require a debtor to file with the court a record of any
interest that the debtor has in an education individual
retirement account or qualified state tuition program.
Sec. 226. Definitions
Section 226 of the conference report is substantively
identical to section 226 of the House bill and the Senate
amendment. Subsection (a) amends section 101 of the Bankruptcy
Code to add certain definitions with respect to debt relief
agencies. Section 226(a)(1) defines an ``assisted person'' as a
person whose debts consist primarily of consumer debts and
whose nonexempt assets are less than $150,000. Section
226(a)(2) defines ``bankruptcy assistance'' as any goods or
services sold or otherwise provided with the express or implied
purpose of giving information, advice, or counsel; preparing
documents for filing; or attending a meeting of creditors
pursuant to section 341; appearing in a proceeding on behalf of
a person; or providing legal representation in a case or
proceeding under the Bankruptcy Code. Section 226(a)(3) defines
a ``debt relief agency'' as any person (including a bankruptcy
petition preparer) who provides bankruptcy assistance to an
assisted person in return for the payment of money or other
valuable consideration. The definition specifically excludes
certain entities. First, it does not apply to a nonprofit
organization exemption from taxation under section 501(c)(3) of
the Internal Revenue Code. Second, it is inapplicable to a
creditor who assisted such person to the extent the assistance
pertained to the restructuring of any debt owed by the person
to the creditor. Third, the definition does not apply to a
depository institution (as defined in section 3 of the Federal
Deposit Insurance Act), or any federal or state credit union
(as defined in section 101 of the Federal Credit Union Act), as
well as any affiliate or subsidiary of such depository
institution or credit union. Fourth, an author, publisher,
distributor, or seller of works subject to copyright protection
under title 17 of the United States Code when acting in such
capacity are not within the ambit of this definition. Section
226(b) amends section 104(B)(1) of the Bankruptcy Code to
permit the monetary amount set forth in the definition of an
``assisted person'' to be automatically adjusted to reflect the
change in the Consumer Price Index.
Sec. 227. Restrictions on debt relief agencies
Section 227 of the conference report is substantively
identical to section 227 of the House bill and the Senate
amendment. This provision creates a new provision in the
Bankruptcy Code intended to proscribe certain activities of a
debt relief agency. It prohibits such agency from: (1) failing
to perform any service that it informed an assisted person it
would provide; (2) advising an assisted person to make an
untrue and misleading statement (or that upon the exercise of
reasonable case, should have been known to be untrue or
misleading) in a document filed in a bankruptcy case; (3)
misrepresenting the services it provides and the benefits that
an assisted person may receive as a result of bankruptcy; and
(4) 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 bankruptcy case. Any waiver by an assisted
person of the protections under this provision are
unenforceable, except against a debt relief agency.
In addition, section 227 imposes penalties for the
violation of section 526, 527 or 528 of the Bankruptcy Code.
First, any contract between a debt relief agency and an
assisted person that does not comply with these provisions is
void and may not be enforced by any state or federal court or
by any person, except an assisted person. Second, a debt relief
agency is liable to an assisted person, under certain
circumstances, for any fees or charges paid by such person to
the agency, actual damages, and reasonable attorneys' fees and
costs. The chief law enforcementofficer of a state who has
reason to believe that a person has violated or is violating section
526 may seek to have such violation enjoined and recover actual
damages. Third, section 227 provides that the United States district
court has concurrent jurisdiction of certain actions under section 526.
Fourth, section 227 provides that sections 526, 527 and 528 preempt
inconsistent state law. In addition, it provides that these provisions
do not limit or curtail the authority of a federal court, a state, or a
subdivision or instrumentality of a state, to determine and enforce
qualifications for the practice of law before the federal court or
under the laws of that state.
Sec. 228. Disclosures
Section 228 of the conference report requires a debt
relief agency to provide certain specified written notices to
an assisted person. These include the notice required under
section 342(b)(1) (as amended by this Act) as well as a notice
advising that: (1) all information the assisted person provides
in connection with the case must be complete, accurate and
truthful; (2) all assets and liabilities must be completely and
accurately disclosed in the documents filed to commence the
case, including the replacement value of each asset (if
required) after reasonable inquiry to establish such value; (3)
current monthly income, monthly expenses and, in a chapter 13
case, disposable income, must be stated after reasonable
inquiry; and (4) the information an assisted person provides
may be audited and that the failure to provide such information
may result in dismissal of the case or other sanction
including, in some instances, criminal sanctions. In addition,
the agency must supply certain specified advisories and
explanations regarding the bankruptcy process. Further, this
provision requires the agency to advise an assisted person (to
the extent permitted under nonbankruptcy law) concerning asset
valuation, the calculation of disposable income, and the
determination of exempt property. Section 228 of the conference
report is substantively identical to section 228 of the House
bill and the Senate amendment.
Sec. 229. Requirements for debt relief agencies
Section 229 adds a new provision to the Bankruptcy Code
requiring a debt relief agency--not later than five business
days after the first date on which it provides any bankruptcy
assistance services to an assisted person (but prior to such
assisted person's bankruptcy petition being filed)--to execute
a written contract with the assisted person. The contract must
specify clearly and conspicuously the services the agency will
provide, the basis on which fees will be charged for such
services, and the terms of payment. The assisted person must be
given a copy of the fully executed and completed contract in a
form the person can retain. The debt relief agency must include
certain specified mandatory statements in any advertisement of
bankruptcy assistance services or regarding the benefits of
bankruptcy that is directed to the general public whether
through the general media, seminars, specific mailings,
telephonic or electronic messages, or otherwise. Section 229 of
the conference report is substantively identical to section 229
of the House bill and the Senate amendment.
Sec. 230. GAO study
Section 230 of the conference report directs the
Comptroller General of the United States to study and prepare a
report on the feasibility, efficacy and cost of requiring
trustees to supply certain specified information about a
debtor's bankruptcy case to the Office of Child Support
Enforcement for the purpose of determining whether a debtor has
outstanding child support obligations. This provision is
substantively identical to section 230 of the House bill and
the Senate amendment.
Sec. 231. Protection of personally identifiable information
Section 231 of the conference report largely reflects
section 231 of the Senate amendment. It differs from its Senate
antecedent in that it clarifies that it applies to personally
identifiable information and does not preempt applicable
nonbankruptcy law. In addition, the provision specifies that
court approval must be preceded by the appointment of a privacy
ombudsman to effectuate the intent of this provision. There is
no counterpart to Section 231 in the House bill.
Subsection (a) amends Bankruptcy Code section 363(b)(1)
to provide that if a debtor, in connection with offering a
product or service, discloses to an individual a policy
prohibiting the transfer of personally identifiable information
to persons unaffiliated with the debtor, and the policy is in
effect at the time of the bankruptcy filing, then the trustee
may not sell or lease such information unless either of the
following conditions is satisfied: (1) the sale is consistent
with such policy; or (2) the court, after appointment of a
consumer privacy ombudsman (pursuant to section 332 of the
Bankruptcy Code, as amended) and notice and hearing, the court
approves the sale or lease upon due consideration of the facts,
circumstances, and conditions of the sale or lease.
Section 231(b) amends Bankruptcy Code section 101 to add
a definition of ``personally identifiable information.'' The
term applies to information provided by an individual to the
debtor in connection with obtaining a product or service from
the debtor primarily for personal, family, or household
purposes. It includes the individual's: (1) first name or
initial and last name (whether given at birth or adoption or
legally changed); (2) physical home address; (3) electronic
address, including an e-mail address; (4) home telephone
number; (5) Social Security number; or (vi) credit card account
number. The term also includes information if it is identified
in connection with the above items: (1) an individual's birth
date, birth or adoption certificate number, or place of birth;
or (2) any other information concerning an identified
individual that, if disclosed, will result in the physical or
electronic contacting or identification of that person.
Sec. 232. Consumer privacy ombudsman
Section 232 implements the preceding provision of the
conference report with respect to the appointment and
responsibilities of a consumer privacy ombudsman. It provides
that if a hearing is required under section 363(b)(1)(B) (as
amended), the court must order the United States trustee to
appoint a disinterested person to serve as the consumer privacy
ombudsman and to provide timely notice of the hearing to such
person. It permits the ombudsman to appear and be heard at such
hearing. The ombudsman must provide the court with information
to assist its consideration of the facts, circumstances and
conditions of the proposed sale or lease of personally
identifiable information. The information may include a
presentation of the debtor's privacy policy, potential losses
or gains of privacy to consumers if the sale or lease is
approved, potential costs or benefits to consumers if the sale
or lease is approved, and possible alternatives that would
mitigate potential privacy losses or costs to consumers.
Section 232 prohibits the ombudsman from disclosing any
personally identifiable information obtained in the case by
such individual. In addition, the provision amends Bankruptcy
Code section 330(a)(1) to permit an ombudsman to be
compensated.
This provision largely reflects section 232 of the Senate
amendment. There is no counterpart to section 232 in the House
bill. The conference report redrafts the Senate provision to be
an amendment to the Bankruptcy Code rather than freestanding
text, deletes the 30-day provision as being deemed to be
unnecessary; restructures the provision to better integrate its
components; and clarifies that the court must direct the United
States trustee to appoint the ombudsman, rather than the court
making such appointment itself.
Sec. 233. Prohibition on disclosure of name of minor children
Section 233 of the conference report adds a new provision
to the Bankruptcy Code (section 112) specifying that a debtor
may be required to provide information regarding his or her
minor child in connection with the bankruptcy case, but such
debtor may not be required to disclose in the public records
the child's name. It provides, however, that the debtor may be
required to disclose this information in a nonpublic record
maintained by the court, which must be available for inspection
by the United States trustee, trustee or an auditor, if any.
Section 233 prohibits the court, United States trustee,
trustee, or auditor from disclosing such minor child's name.
Section 233 of the conference report generally reflects section
233 of the Senate amendment. The conference report clarifies
that the prohibition against disclosure pertains to the minor
child's name. Section 231 of the House bill is similar, but
does not include the provision giving the court, United States
trustee, trustee or audit access to the proscribed information.
Title III--Discouraging Bankruptcy Abuse
Sec. 301. Reinforcement of the fresh start
Section 301 of the conference report makes a clarifying
amendment to section 523(a)(17) of the Bankruptcy Code
concerning the dischargeability of court fees incurred by
prisoners. Section 523(a)(17) was added to the Bankruptcy Code
by the Omnibus Consolidated Rescissions and Appropriations Act
of 1996 \1\ to except from discharge the filing fees and
related costs and expenses assessed by a court in a civil case
or appeal. As the result of a drafting error, however, this
provision might be construed to apply to filing fees, costs or
expenses incurred by any debtor, not solely by those who are
prisoners. The amendment eliminates this ambiguity and makes
other conforming changes to narrow its application in
accordance with its original intent. This provision is
substantively identical to section 301 of the House bill and
the Senate amendment.
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\1\ Pub. L. No. 104-134, Section 804(b) (1996).
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Sec. 302. Discouraging bad faith repeat filings
Section 302 of the conference report amends section
362(c) of the Bankruptcy Code to terminate the automatic stay
within 30 days in a chapter 7, 11, or 13 case filed by or
against an individual if such individual was a debtor in a
previously dismissed case pending within the preceding one-year
period. The provision does not apply to a case refiled under a
chapter other than chapter 7 after dismissal of the prior
chapter 7 case pursuant to section 707(b) of the Bankruptcy
Code. Upon motion of a party in interest, the court may
continue the automatic stay after notice and a hearing
completed prior to the expiration of the 30-day period if such
party demonstrates that the latter case was filed in good faith
as to the creditors who are stayed by the filing. For purposes
of this provision, a case is presumptively not filed in good
faith as to all creditors (but such presumption may be rebutted
by clear and convincing evidence) if: (1) more than one
bankruptcy case under chapter 7, 11 or 13 was previously filed
by the debtor within the preceding one-year period; (2) the
prior chapter 7, 11, or 13 case was dismissed within the
preceding year for the debtor's failure to (a) file or amend
without substantial excuse a document required under the
Bankruptcy Code or the court, (b) provide adequate protection
ordered by the court, or (c) perform the terms of a confirmed
plan; or (3) there has been no substantial change in the
debtor's financial or personal affairs since the dismissal of
the prior case, or there is no reason to conclude that the
pending case will conclude either with a discharge (if a
chapter 7 case) or confirmation (if a chapter 11 or 13 case).
In addition, section 302 provides that a case is presumptively
deemed not to be filed in good faith as to any creditor who
obtained relief from the automatic stay in the prior case or
sought such relief in the prior case and such action was
pending at the time of the prior case's dismissal. The
presumption may be rebutted by clear and convincing evidence. A
similar presumption applies if two or more bankruptcy cases
were pending in the one-year preceding the filing of the
pending case. Section 302 is substantively identical to section
302 of the House bill and the Senate amendment.
Sec. 303. Curbing abusive filings
Section 303 of the conference report is intended to
reduce abusive filings. This provision is substantively
identical to section 303 of the House bill and the Senate
amendment. Subsection (a) amends Bankruptcy Code section 362(d)
to add a new ground for relief from the automatic stay. Under
this provision, cause for relief from the automatic stay may be
established for a creditor whose claim is secured by an
interest in real property, if the court finds that the filing
of the bankruptcy case was part of a scheme to delay, hinder
and defraud creditors that involved either: (i) a transfer of
all or part of an ownership interest in real property without
such creditor's consent or without court approval; or (ii)
multiple bankruptcy filings affecting the real property. If
recorded in compliance with applicable state law governing
notice of an interest in or a lien on real property, an order
entered under this provision is binding in any other bankruptcy
case for two years from the date of entry of such order. A
debtor in a subsequent case may move for relief based upon
changed circumstances or for good cause shown after notice and
a hearing. Section 303(a) further provides that any federal,
state or local governmental unit that accepts a notice of
interest or a lien in real property, must accept a certified
copy of an order entered under this provision.
Section 303(b) amends Bankruptcy Code section 362(b) to
except from the automatic stay an act to enforce any lien
against or security interest in real property within two years
following the entry of an order entered under section
362(d)(4). A debtor, in a subsequent case, may move for relief
from such order based upon changed circumstances or for other
good cause shown after notice and a hearing. Section 303(b)
also provides that the automatic stay does not apply in a case
where the debtor: (1) is ineligible to be a debtor in a
bankruptcy case pursuant to section 109(g) of the Bankruptcy
Code; or (2) filed the bankruptcy case in violation of an order
issued in a prior bankruptcy case prohibiting the debtor from
being a debtor in a subsequent bankruptcy case.
Sec. 304. Debtor retention of personal property security
Section 304 is substantively identical to section 304 of
the House bill and Senate amendment. Section 304(1) of the
conference report amends section 521(a) of the Bankruptcy Code
to provide that an individual who is a chapter 7 debtor may not
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 property is not subject to the automatic
stay and is no longer property of the estate. An exception
applies if the court: (1) determines on motion of the trustee
filed before the expiration of the 45-day period that the
property has consequential value or would benefit the
bankruptcy estate; (2) orders adequate protection of the
creditor's interest; and (iii) directs the debtor to deliver
any collateral in the debtor's possession. Section 304(2)
amends section 722 to clarify that a chapter 7 debtor must pay
the redemption value in full at the time of redemption.
Sec. 305. Relief from the automatic stay when the debtor does not
complete intended surrender of consumer debt collateral
Section 305 of the conference report is substantively
identical to section 305 of the House bill and the Senate
amendment. Subsection (1) amends Bankruptcy Code section 362 to
terminate the automatic stay with respect to personal property
of the estate or of the debtor in a chapter 7, 11, or 13 case
(where the debtor is an individual) that secures a claim (in
whole or in part) or is subject to an unexpired lease if the
debtor fails to: (1) file timely a statement of intention as
required by section 521(a)(2) of the Bankruptcy Code with
respect to such property; or (2) indicate in such statement
whether the property will be surrendered or retained, and if
retained, whether the debtor will redeem the property or
reaffirm the debt, or assume an unexpired lease, if the trustee
does not. Likewise, the automatic stay is terminated if the
debtor fails to take the action specified in the statement of
intention in a timely manner, unless the statement specifies
reaffirmation and the creditor refuses to enter into the
reaffirmation agreement on the original contract terms. In
addition to terminating the automatic stay, this provision
renders such property no longer property of the estate. An
exception pertains where the court determines, on the motion of
the trustee made prior to the expiration of the applicable time
period under section 521(a)(2), and after notice and a hearing,
that such property is of consequential value or benefit to the
estate, orders adequate protection of the creditor's interest,
and directs the debtor to deliver any collateral in the
debtor's possession.
Section 305(2) amends section 521 of the Bankruptcy Code
to make the requirement to file a statement of intention
applicable to all secured debts, not just secured consumer
debts. In addition, it requires the debtor to effectuate his or
her stated intention within 30 days from the first date set for
the meeting of creditors. If the debtor fails to timely
undertake certain specified actions with respect to property
that a lessor or bailor owns and has leased, rented or bailed
to the debtor or in which a creditor has a security interest
(not otherwise avoidable under section 522(f), 544, 545, 547,
548 or 549 of the Bankruptcy Code), then nothing in the
Bankruptcy Code shall prevent or limit the operation of a
provision in a lease or agreement that places the debtor in
default by reason of the debtor's bankruptcy or insolvency.
Sec. 306. Giving secured creditors fair treatment in chapter 13
Section 306 of the conference report is substantively
identical to section 306 of the Housebill and Senate amendment,
except as noted below. Subsection (a) amends Bankruptcy Code section
1325(a)(5)(B)(i) to require--as a condition of confirmation--that a
chapter 13 plan provide that a secured creditor retain its lien until
the earlier of when the underlying debt is paid or the debtor receives
a discharge. If the case is dismissed or converted prior to completion
of the plan, the secured creditor is entitled to retain its lien to the
extent recognized under applicable nonbankruptcy law.
Section 306(b) adds a new paragraph to section 1325(a) of
the Bankruptcy Code specifying that Bankruptcy Code section 506
does not apply to a debt incurred within the two and one-half
year period preceding the filing of the bankruptcy case if the
debt is secured by a purchase money security interest in a
motor vehicle acquired for the personal use of the debtor.
Where the collateral consists of any other type of property
having value, section 306(b) provides that section 506 of the
Bankruptcy Code does not apply if the debt was incurred during
the one-year period preceding the filing of the bankruptcy
case. The 910-day period set forth in Section 306(b) of the
conference report represents a compromise between the House
bill and Senate amendment. Section 306(b) of the House bill
provided for a five-year period, while its Senate counterpart
specified a three-year period.
Section 306(c)(1) amends section 101 of the Bankruptcy
Code to define the term ``debtor's principal residence'' as a
residential structure (including incidental property) without
regard to whether or not such structure is attached to real
property. The term includes an individual condominium or
cooperative unit as well as a mobile or manufactured home, and
a trailer.
Section 306(c)(2) amends section 101 of the Bankruptcy
Code to define the term ``incidental property'' as property
commonly conveyed with a principal residence in the area where
the real property is located. The term includes all easements,
rights, appurtenances, fixtures, rents, royalties, mineral
rights, oil or gas rights or profits, water rights, escrow
funds, and insurance proceeds. Further, the term encompasses
all replacements and additions.
Sec. 307. Domiciliary requirements for exemptions
Section 307 of the conference report is substantively
identical to section 307 of the House bill and the Senate
amendment. This provision amends section 522(b)(2)(A) of the
Bankruptcy Code to extend the time that a debtor must be
domiciled in a state from 180 days to 730 days before he or she
may claim that state's exemptions. If the debtor's domicile has
not been located in a single state for the 730-day period, then
the state where the debtor was domiciled in the 180-day period
preceding the 730-day period (or the longer portion of such
180-day period) controls. If the effect of this provision is to
render the debtor ineligible for any exemption, the debtor may
elect to exempt property of the kind described in the federal
exemption notwithstanding state opt out.
Sec. 308. Reduction of homestead exemption for fraud
Section 308 amends section 522 of the Bankruptcy Code to
reduce the value of a debtor's interest in the following
property that may be claimed as exempt under certain
circumstances: (i) real or personal property that the debtor or
a dependent of the debtor uses as a residence, (ii) a
cooperative that owns property that the debtor or a dependent
of the debtor uses as a residence, (iii) a burial plot, or (iv)
real or personal property that the debtor or dependent of the
debtor claims as a homestead. Where nonexempt property is
converted to the above-specified exempt property within the
ten-year period preceding the filing of the bankruptcy case,
the exemption must be reduced to the extent such value was
acquired with the intent to hinder, delay or defraud a
creditor. Section 308 represents a compromise between the House
and Senate positions on the issue of homestead exemptions. In
section 308 of the House bill, the reachback period is seven
years. Section 308 of the Senate amendment imposes a flat
$125,000 homestead cap, which does not apply to an exemption
claimed by a family farmer for the farmer's principal
residence.
Sec. 309. Protecting secured creditors in chapter 13 cases
Section 309 of the conference report is substantively
identical to section 309 of the House bill and the Senate
amendment. Section 309(a) amends Bankruptcy Code section
348(f)(1)(B) to provide that valuations of property and allowed
secured claims in a chapter 13 case only apply if the case is
subsequently converted to one under chapter 11 or 12. If the
chapter 13 case is converted to one under chapter 7, then the
creditor holding security as of the petition date shall
continue to be secured unless its claim was paid in full as of
the conversion date. In addition, unless a prebankruptcy
default has been fully cured at the time of conversion, then
the default in any bankruptcy proceeding shall have the effect
given under applicable nonbankruptcy law.
Section 309(b) amends section 365 of the Bankruptcy Code
to provide that if a lease of personal property is rejected or
not assumed by the trustee in a timely manner, such property is
no longer property of the estate and the automatic stay under
section 362 with respect to such property is terminated. With
regard to a chapter 7 case in which the debtor is an
individual, the debtor may notify the creditor in writing of
his or her desire to assume the lease. Upon being so notified,
the creditor may, at its option, inform the debtor that it is
willing to have the lease assumed and condition such assumption
on cure of any outstanding default on terms set by the
contract. If within 30 days after such notice the debtor gives
written notice to the lessor that the lease is assumed, the
debtor (not the bankruptcy estate) assumes the liability under
the lease. Section 309(b) provides that the automatic stay of
section 362 and the discharge injunction of section 524 are not
violated if the creditor notifies the debtor and negotiates a
cure under section 365(p)(2) (as amended). In a chapter 11 or
13 case where the debtor is an individual lessee with respect
to a personal property lease and the lease is not assumed in
the confirmed plan, the lease is deemed rejected as of the
conclusion of the confirmation hearing. If the lease is
rejected, the automatic stay under section 362 as well as the
chapter 13 codebtor stay under section 1301 are automatically
terminated with respect to such property.
Section 309(c)(1) amends Bankruptcy Code section
1325(a)(5)(B) to require that periodic payments pursuant to a
chapter 13 plan with respect to a secured claim be made in
equal monthly installments. Where the claim is secured by
personal property, the amount of such payments shall not be
less than the amount sufficient to provide adequate protection
to the holder of such claim. Section 309(c)(2) amends section
1326(a) of the Bankruptcy Code to require a chapter 13 debtor
to commence making payments within 30 days after the filing of
the plan or the order for relief, whichever is earlier. The
amount of such payment must be the amount which is proposed in
the plan, scheduled in a personal property lease for that
portion of the obligation that becomes due postpetition (which
amount shall reduce the payment required to be made to such
lessor pursuant to the plan), and which provides adequate
protection directly to a creditor holding an allowed claim
secured by personal property to the extent the claim is
attributable to the purchase of such property (which amount
shall reduce the payment required to be made to suchsecured
creditor pursuant to the plan). Payments made pursuant to a plan must
be retained by the chapter 13 trustee until confirmation or denial of
confirmation. Section 309(c)(2) provides that if the plan is confirmed,
the trustee must distribute payments received from the debtor as soon
as practicable in accordance with the plan. If the plan is not
confirmed, the trustee must return to the debtor payments not yet due
and owing to creditors. Pending confirmation and subject to section
363, the court, after notice and a hearing, may modify the payments
required under this provision. Section 309(c)(2) requires the debtor,
within 60 days following the filing of the bankruptcy case, to provide
reasonable evidence of any required insurance coverage with respect to
the use or ownership of leased personal property or property securing,
in whole or in part, a purchase money security interest.
Sec. 310. Limitation on luxury goods
Section 310 amends section 523(a)(2)(C) of the Bankruptcy
Code. Under current law, consumer debts owed to a single
creditor that, in the aggregate, exceed $1,075 for luxury goods
or services incurred within 60 days before the commencement of
the case are presumed to be nondischargeable. As amended, the
presumption applies if the aggregate amount of consumer debts
for luxury goods or services is more than $500 for luxury goods
or services incurred by an individual debtor within 90 days
before the order for relief. With respect to cash advances,
current law provides that cash advances aggregating more than
$1,075 that are extensions of consumer credit under an open-end
credit plan obtained by an individual debtor within 60 days
before the case is filed are presumed to be nondischargeable.
As amended, section 523(a)(2)(C) presumes that cash advances
aggregating more than $750 and that are incurred within 70 days
are nondischargeable. 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. In addition, ``an extension of consumer credit under an
open-end credit plan'' has the same meaning as this term has
under the Consumer Credit Protection Act. With respect to the
aggregate amount fixed for luxury goods and services under this
provision, section 310 of the conference report reflects a
compromise between the House bill, which has a $250 threshold,
and the Senate amendment, which has a $750 threshold.
Sec. 311. Automatic stay
Section 311 of the conference report amends section
362(b) of the Bankruptcy Code to except from the automatic stay
a judgment of eviction with respect to a residential leasehold.
It represents a compromise between House and Senate conferees.
The House bill excepts the following proceedings from the
automatic stay: (1) the continuation of any eviction, unlawful
detainer action, or similar proceeding by a lessor against a
debtor involving residential real property where the debtor
resides as a tenant under a rental agreement; (2) the
commencement of any eviction, unlawful detainer action, or
similar proceeding by a lessor against a debtor involving
residential real property where the debtor resides as a tenant
under a rental agreement that has terminated pursuant to the
lease agreement or applicable State law; and (3) an eviction
action based on endangerment to property or person, or the use
of illegal drugs. With respect to granting relief from the
automatic stay to residential leaseholds, the Senate provision
permits an eviction proceeding to continue or to be commenced
if: (1) the debtor failed to make a rental payment that first
becomes due under the unexpired term of a rental agreement or
lease or a tenancy under applicable state or local rent control
law, after the bankruptcy case was filed or during the ten-day
period preceding the date of the filing of the petition,
providing the lessor files with the court a certification that
the debtor has not made the rent payment; or (2) the debtor has
a month-to-month tenancy (or a shorter term) other than under
applicable state or local rent control law where timely
payments are made pursuant to clause (1) if the lessor files
with the court a certification that the requirements of this
clause have been met. In addition, the Senate provision permits
the commencement or continuation of any eviction, unlawful
detainer action or similar proceeding by a lessor if during the
two-year period preceding the date of the filing of the
petition, the lessee-debtor or another occupant of the
premises: (1) filed a bankruptcy case during this period; and
(2) failed to make any rental payment that first became due
under applicable nonbankruptcy law after the filing of the
prior case. Further, the Senate amendment permits an eviction
action to proceed to the extent the proceeding seeks possession
based on endangerment of property or the illegal use of
controlled substances on that property, if the lessor files
with the court a certification that such an eviction has been
filed or the debtor has endangered the property or illegally
used or allowed to be used a controlled substance on such
property during the 30-day period preceding the date of the
filing of the certification. The Senate amendment specifies
certain procedural requirements with respect to certain of
these proceedings.
It is the intent of section 311 of the conference report
to create an exception to the automatic stay of section
362(a)(3) to permit the recovery of possession by rental
housing providers of their property in certain circumstances
where a judgment for possession has been obtained against a
debtor/resident before the filing of the petition for
bankruptcy. At the same time, the section provides tenants a
reasonable amount of time after filing the petition to cure the
default giving rise to the judgment for possession as long as
there are circumstances in which applicable non-bankruptcy law
allows a default to be cured after a judgment has been
obtained. It is also the intent of this section to permit
eviction actions based on illegal use of controlled substances
or endangering property to continue or to be commenced after
the filing of the petition, in certain circumstances.
Where non-bankruptcy law applicable in the jurisdiction
does not permit a tenant to cure a monetary default after the
judgment for possession has been obtained, the automatic stay
of section 362(a)(3) does not operate to limit action by a
rental housing provider to proceed with, or a marshal, sheriff,
or similar local officer to execute, the judgment for
possession. Where the debtor claims that applicable law permits
a tenant to cure after the judgment for possession has been
obtained, the automatic stay operates only where the debtor
files a certification with the bankruptcy petition asserting
that applicable law permits such action and that the debtor or
an adult dependent of the debtor has paid to the court all rent
that will come due during the 30 days following the filing of
the petition. If, within thirty days following the filing of
the petition, the debtor or an adult dependent of the debtor
certifies that the entire monetary default that gave rise to
the judgment for possession has been cured, the automatic stay
remains in effect.
If a lessor has filed or wishes to file an eviction
action based on the use of illegal controlled substances or
property endangerment, the section allows the lessor in certain
cases to file a certification of such circumstance with the
court and obtain an exception to the stay.
For both the judgment based on monetary default and the
controlled substance orendangerment exceptions, the section
provides an opportunity for challenge by either the lessor or the
tenant to certifications filed by the other party and a timely hearing
for the court to resolve any disputed facts and rule on the factual or
legal sufficiency of the certifications. Where the court finds for the
lessor, the clerk shall immediately serve upon the parties a copy of
the court's order confirming that an exception to the automatic stay is
applicable. Where the court finds for the tenant, the stay shall remain
in effect. It is the intent of this section that the clerk's certified
copy of the docket or order shall be sufficient evidence that the
exception under paragraph 22 or paragraph 23 is applicable for a
marshal, sheriff, or similar local officer to proceed immediately to
execute the judgment for possession if applicable law otherwise permits
such action, or for an eviction action for use of illegal controlled
substances or property endangerment to proceed. This section does not
provide any new right to either landlords or tenants relating to
evictions or defenses to eviction under otherwise applicable law.
Sec. 312. Extension of period between bankruptcy discharges
Section 312 of the conference report amends section
727(a)(8) of the Bankruptcy Code to extend the period before
which a chapter 7 debtor may receive a subsequent chapter 7
discharge from six to 8 years. It also amends section 1328 to
prohibit the issuance of a discharge in a subsequent chapter 13
case if the debtor received a discharge in a prior chapter 7,
11, or 12 case within four years preceding the filing of the
subsequent chapter 13 case. This represents a compromise
between the House bill, which sets forth a five-year period
with respect to any case, and the Senate amendment, which sets
forth a three-year period with respect to a prior chapter 7,
11, or 12 case. With respect to the extension of the time
period between subsequent chapter 13 discharges, the conference
report adopts the two-year period set forth in section 312 of
the Senate amendment, but excludes the provision permitting the
court to shorten this period if the debtor demonstrates extreme
hardship.
Sec. 313. Definition of household goods and antiques
Section 313 represents a compromise among the House and
Senate conferees. This provision is substantively similar to
section 313 of the House bill and the Senate amendment.
Subsection (a) amends section 522(f) of the Bankruptcy Code to
codify a modified version of the Federal Trade Commission's
definition of ``household goods'' for purposes of the avoidance
of a nonpossessory, nonpurchase money lien in such property. It
also specifies various items that are expressly not household
goods. Section 313(b) requires the Director of the Executive
Office for United States Trustees to prepare a report
containing findings with respect to the use of this definition.
The report may include recommendations for amendments to the
definition of ``household goods'' as codified in section
522(f)(4). Section 313 of the conference report differs from
its counterparts in the House bill and Senate amendment in
three respects: (1) it specifies a monetary threshold for the
exclusions pertaining to electronic entertainment equipment,
antiques, and jewelry; (2) it eliminates the restriction in the
House bill and Senate amendment pertaining to a personal
computer; and (3) and specifies that works of art are not
household goods, unless by or of the debtor or by any relative
of the debtor.
Sec. 314. Debt incurred to pay nondischargeable debts
Section 314 is substantively identical to section 314 of
the House bill and Senate amendment. Subsection (a) amends
section 523(a) of the Bankruptcy Code to make a debt incurred
to pay a nondischargeable tax owed to a governmental unit
(other than a tax owed to the United States) nondischargeable.
Section 314(b) amends section 1328(a) of the Bankruptcy Code to
make the following additional debts nondischargeable in a
chapter 13 case: (1) debts for money, property, services, or
extensions of credit obtained through fraud or by a false
statement in writing under section 523(a)(2)(A) and (B) of the
Bankruptcy Code; (2) consumer debts owed to a single creditor
that aggregate to more than $500 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 $750 that are extensions of consumer credit obtained
by a debtor under an open-end credit plan within 70 days before
the order for relief under section 523(a)(2)(C) (as amended);
(3) pursuant to section 523(a)(3) of the Bankruptcy Code, 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; (4)
debts resulting from fraud or defalcation by the debtor acting
as a fiduciary under section 523(a)(4) of the Bankruptcy Code;
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.
Sec. 315. Giving creditors fair notice in chapters 7 and 13 cases
Section 315 of the conference report amends several
provisions of the Bankruptcy Code. Subsection (a) amends
Bankruptcy Code section 342(c) to delete the provision
specifying that the failure of a notice to include certain
information required to be given by a debtor to a creditor does
not invalidate the notice's legal effect. It adds a provision
requiring a debtor to send any notice he or she must provide
under the Bankruptcy Code to the address stated by the creditor
and to include in such notice the current account number, if
within 90 days prior to the date that the debtor filed for
bankruptcy relief the creditor in at least two communications
sent to the debtor set forth such address and account number.
If the creditor would be in violation of applicable
nonbankruptcy law by sending any such communication during this
time period, then the debtor must send the notice to the
address provided by the creditor stated in the last two
communications containing the creditor's address and such
notice shall include the current account number. Section 315(a)
also permits a creditor in a chapter 7 or 13 case (where the
debtor is an individual) to file with the court and serve on
the debtor the address to be used to notify such creditor in
that case. Five days after receipt of such notice, the court
and the debtor, respectively, must use the address so specified
to provide notice to such creditor. In addition, section 315(a)
specifies that if an entity files a notice with the court
stating an address to be used generally by all bankruptcy
courts for chapter 7 and 13 cases, or by particular bankruptcy
courts, as specified by such entity. This address must be used
by the court to supply notice in such cases within 30 days
following the filing of such notice where the entity is a
creditor. Notice given other than as provided in section 342 is
not effective until it has been brought to the creditor's
attention. If the creditor has designated a person or
organizational subdivision to be responsible for receiving
notices concerning bankruptcy cases and has established
reasonable procedures so that these notices will be delivered
to such person or subdivision, a notice will not be deemed to
have been received by the creditor until it has been received
by such person or subdivision. This provision also prohibits
the imposition of any monetary penalty for violation of the
automatic stay or for the failure to comply with the Bankruptcy
Code sections 542 and 543 unless the creditor has received effective
notice under section 342. Section 315(a) of the conference report is
substantively identical to section 315(a) of the House bill and Senate
amendment.
Section 315(b) amends section 521 to specify additional
duties of a debtor. This provision requires the debtor to file
a certificate executed by the debtor's attorney or bankruptcy
petition preparer stating that the attorney or preparer
supplied the debtor with the notice required under Bankruptcy
Code section 342(b). If the debtor is not represented by
counsel and 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. In addition, the
debtor must file: (1) copies of all payment advices or other
evidence of payment, if any, from any employer within 60 days
preceding the bankruptcy filing; (2) a statement of the amount
of monthly net income, itemized to show how such amount is
calculated; and (3) a statement disclosing any reasonably
anticipated increase in income or expenditures in the 12-month
period following the date of filing. Upon request of a
creditor, section 315(b) of the conference report requires the
court to make the petition, schedules, and statement of
financial affairs of an individual who is a chapter 7 or 13
debtor available to such creditor.
In addition, section 315(b) requires such debtor to
provide the trustee not later than seven days before the date
first set for the meeting of creditors a copy of his or her
Federal income tax return or transcript (at the election of the
debtor) for the latest taxable period ending prior to the
filing of the bankruptcy case for which a tax return was filed.
Should the debtor fail to comply with this requirement, the
case must be dismissed unless the debtor demonstrates that such
failure was due to circumstances beyond the debtor's control.
In addition, the debtor must file copies of any amendments to
such tax returns. Upon request, the debtor must provide a copy
of the tax return or transcript to the requesting creditor at
the time the debtor supplies the return or transcript to the
trustee. Should the debtor fail to comply with this
requirement, the case must be dismissed unless the debtor
demonstrates that such failure is due to circumstances beyond
the debtor's control. A creditor in a chapter 13 case may, at
any time, file a notice with the court requesting a copy of the
plan. The court must supply a copy of the chapter 13 plan at a
reasonable cost not later than 5 days after such request. This
provision represents a compromise between section 315(b) of the
House bill and the Senate amendment. The House bill was not
limited to Federal tax returns and did not consistently include
transcripts as an alternative. In addition, the conference
report clarifies that this provision applies to Federal income
tax returns.
During the pendency of a chapter 7, 11 or 13 case, the
debtor must file with the court, at the request of the judge,
United States trustee, or any party in interest, at the time
filed with the taxing authority, copies of any Federal income
tax returns (or transcripts thereof) that were not filed for
the three-year period preceding the date on which the order for
relief was entered. In addition, the debtor must file copies of
any amendments to such tax returns.
In a chapter 13 case, the debtor must file a statement,
under penalty of perjury, of income and expenditures in the
preceding tax year and monthly income showing how the amounts
were calculated. The statement must be filed on the date that
is the later of 90 days after the close of the debtor's tax
year or one year after the order for relief, unless a plan has
been confirmed. Thereafter, the statement must be filed on or
before the date that is 45 days before the anniversary date of
the plan's confirmation, until the case is closed. The
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 to the debtor's household expenses, and
the amount of any such contributions.
Section 315(b)(2) mandates that the tax returns,
amendments thereto, and the statement of income and
expenditures of an individual who is a chapter 7 or chapter 13
debtor be made available to the United States trustee or
bankruptcy administrator, the trustee, and any party in
interest for inspection and copying, subject to procedures
established by the Director of the Administrative Office for
United States Courts within 180 days from the date of enactment
of this Act. The procedures must safeguard the confidentiality
of any tax information required under this provision and
include restrictions on creditor access to such information. In
addition, the Director must, within 540 days from the Act's
enactment date, prepare and submit to Congress a report that
assesses the effectiveness of such procedures and, if
appropriate, includes recommendations for legislation to
further protect the confidentiality of such tax information and
to impose penalties for its improper use. If requested by the
United States trustee or trustee, the debtor must provide a
document establishing the debtor's identity, which may include
a driver's license, passport, or other document containing a
photograph of the debtor, and such other personal identifying
information relating to the debtor. Section 315(b) is
substantively similar to section 315(b) of the House bill and
the Senate amendment. The conference report makes technical and
clarifying revisions.
Sec. 316. Dismissal for failure to timely file schedules or provide
required information
Section 316 of the conference report is similar to
section 316 of the House bill and the Senate amendment. This
provision amends section 521 of the Bankruptcy Code to provide
that if an individual debtor in a voluntary chapter 7 or
chapter 13 case fails to file all of the information required
under section 521(a)(1) within 45 days of the date on which the
case is filed, the case must be automatically dismissed,
effective on the 46th day. The 45-day period may be extended
for an additional 45-day period providing the debtor requests
such extension prior to the expiration of the original 45-day
period and the court finds justification for such extension.
Upon request of a party in interest, the court must enter an
order of dismissal within 5 days of such request. Section 316
of the conference report, unlike its House and Senate
antecedents, provides that a court may decline to dismiss the
case if: (1) the trustee files a motion before the stated time
periods; (2) the court finds, after notice and a hearing, that
the debtor in good faith attempted to file all the information
required under section 521(a)(1)(B)(iv); and (3) the court
finds that the best interests of creditors would be served by
continued administration of the case.
Sec. 317. Adequate time to prepare for hearing on confirmation of the
plan
Section 317 of the conference report is similar to
section 317 of the House bill and the Senate amendment. This
provision amends section 1324 of the Bankruptcy Code to require
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, unless the
court determines that it would be in the best interests of
creditor and the estate to hold such hearing at an earlier date
and there is no objection to such earlier date. The House and
Senate antecedents to section 317 of the conference report do
not include this exception.
Sec. 318. Chapter 13 plans to have a 5-year duration in certain cases
Section 318 of the conference report is substantially
identical to section 318 of the House bill and the Senate
amendment. Subsection (1) amends Bankruptcy Code sections
1322(d) and 1325(b) to specify that a chapter 13 plan may not
provide for payments over a period that is not less than five
years if the current monthly income of the debtor and the
debtor's spouse combined exceeds certain monetary thresholds.
If the current monthly income of the debtor and the
debtor's spouse fall below these thresholds, then the duration
of the plan may not be longer than three years, unless the
court, for cause, approves a longer period up to five years.
The applicable commitment period may be less if the plan
provides for payment in full of all allowed unsecured claims
over a shorter period. Section 318(2), (3), and (4) make
conforming amendments to sections 1325(b) and 1329(c) of the
Bankruptcy Code.
Sec. 319. Sense of Congress regarding expansion of rule 9011 of the
Federal Rules of Bankruptcy Procedure
Section 319 of the conference report expresses a sense of
the Congress that Federal Rule of Bankruptcy Procedure 9011 be
modified to require that any document, whether signed or
unsigned, including schedules, supplied to the court or the
trustee by a debtor may 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 warranted by existing law or a good faith
argument for the extension, modification, or reversal of
existing law. Section 319 of the conference report is
substantially identical to section 319 of the House bill and
the Senate amendment.
Sec. 320. Prompt relief from stay in individual cases
Section 320 of the conference report is substantively
identical to section 320 of the House bill and the Senate
amendment. This provision amends section 362(e) of the
Bankruptcy Code to terminate the automatic stay in a chapter 7,
11, or 13 case of an individual debtor within 60 days following
a request for relief from the stay, unless the bankruptcy court
renders a final decision prior to the expiration of the 60-day
time period, such 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.
Sec. 321. Chapter 11 cases filed by individuals
Section 321(a) of the conference report creates a new
provision under chapter 11 of the Bankruptcy Code specifying
that property of the estate of an individual debtor includes,
in addition to that identified in section 541 of the Bankruptcy
Code, all property of the kind described in section 541 that
the debtor acquires after commencement of the case, but before
the case is closed, dismissed or converted to a case under
chapter 7, 12, or 13 (whichever occurs first). In addition, it
includes earnings from services performed by the debtor after
commencement of the case, but before the case is closed,
dismissed or converted to a case under chapter 7, 12, or 13.
Except as provided in section 1104 of the Bankruptcy Code or
the order confirming a chapter 11 plan, section 321(a) provides
that the debtor remains in possession of all property of the
estate. Section 321(a) is substantively identical to section
321(a) of the House bill and the Senate amendment.
Section 321(b) amends Bankruptcy Code section 1123 to
require the chapter 11 plan of an individual debtor to provide
for the payment to creditors of all or such portion of the
debtor's earnings from personal services performed after
commencement of the case or other future income that is
necessary for the plan's execution. This provision is
substantively identical to section 321(b) of the House bill and
the Senate amendment.
Section 321(c) amends Bankruptcy Code section 1129(a) to
include an additional requirement for confirmation in a chapter
11 case of an individual debtor upon objection to confirmation
by a holder of an allowed unsecured claim. In such instance,
the value of property to be distributed under the plan (1) on
account of such claim, as of the plan's effective date, must
not be less than the amount of such claim; or (2) is not less
than the debtor's projected disposable income (as defined in
section 1325(b)(2)) to be received during the 5-year period
beginning on the date that the first payment is due under the
plan or during the plan's term, whichever is longer. Section
321(c) also amends section 1129(b)(2)(B)(ii) of the Bankruptcy
Code to provide that an individual chapter 11 debtor may retain
property included in the estate under section 1115 (as added by
the Act), subject to section 1129(a)(14). This provision is
substantively identical to section 321(c) of the House bill and
the Senate amendment.
Section 321(d)(1) of the conference report reflects the
Senate position represented in section 321(d) of the Senate
amendment, which amends Bankruptcy Code section 1141(d) to
provide that a discharge under chapter 11 does not discharge a
debtor who is an individual from any debt excepted from
discharge under Bankruptcy Code section 523. The House bill
provides that a chapter 11 debtor, including a corporation, is
not discharged from any debt excepted from discharge under
section 523.
Section 321(d)(2) of the conference report provides that
in a chapter 11 individual debtor is not discharged until all
plan payments have been made. The court may grant a hardship
discharge if the value of property actually distributed under
the plan--as of the plan's effective date--is not less than the
amount that would have been available for distribution if the
case was liquidated under chapter 7 on such date, and
modification of the plan is not practicable. This provision is
substantively identical to its counterparts in the House bill
and Senate amendment.
Section 321(e) of the conference report amends section
1127 to permit a plan in a chapter 11 case of an individual
debtor to be modified postconfirmation for the purpose of
increasing or reducing the amount of payments, extending or
reducing the time period for such payments, or altering the
amount of distribution to a creditor whose claim is provided
for by the plan. Such modification may be made at any time on
request of the debtor, trustee, United States trustee, or
holder of an allowed unsecured claim, if the plan has not been
substantially consummated.
Section 321(f) specifies that sections 1121 through 1129
apply to such modification. In addition, it provides that the
modified plan shall become the confirmed plan only if: (a)
there has been disclosure pursuant to section 1125 (as the
court directs); (b) notice and a hearing; and (c) such
modification is approved. Subsections (e) and (f) of section
321 of the conference report are substantively identical to
their counterparts in the House bill and the Senate amendment.
Sec. 322. Limitations on homestead exemption
Section 322(a) amends section 522 of the Bankruptcy Code
to impose an aggregate monetary limitation of $125,000, subject
to Bankruptcy Code sections 544 and 548, on the valueof
property that the debtor may claim as exempt under State or local law
pursuant to section 522(b)(3)(A) under certain circumstances. The
monetary cap applies if the debtor acquired such property within the
1215-day period preceding the filing of the petition and the property
consists of any of the following: (a) real or personal property of the
debtor or that a dependent of the debtor uses as a residence; (b) an
interest in a cooperative that owns property, which the debtor or the
debtor's dependent uses as a residence; (c) a burial plot for the
debtor or the debtor's dependent; or (d) real or personal property that
the debtor or dependent of the debtor claims as a homestead. This
limitation does not apply to a principal residence claimed as exempt by
a family farmer. In addition, the limitation does not apply to any
interest transferred from a debtor's principal residence (which was
acquired prior to the beginning of the specified time period) to the
debtor's current principal residence, if both the previous and current
residences are located in the same State.
Section 322(a) further amends section 522 to add a
provision that does not allow a debtor to exempt any amount of
an interest in property described in the preceding paragraph in
excess of $125,000 if any of the following applies:
(a) the court determines, after notice and a
hearing, that the debtor has been convicted of a felony
(as defined in section 3156 of title 18), which under
the circumstances, demonstrates that the filing of the
case was an abuse of the provisions of the Bankruptcy
Code; or
(b) the debtor owes a debt arising from:
(A) any violation of the federal securities
laws defined in section 3(a)(47) of the
Securities and Exchange Act of 1934, any state
securities laws, or any regulation or order
issued under Federal securities laws or state
securities laws;
(B) fraud, deceit, or manipulation in a
fiduciary capacity or in connection with the
purchase or sale of any security registered
under section 12 or 15(d) of the Securities
Exchange Act of 1934, or under section 6 of the
Securities Act of 1933;
(C) any civil remedy under section 1964 of
title 18 of the United States Code; or
(D) any criminal act, intentional tort, or
willful or reckless misconduct that caused
serious physical injury or death to another
individual in the preceding five years.
The conferees intend that the language in section 522(q)(1) be
liberally construed to encompass misconduct that rises above
mere negligence under applicable state law. An exception to the
monetary limit applies to the extent the value of the homestead
property is reasonably necessary for the support of the debtor
and any dependent of the debtor.
Section 322(b) makes the monetary limitation set forth in
section 322(a) subject to automatic adjustment pursuant to
section 104 of the Bankruptcy Code.
This provision is substantively different from its House
and Senate counterparts. Section 322 of the House bill imposes
an aggregate $100,000 homestead cap, which applies if the
debtor acquired such property within the two-year period
preceding the filing of the petition and the property consists.
As with section 322 of the conference report, the House
provision includes the exception for a family farmer and the
transfer of an interest in a principal residence of the debtor
from a prior principal residence of the debtor acquired prior
to the beginning of the two-year period. Section 308 of the
Senate amendment, on the other hand, imposes a flat $125,000
cap on a homestead exemption.
Sec. 323. Excluding employee benefit plan participant contributions and
other property from the estate
Section 323 of the conference report is substantively
identical to section 323 of the House bill and section 322 of
the Senate amendment. It amends section 541(b) of the
Bankruptcy Code to exclude as property of the estate funds
withheld or received by an employer from its employees' wages
for payment as contributions to specified employee retirement
plans, deferred compensation plans, and tax-deferred annuities.
Such contributions do not constitute disposable income as
defined in section 1325(b)(2) of the Bankruptcy Code. Section
323 also excludes as property of the estate funds withheld by
an employer from the wages of its employees for payment as
contributions to health insurance plans regulated by State law.
Sec. 324. Exclusive jurisdiction in matters involving bankruptcy
professionals
Section 324 of the conference report amends section 1334
of title 28 of the United State Code to give a district court
exclusive jurisdiction of all claims or causes of action
involving the construction of section 327 of the Bankruptcy
Code or rules relating to disclosure requirements under such
provision. This provision is substantively identical to section
324 of the House bill and section 323 of the Senate amendment.
Sec. 325. United States trustee program filing fee increase
Section 325 of the conference report is substantively
identical to section 325 of the House bill and section 324 of
the Senate amendment. Section 325(a) amends section 1930(a) of
title 28 of the United States Code to increase the filing fees
for chapter 7 and chapter 13 cases respectively to $160 and
$150. Subsections 325(b) and (c) amend section 589a of title 28
of the United States Code and section 406(b) of the Judiciary
Appropriations Act of 1990 to increase the percentage of the
fees collected under section 1930 of title 28 of the United
States Code that are paid to the United States Trustee System
Fund.
Sec. 326. Sharing of compensation
Section 326 amends Bankruptcy Code section 504 to create
a limited exception to the prohibition against fee sharing. The
provision allows the sharing of compensation with bona fide
public service attorney referral programs that operate in
accordance with non-federal law regulating attorney referral
services and with rules of professional responsibility
applicable to attorney acceptance of referrals. This provision
is substantively identical to section 326 of the House bill and
section 325 of the Senate amendment.
Sec. 327. Fair valuation of collateral
Section 327 of the conference report amends section
506(a) of the Bankruptcy Code toprovide that the value of an
allowed claim secured by personal property that is an asset in an
individual debtor's chapter 7 or 13 case is determined based on the
replacement value of such property as of the filing date of the
bankruptcy case without deduction for selling or marketing costs. 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. This provision is
identical to section 327 of the House bill and section 326 of the
Senate amendment.
Sec. 328. Defaults based on nonmonetary obligations
Section 328 is substantively identical to section 328 of
the House bill and section 327 of the Senate amendment.
Subsection (a)(1) amends section 365(b) to provide that a
trustee does not have to cure a default that is a breach of a
provision (other than a penalty rate or penalty provision)
relating to a default arising from any failure to perform a
nonmonetary obligation under an unexpired lease of real
property, if it is impossible for the trustee to cure the
default by performing such nonmonetary act at and after the
time of assumption. If the default arises from a failure to
operate in accordance with a nonresidential real property
lease, the default must be cured by performance at and after
the time of assumption in accordance with the lease. Pecuniary
losses resulting from such default must be compensated pursuant
to section 365(b)(1). In addition, section 328(a)(1) amends
section 365(b)(2)(D) to clarify that it applies to penalty
provisions. Section 328(a)(2) through (4) make technical
revisions to section 365(c), (d) and (f) by deleting language
that is no longer effective pursuant to the Rail Safety
Enforcement and Review Act.\2\
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\2\ Pub. L. No. 102-365, 106 Stat. 972 (1992).
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Section 328(b) amends section 1124(2)(A) of the
Bankruptcy Code to clarify that a claim is not impaired if
section 365(b)(2) (as amended by this Act) expressly does not
require a default with respect to such claim to be cured. In
addition, it provides that any claim or interest that arises
from the failure to perform a nonmonetary obligation (other
than a default arising from the failure to operate a
nonresidential real property lease subject to section
365(b)(1)(A)), is impaired unless the holder of such claim or
interest (other than the debtor or an insider) is compensated
for any actual pecuniary loss incurred by the holder as a
result of such failure.
Sec. 329. Clarification of postpetition wages and benefits
Section 329 amends Bankruptcy Code section 503(b)(1)(A)
to accord administrative expense status to certain back pay
awards. This provision applies to a back pay award attributable
to any period of time occurring postpetition as a result of a
violation of Federal or state law by the debtor pursuant to an
action brought in a court or before the National Labor
Relations Board, providing the bankruptcy court determines that
the award will not substantially increase the probability of
layoff or termination of current employees or of nonpayment of
domestic support obligations. Section 329 of the conference
report substantively reflects the Senate position as
represented in section 329 of the Senate amendment. The
conference report clarifies the provision with respect to the
timing of the unlawful conduct. There is no counterpart to this
provision in the House bill.
Sec. 330. Nondischargeability of debts incurred through violations of
laws relating to the provision of lawful goods and services
Section 330(a) amends Bankruptcy Code section 523(a) to
prohibit the discharge of a debt that results from any
judgment, order, consent order, or decree entered in any
Federal or State court, or contained in any settlement
agreement entered into by the debtor (including any court-
ordered damages, fine, penalty, or attorney fee or cost owed by
the debtor), that arises from:
(a) the violation by the debtor of any Federal or
State statutory law, including but not limited to
violations of title 18 of the United States Code, that
results from intentional actions of the debtor that--
(i) by force or threat of force or by
physical obstruction, intentionally injure,
intimidate, or interfere with or attempt to
injure, intimidate or interfere with any person
because that person is or has been, or in order
to intimidate such person or any other person
or class of persons from obtaining or providing
lawful goods or services;
(ii) by force of threat or force or by
physical obstruction, intentionally injure,
intimidate, or interfere with or attempt to
injure, intimidate, or interfere with any
person lawfully exercising or seeking to
exercise the First Amendment right of religious
freedom at a place of religious worship; or
(iii) intentionally damage or destroy the
property of a facility, or attempt to do so,
because such facility provides lawful goods or
services, or intentionally damage or destroy
the property of a place of religious worship;
or
(b) a violation of a court order or injunction that
protects access to a facility that or a person who
provides lawful goods or services or the provision of
lawful goods or services if such violation--
(i) is intentional or knowing; or
(ii) occurs after a court has found that
the debtor previously violated such court order
or injunction, or any other court order or
injunction that protects access to the same
facility or the same person.
The provision specifies that it shall not be construed to
affect any expressive conduct, including peaceful picketing,
peaceful prayer, or other peaceful demonstration, protected
from legal prohibition by the First Amendment to the
Constitution of the United States.
Section 330(b) amends section 523(a)(13) of the
Bankruptcy Code to make a debt for a criminal restitution order
entered pursuant to state criminal law nondischargeable.
Sec. 331. Delay of discharge during pendency of certain proceedings
Section 330 amends section 727(a) of the Bankruptcy Code
to require the court to withhold the entry of a debtor's
discharge order if the court, after notice and a hearing, finds
that there is reasonable cause to believe that there is pending
a proceeding in which the debtor may be found guilty of a
felony of the kind described in section 522(q)(1) or liable for
a debt of the kind described in section 522(q)(2). There is no
counterpart to this provision in either the House bill or
Senate amendment.
Title IV--General and Small Business Bankruptcy Provisions
SUBTITLE A--GENERAL BUSINESS BANKRUPTCY PROVISIONS
Sec. 401. Adequate protection for investors
Section 401 is substantively identical to section 401 of
the House bill and Senate amendment. Subsection (a) amends
section 101 of the Bankruptcy Code to define ``securities self
regulatory organization'' as a securities association or
national securities exchange registered with the Securities and
Exchange Commission. Section 401(b) amends section 362 of the
Bankruptcy Code to except from the automatic stay certain
enforcement actions by a securities self regulatory
organization.
Sec. 402. Meetings of creditors and equity security holders
Section 402 amends section 341 of the Bankruptcy Code to
permit a court, on request of a party in interest and after
notice and a hearing, to order the United States trustee not to
convene a meeting of creditors or equity security holders if a
debtor has filed a plan for which the debtor solicited
acceptances prior to the commencement of the case. This
provision is substantively identical to section 402 of the
House bill and the Senate amendment.
Sec. 403. Protection of refinance of security interest
Section 403 amends section 547(e)(2) of the Bankruptcy
Code to increase the perfection period from ten to 30 days for
the purpose of determining whether a transfer is an avoidable
preference. This provision is substantively identical to
section 403 of the House bill and the Senate amendment.
Sec. 404. Executory contracts and unexpired leases
Section 404 is identical to section 404 of the House bill
and the Senate amendment. Subsection (a) amends section
365(d)(4) of the Bankruptcy Code to establish a firm, bright
line deadline by which an unexpired lease of nonresidential
real property must be assumed or rejected. If such lease is not
assumed or rejected by such deadline, then such lease shall be
deemed rejected, and the trustee shall immediately surrender
such property to the lessor. Section 404(a) permits a
bankruptcy trustee to assume or reject a lease on a date which
is the earlier of the date of confirmation of a plan or the
date which is 120 days after the date of the order for relief.
A further extension of time may be granted, within the 120 day
period, for an additional 90 days, for cause, upon motion of
the trustee or lessor. Any subsequent extension can only be
granted by the judge upon the prior written consent of the
lessor: either by the lessor's motion for an extension, or by a
motion of the trustee, provided that the trustee has the prior
written approval of the lessor. This provision is designed to
remove the bankruptcy judge's discretion to grant extensions of
the time for the retail debtor to decide whether to assume or
reject a lease after a maximum possible period of 210 days from
the time of entry of the order of relief. Beyond that maximum
period, there is no authority in the judge to grant further
time unless the lessor has agreed in writing to the extension.
Section 404(b) amends section 365(f)(1) to assure that
section 365(f) does not override any part of section 365(b).
Thus, section 404(b) makes a trustee's authority to assign an
executory contract or unexpired lease subject not only to
section 365(c), but also to section 365(b), which is given full
effect. Therefore, for example, assumption or assignment of a
lease of real property in a shopping center must be subject to
the provisions of the lease, such as use clauses.
Sec. 405. Creditors and equity security holders committees
Section 405 is substantively identical to section 405 of
the House bill and the Senate amendment. Subsection (a) amends
section 1102(a)(2) of the Bankruptcy Code to permit, after
notice and a hearing, a court, on its own motion or on motion
of a party in interest, to order a change in a committee's
membership to ensure adequate representation of creditors or
equity security holders in a chapter 11 case. It specifies that
the court may direct the United States trustee to increase the
membership of a committee for the purpose of including a small
business concern if the court determines that such creditor's
claim is of the kind represented by the committee and that, in
the aggregate, is disproportionately large when compared to the
creditor's annual gross revenue. Section 405(b) requires the
committee to give creditors having claims of the kind
represented by the committee access to information. In
addition, the committee must solicit and receive comments from
these creditors and, pursuant to court order, make additional
reports or disclosures available to them.
Sec. 406. Amendment to section 546 of title 11, United States Code
Section 406 reflects the Senate position as represented
in section 406 of the Senate amendment. The provision corrects
an erroneous subsection designation in section 546 of the
Bankruptcy Code. It redesignates the second subsection (g) as
subsection (i). In addition, section 406 amends section 546(i)
(as redesignated) to subject that provision to the prior rights
of security interest holders. The House bill did not include
this provision. Further, section 406 adds a new provision to
section 546 that prohibits a trustee from avoiding a warehouse
lien for storage, transportation, or other costs incidental to
the storage and handling of goods. It specifies that this
prohibition must be applied in a manner consistent with any
applicable state statute that is similar to section 7-209 of
the Uniform Commercial Code.
Sec. 407. Amendments to section 330(a) of title 11, United States Code
Section 407 amends section 330(a)(3) of the Bankruptcy
Code to clarify that this provision applies to examiners,
chapter 11 trustees, and professional persons. This section
also amends section 330(a) to add a provision that requires a
court, in determining the amount of reasonable compensation to
award to a trustee, to treat such compensation as a commission
pursuant to section 326 of the Bankruptcy Code. Section 407 is
substantively identical to section 407 of the House bill and
the Senate amendment.
Sec. 408. Postpetition disclosure and solicitation
Section 408 amends section 1125 of the Bankruptcy Code to
permit an acceptance or rejection of a chapter 11 plan to be
solicited from the holder of a claim or interest if the holder
was solicited before the commencement of the case in a manner
that complied with applicable nonbankruptcy law. Section 408 is
substantively identical to section 408 of the House bill and
the Senate amendment.
Sec. 409. Preferences
Section 409 amends section 547(c)(2) of the Bankruptcy
Code to provide that a trusteemay not avoid a transfer to the
extent such transfer was in payment of a debt incurred by the debtor in
the ordinary course of the business or financial affairs of the debtor
and the transferee and such transfer was made either: (1) in the
ordinary course of the debtor's and the transferee's financial affairs
or business; or (2) in accordance with ordinary business terms. Present
law requires the recipient of a preferential transfer to establish both
of these grounds in order to sustain a defense to a preferential
transfer proceeding. In a case in which the debts are not primarily
consumer debts, section 409 provides that a transfer may not be avoided
if the aggregate amount of all property constituting or affected by the
transfer is less than $5,000. This provision is substantively identical
to section 409 of the House bill and the Senate amendment.
Sec. 410. Venue of certain proceedings
Section 410 amends section 1409(b) of title 28 of the
United States Code to provide that a preferential transfer
action in the amount of $10,000 or less pertaining to a
nonconsumer debt against a noninsider defendant must be filed
in the district where such defendant resides. This amount is
presently fixed at $1,000. This provision is substantively
identical to section 410 of the House bill and the Senate
amendment.
Sec. 411. Period for filing plan under chapter 11
Section 411 amends section 1121(d) of the Bankruptcy Code
to mandate 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. In addition, it 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. This provision is substantively identical to
section 411 of the House bill and the Senate amendment.
Sec. 412. Fees arising from certain ownership interests
Section 412 amends section 523(a)(16) of the Bankruptcy
Code to broaden the protections accorded to community
associations with respect 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, fees or assessments
that accrue during the period the debtor or the trustee has a
legal, equitable, or possessory ownership interest in such
property are nondischargeable. This provision is substantively
identical to section 412 of the House bill and the Senate
amendment.
Sec. 413. Creditor representation at first meeting of creditors
Section 413 amends section 341(c) of the Bankruptcy Code
to permit a creditor holding a consumer debt or any
representative of such creditor, notwithstanding any local
court rule, provision of a State constitution, or any other
Federal or state nonbankruptcy law, to appear and participate
at the meeting of creditors in chapter 7 and chapter 13 cases
either alone or in conjunction with an attorney. In addition,
the provision clarifies that it cannot be construed to require
a creditor to be represented by counsel at any meeting of
creditors. This provision is substantively identical to section
413 of the House bill and the Senate amendment.
Sec. 414. Definition of disinterested person
Section 414 amends section 101(14) of the Bankruptcy Code
to eliminate the requirement that an investment banker be a
disinterested person. This provision is substantively identical
to section 414 of the House bill and the Senate amendment.
Sec. 415. Factors for compensation of professional persons
Section 415 amends section 330(a)(3) of the Bankruptcy
Code to permit the court to consider, in awarding compensation
to a professional person, whether such person is board
certified or otherwise has demonstrated skill and experience in
the practice of bankruptcy law. This provision is substantively
identical to section 415 of the House bill and the Senate
amendment.
Sec. 416. Appointment of elected trustee
Section 416 of the conference report is substantively
identical to section 416 of the House bill and the Senate
amendment. This provision amends section 1104(b) of the
Bankruptcy Code to clarify the procedure for the election of a
trustee in a chapter 11 case. Section 1104(b) permits creditors
to elect an eligible, disinterested person to serve as the
trustee in the case, provided certain conditions are met.
Section 416 amends this provision to require the United States
trustee to file a report certifying the election of a chapter
11 trustee. Upon the filing of the report, the elected trustee
is deemed to be selected and appointed for purposes of section
1104 and the service of any prior trustee appointed in the case
is terminated. Section 416 also clarifies that the court shall
resolve any dispute arising out of a chapter 11 trustee
election.
Sec. 417. Utility service
Section 417 amends section 366 of the Bankruptcy Code to
provide that assurance of payment, for purposes of this
provision, includes a cash deposit, letter of credit,
certificate of deposit, surety bond, prepayment of utility
consumption, or other form of security that is mutually agreed
upon by the debtor or trustee and the utility. It also
specifies that an administrative expense priority does not
constitute an assurance of payment. With respect to chapter 11
cases, section 417 permits a utility to alter, refuse or
discontinue service if it does not receive adequate assurance
of payment that is satisfactory to the utility within 30 days
of the filing of the petition. The court, upon request of a
party in interest, may modify the amount of this payment after
notice and a hearing. In determining the adequacy of such
payment, a court may not consider: (i) the absence of security
before the case was filed; (ii) the debtor's timely payment of
utility service charges before the case was filed; or (iii) the
availability of an administrative expense priority.
Notwithstanding any other provision of law, section 417 permits
a utility to recover or set off against a security deposit
provided prepetition by the debtor to the utility without
notice or court order. This provision is substantively
identical to section 417 of the House bill and the Senate
amendment.
Sec. 418. Bankruptcy fees
Section 418 of the conference report amends section 1930
of title 28 of the United States Code to permit a district
court or a bankruptcy court, pursuant to procedures prescribed
by the Judicial Conference of the United States, to waive the
chapter 7 filing fee for an individual and certain other fees
under subsections (b) and (c) of section 1930 if such
individual's income is less than 150 percent of the official
poverty level (as defined by the Office of Management
andBudget) and the individual is unable to pay such fee in
installments. section 418 also clarifies that section 1930, as amended,
does not prevent a district or bankruptcy court from waiving other fees
for creditors and debtors, if in accordance with Judicial Conference
policy. This provision is substantively identical to section 418 of the
House bill and the Senate amendment.
Sec. 419. More complete information regarding assets of the estate
Section 419 of the conference report is substantively
identical to section 419 of the House bill and the Senate
amendment. This provision requires the Advisory Committee on
Bankruptcy Rules, after consideration of the views of the
Director of the Executive Office for United States Trustees, to
propose official rules and forms directing chapter 11 debtors
to disclose information concerning the value, operations, and
profitability of any closely held corporation, partnership, or
other entity in which the debtor holds a substantial or
controlling interest. Section 419 is intended to ensure that
the debtor's interest in any of these entities is used for the
payment of allowed claims against debtor.
SUBTITLE B--SMALL BUSINESS BANKRUPTCY PROVISIONS
Sec. 431. Flexible rules for disclosure statement and plan
Section 431 of the conference report amends section 1125
of the Bankruptcy Code to streamline the disclosure statement
process and to provide for more flexibility. This provision is
substantively identical to section 431 of the House bill and
the Senate amendment. Section 431(1) amends section 1125(a)(1)
of the Bankruptcy Code to require a bankruptcy court, in
determining whether a disclosure statement supplies adequate
information, to consider the complexity of the case, the
benefit of additional information to creditors and other
parties in interest, and the cost of providing such additional
information. With regard to a small business case, section
431(2) amends section 1125(f) to permit the court to dispense
with a disclosure statement if the plan itself supplies
adequate information. In addition, it provides that the court
may approve a disclosure statement submitted on standard forms
approved by the court or adopted under section 2075 of title 28
of the United States Code. Further, section 431(2) provides
that the court may conditionally approve a disclosure
statement, subject to final approval after notice and a
hearing, and allow the debtor to solicit acceptances of the
plan based on such disclosure statement. The hearing on the
disclosure statement may be combined with the confirmation
hearing.
Sec. 432. Definitions
Section 432 of the conference report is substantively
similar to section 431 of the House bill and the Senate
amendment. This provision amends section 101 of the Bankruptcy
Code to define a ``small business case'' as a chapter 11 case
in which the debtor is a small business debtor. Section 432, in
turn, defines a ``small business debtor'' as a person engaged
in commercial or business activities (including an affiliate of
such person that is also a debtor, but excluding a person whose
primary activity is the business of owning or operating real
property or activities incidental thereto) having aggregate
noncontingent, liquidated secured and unsecured debts of not
more than $2 million (excluding debts owed to affiliates or
insiders of the debtor) as of the date of the petition or the
order for relief. This monetary definition is a compromise. The
House and Senate antecedents specified a $3 million
definitional limit. This definition applies only in a case
where the United States trustee has not appointed a creditors'
committee or where the court has determined that the committee
of unsecured creditors is not sufficiently active and
representative to provide effective oversight of the debtor. It
does not apply to any member of a group of affiliated debtors
that has aggregate noncontingent, liquidated secured and
unsecured debts in excess of $2 million (excluding debts owed
to one or more affiliates or insiders). The conference report
also requires this monetary figure to be periodically adjusted
for inflation pursuant to section 104 of the Bankruptcy Code.
Sec. 433. Standard form disclosure statement and plan
Section 433 of the conference report directs the Advisory
Committee on Bankruptcy Rules of the Judicial Conference of the
United States to propose for adoption standard form disclosure
statements and reorganization plans for small business debtors.
The provision directs that the forms be designed to achieve a
practical balance between the needs of the court, case
administrators, and other parties in interest to have
reasonably complete information as well as the debtor's need
for economy and simplicity. This provision is substantively
identical to section 433 of the House bill and the Senate
amendment.
Sec. 434. Uniform national reporting requirements
Section 434 of the conference report is substantively
identical to section 434 of the House bill and the Senate
amendment. Subsection (a) adds a new provision to the
Bankruptcy Code mandating additional reporting requirements for
small business debtors. It requires a small business debtor to
file periodic financial reports and other documents containing
the following information with respect to the debtor's business
operations: (i) profitability; (ii) reasonable approximations
of projected cash receipts and disbursements; (iii) comparisons
of actual cash receipts and disbursements with projections in
prior reports; (iv) whether the debtor is complying with
postpetition requirements pursuant to the Bankruptcy Code and
Federal Rules of Bankruptcy Procedure; (v) whether the debtor
is timely filing tax returns and other government filings; and
(vi) whether the debtor is paying taxes and other
administrative expenses when due. In addition, the debtor must
report on such other matters that are in the best interests of
the debtor and the creditors and in the public interest. If the
debtor is not in compliance with any postpetition requirements
pursuant to the Bankruptcy Code and Federal Rules of Bankruptcy
Procedure, or is not filing tax returns or other required
governmental filings, paying taxes and other administrative
expenses when due, the debtor must report: (a) what the
failures are, (b) how they will be cured; (c) the cost of their
cure; and (d) when they will be cured. Section 434(b) specifies
that the effective date of this provision is 60 days after the
date on which the rules required under this provision are
promulgated.
Sec. 435. Uniform reporting rules and forms for small business cases
Section 435 of the conference report is substantively
identical to section 435 of the House bill and the Senate
amendment. Subsection (a) mandates that the Advisory Committee
on Bankruptcy Rules of the Judicial Conference of the United
States propose official rules and forms with respect to the
periodic financial reports and other information that a small
businessdebtor must file concerning its profitability, cash
receipts and disbursements, filing of its tax returns, and payment of
its taxes and other administrative expenses.
Section 435(b) requires the rules and forms to achieve a
practical balance between the need for reasonably complete
information by the bankruptcy court, United States trustee,
creditors and other parties in interest, and the small business
debtor's interest in having such forms be easy and inexpensive
to complete. The forms should also be designed to help the
small business debtor better understand its financial condition
and plan its future.
Sec. 436. Duties in small business cases
Section 436 of the conference report is substantively
identical to section 436 of the House bill and the Senate
amendment. Intended to implement greater administrative
oversight and controls over small business chapter 11 cases,
the provision requires a chapter 11 trustee or debtor to:
(1) file with a voluntary petition (or in an
involuntary case, within seven days from the date of
the order for relief) the debtor's most recent
financial statements (including a balance sheet,
statement of operations, cash flow statement, and
Federal income tax return) or a statement explaining
why such information is not available;
(2) attend, through its senior management personnel
and counsel, meetings scheduled by the bankruptcy court
or the United States trustee (including the initial
debtor interview and meeting of creditors pursuant to
section 341 of the Bankruptcy Code), unless the court
waives this requirement after notice and a hearing upon
a finding of extraordinary and compelling
circumstances;
(3) timely file all requisite schedules and the
statement of financial affairs, unless the court, after
notice and a hearing, grants an extension of up to 30
days from the order of 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) maintain insurance that is customary and
appropriate for the industry, subject to section
363(c)(2);
(6) timely file tax returns and other required
government filings;
(7) timely pay all administrative expense taxes
(except for certain contested claims), subject to
section 363(c)(2); and
(8) permit the United States trustee to inspect the
debtor's business premises, books, and records at
reasonable hours after appropriate prior written
notice, unless notice is waived by the debtor.
Sec. 437. Plan filing and confirmation deadlines
Section 437 of the conference report amends section
1121(e) of the Bankruptcy Code with respect to the period of
time within which a small business debtor must file and confirm
a plan of reorganization. This provision is substantively
identical to section 437 of the House bill and the Senate
amendment. It provides that a small business debtor's exclusive
period to file a plan is 180 days from the date of the order
for relief, unless the period is extended after notice and a
hearing, or the court, for cause, orders otherwise. It further
provides that a small business debtor must file a plan and any
disclosure statement not later than 300 days after the order
for relief. These time periods and the time fixed in section
1129(e) may be extended only if (a) the debtor, after providing
notice to parties in interest, demonstrates by a preponderance
of the evidence that it is more likely than not that the court
will confirm a plan within a reasonable period of time; (b) a
new deadline is imposed at the time the extension is granted;
and (c) the order granting such extension is signed before the
expiration of the existing deadline.
Sec. 438. Plan confirmation deadline
Section 438 of the conference report amends Bankruptcy
Code section 1129 to require the court to confirm a plan not
later than 45 days after it is filed if the plan complies with
the applicable provisions of the Bankruptcy Code, unless this
period is extended pursuant to section 1121(e)(3). This
provision is a compromise between section 438 of the House bill
and the Senate amendment. The conference report clarifies that
the plan must otherwise comply with applicable provisions of
the Bankruptcy Code and includes a cross-reference to section
1121(e)(3), as added by section 437 of this Act. The House
provision specifies that a plan in a small business case must
be confirmed not later than 175 days from the date of the order
for relief, unless this period is extended pursuant to section
1121(e)(3). The Senate amendment requires the plan to be
confirmed within 45 days from the date on which a plan is
filed, subject to extension pursuant to certain specified
criteria.
Sec. 439. Duties of the United States trustee
Section 439 of the conference report is substantively
identical to section 439 of the House bill and the Senate
amendment. This provision amends section 586(a) of title 28 of
the United States Code to require the United States trustee to
perform the following additional duties with respect to small
business debtors:
(1) conduct an initial debtor interview before the
meeting of creditors for the purpose of (a)
investigating the debtor's viability, (b) inquiring
about the debtor's business plan, (c) explaining the
debtor's obligation to file monthly operating reports,
(d) attempting to obtain an agreed scheduling order
setting various time frames (such as the date for
filing a plan and effecting confirmation), and (e)
informing the debtor of other obligations;
(2) if determined to be appropriate and advisable,
inspect the debtor's business premises for the purpose
of reviewing the debtor's books and records and
verifying that the debtor has filed its tax returns;
(3) review and monitor diligently the debtor's
activities to determine as promptly as possiblewhether
the debtor will be unable to confirm a plan; and
(4) promptly apply to the court for relief in any
case in which the United States trustee finds material
grounds for dismissal or conversion of the case.
Sec. 440. Scheduling conferences
Section 440 amends section 105(d) of the Bankruptcy Code
to mandate that a bankruptcy court hold status conferences as
are necessary to further the expeditious and economical
resolution of a bankruptcy case. This provision is identical to
section 440 of the House bill and the Senate amendment.
Sec. 441. Serial filer provisions
Section 441 of the conference report is substantively
similar to section 441 of the House bill and the Senate
amendment. Subsection (1) amends section 362 of the Bankruptcy
Code to provide that a court may award only actual damages for
a violation of the automatic stay committed by an entity in the
good faith belief that subsection (h) of section 362 (as added
by this Act) applies to the debtor. Section 441(2) adds a new
subsection to section 362 of the Bankruptcy Code specifying
that the automatic stay does not apply where the chapter 11
debtor: (1) is a debtor in a small business case pending at the
time the subsequent case is filed; (2) was a debtor in a small
business case dismissed for any reason pursuant to an order
that became final in the two-year period ending on the date of
the order for relief entered in the pending case; (3) was a
debtor in small business case in which a plan was confirmed in
the two-year period ending on the date of the order for relief
entered in the pending case; or (4) is an entity that has
acquired substantially all of the assets or business of a small
business debtor described in the preceding paragraphs, unless
such entity establishes by a preponderance of the evidence that
it acquired the assets or business in good faith and not for
the purpose of evading this provision. This exception was added
to the conference report as a compromise.
An exception to this provision applies to a chapter 11
case that is commenced involuntarily and involves no collusion
between the debtor and the petitioning creditors. Also, it does
not apply if the debtor proves by a preponderance of the
evidence that: (1) the filing of the subsequent case resulted
from circumstances beyond the debtor's control and which were
not foreseeable at the time the prior case was filed; and (2)
it is more likely than not that the court will confirm a
feasible plan of reorganization (but not a liquidating plan)
within a reasonable time.
Sec. 442. Expanded grounds for dismissal or conversion and appointment
of trustee
Section 442 largely reflects the Senate position as
represented in section 442 of the Senate amendment. Subsection
(a) amends section 1112(b) of the Bankruptcy Code to mandate
that the court convert or dismiss a chapter 11 case, whichever
is in the best interests of creditors and the estate, if the
movant establishes cause, absent unusual circumstances. In this
regard, the court must specify the circumstances that support
the court's finding that conversion or dismissal is not in the
best interests of creditors and the estate. This exception was
added to the conference report as a compromise.
In addition, the provision specifies an exception to the
provision's mandatory requirement applies if: (1) the debtor or
a party in interest objects and establishes that there is a
reasonable likelihood that a plan will be confirmed within the
time period set forth in section 1121(e) and 1129(e), or if
these provisions are inapplicable, within a reasonable period
of time; (2) the grounds for granting such relief include an
act or omission of the debtor for which there exists a
reasonable justification for such act or omission; and (3) such
act or omission will be cured within a reasonable period of
time.
The court must commence the hearing on a section 1112(b)
motion within 30 days of its filing and decide the motion not
later than 15 days after commencement of the hearing unless the
movant expressly consents to a continuance for a specified
period of time or compelling circumstances prevent the court
from meeting these time limits. Section 442 provides that the
term ``cause'' under section 1112(b), as amended by this
provision, includes the following:
(1) substantial or continuing loss to or diminution
of the estate and the absence of a reasonable
likelihood of rehabilitation;
(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) unexcused failure to timely satisfy any filing
or reporting requirement under the Bankruptcy Code or
applicable rule;
(7) failure to attend the section 341 meeting of
creditors or an examination pursuant to Rule 2004 of
the Federal Rules of Bankruptcy Procedure, without good
cause shown by the debtor;
(8) failure to timely provide information or to
attend meetings reasonably requested by the United
States trustee or bankruptcy administrator;
(9) failure to timely pay taxes owed after the
order for relief or to file tax returns due
postpetition;
(10) failure to file a disclosure statement or to
confirm a plan within the time fixed by the Bankruptcy
Code or pursuant to court order;
(11) failure to pay any requisite fees or charges
under chapter 123 of title 28 of the United States
Code;
(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;
(15) termination of a plan by reason of the
occurrence of a condition specified in the plan; and
(16) the debtor's failure to pay any domestic
support obligation that first becomes payable
postpetition.
This definition of the term ``cause'' represents a compromise
between the House and Senate conferees.
Section 442(b) creates additional grounds for the
appointment of a chapter 11 trustee under section 1104(a). It
provides that should the bankruptcy court determine cause
exists toconvert or dismiss a chapter 11 case, it may appoint a
trustee or examiner if in the best interests of creditors and the
bankruptcy estate. Section 442 of the conference report represents a
compromise between the House and Senate conferees. Under the House
version of this provision, the standard for the exception is a plan
with a reasonable possibility of being confirmed will be filed within a
reasonable period of time. The standard under the Senate amendment is
reasonable likelihood that a plan will be confirmed within specified
time frames established in sections 1121(e) and 1129(e), or within a
reasonable period of time in those cases where sections 1121(e) or
1129(e) do not apply.
Sec. 443. Study of operation of title 11, United States Code, with
respect to small businesses
Section 443 of the conference report is substantively
identical to section 443 of the House bill and the Senate
amendment. This provision 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 to
determine: (i) the internal and external factors that cause
small businesses (particularly sole proprietorships) to seek
bankruptcy relief and the factors that cause small businesses
to successfully complete their chapter 11 cases; and (ii) how
the bankruptcy laws may be made more effective and efficient in
assisting small business to remain viable.
Sec. 444. Payment of interest
Section 444 of the conference report is substantively
identical to section 444 of the House bill and the Senate
amendment. Subsection (1) amends section 362(d)(3) of the
Bankruptcy Code to require a court to grant relief from the
automatic stay within 30 days after it determines that a single
asset real estate debtor is subject to this provision. Section
444(2) amends section 362(d)(3)(B) to specify that relief from
the automatic stay shall be granted unless the single asset
real estate debtor has commenced making monthly payments to
each creditor secured by the debtor's real property (other than
a claim secured by a judgment lien or unmatured statutory lien)
in an amount equal to the interest at the then applicable
nondefault contract rate of interest on the value of the
creditor's interest in the real estate. 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,
notwithstanding section 363(c)(2).
Sec. 445. Priority for administrative expenses
Section 445 of the conference report is substantively
identical to section 445 of the House bill and the Senate
amendment. The provision amends section 503(b) of the
Bankruptcy Code to add a new administrative expense priority
for a nonresidential real property lease that is assumed under
section 365 and then subsequently rejected. The amount of the
priority is the sum of all monetary obligations due under the
lease (excluding penalties and obligations arising from or
relating to a failure to operate) for the two-year period
following the rejection date or actual turnover of the premises
(whichever is later), without reduction or setoff for any
reason, except for sums actually received or to be received
from a nondebtor. Any remaining sums due for the balance of the
term of the lease are treated as a claim under section
502(b)(6) of the Bankruptcy Code.
Sec. 446. Duties with respect to a debtor who is a plan administrator
of an employee benefit plan
Section 446 of the conference report reflects the Senate
position as represented in section 420 of the Senate amendment.
There is no counterpart to this provision in the House bill.
Subsection (a) amends Bankruptcy Code section 521(a) to require
a debtor, unless a trustee is serving in the case, to serve as
the administrator (as defined in the Employee Retirement Income
Security Act) of an employee benefit plan if the debtor served
in such capacity at the time the case was filed. Section 446(b)
amends Bankruptcy Code section 704 to require the chapter 7
trustee to perform the obligations of such administrator in a
case where the debtor was required to perform such obligations.
Section 446(c) amends Bankruptcy Code section 1106(a) to
require a chapter 11 trustee to perform these obligations.
Sec. 447. Appointment of committee of retired employees
This provision amends section 1114(d) of the Bankruptcy
Code to clarify that it is the responsibility of the United
States trustee to appoint members to a committee of retired
employees. There is no antecedent to this provision in either
the House bill or the Senate amendment.
Title V--Municipal Bankruptcy Provisions
Sec. 501. Petition and proceedings related to petition
Section 501 amends sections 921(d) and 301 of the
Bankruptcy Code to clarify that the court must enter the order
for relief in a chapter 9 case. This provision is substantively
identical to section 501 of the House bill and the Senate
amendment.
Sec. 502. Applicability of other sections to chapter 9
Section 502 of the conference report is substantively
identical to section 502 of the House bill and the Senate
amendment. This provision amends section 901 of the Bankruptcy
Code to make the following sections applicable to chapter 9
cases: (1) section 555 (contractual right to liquidate,
terminate or accelerate a securities contract);
(2) section 556 (contractual right to liquidate,
terminate or accelerate a commodities or forward
contract);
(3) section 559 (contractual right to liquidate,
terminate or accelerate a repurchase agreement);
(4) section 560 (contractual right to liquidate,
terminate or accelerate a swap agreement);
(5) section 561 (contractual right to liquidate,
terminate, accelerate, or offset under a master netting
agreement and across contracts); and
(6) section 562 (damage measure in connection with
swap agreements, securities contracts, forward
contracts, commodity contracts, repurchase agreements,
or master netting agreement).
Title VI--Bankruptcy Data
Sec. 601. Improved bankruptcy statistics
Section 601 of the conference report is substantively
similar to section 601 of the House bill and the Senate
amendment. In recognition of the delayed effective date of this
Act, section 601 extends the date by which the report described
herein must be submitted.
This provision amends chapter 6 of title 28 of the United
States Code to require the clerk for each district (or the
bankruptcy court clerk if one has been certified pursuant to
section 156(b) of title 28 of the United States Code) to
collect certain statistics for chapter 7, 11, and 13 cases in a
standardized format prescribed by the Director of the
Administrative Office of the United States Courts and to make
this information available to the public. Not later than June
1, 2005, the Director must submit a report to Congress
concerning the statistical information collected and then must
report annually thereafter. The statistics must be itemized by
chapter of the Bankruptcy Code and be presented in the
aggregate for each district. The specific categories of
information that must be gathered include the following:
(1) scheduled total assets and liabilities of
debtors who are individuals with primarily consumer
debts under chapters 7, 11 and 13 by category;
(2) such debtors' current monthly income, average
income, and average expenses;
(3) the aggregate amount of debts discharged during
the reporting period based on the difference between
the total amount of scheduled debts and by categories
that are predominantly nondischargeable;
(4) the average time between the filing of the
bankruptcy case and the closing of the case;
(5) the number of cases in which reaffirmation
agreements were filed, the total number of
reaffirmation agreements filed, the number of cases in
which the debtor was pro se and a reaffirmation
agreement was filed, and the number of cases in which
the reaffirmation agreement was approved by the court;
(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) final orders that determined the value of property
securing a claim, (c) cases dismissed, (d) cases
dismissed for failure to make payments under the plan,
(e) cases refiled after dismissal, (f) cases in which
the plan was completed (separately itemized with
respect to the number of modifications made before
completion of the plan, and (g) 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 for creditor misconduct; and
(8) the number of cases in which sanctions under
rule 9011 of the Federal Rules of Bankruptcy Procedure
were imposed against a debtor's counsel and the damages
awarded under this rule.
Section 601 provides that the amendments in this provision take
effect 18 months after the date of enactment of this Act.
Sec. 602. Uniform rules for the collection of bankruptcy data
Section 602 of the conference report is substantively
identical to section 602 of the House bill and the Senate
amendment. It amends chapter 39 of title 28 of the United
States Code to add a provision requiring the Attorney General
to promulgate rules mandating the establishment of uniform
forms for final reports in chapter 7, 12 and 13 cases and
periodic reports in chapter 11 cases. This provision also
specifies that these reports be designed to facilitate
compilation of data and to provide maximum public access by
physical inspection at one or more central filing locations and
by electronic access through the Internet or other appropriate
media. The information should enable an evaluation of the
efficiency and practicality of the Federal bankruptcy system.
In issuing rules, the Attorney General must consider: (1) the
reasonable needs of the public for information about the
Federal bankruptcy system; (2) the economy, simplicity, and
lack of undue burden on persons obligated to file the reports;
and (3) appropriate privacy concerns and safeguards. Section
602 provides that final reports by trustees in chapter 7, 12,
and 13 cases include the following information: (1) the length
of time the case was pending; (2) assets abandoned; (3) assets
exempted; (4) receipts and disbursements of the estate; (5)
administrative expenses, including those associated with
section 707(b) of the Bankruptcy Code, and the actual costs of
administering chapter 13 cases; (6) claims asserted; (7) claims
allowed; and (8) distributions to claimants and claims
discharged without payment. With regard to chapter 11 cases,
section 602 provides that periodic reports include the
following information regarding:
(1) the standard industry classification for
businesses conducted by the debtor, as published by the
Department of Commerce;
(2) the length of time that the case was pending;
(3) the number of full-time employees as of the
date of the order for relief and at the end of each
reporting period;
(4) cash receipts, cash disbursements, and
profitability of the debtor for the most recent period
and cumulatively from the date of the order for relief;
(5) the debtor's compliance with the Bankruptcy
Code, including whether tax returns have been filed and
taxes have been paid;
(6) professional fees approved by the court for the
most recent period and cumulatively from the date of
the order for relief; and
(7) plans filed and confirmed, including the
aggregate recoveries of holders by class and as a
percentage of total claims of an allowed class.
Sec. 603. Audit procedures
Section 603 is substantively identical to section 603 of
the House bill and the Senate amendment. Subsection (a)(1)
requires the Attorney General (for judicial districts served by
United States trustees) and the Judicial Conference of the
United States (for judicial districts served by bankruptcy
administrators) to establish procedures to determine the
accuracy, veracity, and completeness of petitions, schedules
and other information filed by debtors pursuant to sections
111, 521 and 1322 of the Bankruptcy Code. Section 603(a)(1)
requires the audits to be conducted in accordance with
generally accepted auditing standards and performed by
independent certified public accountants or independent
licensed public accountants. It permits the Attorney General
and the Judicial Conference to develop alternative auditing
standards not later than two years after the date of enactment
of this Act. Section 603(a)(2) requires these procedures to:
(1) establish a method of selecting appropriate qualified
contractors to perform these audits; (2) establish a method of
randomly selecting cases for audit, and that a minimum of at
least one case out of every 250 cases be selected for audit;
(3) require audits in cases where the schedules of income and
expenses reflect greater than average variances from the
statistical norm for the district if they occur by reason of
higher income or higher expenses than the statistical norm in
which the schedules were filed; and (4) require the aggregate
results of such audits, including the percentage of cases by
district in which a material misstatement of income or
expenditures is reported, to be made available to the public on
an annual basis.
Section 603(b) amends section 586 of title 28 of the
United States Code to require the United States trustee to
submit reports as directed by the Attorney General, including
the results of audits performed under section 603(a). In
addition, it authorizes the United States trustee to contract
with auditors to perform the audits specified in this
provision. Further, it requires the report of each audit to be
filed with the court and transmitted to the United States
trustee. The report must specify material misstatements of
income, expenditures or assets. In a case where a material
misstatement has been reported, the clerk must provide notice
of such misstatement to creditors and the United States trustee
must report it to the United States Attorney, if appropriate,
for possible criminal prosecution. If advisable, the United
States trustee must also take appropriate action, such as
revoking the debtor's discharge.
Section 603(c) amends section 521 of the Bankruptcy Code
to make it a duty of the debtor to cooperate with an auditor.
Section 603(d) amends section 727 of the Bankruptcy Code to
add, as a ground for revocation of a chapter 7 discharge the
debtor's failure to: (a) satisfactorily explain a material
misstatement discovered as the result of an audit pursuant to
this provision; or (b) make available for inspection all
necessary documents or property belonging to the debtor that
are requested in connection with such audit. Section 603(e)
provides that the amendments made by this provision take effect
18 months after the Act's date of enactment.
Sec. 604. Sense of Congress regarding availability of bankruptcy data
Section 604 expresses a sense of the Congress that it is
a national policy of the United States that all data collected
by bankruptcy clerks in electronic form (to the extent such
data relates to public records pursuant to section 107 of the
Bankruptcy Code) should be made available to the public in a
useable 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 uniform
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 should be aggregated in
electronic format. This provision is substantively identical to
section 604 of the House bill and the Senate amendment.
Title VII--Bankruptcy Tax Provisions
Sec. 701. Treatment of certain tax liens
Section 701 of the conference report is substantively
identical to section 701 of the House bill and the Senate
amendment. Subsection (a) 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. Many school boards obtain liens on real property to
ensure collection of unpaid ad valorem taxes. Under current
law, local governments are sometimes unable to collect these
taxes despite the presence of a lien because they may be
subordinated to certain claims and expenses as a result of
section 724. Section 701(a) is intended to protect the holders
of these tax liens from, among other things, erosion of their
claims' status by expenses incurred under chapter 11 of the
Bankruptcy Code. Pursuant to section 701(a), subordination of
ad valorem tax liens is still possible under section 724(b),
but limited to the payment of: (1) claims incurred under
chapter 7 for wages, salaries, or commissions (but not expenses
incurred under chapter 11); (2) claims for wages, salaries, and
commissions entitled to priority under section 507(a)(4); and
(3) claims for contributions to employee benefit plans entitled
to priority under section 507(a)(5). Before a tax lien on real
or personal property may be subordinated pursuant to section
724, the chapter 7 trustee must exhaust all other unencumbered
estate assets and, consistent with section 506, recover
reasonably necessary costs and expenses of preserving or
disposing of such property. Section 701(b) amends section
505(a)(2) of the Bankruptcy Code to prevent 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.
Sec. 702. Treatment of fuel tax claims
Section 702 is substantively identical to section 702 of
the House bill and the Senate amendment. The provision amends
section 501 of the Bankruptcy Code to simplify the process for
filing of claims by states for certain fuel taxes. Rather than
requiring each state to file a claim for these taxes (as is the
case under current law), section 702 permits the designated
``base jurisdiction'' under the International Fuel Tax
Agreement to file a claim on behalf of all states, which would
then be allowed as a single claim.
Sec. 703. Notice of request for a determination of taxes
Under current law, a trustee or debtor in possession may
request a governmental unit to determine administrative tax
liabilities in order to receive a discharge of those
liabilities. There are no requirements as to the content or
form of such notice to the government. Section 703 of the
conference report amends section 505(b) of the Bankruptcy Code
to require the clerk of eachdistrict to maintain a list of
addresses designated by governmental units for service of section 505
requests. In addition, the list may also include information concerning
filing requirements specified by such governmental units. If a
governmental entity does not designate an address and provide that
address to the bankruptcy court clerk, any request made under section
505(b) of the Bankruptcy Code may be served at the address of the
appropriate taxing authority of that governmental unit. This provision
is substantively identical to section 703 of the House bill and the
Senate amendment.
Sec. 704. Rate of interest on tax claims
Under current law, there is no uniform rate of interest
applicable to tax claims. As a result, varying standards have
been used to determine the applicable rate. Section 704 of the
conference report amends the Bankruptcy Code to add section 511
for the purpose of simplifying the interest rate calculation.
It provides that for all tax claims (federal, state, and
local), including administrative expense taxes, the interest
rate shall be determined in accordance with applicable
nonbankruptcy law. With respect to taxes paid under a confirmed
plan, the rate of interest is determined as of the calendar
month in which the plan is confirmed. This provision is
substantively identical to section 704 of the House bill and
the Senate amendment.
Sec. 705. Priority of tax claims
Under current law, a tax claim is entitled to be treated
as a priority claim if it arises within certain specified time
periods. In the case of income taxes, a priority arises, among
other time periods, if the tax return was due within 3 years of
the filing of the bankruptcy petition or if the assessment of
the tax was made within 240 days of the filing of the petition.
The 240-day period is tolled during the time that an offer in
compromise is pending (plus 30 days). Though the statute is
silent, most courts have also held that the 3-year and 240-day
time periods are tolled during the pendency of a previous
bankruptcy case. Section 705 amends section 507(a)(8) of the
Bankruptcy Code to codify the rule tolling priority periods
during the pendency of a previous bankruptcy case during that
240-day period together with an additional 90 days. It also
includes tolling provisions to adjust for the collection due
process rights provided by the Internal Revenue Service
Restructuring and Reform Act of 1998. During any period in
which the government is prohibited from collecting a tax as a
result of a request by the debtor for a hearing and an appeal
of any collection action taken against the debtor, the priority
is tolled, plus 90 days. Also, during any time in which there
was a stay of proceedings in a prior bankruptcy case or
collection of an income tax was precluded by a confirmed
bankruptcy plan, the priority is tolled, plus 90 days. This
provision is substantively identical to section 705 of the
House bill and the Senate amendment.
Sec. 706. Priority property taxes incurred
Under current law, many provisions of the Bankruptcy Code
are keyed to the word ``assessed.'' While this term has an
accepted meaning in the federal system, it is not used in many
state and local statutes and has created some confusion. To
eliminate this problem with respect to real property taxes,
section 706 amends section 507(a)(8)(B) of the Bankruptcy Code
by replacing the word ``assessed'' with ``incurred''. This
provision is substantively identical to section 706 of the
House bill and the Senate amendment.
Sec. 707. No discharge of fraudulent taxes in chapter 13
Under current law, a debtor's ability to discharge tax
debts varies depending on whether the debtor is in chapter 7 or
chapter 13. In a chapter 7 case, taxes from a return due within
3 years of the petition date, taxes assessed within 240 days,
or taxes related to an unfiled return or false return are not
dischargeable. Chapter 13, on the other hand, allows these
obligations to be discharged. Section 707 of the conference
report amends Bankruptcy Code section 1328(a)(2) to prohibit
the discharge of tax claims described in section 523(a)(1)(B)
and (C) as well as claims for a tax required to be collected or
withheld and for which the debtor is liable in whatever
capacity pursuant to section 507(a)(8)(C). This provision is
substantively identical to section 707 of the House bill and
the Senate amendment.
Sec. 708. No discharge of fraudulent taxes in chapter 11
Section 708 of the conference report largely reflects the
Senate position as represented in section 708 of the Senate
amendment. Under current law, the confirmation of a chapter 11
plan discharges a corporate debtor from most debts. Section 708
amends section 1141(d) of the Bankruptcy Code to except from
discharge in corporate chapter 11 case a debt specified in
subsections 523(a)(2)(A) and (B) of the Bankruptcy Code owed to
a domestic governmental unit. In addition, it excepts from
discharge a debt owed to a person as the result of an action
filed under subchapter III of chapter 37 of title 31 of the
United States Code or any similar state statute. In contrast,
the House renders any debt under section 523(a)(2)
nondischargeable in a corporate chapter 11 case. Like the House
provision and its Senate counterpart, however, section 708
excepts from discharge a debt for a tax or customs duty with
respect to which the debtor made a fraudulent tax return or
willfully attempted in any manner to evade or defeat such tax.
Sec. 709. Stay of tax proceedings limited to prepetition taxes
Under current law, the filing of a petition for relief
under the Bankruptcy Code activates an automatic stay that
enjoins the commencement or continuation of a case in the
federal tax court. This rule was arguably extended in Halpern
v. Commissioner,\3\ which held that the tax court did not have
jurisdiction to hear a case involving a postpetition year. To
address this issue, section 709 of the conference report amends
section 362(a)(8) of the Bankruptcy Code to specify that the
automatic stay is limited to an individual debtor's prepetition
taxes (taxes incurred before entering bankruptcy). The
amendment clarifies that the automatic stay does not apply to
an individual debtor's postpetition taxes. In addition, section
709 allows the bankruptcy court to determine whether the
automatic stay applies to the postpetition tax liabilities of a
corporate debtor. This provision is substantively identical to
section 709 of the House bill and the Senate amendment.
---------------------------------------------------------------------------
\3\ 96 T.C. 895 (1991).
---------------------------------------------------------------------------
Sec. 710. Periodic payment of taxes in chapter 11 cases
Section 710 of the conference report amends section
1129(a)(9) of the Bankruptcy Code to provide that the allowed
amount of priority tax claims (as of the plan's effective date)
must be paid in regular cash installments within five years
from the entry of the order for relief. Themanner of payment
may not be less favorable than that accorded the most favored
nonpriority unsecured class of claims under section 1122(b). In
addition, it requires the same payment treatment to be accorded to
secured section 507(a)(8) claims of a governmental unit. This provision
is substantively identical to section 710 of the House bill and the
Senate amendment.
Sec. 711. Avoidance of statutory liens prohibited
The Internal Revenue Code gives special protections to
certain purchasers of securities and motor vehicles
notwithstanding the existence of a filed tax lien. Section 711
of the conference report amends section 545(2) of the
Bankruptcy Code to prevent that provision's special protections
from being used to avoid an otherwise valid lien. Specifically,
it prevents the avoidance of unperfected liens against a bona
fide purchaser, if the purchaser qualifies as such under
section 6323 of the Internal Revenue Code or a similar
provision under state or local law. Section 711 is
substantively identical to section 711 of the House bill and
the Senate amendment.
Sec. 712. Payment of taxes in the conduct of business
Although current law generally requires trustees and
receivers to pay taxes in the ordinary course of the debtor's
business, the payment of administrative expenses must first be
authorized by the court. Section 712(a) of the conference
report amends section 960 of title 28 of the United States Code
to clarify that postpetition taxes in the ordinary course of
business must be paid on or before when such tax is due under
applicable nonbankruptcy law, with certain exceptions. This
requirement does not apply if the obligation is a property tax
secured by a lien against property that is abandoned under
section 554 within a reasonable time after the lien attaches.
In addition, the requirement does not pertain where the payment
is excused under the Bankruptcy Code. With respect to chapter 7
cases, section 712(a) provides that the payment of a tax claim
may be deferred until final distribution pursuant to section
726 if the tax was not incurred by a chapter 7 trustee or if
the court, prior to the due date of the tax, finds that the
estate has insufficient funds to pay all administrative
expenses in full. Section 712(b) amends section 503(b)(1)(B)(i)
of the Bankruptcy Code to clarify that this provision applies
to secured as well as unsecured tax claims, including property
taxes based on liability that is in rem, in personam or both.
Section 712(c) amends section 503(b)(1) to exempt a
governmental unit from the requirement to file a request for
payment of an administrative expense. Section 712(d)(1) amends
section 506(b) to provide that to the extent that an allowed
claim is oversecured, the holder is entitled to interest and
any reasonable fees, costs, or charges provided for under state
law. Section 712(d)(2), in turn, amends section 506(c) to
permit a trustee to recover from a secured creditor the payment
of all ad valorem property taxes. Section 712 of the conference
report is substantively identical to section 712 of the House
bill and the Senate amendment.
Sec. 713. Tardily filed priority tax claims
Section 713 of the conference report is substantively
identical to section 713 of the House bill and the Senate
amendment. This provision amends section 726(a)(1) of the
Bankruptcy Code to require a claim under section 507 that is
not timely filed pursuant to section 501 to be entitled to a
distribution if such claim is filed the earlier of the date
that is ten days following the mailing to creditors of the
summary of the trustee's final report or before the trustee
commences final distribution.
Sec. 714. Income tax returns prepared by tax authorities
Section 714 of the conference report is substantively
identical to section 714 of the House bill and the Senate
amendment. This provision amends section 523(a) of the
Bankruptcy Code to provide that a return filed on behalf of a
taxpayer who has provided information sufficient to complete a
return constitutes filing a return (and the debt can be
discharged), but that a return filed on behalf of a taxpayer
based on information the Secretary obtains through testimony or
otherwise does not constitute filing a return (and the debt
cannot be discharged).
Sec. 715. Discharge of the estate's liability for unpaid taxes
Under the Bankruptcy Code, a trustee or debtor in
possession may request a prompt audit to determine postpetition
tax liabilities. If the government does not make a
determination or request an extension of time to audit, then
the trustee or debtor in possession's determination of taxes
will be final. Several court cases have held that while this
protects the debtor and the trustee, it does not necessarily
protect the estate. Section 715 of the conference report amends
section 505(b) of the Bankruptcy Code to clarify that the
estate is also protected if the government does not request an
audit of the debtor's tax returns. Therefore, if the government
does not make a determination of postpetition tax liabilities
or request extension of time to audit, then the estate's
liability for unpaid taxes is discharged. This provision is
substantively identical to section 715 of the House bill and
the Senate amendment.
Sec. 716. Requirement to file tax returns to confirm chapter 13 plans
Under current law, a debtor may enjoy the benefits of
chapter 13 even if delinquent in the filing of tax returns.
Section 716 of the conference report responds to this problem.
This provision is substantively identical to section 716 of the
House bill and the Senate amendment. Subsection (a) amends
section 1325(a) of the Bankruptcy Code to require a chapter 13
debtor file all applicable Federal, state, and local tax
returns as a condition of confirmation as required by section
1308 (as added by section 716(b)). Section 716(b) adds section
1308 to chapter 13. This provision requires a chapter 13 debtor
to be current on the filing of tax returns for the four-year
period preceding the filing of the case. If the returns are not
filed by the date on which the meeting of creditors is first
scheduled, the trustee may hold open that meeting for a
reasonable period of time to allow the debtor to file any
unfiled returns. The additional period of time may not extend
beyond 120 days after the date of the meeting of the creditors
or beyond the date on which the return is due under the last
automatic extension of time for filing. The debtor, however,
may obtain an extension of time from the court if the debtor
demonstrates by a preponderance of the evidence that the
failure to file was attributable to circumstances beyond the
debtor's control.
Section 716(c) amends section 1307 of the Bankruptcy Code
to provide that if a chapter 13 debtor fails to file a tax
return as required by section 1308, the court must dismiss the
case or convert it to one under chapter 7 (whichever is in the
best interests of creditors and the estate) on request of a
party in interest or the United States trustee after notice and
a hearing.
Section 716(d) amends section 502(b)(9) of the Bankruptcy
Code to provide that in a chapter 13 case, a governmental
unit's tax claim based on a return filed under section 1308
shall be deemed to be timely filed if the claim is filed within
60 days from the date on which such return is filed. Section
716(e) states the sense of the Congress that the Advisory
Committee onBankruptcy Rules of the Judicial Conference of the
United States should propose for adoption official rules with respect
an objection by a governmental unit to confirmation of a chapter 13
plan when such claim pertains to a tax return filed pursuant to section
1308.
Sec. 717. Standards for tax disclosure
Before creditors and stockholders may be solicited to
vote on a chapter 11 plan, the plan proponent must file a
disclosure statement that provides adequate information to
holders of claims and interests so they can make a decision as
to whether or not to vote in favor of the plan. As the tax
consequences of a plan can have a significant impact on the
debtor's reorganization prospects, section 717 amends section
1125(a) of the Bankruptcy Code to require that a chapter 11
disclosure statement discuss the plan's potential material
Federal tax consequences to the debtor, any successor to the
debtor, and to a hypothetical investor that is representative
of the claimants and interest holders in the case. This
provision is substantively identical to section 717 of the
House bill and the Senate amendment.
Sec. 718. Setoff of tax refunds
Under current law, the filing of a bankruptcy petition
automatically stays the setoff of a prepetition tax refund
against a prepetition tax obligation unless the bankruptcy
court approves the setoff. Interest and penalties that may
continue to accrue may also be nondischargeable pursuant to
section 523(a)(1) of the Bankruptcy Code and cause individual
debtors undue hardship. Section 718 of the conference report
amends section 362(b) of the Bankruptcy Code to create an
exception to the automatic stay whereby such setoff could occur
without court order unless it would not be permitted under
applicable nonbankruptcy law because of a pending action to
determine the amount or legality of the tax liability. In that
circumstance, the governmental authority may hold the refund
pending resolution of the action, unless the court, on motion
of the trustee and after notice and a hearing, grants the
taxing authority adequate protection pursuant to section 361.
Section 718 is substantively identical to section 718 of the
House bill and the Senate amendment.
Sec. 719. Special provisions related to the treatment of state and
local taxes
Section 719 of the conference report is substantively
identical to section 719 of the House bill and the Senate
amendment. This provision conforms state and local income tax
administrative issues to the Internal Revenue Code. For
example, under federal law, a bankruptcy petitioner filing on
March 5 has two tax years--January 1 to March 4, and March 5 to
December 31. Under the Bankruptcy Code, however, state and
local tax years are divided differently--January 1 to March 5,
and March 6 to December 31. Section 719 requires the states to
follow the federal convention. It conforms state and local tax
administration to the Internal Revenue Code in the following
areas: division of tax liabilities and responsibilities between
the estate and the debtor, tax consequences with respect to
partnerships and transfers of property, and the taxable period
of a debtor. Section 719 does not conform state and local tax
rates to federal tax rates.
Sec. 720. Dismissal for failure to timely file tax returns
Under existing law, there is no definitive rule with
respect to whether a bankruptcy court may dismiss a bankruptcy
case if the debtor fails to file returns for taxes incurred
postpetition. Section 720 of the conference report amends
section 521 of the Bankruptcy Code to allow a taxing authority
to request that the court dismiss or convert a bankruptcy case
if the debtor fails to file a postpetition tax return or obtain
an extension. If the debtor does not file the required return
or obtain the extension within 90 days from the time of the
request by the taxing authority to file the return, the court
must convert or dismiss the case, whichever is in the best
interest of creditors and the estate. Section 720 is
substantively identical to section 720 of the House bill and
the Senate amendment.
Title VIII--Ancillary and Other Cross-Border Cases
Title VIII of the conference report adds a new chapter to
the Bankruptcy Code for transnational bankruptcy cases. It
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
VIII 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 the debtor's assets. Title VIII is substantially
identical to title VIII of the House bill and the Senate
amendment.
Sec. 801. Amendment to add chapter 15 to title 11, United States Code
Section 801 introduces chapter 15 to the Bankruptcy Code,
which is the Model Law on Cross-Border Insolvency (``Model
Law'') promulgated by the United Nations Commission on
International Trade Law (``UNCITRAL'') at its Thirtieth Session
on May 12-30, 1997.\4\ Cases brought under chapter 15 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 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.\5\ 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.
In any case, an order granting recognition is required as a
prerequisite to the use of sections 301 and 303 by a foreign
representative.
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\4\ 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.
\5\ See section 1529 and commentary.
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Sec. 1501. Purpose and scope of application
Section 1501 combines the Preamble to the Model Law
(subsection (1)) with its article 1 (subsections (2) and
(3)).\6\ It largely tracks the language of the Model Law 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 such exclusion would be necessary
in countries like the United States where there are special
provisions for consumer debtors in the insolvency laws.\7\
---------------------------------------------------------------------------
\6\ Guide at 16-19.
\7\ 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.\8\ Foreign representatives of
foreign proceedings which are excluded from the scope of
chapter 15 may seek comity from courts other than the
bankruptcy court since the limitations of section 1509(b)(2)
and (3) would not apply to them.
---------------------------------------------------------------------------
\8\ Id. at 17.
---------------------------------------------------------------------------
The reference to section 109(b) interpolates into chapter
15 the entities governed by specialized insolvency regimes
under United States law which are currently excluded from
liquidation proceedings under title 11. Section 1501 contains
an exception to the section 109(b) exclusions so that foreign
proceedings of foreign insurance companies are eligible for
recognition and relief under chapter 15 as they had been under
section 304. However, section 1501(d) has the effect of leaving
to State regulation any deposit, escrow, trust fund or the like
posted by a foreign insurer under State law.
Sec. 1502. Definitions
``Debtor'' is given a special definition for this
chapter. This 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.\9\
---------------------------------------------------------------------------
\9\ 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. In addition, a definition
of ``recognition'' supplements the Model Law definitions and
merely simplifies drafting of various other sections of chapter
15.
Two key definitions of ``foreign proceeding'' and
``foreign representative,'' are found in sections 101(23) and
(24), which have been amended consistent with Model Law article
2.\10\ 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.\11\ In order to be recognized as
a foreign non-main proceeding, the debtor must at least have an
establishment in that foreign country.\12\
---------------------------------------------------------------------------
\10\ Guide at 19-21, para.para. 67-68.
\11\ See Guide at 19, (Model Law) 21 para. 75 (concerning
establishment); 21 para. 74 (concerning foreign court); 21 para.para.
72, 73 and 75 (concerning foreign main and non-main proceedings).
\12\ See id. at 21, para. 75.
---------------------------------------------------------------------------
Sec. 1503. International obligations of the United States
This section is taken exactly from the Model Law with
only minor adaptations of terminology.\13\ Although this
section makes an international obligation prevail over chapter
15, the courts will attempt to read the Model Law and the
international obligation so as not to conflict, especially if
the international obligation addresses a subject matter less
directly related than the Model Law to a case before the court.
---------------------------------------------------------------------------
\13\ See id. at 22, Art. 3.
---------------------------------------------------------------------------
Sec. 1504. Commencement of ancillary case
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, section 1334(a) of title 28
gives exclusive jurisdiction to the district courts in a
``case'' under this title.\14\ Therefore, since the competent
court has been determined in title 28, this section instead
provides that a petition for recognition commences a ``case,''
an approach that also invokes a number of other useful
procedural provisions. In addition, a new subsection (P) to
section 157 of title 28 makes cases under this chapter part of
the core jurisdiction of bankruptcy courts if referred 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 a revised
section 1410 of title 28 governing venue and transfer.\15\
---------------------------------------------------------------------------
\14\ See id. at 23, Art. 4.
\15\ New section 1410 of title 28 provides as follows:
A case under chapter 15 of title 11 may be commenced in the
district court for the district--
(1) in which the debtor has its principal place of business or
principal assets in the United States;
(2) if the debtor does not have a place of business or assets in
the United States, in which there is pending against the debtor an
action or proceeding or enforcement of judgment in a Federal or State
court; or
(3) in a case other than those specified in paragraph (1) or (2),
in which venue will be consistent with the interests of justice and the
convenience of the parties having regard to the relief sought by the
foreign representative.
---------------------------------------------------------------------------
The title ``ancillary'' in this section and in the title
of this chapter emphasizes the UnitedStates 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.
Sec. 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 trustee or other entity entitled to act
is under United States law, while the scope of actions that may
be taken by the trustee or other entity under foreign law is
limited by the foreign law.\16\
---------------------------------------------------------------------------
\16\ See Guide at 24.
---------------------------------------------------------------------------
The related amendment to section 586(a)(3) of title 28
makes 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.\17\ 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.
---------------------------------------------------------------------------
\17\ See id. at 24, Art. 5.
---------------------------------------------------------------------------
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.\18\
---------------------------------------------------------------------------
\18\ See id. at 23-24, para. 82.
---------------------------------------------------------------------------
Sec. 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.\19\
---------------------------------------------------------------------------
\19\ See id. at 25.
---------------------------------------------------------------------------
Sec. 1507. Additional assistance
Subsection (1) follows the language of Model Law article
7.\20\ Subsection (2) makes the authority for additional relief
(beyond that permitted under sections 1519-1521, below) subject
to the conditions for relief heretofore specified in 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 section 304 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 makes it clear that comity is the central consideration,
its physical placement as one of six factors in subsection (c)
of section 304 is misleading, since those factors are
essentially elements of the grounds for granting comity.
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.\21\
---------------------------------------------------------------------------
\20\ Id. at 26.
\21\ Id.
---------------------------------------------------------------------------
Sec. 1508. Interpretation
This provision follows conceptually Model Law article 8
and is a standard one in recent UNCITRAL treaties and model
laws. Changes to the language were made to express the concepts
more clearly in United States vernacular.\22\ 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 text promulgated
by UNCITRAL. Not only are these sources persuasive, but they
advance 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.
---------------------------------------------------------------------------
\22\ Id. at 26, para. 91.
---------------------------------------------------------------------------
Sec. 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. If recognition is granted, the foreign
representative will have full capacity under United States 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 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 that of 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.\23\
---------------------------------------------------------------------------
\23\ See id. at 23, Art. 4, para.para.79-83; 27 Art. 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.\24\
---------------------------------------------------------------------------
\24\ See id. at 27, Art. 9; 34-35, Art. 15 and para.para.116-119;
39-40, Art. 18, para.para.133-134; see also sections 1515(3), 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 activities in the United States
by a foreign representative subject to applicable United States
law, just as 28 U.S.C. section 959 does for a domestic trustee
in bankruptcy.\25\ 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.
---------------------------------------------------------------------------
\25\ Id. at 27, para.93.
---------------------------------------------------------------------------
Sec. 1510. Limited jurisdiction
Section 1510, article 10 of the Model Law, is modeled on
section 306 of the Bankruptcy 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.
Sec. 1511. Commencement of Case Under Section 301 or 303
This section reflects 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 and coordination among them.\26\ Article 11 does
not distinguish between voluntary and involuntary proceedings,
but seems to have implicitly assumed an involuntary
proceeding.\27\ Subsection 1(a)(2) goes farther and permits a
voluntary filing, with its much simpler requirements, if the
foreign proceeding that has been recognized is a main
proceeding.
---------------------------------------------------------------------------
\26\ See id. at 28, Art. 11.
\27\ Id. at 38, para.para.97-99.
---------------------------------------------------------------------------
Sec. 1512. Participation of a foreign representative in a
case under this title
This section tracks article 12 of the Model Law with a
slight alteration to tie into United States procedural
terminology.\28\ 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.\29\
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.
---------------------------------------------------------------------------
\28\ Id. at 29, Art. 12.
\29\ Id. at 29, para.para.10-102.
---------------------------------------------------------------------------
Sec. 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 required alteration to fit
into the Bankruptcy Code.\30\ 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 permits the 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.\31\ The Model Law allows
for an exception to the policy of nondiscrimination as to
foreign revenue and other public law claims.\32\ Such claims
(such as tax and Social Security claims) have been
traditionally denied enforcement in the United States, 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 this question to developing
case law. It also allows the Department of the 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.
---------------------------------------------------------------------------
\30\ Id. at 30, para.103.
\31\ See id. at 30, para.104.
\32\ See id. at 31, para.105.
---------------------------------------------------------------------------
Sec. 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.\33\ As a ``foreign
creditor'' is not a defined term, foreign addresses are used as
the distinguishing factor. The Federal Rules of Bankruptcy
Procedure (``Rules'') should be amended to conform to the
requirements of this section, including a special form for
initial notice to such creditors. In particular, the Rules must
provide additional time for such creditors to file proofs of
claim where appropriate and require the court to make specific
orders in that regard in proper circumstances. 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.\34\ 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. Subsection (d) replaces
the reference to ``a reasonable time period'' in Model Law
article 14(3)(a).\35\ It makes clear that the Rules, 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.
---------------------------------------------------------------------------
\33\ See Model Law, Art. 14; Guide at 31-32, para.para. 106-109.
\34\ Guide at 33, para. 111.
\35\ Id. at 31, Art. 14(3)(a).
---------------------------------------------------------------------------
Sec. 1515. Application for recognition of a foreign
proceeding
This section follows article 15 of the Model Law with
minor changes.\36\ 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 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.\37\
---------------------------------------------------------------------------
\36\ Id. at 33.
\37\ See id. at 36, para. 121.
---------------------------------------------------------------------------
Sec. 1516. Presumptions concerning recognition
This section follows article 16 of the Model Law with
minor changes.\38\ 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.\39\ ``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.\40\
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.
---------------------------------------------------------------------------
\38\ Id. at 36.
\39\ Id. at 36, Art. 16(3).
\40\ Id.
---------------------------------------------------------------------------
Sec. 1517. Order granting recognition
This section closely tracks article 17 of the Model Law,
with a few exceptions.\41\ 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)
of the Bankruptcy Code. The requirements of this section, which
incorporates the definitions in section 1502 and sections
101(23) and (24), are all that must be fulfilled to attain
recognition. Reciprocity was specifically suggested as a
requirement for recognition on more than one occasion in the
negotiations that resulted in the Model Law. It was rejected by
overwhelming consensus each time. The United States was one of
the leading countries opposing the inclusion of a reciprocity
requirement.\42\ In this regard, the Model Law conforms to
section 304, which has no such requirement.
---------------------------------------------------------------------------
\41\ Id. at 37.
\42\ Report of the working group on Insolvency Law on the work of
its Twentieth Session (Vienna, 7-18 October 1996), at 6, para.para. 16-
20.
---------------------------------------------------------------------------
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). A petition under section
1515 must show that proceeding is a main or a qualifying non-
main proceeding in order to obtain 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
(found in section 1520 and including an automatic stay) are
subject to modification under section 362(d), made applicable
by section 1520(2), which permits relief from the automatic
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.\43\ 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 may provide or a court
may order.\44\
---------------------------------------------------------------------------
\43\ Guide at 37, Art. 17(1)(d).
\44\ Id.
---------------------------------------------------------------------------
Sec. 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.\45\ Judges in
several jurisdictions, including the United States, have
reported a need for a requirement of complete and candid
reports to the court of all proceedings, worldwide, involving
the debtor. This section 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.
---------------------------------------------------------------------------
\45\ Id. at 39-40, para.para. 133, 134.
---------------------------------------------------------------------------
Sec. 1519. Relief may be granted upon petition for
recognition of a foreign proceeding
This section generally follows article 19 of the Model
Law.\46\ 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. Subsection (d) precludes injunctive relief against police
and regulatory action under section 1519, leaving section 105
as the only avenue for such relief. Subsection (e) makes clear
that this section contemplates injunctive relief and that such
relief is subject to specific rules and a body of
jurisprudence. Subsection (f) was added to complement
amendments to the Bankruptcy Code provisions dealing with
financial contracts.
---------------------------------------------------------------------------
\46\ Id. at 40.
---------------------------------------------------------------------------
Sec. 1520. Effects of recognition of a foreign main
proceeding
In general, this chapter 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 and this chapter have no effect on any relief
currently available under section 105. The stay created by
article 20 of the Model Law is imported to chapter 15 from
existing provisions of the Code. Subsection (a)(1) combines
subsections 1(a) and (b) of article 20 of the Model Law,
because section 362 imposes the restrictions required by those
two subsections as well as additional restrictions.\47\
---------------------------------------------------------------------------
\47\ Id. at 42, Art. 20 1(a), (b).
---------------------------------------------------------------------------
Subsections (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.\48\ 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.
---------------------------------------------------------------------------
\48\ Id. at 42, 45.
---------------------------------------------------------------------------
By applying sections 361 and 362, subsection (a) makes
applicable the United States exceptions and limitations to the
restraints imposed on creditors, debtors, and other in a case
under this title, as stated in article 20(2) of the Model
Law.\49\ It also introduces the concept of adequate protection
provided in sections 362 and 363. These exceptions and
limitations include those set forth in sections 362(b), (c) and
(d). As a result, the court has the power to terminate the stay
pursuant to section 362(d), for cause, including a failure of
adequate protection.\50\
---------------------------------------------------------------------------
\49\ Id. at 42, Art. 20(2); 44, para.para. 148, 150.
\50\ Id. at 42, Art. 20(3); 44-45, para.para. 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 and to section 305
providing for stay or dismissal. Section 108 of the Bankruptcy
Code provides the tolling protection intended by Model Law
article 20(3), so no exception is necessary for claims that
might be extinguished under United States law.\51\
---------------------------------------------------------------------------
\51\ Id.
---------------------------------------------------------------------------
Sec. 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 conform to United States law.\52\ 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(a)(2).
The word ``adequately'' in the Model Law, articles 21(2) and
22(1), has been changed to ``sufficiently'' in sections 1521(b)
and 1522(a) to avoid confusion with a very specialized legal
term in United States bankruptcy, ``adequate protection.'' \53\
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.\54\ Subsections (d), (e) and (f) are identical to those
same subsections of section 1519. This section does not expand
or reduce the scope of relief currently available in ancillary
cases under sections 105 and 304 nor does it modify the sweep
of sections 555 through 560.
---------------------------------------------------------------------------
\52\ Id. at 45-46, Art. 21.
\53\ Id. at 46, Art. 21(2); 47, Art. 22(1).
\54\ See id. at 46-47, para.para. 158, 160.
---------------------------------------------------------------------------
Sec. 1522. Protection of creditors and other interested
persons
This section follows article 22 of the Model Law with
changes for United States usage and references to relevant
Bankruptcy Code sections.\55\ It gives the bankruptcy court
broad latitude to mold relief to meet specific 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. 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.
---------------------------------------------------------------------------
\55\ Id. at 47.
---------------------------------------------------------------------------
Sec. 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.\56\ It
confers standing on a recognized foreign representative to
assert an avoidance action but only in a pending case under
another chapter of this title. The Model Law is not clear about
whether it would grant 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 a simple grant of standing to bring
avoidance actions neglects 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 of
obligation.\57\ The courts will determine the nature and extent
of any such action and what national law may be applicable to
such action.
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\56\ Id. at 48-49
\57\ See id. at 49, para. 166.
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Sec. 1524. Intervention by a foreign representative
The wording is the same as the Model Law, except for a
few clarifying words.\58\ This section gives the foreign
representative whose foreign proceeding has been recognized 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.
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\58\ Id. at 49.
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Sec. 1525. Cooperation and direct communication between the
court and foreign courts or foreign representatives
The wording of this provision is nearly identical to that
of the Model Law.\59\ 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 are left to the
federal rules of bankruptcy procedure.
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\59\ Id. at 50.
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Sec. 1526 Cooperation and direct communication between the
trustee and foreign courts or foreign
representatives
This section closely tracks the Model Law.\60\ 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. 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.
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\60\ Id. at 51.
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Sec. 1527. Forms of cooperation
This section is identical to the Model Law.\61\ United
States bankruptcy courts already engage in most of the forms of
cooperation described here, but they now have explicit
statutory authorization for acts like the approval of protocols
of the sort used in cases.\62\
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\61\ Guide at 51, 53.
\62\ See e.g., In re Maxwell Communication Corp., 93 F.2d 1036 (2d
Cir. 1996).
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Sec. 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 of
the section 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.\63\ 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, if it is a main proceeding.
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\63\ Guide at 54-55.
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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 the next
section and section 305 to exercise its discretion to dismiss,
stay, or limit a United States case 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.
Sec. 1529. Coordination of a case under title 11 and a
foreign proceeding
This section follows the Model Law almost exactly, but
subsection (4) adds a reference to section 305 to make it clear
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.\64\
This provision is consistent with United States policy to act
ancillary to a foreign main proceeding whenever possible.
---------------------------------------------------------------------------
\64\ Id. at 55-56.
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Sec. 1530. Coordination of more than one foreign proceeding
This section follows exactly article 30 of the Model
Law.\65\ 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.
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\65\ Id. at 57.
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Sec. 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.\66\ 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'' in
this provision here means ``presumption.'' The presumption does
not arise for any purpose outside this section.
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\66\ Id. at 58.
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Sec. 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).\67\
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\67\ Id. at 59.
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Sec. 802. Other amendments to titles 11 and 28, United States Code
Section 802(a) amends section 103 of the Bankruptcy Code
to clarify the provisions of the Code that apply to chapter 15
and to specify which portions of chapter 15 apply in cases
under other chapters of title 11. Section 802(b) amends the
Bankruptcy Code's definitions of foreign proceeding and foreign
representative in section 101. The new definitions are nearly
identical to those contained in the Model Law but add to the
phrase ``under a law relating to insolvency'' the words ``or
debt adjustment.'' This addition emphasizes that the scope of
the Model Law and chapter 15 is not limited to proceedings
involving only debtors which are technically insolvent, but
broadly includes all proceedings involving debtors in severe
financial distress, so long as those proceedings also meet the
other criteria of section 101(24).\68\
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\68\ Id. at 51-52, 71.
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Section 802(c) amends section 157(b)(2) of title 28 to
provide that proceedings under chapter 15 will be core
proceedings while other amendments to title 28 provide that the
United States trustee's standing extends to cases under chapter
15 and that the United States trustee's duties include acting
in chapter 15 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.
Section 802(d) amends section 109 of the Bankruptcy Code
to permit recognition of foreign proceedings involving foreign
insurance companies and involving foreign banks which do not
have a branch or agency in the United States (as defined in 12
U.S.C. 3101). While a foreign bank not subject to United States
regulation will be eligible for chapter 15 as a consequence of
the amendment to section 109, section 303 prohibits the
commencement of a full involuntary case against such a foreign
bank unless the bank is a debtor in a foreign proceeding.
While section 304 is repealed and replaced by chapter 15,
access to the jurisprudence which developed under section 304
is preserved in the context of new section 1507. On deciding
whether to grant the additional assistance contemplated by
section 1507, the court must consider the same factors
specified in former section 304. The venue provisions for cases
ancillary to foreign proceedings have been amended to provide a
hierarchy of choices beginning with principal place of business
in the United States, if any. If there is no principal place of
business in the United States, but there is litigation against
a debtor, then the district in which the litigation is pending
would be the appropriate venue. In any other case, venue must
be determined with reference to the interests of justice and
the convenience of the parties.
Title IX--Financial Contract Provisions
Sec. 901. Treatment of certain agreements by conservators or receivers
of insured depository institutions
Subsections (a) through (f) of section 901 of the
conference report amend the Federal Deposit Insurance Act's
(FDIA) 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 and to reflect the enactment of the Commodity Futures
Modernization Act of 2000 (CFMA). It is intended that the
legislative history and case law surrounding those terms, to
the date of this amendment, be incorporated into the
legislative history of the FDIA.
Subsection (b) amends the definition of ``securities
contract'' expressly to encompass margin loans, to clarify the
coverage of securities options and to clarify the coverage of
repurchase and reverse repurchase transactions. The reference
in subsection (b) to a ``guarantee by or to any securities
clearing agency'' is intended to cover other arrangements, such
as novation, that have an effect similar to a guarantee. The
reference to a ``loan'' of a security in the definition is
intended to apply to loans of securities, whether or not for a
``permitted purpose'' under margin regulations. The reference
to ``repurchase and reverse repurchase transactions'' is
intended to eliminate any inquiry under the qualified financial
contract provisions of the FDIA as to whether a repurchase or
reverse repurchase transaction is a purchase and sale
transaction or a secured financing. Repurchase and reverse
repurchase transactions meeting certain criteria are already
covered under the definition of ``repurchase agreement'' in the
FDIA (and a regulation of the Federal Deposit Insurance
Corporation (FDIC)). Repurchase and reverse repurchase
transactions on all securities (including, for example, equity
securities, asset-backed securities, corporate bonds and
commercial paper) are included under the definition of
``securities contract''.
Subsection (b) also specifies that purchase, sale and
repurchase obligations under a participation in a commercial
mortgage loan do not constitute ``securities contracts.'' While
a contract for the purchase, sale or repurchase of a
participation may constitute a ``securities contract,'' the
purchase, sale or repurchase obligation embedded in a
participation agreement does not make that agreement a
``securities contract.''
A number of terms used in the qualified financial
contract provisions, but not defined therein, are intended to
have the meanings set forth in the analogous provisions of the
Bankruptcy Code or Federal Deposit Insurance Corporation
Improvement Act (``FDICIA''), such as, for example,
``securities clearing agency''. The term ``person,'' however,
is not intended to be so interpreted. Instead, ``person'' is
intended to have the meaning set forth in section 1 of title
1of the United States Code.
Section 901(b) reflects the Senate position as
represented in section 901(b) of the Senate amendment. The
House version of this provision did not include the
clarification that the definition applies to mortgage loans.
The conference report also includes the Senate amendment's
clarification of the reference to guarantee or reimbursement
obligation.
Section 901(c) amends the definition of ``commodity
contract'' in section 11(e)(8)(D)(iii) of the Federal Deposit
Insurance Act. It reflects the Senate position as represented
in section 901(c) of the Senate amendment, which includes the
Senate amendment's clarification of the reference to guarantee
or reimbursement obligation. Section 901(d) amends section
11(e)(8)(D)(iv) of the Federal Deposit Insurance Act with
respect to its definition of a ``forward contract''. It
reflects the Senate position as represented in section 901(d)
of the Senate amendment, which includes the Senate amendment's
clarification of the reference to guarantee or reimbursement
obligation.
Subsection (e) amends the definition of ``repurchase
agreement'' to codify the substance of the FDIC's 1995
regulation defining repurchase agreement to include those on
qualified foreign government securities.\69\ The term
``qualified foreign government securities'' is defined to
include those that are direct obligations of, or fully
guaranteed by, central governments of members of the
Organization for Economic Cooperation and Development (OECD).
Subsection (e) reflects developments in the repurchase
agreement markets, which increasingly use foreign government
securities as the underlying asset. The securities are limited
to those issued by or guaranteed by full members of the OECD,
as well as countries that have concluded special lending
arrangements with the International Monetary Fund associated
with the Fund's General Arrangements to Borrow.
---------------------------------------------------------------------------
\69\ See 12 C.F.R. Sec. 360.5.
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Subsection (e) also amends the definition of ``repurchase
agreement'' to include those on mortgage-related securities,
mortgage loans and interests therein, and expressly to include
principal and interest-only U.S. government and agency
securities as securities that can be the subject of a
``repurchase agreement.'' The reference in the definition to
United States government- and agency-issued or fully guaranteed
securities is intended to include obligations issued or
guaranteed by Fannie Mae and the Federal Home Loan Mortgage
Corporation (Freddie Mac) as well as all obligations eligible
for purchase by Federal Reserve banks under the similar
language of section 14(b) of the Federal Reserve Act. This
amendment is not intended to affect the status of repos
involving securities or commodities as securities contracts,
commodity contracts, or forward contracts, and their consequent
eligibility for similar treatment under the qualified financial
contract provisions. In particular, an agreement for the sale
and repurchase of a security would continue to be a securities
contract as defined in the FDIA, even if not a ``repurchase
agreement'' as defined in the FDIA. Similarly, an agreement for
the sale and repurchase of a commodity, even though not a
``repurchase agreement'' as defined in the FDIA, would continue
to be a forward contract for purposes of the FDIA.
Subsection (e), like subsection (b) for ``securities
contracts,'' specifies that repurchase obligations under a
participation in a commercial mortgage loan do not make the
participation agreement a ``repurchase agreement.'' Such
repurchase obligations embedded in participations in commercial
loans (such as recourse obligations) do not constitute a
``repurchase agreement.'' 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, would constitute a ``repurchase agreement''
as well as a ``securities contract''. Section 901(e) reflects
the Senate position as represented in section 901(e) of the
Senate amendment. The House version of this provision did not
include the clarification that the definition applies to
mortgage loans. The conference report also includes the Senate
amendment's clarification of the reference to guarantee or
reimbursement obligation.
Section 901(f) of the conference report amends the
definition of ``swap agreement'' to include an ``interest rate
swap, option, future, or forward agreement, including a rate
floor, rate cap, rate collar, cross-currency rate swap, and
basis swap; a spot, same day-tomorrow, tomorrow-next, forward,
or other foreign exchange or precious metals agreement; a
currency swap, option, future, or forward agreement; an equity
index or equity swap, option, future, or forward agreement; a
debt index or debt swap, option, future, or forward agreement;
a total return, credit spread or credit swap, option, future,
or forward agreement; a commodity index or commodity swap,
option, future, or forward agreement; or a weather swap,
weather derivative, or weather option.'' As amended, the
definition of ``swap agreement'' will update the statutory
definition and achieve contractual netting across economically
similar transactions.
The definition of ``swap agreement'' originally was
intended to provide sufficient flexibility to avoid the need to
amend the definition as the nature and uses of swap
transactions matured. To that end, the phrase ``or any other
similar agreement'' was included in the definition. (The phrase
``or any similar agreement'' has been added to the definitions
of ``forward contract,'' ``commodity contract,'' ``repurchase
agreement'' and ``securities contract'' for the same reason.)
To clarify this, subsection (f) expands the definition of
``swap agreement'' to include ``any agreement or transaction
that is similar to any other agreement or transaction referred
to in [section 11(e)(8)(D)(vi) of the FDIA] and is of a type
that has been, is presently, or in the future becomes, the
subject of recurrent dealings in the swap markets . . . and
that is a forward, swap, future, or option on one or more
rates, currencies, commodities, equity securities or other
equity instruments, debt securities or other debt instruments,
quantitative measures associated with an occurrence, extent of
an occurrence, or contingency associated with a financial,
commercial, or economic consequence, or economic or financial
indices or measures of economic or financial risk or value.''
The definition of ``swap agreement,'' however, should not
be interpreted to permit parties to document non-swaps as swap
transactions. Traditional commercial arrangements, such as
supply agreements, or other non-financial market transactions,
such as commercial, residential or consumer loans, cannot be
treated as ``swaps'' under either the FDIA or the Bankruptcy
Code simply because the parties purport to document or label
the transactions as ``swap agreements.'' In addition, these
definitions apply only for purposes of the FDIA and the
Bankruptcy Code. These definitions, and the characterization of
a certain transaction as a ``swap agreement,'' are not intended
to affect the characterization, definition, or treatment of any
instruments under any other statute, regulation, or rule
including, but not limited to, the statutes, regulations or
rules enumerated in subsection (f). Similarly, Section 17 and a
new paragraph of Section 11(e) of the FDIA provide that the
definitions of ``securities contract,'' ``repurchase
agreement,'' ``forward contract,'' and ``commodity contract,''
and the characterization of certain transactions as such a
contract or agreement, are not intended to affect the
characterization, definition, or treatment ofany instruments
under any other statute, regulation, or rule including, but not limited
to, the statutes, regulations or rules enumerated in subsection (f).
The definition also includes any security agreement or
arrangement, or other credit enhancement, related to a swap
agreement, including any guarantee or reimbursement obligation
related to a swap agreement. This ensures that any such
agreement, arrangement or enhancement is itself deemed to be a
swap agreement, and therefore eligible for treatment as such
for purposes of termination, liquidation, acceleration, offset
and netting under the FDIA and the Bankruptcy Code. Similar
changes are made in the definitions of ``forward contract,''
``commodity contract,'' ``repurchase agreement'' and
``securities contract.''
The use of the term ``forward'' in the definition of
``swap agreement'' is not intended to refer only to
transactions that fall within the definition of ``forward
contract.'' Instead, a ``forward'' transaction could be a
``swap agreement'' even if not a ``forward contract.''
Section 901(f) reflects the Senate position as reflected
in section 901(f) of the Senate amendment. The Senate amendment
clarifies that the definition pertains to an agreement or
transaction is ``of a type that'' has been, presently, or in
the future becomes, the subject of recurrent dealings in the
swap markets. The House version did not include this
clarification. Section 901(f) also eliminates the reference in
the House provision to regulations promulgated by the
Securities and Exchange Commission (SEC) or the Commodity
Futures Trading Commission (CFTC).
Section 901(g) of the conference report is substantively
identical to section 901(g) of the House bill and the Senate
amendment. It amends the FDIA by adding a definition for
``transfer,'' which is a key term used in the FDIA, to ensure
that it is broadly construed to encompass dispositions of
property or interests in property. The definition tracks that
in section 101 of the Bankruptcy Code.
Section 901(h) makes clarifying technical changes to
conform the receivership and conservatorship provisions of the
FDIA. It also clarifies that the FDIA expressly protects rights
under security agreements, arrangements or other credit
enhancements related to one or more qualified financial
contracts (QFCs). An example of a security arrangement is a
right of setoff, and examples of other credit enhancements are
letters of credit, guarantees, reimbursement obligations and
other similar agreements. Section 901(h) is substantively
identical to section 901(h) of the House bill and Senate
amendment.
Section 901(i) of the conference report clarifies that no
provision of Federal or state law relating to the avoidance of
preferential or fraudulent transfers (including the anti-
preference provision of the National Bank Act) can be invoked
to avoid a transfer made in connection with any QFC of an
insured depository institution in conservatorship or
receivership, absent actual fraudulent intent on the part of
the transferee. Section 901(i) is substantively identical to
section 901(i) of the House bill and Senate amendment.
Sec. 902. Authority of the corporation with respect to failed and
failing institutions
Section 902 of the conference report provides that no
provision of law, including FDICIA, shall be construed to limit
the power of the FDIC to transfer or to repudiate any QFC in
accordance with its powers under the FDIA. As discussed below,
there has been some uncertainty regarding whether or not FDICIA
limits the authority of the FDIC to transfer or to repudiate
QFCs of an insolvent financial institution. Section 902, as
well as other provisions in the Act, clarify that FDICIA does
not limit the transfer powers of the FDIC with respect to QFCs.
Section 902 denies enforcement to ``walkaway'' clauses in QFCs.
A walkaway clause is defined as a provision that, after
calculation of a value of a party's position or an amount due
to or from one of the parties upon termination, liquidation or
acceleration of the QFC, either does not create a payment
obligation of a party or extinguishes a payment obligation of a
party in whole or in part solely because of such party's status
as a non-defaulting party. Section 902 is substantively
identical to section 902 of the House bill and Senate
amendment.
Sec. 903. Amendments relating to transfers of qualified financial
contracts
Section 903 of the conference report amends the FDIA to
expand the transfer authority of the FDIC to permit transfers
of QFCs to ``financial institutions'' as defined in FDICIA or
in regulations. This provision is substantively identical to
section 903(a) of the House bill and the Senate amendment. It
will allow the FDIC to transfer QFCs to a non-depository
financial institution, provided the institution is not subject
to bankruptcy or insolvency proceedings.
The new FDIA provision specifies that when the FDIC
transfers QFCs that are cleared on or subject to the rules of a
particular clearing organization, the transfer will not require
the clearing organization to accept the transferee as a member
of the organization. This provision gives the FDIC flexibility
in resolving QFCs cleared on or subject to the rules of a
clearing organization, while preserving the ability of such
organizations to enforce appropriate risk reducing membership
requirements. The amendment does not require the clearing
organization to accept for clearing any QFCs from the
transferee, except on the terms and conditions applicable to
other parties permitted to clear through that clearing
organization. ``Clearing organization'' is defined to mean a
``clearing organization'' within the meaning of FDICIA (as
amended both by the CFMA and by Section 906 of the Act).
The new FDIA provision also permits transfers to an
eligible financial institution that is a non-U.S. person, or
the branch or agency of a non-U.S. person or a U.S. financial
institution that is not an FDIC-insured institution if,
following the transfer, the contractual rights of the parties
would be enforceable substantially to the same extent as under
the FDIA. It is expected that the FDIC would not transfer QFCs
to such a financial institution if there were an impending
change of law that would impair the enforceability of the
parties' contractual rights.
Section 903(b) amends the notification requirements
following a transfer of the QFCs of a failed depository
institution to require the FDIC to notify any party to a
transferred QFC of such transfer by 5:00 p.m. (Eastern Time) on
the business day following the date of the appointment of the
FDIC acting as receiver or following the date of such transfer
by the FDIC acting as a conservator. This amendment is
consistent with the policy statement on QFCs issued by the FDIC
on December 12, 1989. Section 903(b) is substantively identical
to section 903(b) of the House bill and the Senate amendment.
Section 903(c) amends the FDIA to clarify the
relationship between the FDIA and FDICIA. It is substantively
identical to section 903(c) of the House bill and the Senate
amendment. There has been some uncertainty whether FDICIA
permits counterparties to terminate or liquidate a QFC before
the expiration of the time period provided by the FDIA during
which the FDIC may repudiate or transfer a QFC in a
conservatorship or receivership.Subsection (c) provides that a
party may not terminate a QFC based solely on the appointment of the
FDIC as receiver until 5:00 p.m. (Eastern Time) on the business day
following the appointment of the receiver or after the person has
received notice of a transfer under FDIA section 11(d)(9), or based
solely on the appointment of the FDIC as conservator, notwithstanding
the provisions of FDICIA. This provides the FDIC with an opportunity to
undertake an orderly resolution of the insured depository institution.
Section 903(c) also prohibits the enforcement of rights
of termination or liquidation that arise solely because of the
insolvency of the institution or are based on the ``financial
condition'' of the depository institution in receivership or
conservatorship. For example, termination based on a cross-
default provision in a QFC that is triggered upon a default
under another contract could be rendered ineffective if such
other default was caused by an acceleration of amounts due
under that other contract, and such acceleration was based
solely on the appointment of a conservator or receiver for that
depository institution. Similarly, a provision in a QFC
permitting termination of the QFC based solely on a downgraded
credit rating of a party will not be enforceable in an FDIC
receivership or conservatorship because the provision is based
solely on the financial condition of the depository institution
in default. However, any payment, delivery or other
performance-based default, or breach of a representation or
covenant putting in question the enforceability of the
agreement, will not be deemed to be based solely on financial
condition for purposes of this provision. The amendment is not
intended to prevent counterparties from taking all actions
permitted and recovering all damages authorized upon
repudiation of any QFC by a conservator or receiver, or from
taking actions based upon a receivership or other financial
condition-triggered default in the absence of a transfer (as
contemplated in Section 11(e)(10) of the FDIA). The amendment
allows the FDIC to meet its obligation to provide notice to
parties to transferred QFCs by taking steps reasonably
calculated to provide notice to such parties by the required
time. This is consistent with the existing policy statement on
QFCs issued by the FDIC on December 12, 1989.
Finally, the amendment permits the FDIC to transfer QFCs
of a failed depository institution to a bridge bank or a
depository institution organized by the FDIC for which a
conservator is appointed either (i) immediately upon the
organization of such institution or (ii) at the time of a
purchase and assumption transaction between the FDIC and the
institution. This provision clarifies that such institutions
are not to be considered financial institutions that are
ineligible to receive such transfers under FDIA section
11(e)(9). This is consistent with the existing policy statement
on QFCs issued by the FDIC on December 12, 1989.
Sec. 904. Amendments relating to disaffirmance or repudiation of
qualified financial contracts
Section 904 of the conference report 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 904
reflects the Senate position as represented in section 904 of
the Senate amendment. The House version of section 904 did not
include the savings clause provision.
Sec. 905. Clarifying amendment relating to master agreements
Section 905 of the conference report specifies 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 (but only to the extent the underlying agreements are
themselves QFCs). This provision ensures that cross-product
netting pursuant to a master agreement, or pursuant to an
umbrella agreement for separate master agreements between the
same parties, each of which is used to document one or more
qualified financial contracts, will be enforceable under the
FDIA. Cross-product 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. Section 905 is
substantively identical to section 905 of the House bill and
the Senate amendment.
Sec. 906. Federal Deposit Insurance Corporation Improvement Act of 1991
Section 906(a) of the conference report is substantively
identical to section 906(a) of the House bill and the Senate
amendment. Subsection (a)(1) amends the definition of
``clearing organization'' to include clearinghouses that are
subject to exemptions pursuant to orders of the Securities and
Exchange Commission or the Commodity Futures Trading Commission
and to include multilateral clearing organizations (the
definition of which was added to FDICIA by the CFMA).
FDICIA provides that a netting arrangement will be
enforced pursuant to its terms, notwithstanding the failure of
a party to the agreement. The current netting provisions of
FDICIA, however, limit this protection to ``financial
institutions,'' which include depository institutions. Section
906(a)(2) amends the FDICIA definition of covered institutions
to include (i) uninsured national and State member banks,
irrespective of their eligibility for deposit insurance and
(ii) foreign banks (including the foreign bank and its branches
or agencies as a combined group, or only the foreign bank
parent of a branch or agency). The latter change will extend
the protections of FDICIA to ensure that U.S. financial
organizations participating in netting agreements with foreign
banks are covered by the Act, thereby enhancing the safety and
soundness of these arrangements. It is intended that a non-
defaulting foreign bank and its branches and agencies be
considered to be a single financial institution for purposes of
the bilateral netting provisions of FDICIA (except to the
extent that the non-defaulting foreign bank and its branches
and agencies on the one hand, and the defaulting financial
institution, on the other, have entered into agreements that
clearly evidence an intention that the non-defaulting foreign
bank and its branches and agencies be treated as separate
financial institutions for purposes of the bilateral netting
provisions of FDICIA).
Subsection (a)(3) amends the 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 clearingorganizations 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.
Section 906(a)(4) of the conference report 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, however, particularly netting
arrangements covering positions taken in foreign exchange
dealings, are governed by the laws of a foreign country. This
subsection broadens the definition of ``netting contract'' to
include those agreements governed by foreign law, and preserves
the FDICIA requirement that a netting contract not be invalid
under, or precluded by, Federal law.
Section 906(b) and (c) of the conference report are
substantively identical to their counterparts in section 906 of
the House bill and the Senate amendment. These provisions
establish two exceptions to FDICIA's protection of the
enforceability of the provisions of netting contracts between
financial institutions and among clearing organization members.
First, the termination provisions of netting contracts will not
be enforceable based solely on (i) the appointment of a
conservator for an insolvent depository institution under the
FDIA or (ii) the appointment of a receiver for such institution
under the FDIA, if such receiver transfers or repudiates QFCs
in accordance with the FDIA and gives notice of a transfer by
5:00 p.m. on the business day following the appointment of a
receiver. This change is made to confirm the FDIC's flexibility
to transfer or repudiate the QFCs of an insolvent depository
institution in accordance with the terms of the FDIA. This
modification also provides important legal certainty regarding
the treatment of QFCs under the FDIA, because the current
relationship between the FDIA and FDICIA is unclear.
The second exception provides that FDICIA does not
override a stay order under SIPA with respect to foreclosure on
securities (but not cash) collateral of a debtor (section 911
of the conference report makes a conforming change to SIPA).
There is also an exception relating to insolvent commodity
brokers. Subsections (b) and (c) also clarify that a security
agreement or other credit enhancement related to a netting
contract is enforceable to the same extent as the underlying
netting contract.
Section 906(d) of the conference report adds a new
section 407 to FDICIA. This new section provides that,
notwithstanding any other law, QFCs with uninsured national
banks, uninsured Federal branches or agencies, or Edge Act
corporations, or uninsured State member banks that operate, or
operate as, a multilateral clearing organization and that are
placed in receivership or conservatorship will be treated in
the same manner as if the contract were with an insured
national bank or insured Federal branch for which a receiver or
conservator was appointed. This provision will ensure that
parties to QFCs with these institutions will have the same
rights and obligations as parties entering into the same
agreements with insured depository institutions. The new
section also specifically limits the powers of a receiver or
conservator for such an institution to those contained in 12
U.S.C. Sec. Sec. 1821(e)(8), (9), (10), and (11), which address
QFCs.
While the amendment would apply the same rules to such
institutions that apply to insured institutions, the provision
would not change the rules that apply to insured institutions.
Nothing in this section would amend the International Banking
Act, the Federal Deposit Insurance Act, the National Bank Act,
or other statutory provisions with respect to receiverships of
insured national banks or Federal branches.
Section 906(d) reflects the Senate position in Section
906(d) of the Senate amendment. It does not include the
reference in the House provision concerning a receiver of an
uninsured national bank, or Federal branch or agency. The
conference report also eliminates the reference to the Board of
Governors of the Federal Reserve System in the case of a
corporation chartered under section 25A of the Federal Reserve
Act.
Sec. 907. Bankruptcy law amendments
Section 907 of the conference report makes a series of
amendments to the Bankruptcy Code. 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 2(e) and 2(f) of the Act.
In connection with the definition of ``repurchase
agreement,'' the term ``qualified foreign government
securities'' is defined to include securities that are direct
obligations of, or fully guaranteed by, central governments of
members of the Organization for Economic Cooperation and
Development (OECD). This language reflects developments in the
repurchase agreement markets, which increasingly use foreign
government securities as the underlying asset. The securities
are limited to those issued by or guaranteed by full members of
the OECD, as well as countries that have concluded special
lending arrangements with the International Monetary Fund
associated with the Fund's General Arrangements to Borrow. The
term ``stockbroker,'' as defined in Bankruptcy Code section
101(53A), is intended to include within its scope an ``OTC
derivatives dealer'', as that term is defined in Rule 3b-12 of
the Securities Exchange Act of 1934, as amended, which is the
new class of broker-dealer created by the Securities and
Exchange Commission in 1999 to engage in over-the-counter
derivatives transactions that are securities.
Subsection (a)(1) also amends the definition of
``repurchase agreement'' to include those on mortgage-related
securities, mortgage loans and interests therein, and expressly
to include principal and interest-only U.S. government and
agency securities as securities that can be the subject of a
``repurchase agreement.'' The reference in the definition to
United States government- and agency-issued or fully guaranteed
securities is intended to include obligations issued or
guaranteed by Fannie Mae and the Federal Home Loan Mortgage
Corporation (Freddie Mac) as well as all obligations eligible
for purchase by Federal Reserve banks under the similar
language of section 14(b) of the Federal Reserve Act.
This amendment is not intended to affect the status of
repos involving securities or commodities as securities
contracts, commodity contracts, or forward contracts, and their
consequent eligibility for similar treatment under other
provisions of the Bankruptcy Code. In particular, an agreement
for the sale and repurchase of a security would continue to be
a securities contract as defined in the Bankruptcy Code and
thus also would be subject to the Bankruptcy Code provisions
pertaining to securities contracts, even if not a ``repurchase
agreement'' as defined in the Bankruptcy Code. Similarly, an
agreement for the sale and repurchase of a commodity, even
though not a ``repurchase agreement'' as defined in the
Bankruptcy Code, would continue to be a forward contract for
purposes of the Bankruptcy Codeand would be subject to the
Bankruptcy Code provisions pertaining to forward contracts.
Subsection (a)(1) specifies that repurchase obligations
under a participation in a commercial mortgage loan do not make
the participation agreement a ``repurchase agreement.'' Such
repurchase obligations embedded in participations in commercial
loans (such as recourse obligations) do not constitute a
``repurchase agreement.'' However, a repurchase agreement
involving the transfer of participations in commercial mortgage
loans with a simultaneous agreement to repurchase the
participation on demand or at a date certain one year or less
after such transfer would constitute a ``repurchase agreement''
(as well as a ``securities contract'').
The definition of ``swap agreement'' is amended to
include an ``interest rate swap, option, future, or forward
agreement, including a rate floor, rate cap, rate collar,
cross-currency rate swap, and basis swap; a spot, same day-
tomorrow, tomorrow-next, forward, or other foreign exchange or
precious metals agreement; a currency swap, option, future, or
forward agreement; an equity index or equity swap, option,
future, or forward agreement; a debt index or debt swap,
option, future, or forward agreement; a total return, credit
spread or credit swap, option, future, or forward agreement; a
commodity index or commodity swap, option, future, or forward
agreement; or a weather swap, weather derivative, or weather
option.'' As amended, the definition of ``swap agreement'' will
update the statutory definition and achieve contractual netting
across economically similar transactions.
The definition of ``swap agreement'' originally was
intended to provide sufficient flexibility to avoid the need to
amend the definition as the nature and uses of swap
transactions matured. To that end, the phrase ``or any other
similar agreement'' was included in the definition. (The phrase
``or any similar agreement'' has been added to the definitions
of ``forward contract,'' ``commodity contract,'' ``repurchase
agreement,'' and ``securities contract'' for the same reason.)
To clarify this, subsection (a)(1) expands the definition of
``swap agreement'' to include ``any agreement or transaction
that is similar to any other agreement or transaction referred
to in [Section 101(53B) of the Bankruptcy Code] and that is of
a type that has been, is presently, or in the future becomes,
the subject of recurrent dealings in the swap markets * * *
and [that] is a forward, swap, future, or option on one or more
rates, currencies, commodities, equity securities or other
equity instruments, debt securities or other debt instruments,
quantitative measures associated with an occurrence, extent of
an occurrence, or contingency associated with a financial,
commercial, or economic consequence, or economic or financial
indices or measures of economic or financial risk or value.''
The definition of ``swap agreement'' in this subsection
should not be interpreted to permit parties to document non-
swaps as swap transactions. Traditional commercial
arrangements, such as supply agreements, or other non-financial
market transactions, such as commercial, residential or
consumer loans, cannot be treated as ``swaps'' under either the
FDIA or the Bankruptcy Code because the parties purport to
document or label the transactions as ``swap agreements.''
These definitions, and the characterization of a certain
transaction as a ``swap agreement,'' are not intended to affect
the characterization, definition, or treatment of any
instruments under any other statute, regulation, or rule
including, but not limited to, the statutes, regulations or
rules enumerated in subsection (a)(1)(C). The definition also
includes any security agreement or arrangement, or other credit
enhancement, related to a swap agreement, including any
guarantee or reimbursement obligation related to a swap
agreement. This ensures that any such agreement, arrangement or
enhancement is itself deemed to be a swap agreement, and
therefore eligible for treatment as such for purposes of
termination, liquidation, acceleration, offset and netting
under the Bankruptcy Code and the FDIA. Similar changes are
made in the definitions of ``forward contract,'' ``commodity
contract,'' ``repurchase agreement,'' and ``securities
contract.'' An example of a security arrangement is a right of
setoff; examples of other credit enhancements are letters of
credit and other similar agreements. A security agreement or
arrangement or guarantee or reimbursement obligation related to
a ``swap agreement,'' ``forward contract,'' ``commodity
contract,'' ``repurchase agreement'' or ``securities contract''
will be such an agreement or contract only to the extent of the
damages in connection with such agreement measured in
accordance with Section 562 of the Bankruptcy Code (added by
the Act). This limitation does not affect, however, the other
provisions of the Bankruptcy Code (including Section 362(b))
relating to security arrangements in connection with agreements
or contracts that otherwise qualify as ``swap agreements,''
``forward contracts,'' ``commodity contracts,'' ``repurchase
agreements'' or ``securities contracts.''
The use of the term ``forward'' in the definition of
``swap agreement'' is not intended to refer only to
transactions that fall within the definition of ``forward
contract.'' Instead, a ``forward'' transaction could be a
``swap agreement'' even if not a ``forward contract.''
Subsections (a)(2) and (a)(3) amend the Bankruptcy Code
definitions of ``securities contract'' and ``commodity
contract,'' respectively, to conform them to the definitions in
the FDIA.
Subsection (a)(2), like the amendments to the FDIA,
amends the definition of ``securities contract'' expressly to
encompass margin loans, to clarify the coverage of securities
options and to clarify the coverage of repurchase and reverse
repurchase transactions. The reference in subsection (b) to a
``guarantee'' by or to a ``securities clearing agency'' is
intended to cover other arrangements, such as novation, that
have an effect similar to a guarantee. The reference to a
``loan'' of a security in the definition is intended to apply
to loans of securities, whether or not for a ``permitted
purpose'' under margin regulations. The reference to
``repurchase and reverse repurchase transactions'' is intended
to eliminate any inquiry under section 555 and related
provisions as to whether a repurchase or reverse repurchase
transaction is a purchase and sale transaction or a secured
financing. Repurchase and reverse repurchase transactions
meeting certain criteria are already covered under the
definition of ``repurchase agreement'' in the Bankruptcy Code.
Repurchase and reverse repurchase transactions on all
securities (including, for example, equity securities, asset-
backed securities, corporate bonds and commercial paper) are
included under the definition of ``securities contract''. A
repurchase or reverse repurchase transaction which is a
``securities contract'' but not a ``repurchase agreement''
would thus be subject to the ``counterparty limitations''
contained in section 555 of the Bankruptcy Code (i.e., only
stockbrokers, financial institutions, securities clearing
agencies and financial participants can avail themselves of
section 555 and related provisions).
Subsection (a)(2) also specifies that purchase, sale and
repurchase obligations under a participation in a commercial
mortgage loan do not constitute ``securities contracts.'' While
a contract for the purchase, sale or repurchase of a
participation may constitute a ``securities contract,'' the
purchase, sale or repurchase obligation embedded in a
participation agreement does not make that agreement a
``securities contract.''
Section 907(a) reflects the Senate position as
represented in section 907(a) of the Senate amendment. The
House version of this provision did not include the
clarification that thedefinition applies to mortgage loans. The
conference report also includes the Senate amendment's clarification of
the reference to guarantee or reimbursement obligation.
Section 907(b) amends the Bankruptcy Code definitions of
``financial institution'' and ``forward contract merchant.'' It
is substantively identical to section 907(b) of the House bill
and the Senate amendment. The definition for ``financial
institution'' includes Federal Reserve Banks and the receivers
or conservators of insolvent depository institutions. With
respect to securities contracts, the definition of ``financial
institution'' expressly includes investment companies
registered under the Investment Company Act of 1940.
Subsection (b) also adds a new definition of ``financial
participant'' to limit the potential impact of insolvencies
upon other major market participants. This definition will
allow such market participants to close-out and net agreements
with insolvent entities under sections 362(b)(6), 555, and 556
even if the creditor could not qualify as, for example, a
commodity broker. Sections 362(b)(6), 555 and 556 preserve the
limitations of the right to close-out and net such contracts,
in most cases, to entities who qualify under the Bankruptcy
Code's counterparty limitations. However, where the
counterparty has transactions with a total gross dollar value
of at least $1 billion in notional or actual principal amount
outstanding on any day during the previous 15-month period, or
has gross mark-to-market positions of at least $100 million
(aggregated across counterparties) in one or more agreements or
transactions on any day during the previous 15-month period,
sections 362(b)(6), 555 and 556 and corresponding amendments
would permit it to exercise netting and related rights
irrespective of its inability otherwise to satisfy those
counterparty limitations. This change will help prevent
systemic impact upon the markets from a single failure, and is
derived from threshold tests contained in Regulation EE
promulgated by the Federal Reserve Board in implementing the
netting provisions of the Federal Deposit Insurance Corporation
Improvement Act. It is intended that the 15-month period be
measured with reference to the 15 months preceding the filing
of a petition by or against the debtor.
``Financial participant'' is also defined to include
``clearing organizations'' within the meaning of FDICIA (as
amended by the CFMA and Section 906 of the Act). This
amendment, together with the inclusion of ``financial
participants'' as eligible counterparties in connection with
``commodity contracts,'' ``forward contracts'' and ``securities
contracts'' and the amendments made in other Sections of the
Act to include ``financial participants'' as counterparties
eligible for the protections in respect of ``swap agreements''
and ``repurchase agreements'', take into account the CFMA and
will allow clearing organizations to benefit from the
protections of all of the provisions of the Bankruptcy Code
relating to these contracts and agreements. This will further
the goal of promoting the clearing of derivatives and other
transactions as a way to reduce systemic risk. The definition
of ``financial participant'' (as with the other provisions of
the Bankruptcy Code relating to ``securities contracts,''
``forward contracts,'' ``commodity contracts,'' ``repurchase
agreements'' and ``swap agreements'') is not mutually
exclusive, i.e., an entity that qualifies as a ``financial
participant'' could also be a ``swap participant,'' ``repo
participant,'' ``forward contract merchant,'' ``commodity
broker,'' ``stockbroker,'' ``securities clearing agency'' and/
or ``financial institution.''
Section 907(c) of the conference report 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. Section 907(c) is substantively identical to section
907(c) of the House bill and the Senate amendment.
Subsection (d) amends section 362(b) of the Bankruptcy
Code to protect enforcement, free from the automatic stay, of
setoff or netting provisions in swap agreements and in master
netting agreements and security agreements or arrangements
related to one or more swap agreements or master netting
agreements. This provision parallels the other provisions of
the Bankruptcy Code that protect netting provisions of
securities contracts, commodity contracts, forward contracts,
and repurchase agreements. Because the relevant definitions
include related security agreements, the references to
``setoff'' in these provisions, as well as in section 362(b)(6)
and (7) of the Bankruptcy Code, are intended to refer also to
rights to foreclose on, and to set off against obligations to
return, collateral securing swap agreements, master netting
agreements, repurchase agreements, securities contracts,
commodity contracts, or forward contracts. Collateral may be
pledged to cover the cost of replacing the defaulted
transactions in the relevant market, as well as other costs and
expenses incurred or estimated to be incurred for the purpose
of hedging or reducing the risks arising out of such
termination. Enforcement of these agreements and arrangements
free from the automatic stay is consistent with the policy goal
of minimizing systemic risk.
Subsection (d) also clarifies that the provisions
protecting setoff and foreclosure in relation to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, and master netting agreements free
from the automatic stay apply to collateral pledged by the
debtor but that cannot technically be ``held by'' the creditor,
such as receivables and book-entry securities, and to
collateral that has been repledged by the creditor and
securities re-sold pursuant to repurchase agreements. Section
907(d) is substantively identical to section 907(d) of the
House bill and the Senate amendment.
Subsections (e) and (f) of section 907 of the conference
report amend sections 546 and 548(d) of the Bankruptcy Code to
provide that transfers made under or in connection with a
master netting agreement may not be avoided by a trustee except
where such transfer is made with actual intent to hinder, delay
or defraud and not taken in good faith. This amendment provides
the same protections for a transfer made under, or in
connection with, a master netting agreement as currently is
provided for margin payments, settlement payments and other
transfers received by commodity brokers, forward contract
merchants, stockbrokers, financial institutions, securities
clearing agencies, repo participants, and swap participants
under sections 546 and 548(d), except to the extent the trustee
could otherwise avoid such a transfer made under anindividual
contract covered by such master netting agreement. Subsections (e) and
(f) are substantively identical to section 907(f) of the House bill and
the Senate amendment.
Subsections (g), (h), (i), and (j) of section 907 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. These
provisions are substantively similar to their counterparts in
section 907 of the House bill and Senate amendment.
Section 907(k) of the conference report represents the
Senate position as reflected in section 907(k) of the Senate
amendment. It adds a new section 561 to the Bankruptcy Code to
protect the contractual right of a master netting agreement
participant to enforce any rights of termination, liquidation,
acceleration, offset or netting under a master netting
agreement. Such rights include rights arising (i) from the
rules of a derivatives clearing organization, multilateral
clearing organization, securities clearing agency, securities
exchange, securities association, contract market, derivatives
transaction execution facility or board of trade, (ii) under
common law, law merchant or (iii) by reason of normal business
practice. This reflects the enactment of the CFMA and the
current treatment of rights under swap agreements under section
560 of the Bankruptcy Code. Similar changes to reflect the
enactment of the CFMA have been made to the definition of
``contractual right'' for purposes of Sections 555, 556, 559
and 560 of the Bankruptcy Code.
Subsections (b)(2)(A) and (b)(2)(B) of new Section 561
limit the exercise of contractual rights to net or to offset
obligations where the debtor is a commodity broker and one leg
of the obligations sought to be netted relates to commodity
contracts traded on or subject to the rules of a contract
market designated under the Commodity Exchange Act or a
derivatives transaction execution facility registered under the
Commodity Exchange Act. Under subsection (b)(2)(A) netting or
offsetting is not permitted in these circumstances if the party
seeking to net or to offset has no positive net equity in the
commodity accounts at the debtor. Subsection (b)(2)(B) applies
only if the debtor is a commodity broker, acting on behalf of
its own customer, and is in turn a customer of another
commodity broker. In that case, the latter commodity broker may
not net or offset obligations under such commodity contracts
with other claims against its customer, the debtor. Subsections
(b)(2)(A) and (b)(2)(B) limit the depletion of assets available
for distribution to customers of commodity brokers. Subsection
(b)(2)(C) provides an exception to subsections (b)(2)(A) and
(b)(2)(B) for cross-margining and other similar arrangements
approved by, or submitted to and not rendered ineffective by,
the Commodity Futures Trading Commission, as well as certain
other netting arrangements.
For the purposes of Bankruptcy Code sections 555, 556,
559, 560 and 561, it is intended that the normal business
practice in the event of a default of a party based on
bankruptcy or insolvency is to terminate, liquidate or
accelerate securities contracts, commodity contracts, forward
contracts, repurchase agreements, swap agreements and master
netting agreements with the bankrupt or insolvent party. The
protection of netting and offset rights in sections 560 and 561
is in addition to the protections afforded in sections
362(b)(6), (b)(7), (b)(17) and (b)(28) of the Bankruptcy Code.
Under the Act, the termination, liquidation or
acceleration rights of a master netting agreement participant
are subject to limitations contained in other provisions of the
Bankruptcy Code relating to securities contracts and repurchase
agreements. In particular, if a securities contract or
repurchase agreement is documented under a master netting
agreement, a party's termination, liquidation and acceleration
rights would be subject to the provisions of the Bankruptcy
Code relating to orders authorized under the provisions of SIPA
or any statute administered by the SEC. In addition, the
netting rights of a party to a master netting agreement would
be subject to any contractual terms between the parties
limiting or waiving netting or set off rights. Similarly, a
waiver by a bank or a counterparty of netting or set off rights
in connection with QFCs would be enforceable under the FDIA.
New Section 561 of the Bankruptcy Code clarifies that the
provisions of the Bankruptcy Code related to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements and master netting agreements apply
in a proceeding ancillary to a foreign insolvency proceeding
under new section 304 of the Bankruptcy Code.
Subsections (l) and (m) of section 907 of the conference
report clarify that the exercise of termination and netting
rights will not otherwise affect the priority of the creditor's
claim after the exercise of netting, foreclosure and related
rights. These provisions are substantively identical to there
counterparts in the House bill and the Senate amendment.
Subsection (n) amends section 553 of the Bankruptcy Code
to clarify that the acquisition by a creditor of setoff rights
in connection with swap agreements, repurchase agreements,
securities contracts, forward contracts, commodity contracts
and master netting agreements cannot be avoided as a
preference. This subsection also adds setoff of the kinds
described in sections 555, 556, 559, 560, and 561 of the
Bankruptcy Code to the types of setoff excepted from section
553(b). This provision generally represents the Senate's
position as represented in Section 907(n) of the Senate
amendment.
Section 907(o), as well as other subsections of the Act,
adds references to ``financial participant'' in all the
provisions of the Bankruptcy Code relating to securities,
forward and commodity contracts and repurchase and swap
agreements. This provision generally represents the Senate's
position as represented in Section 907(o) of the Senate
amendment.
Sec. 908. Recordkeeping requirements
Section 908 of the conference report 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 by
any insured depository institution with respect to QFCs only if
the insured financial institution is in a troubled condition
(as such term is defined in the FDIA). Section 908 reflects the
Senate position in section 908 of the Senate amendment, which
includes clarifying references to insured depository
institution and institutions in troubled condition.
Sec. 909. Exemptions from contemporaneous execution requirement
Section 909 of the conference report 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 909 is substantively identical
to section 909 of the House bill and the Senate amendment.
Sec. 910. Damage measure
Section 910 of the conference report adds a new section
562 to the Bankruptcy Code providing that damages under any
swap agreement, securities contract, forward contract,
commodity contract, repurchase agreement or master netting
agreement will be calculated as of the earlier of (i) the date
of rejection of such agreement by a trustee or (ii) the date or
dates of liquidation, termination or acceleration of such
contract or agreement. Section 910 reflects the Senate's
position as represented in section 910 of the Senate amendment.
Section 562 provides an exception to the rules in (i) and
(ii) if there are no commercially reasonable determinants of
value as of such date or dates, in which case damages are to be
measured as of the earliest subsequent date or dates on which
there are commercially reasonable determinants of value.
Although it is expected that in most circumstances damages
would be measured as of the date or dates of either rejection
or liquidation, termination or acceleration, in certain unusual
circumstances, such as dysfunctional markets or liquidation of
very large portfolios, there may be no commercially reasonable
determinants of value for liquidating any such agreements or
contracts or for liquidating all such agreements and contracts
in a large portfolio on a single day.
The party determining damages is given limited discretion
to determine the dates as of which damages are to be measured.
Its actions are circumscribed unless there are no
``commercially reasonable'' determinants of value for it to
measure damages on the date or dates of either rejection or
liquidation, termination or acceleration. The references to
``commercially reasonable'' are intended to reflect existing
state law standards relating to a creditor's actions in
determining damages. New section 562 provides that if damages
are not measured as of either the date of rejection or the date
or dates of liquidation, termination or acceleration and the
other party challenges the timing of the measurement of damages
by the party determining the damages, that party has the burden
of proving the absence of any commercially reasonable
determinants of value.
New section 562 is not intended to have any impact on the
determination under the Bankruptcy Code of the timing of
damages for contracts and agreements other than those specified
in section 562. Also, section 562 does not apply to proceedings
under the FDIA, and it is not intended that Section 562 have
any impact on the interpretation of the provisions of the FDIA
relating to timing of damages in respect of QFCs or other
contracts.
Sec. 911. SIPA stay
Section 911 of the conference report amends 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 master netting agreements (as
defined in the Bankruptcy Code and including rights of
foreclosure on collateral), except that such order or decree
may stay any right to foreclose on or dispose of securities
(but not cash) collateral pledged by the debtor or sold by the
debtor under a repurchase agreement or lent by the debtor under
a securities lending agreement. A corresponding amendment to
FDICIA is made by section 906. A creditor that was stayed in
exercising rights against such securities would be entitled to
post-insolvency interest to the extent of the value of such
securities. Section 911 is substantively identical to section
911 of the House bill and the Senate amendment.
Title X--Protection of Family Farmers
Sec. 1001. Permanent reenactment of chapter 12
Chapter 12 is a specialized form of bankruptcy relief
available only to a ``family farmer with regular annual
income,'' \70\ a defined term.\71\ This form of bankruptcy
relief permits eligible family farmers, under the supervision
of a bankruptcy trustee,\72\ to reorganize their debts pursuant
to a repayment plan.\73\ 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 \74\ and chapter 13.\75\
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\70\ 11 U.S.C. Sec. 109(f).
\71\ 11 U.S.C. Sec. 101(19).
\72\ 11 U.S.C. Sec. 1202.
\73\ 11 U.S.C. Sec. 1222.
\74\ 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.
\75\ 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).
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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 \76\ in response to the
farm financial crisis of the early- to mid-1980's.\77\ It was
subsequently reenacted and extended on several occasions. The
most recent extension, authorized as part of the Farm Security
and Rural Investment Act of 2002, provides that chapter remains
in effect until December 31, 2002.\78\
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\76\ Pub. L. No. 99-554, Sec. 255, 100 Stat. 3088, 3105 (1986).
\77\ 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 our 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. 28147 (1986) (statement of Rep. Mike Synar (D-
Okla.)).
\78\ Pub. L. No. 107-171, Sec. 10814 (2002).
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Section 1001(a) of the conference report reenacts chapter
12 of the Bankruptcy Code and provides that such reenactment
takes effect as of the date of enactment. Section 1001(b) makes
a conforming amendment to section 302 of the Bankruptcy Judges,
United States Trustees, and Family Farmer Bankruptcy Act of
1986. As a result of this provision, chapter 12 becomes a
permanent form of relief under the Bankruptcy Code. Section
1001 is substantively identical to section 1001 of the House
bill and the Senate amendment.
Sec. 1002. Debt limit increase
Section 1002 of the conference report amends section
104(b) of the Bankruptcy Code to provide for periodic
adjustments for inflation of the debt eligibility limit for
family farmers. This provision represents a compromise between
section 1002 of the House bill and the Senate amendment. The
Senate version required the adjustment to become effective as
of April 1, 2001 or 60 days after the date of enactment of this
Act. The House provision allows for a prospective effective
date of April 1, 2004.
Sec. 1003. Certain claims owed to governmental units
Section 1003 of the conference report is substantively
identical to section 1003 of the House bill and the Senate
amendment. Subsection (a) amends section 1222(a) of the
Bankruptcy Code to add an exception with respect to payments to
a governmental unit for a debt entitled to priority under
section 507 if such debt arises from the sale, transfer,
exchange, or other disposition of an asset used in the debtor's
farming operation, but only if the debtor receives a discharge.
Section 1003(b) amends section 1231(b) of the Bankruptcy Code
to have it apply to any governmental unit. Subsection (c)
provides that section 1003 becomes effective on the date of
enactment of this Act and applies to cases commenced after such
effective date.
Sec. 1004. Definition of family farmer
Section 1004 of the conference report amends the
definition of ``family farmer'' in section 101(18) of the
Bankruptcy Code to increase the debt eligibility limit from
$1,500,000 to $3,237,000. It also reduces the percentage of the
farmer's liabilities that must arise out of the debtor's
farming operation for eligibility purposes from 80 percent to
50 percent. Section 1004 represents a compromise. It takes into
consideration the adjustment that went into effect on April 1,
2001 pursuant to Bankruptcy Code section 104. There is no
counterpart to this provision in the House bill.
Sec. 1005. Elimination of requirement that family farmer and spouse
receive over 50 percent of income from farming operation in
year prior to bankruptcy
Section 1005 of the conference report amends the
Bankruptcy Code's definition of ``family farmer'' with respect
to the determination of the farmer's income. Current law
provides that a debtor, in order to be eligible to be a family
farmer, must derive a specified percentage of his or her income
from farming activities for the taxable year preceding the
commencement of the bankruptcy case. Section 1005 adjusts the
threshold percentage to be met during either: (1) the taxable
year preceding the filing of the bankruptcy case; or (2) the
taxable year in the second and third taxable years preceding
the filing of the bankruptcy case. Section 1005 represents a
compromise between the House bill and Senate amendment. The
Senate provision sets the determination period as at least one
of the three years preceding the filing of the bankruptcy case.
There is no counterpart to this provision in the House bill.
Sec. 1006. Prohibition of retroactive assessment of disposable income
Section 1006 of the conference report amends the
Bankruptcy Code in two respects concerning chapter 12 plans.
Section 1006(a) amends Bankruptcy Code section 1225(b) to
permit the court to confirm a plan even if the distribution
proposed under the plan equal or exceeds the debtor's projected
disposable income for that period, providing the plan otherwise
satisfies the requirements for confirmation. Section 1006(b)
amends Bankruptcy Code section 1229 to restrict the bases for
modifying a confirmed chapter 12 plan. Specifically, Section
1006(b) to provide that a confirmed chapter 12 plan may not be
modified to increase the amount of payments due prior to the
date of the order modifying the confirmation of the plan. Where
the modification is based on an increase in the debtor's
disposable income, the plan may not be modified to require
payments to unsecured creditors in any particular month in an
amount greater than the debtor's disposable income for that
month, unless the debtor proposes such a modification. Section
1006(b) further provides that a modification of a plan shall
not require payments that would leave the debtor with
insufficient funds to carry on the farming operation after the
plan is completed, unless the debtor proposes such a
modification. Section 1006 of the conference report reflects
the Senate position as represented in section 1006 of the
Senate amendment. There is no counterpart to this provision in
the House bill.
Sec. 1007. Family fishermen
Section 1007 of the conference report is a compromise
between the House and Senate. Subsection (a) of the conference
report amends Bankruptcy Code section 101 to add definitions of
``commercial fishing operation,'' ``commercial fishing
vessel,'' ``family fisherman'' and ``family fisherman with
regular annual income''. The definition of ``commercial fishing
operation'' includes the catching or harvesting of fish,
shrimp, lobsters, urchins, seaweed, shellfish, or other aquatic
species or products. The term ``commercial fishing vessel'' is
defined as a vessel used by a fisher to ``carry out a
commercial fishing operation''. The term ``family fisherman''
is defined as an individual engaged in a commercial fishing
operation, with an aggregate debt limit of $1.5 million. The
definition specifies that at least 80 percent of those debts
must be derived from a commercial fishing operation. The
percentage of income that must be derived from such operation
is specified to be more than 50 percent of the individual's
gross income for the taxable year preceding the taxable year in
which the case was filed. Similar provisions are included for
corporations and partnerships. The term ``family fisherman with
regular annual income'' is defined as a family fisherman whose
annual income is sufficiently stable and regular to enable such
person to make payments under a chapter 12 plan. Section
1007(b) amends Bankruptcy Code section 109 to provide that a
family fisherman is eligible to be a debtor under chapter 12.
Section 1007(c) amends the heading of chapter 12 to
include a reference to family fisherman and makes conforming
revisions to Sections 1203 and 1206. The conference report does
not include a provision in the Senate amendment, which requires
certain maritime liens to be treated as unsecured claims. It
also does not include provisions in the Senate amendment
concerning the codebtor stay.
Title XI--Health Care and Employee Benefits
Sec. 1101. Definitions
Section 1101 of the conference report is substantively
identical to section 1101 of the House bill and the Senate
amendment. Subsection (a) amends section 101 of the Bankruptcy
Code to add a definition of ``health care business''. The
definition includes any public or private entity (without
regard to whether that entity is for or not for profit) that is
primarily engaged in offering to the general public facilities
and services for diagnosis or treatment of injury, deformity or
disease; and surgical, drug treatment, psychiatric or obstetric
care. It also includes the following entities: (1) a general or
specialized hospital; (2) an ancillary ambulatory, emergency,
or surgical treatment facility; (3) a hospice; (d) a home
health agency; (e) other health care institution that is
similar to an entity referred to in (a) through (d); and other
long-term care facility. These include a skilled nursing
facility, intermediate care facility; assisted living facility,
home for the aged, domiciliary care facility, and health care
institution that is related to an aforementioned facility.
Section 1101(b) amends Bankruptcy Code section 101 to add a
definition of ``patient''. The term means any person who
obtains or receives services from a health care business.
Section 1101(c) amends section 101 of the Bankruptcy Code to
add a definition of ``patient records''. The term means any
written document relating to a patient or record recorded in a
magnetic, optical, or other form of electronic medium. Section
1101(d) specifies that the amendments effected by new section
101(27A) do not affect the interpretation of section 109(b).
Sec. 1102. Disposal of patient records
Section 1102 of the conference report is substantively
identical to section 1102 of the House bill and the Senate
amendment. It adds a provision to the Bankruptcy Code
specifying requirements for the disposal of patient records in
a chapter 7, 9, or 11 case of a health care business where the
trustee lacks sufficient funds to pay for the storage of such
records in accordance with applicable Federal or state law. The
requirements chiefly consist of providing notice to the
affected patients and specifying the method of disposal for
unclaimed records. They are intended to protect the privacy and
confidentiality of a patient's medical records when they are in
the custody of a health care business in bankruptcy. The
provision specifies the following requirements:
(1) The trustee shall: (a) publish notice in one or more
appropriate newspapers stating that if the records are not
claimed by the patient or an insurance provider (if permitted
under applicable law) within 90 days of the date of such
notice, then the trustee will destroy such records; and (b)
during such 90-day period, attempt to directly notify by mail
each patient and appropriate insurance carrier of the claiming
or disposing of such records.
(2) If after providing such notice patient records are
not claimed within the specified period, the trustee shall,
upon the expiration of such period, send a request by certified
mail to each appropriate federal agency to request permission
from such agency to deposit the records with the agency.
(3) If after providing the notice under 1 and 2 above,
patient records are not claimed, the trustee shall destroy such
records as follows: (a) by shredding or burning, if the records
are written; or (b) by destroying the records so that their
information cannot be retrieved, if the records are magnetic,
optical or electronic.
It is anticipated that if the estate of the debtor lacks
the funds to pay for the costs and expenses related to the
above, the trustee may recover such costs and expenses under
section 506(c) of the Bankruptcy Code.
Sec. 1103. Administrative expense claim for costs of closing a health
care business and other administrative expenses
Section 1103 of the conference report is substantively
identical to section 1103 of the House bill and the Senate
amendment. It amends section 503(b) of the Bankruptcy Code to
provide that the actual, necessary costs and expenses of
closing a health care business (including the disposal of
patient records or transferral of patients) incurred by a
trustee, Federal agency, or a department or agency of a State
are allowed administrative expenses. The conference report does
not include a duplicative and unrelated provision in the House
bill and Senate amendment pertaining to nonresidential real
property leases.
Sec. 1104. Appointment of ombudsman to act as patient advocate
Section 1104 of the conference report adds a provision to
the Bankruptcy Code requiring the court to order the
appointment of an ombudsman to monitor the quality of patient
care within 30 days after commencement of a chapter 7, 9, or 11
health care business bankruptcy case, unless the court finds
that such appointment is not necessary for the protection of
patients under the specific facts of the case. The ombudsman
must be a disinterested person. If the health care business is
a long-term care facility, a person who is serving as a State
Long-Term Care Ombudsman of the Older Americans Act of 1965 may
be appointed as the ombudsman in such case. The ombudsman must:
(1) monitor the quality of patient care to the extent necessary
under the circumstances, including interviewing patients and
physicians; (2) report to the court, not less than 60 days from
the date of appointment and then every 60 days thereafter, at a
hearing or in writing regarding the quality of patient care at
the health care business involved; and (3) notify the court by
motion or written report (with notice to appropriate parties in
interest) if the ombudsman determines that the quality of
patient care is declining significantly or is otherwise being
materially compromised. The provision requires the ombudsman to
maintain any information obtained that relates to patients
(including patient records) as confidential. Section 1104(b)
amends section 330(a)(1) of the Bankruptcy Code to authorize
the payment of reasonable compensation to an ombudsman. Section
1104 reflects the Senate position as represented in section
1104 of the Senate amendment. The conference report includes
the Senate's provision with respect to a case where the United
States trustee does not appoint a State Long-Term Care
Ombudsman. The House bill did not include this provision.
Sec. 1105. Debtor in possession; duty of trustee to transfer patients
Section 1105 of the conference report is identical to
section 1105 of the House bill and the Senate amendment. This
provision amends section 704(a) of the Bankruptcy Code to
requirea chapter 7 trustee, chapter 11 trustee, and chapter 11
debtor in possession to use all reasonable and best efforts to transfer
patients from a health care business that is in the process of being
closed to an appropriate health care business. The transferee health
care business should be in the vicinity of the transferor health care
business, provide the patient with services that are substantially
similar to those provided by the transferor health care business, and
maintain a reasonable quality of care.
Sec. 1106. Exclusion from program participation not subject to
automatic stay
Section 1106 amends section 362(b) of the Bankruptcy Code
to except from the automatic stay the exclusion by the
Secretary of Health and Human Services of a debtor from
participation in the medicare program or other specified
Federal health care programs. This provision is substantively
identical to section 1106 of the House bill and the Senate
amendment.
Title XII--Technical Amendments
Sec. 1201. Definitions
Section 1201 of the conference report is substantively
identical to section 1201 of the House bill and the Senate
amendment. This provision amends the definitions contained in
section 101 of the Bankruptcy Code. Paragraphs (1), (2), (4),
and (7) of section 1201 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
necessary and conforming amendments to cross references to the
newly redesignated definitions.
Paragraph (5) of section 1201 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. The largest creditor in a single asset
real estate case is typically 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 single asset real estate debtors. 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. 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) 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 1201, together with section
1214, respond to a 1997 Ninth Circuit case, in which two
purchase money lenders (without knowledge that the debtor had
recently filed an undisclosed chapter 11 case that was
subsequently 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'' in section 101(54) of the Bankruptcy
Code 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, that is, a
transfer includes the creation of a lien.
Sec. 1202. Adjustment of dollar amounts
Section 1202 of the conference report is substantively
identical to section 1202 of the House bill and the Senate
amendment. This provision corrects an omission in section
104(b) of the Bankruptcy Code to include a reference to section
522(f)(3).
Sec. 1203. Extension of time
Section 1203 of the conference report 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
the Bankruptcy Code, the amendment made by section 257(b)(2)(B)
of Public Law 99-554 could not be executed as stated. This
provision is substantively identical to section 1203 of the
House bill and the Senate amendment.
Sec. 1204. Technical amendments
Section 1204 of the conference report is identical to
section 1204 of the House bill and the Senate amendment. This
provision makes technical amendments to Bankruptcy Code
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
1204 is substantively identical to section 1204 of the House
bill and the Senate amendment.
Sec. 1205. Penalty for persons who negligently or fraudulently prepare
bankruptcy petitions
Section 1205 of the conference report amends section
110(j)(4) of the Bankruptcy Code to change the reference to
attorneys from the singular possessive to the plural
possessive. Thisprovision is substantively identical to section
1205 of the House bill and the Senate amendment.
Sec. 1206. 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 1206 of the conference report amends section
328(a) to include compensation ``on a fixed or percentage fee
basis'' in addition to the other specified forms of
reimbursement. This provision is substantively identical to
section 1206 of the House bill and the Senate amendment.
Sec. 1207. Effect of conversion
Section 1207 of the conference report makes a technical
correction in section 348(f)(2) of the Bankruptcy Code to
clarify that the first reference to property, like the
subsequent reference to property, is a reference to property of
the estate. This provision is substantively identical to
section 1207 of the House bill and the Senate amendment.
Sec. 1208. Allowance of administrative expenses
Section 1208 of the conference report 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' or equity security holders'
committees are not recoverable, but expenses incurred for such
professional services incurred by such committees themselves
would be. This provision is substantively identical to section
1208 of the House bill and the Senate amendment.
Sec. 1209. Exceptions to discharge
Section 1209 of the conference report is substantively
identical to section 1209 of the House bill and the Senate
amendment. This provision amends section 523(a) of the
Bankruptcy Code 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. Section 1209
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 corrects a grammatical error in section
523(e).
Sec. 1210. Effect of discharge
Section 1210 of the conference report makes technical
amendments to correct errors in section 524(a)(3) of the
Bankruptcy Code caused by section 257(o)(2) of Public Law 99-
554 and section 501(d)(14)(A) of Public Law 103-394.\79\ This
provision is substantively identical to section 1210 of the
House bill and the Senate amendment.
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\79\ For a description of these errors, see the appropriate
footnote and amendment notes in the United States Code.
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Sec. 1211. Protection against discriminatory treatment
Section 1211 of the conference report is substantively
identical to section 1211 of the House bill and the Senate
amendment. This provision conforms a reference to its
antecedent reference in section 525(c) of the Bankruptcy Code.
The omission of ``student'' before ``grant'' in the second
place it appears in section 525(c) made possible the
interpretation that a broader limitation on lender discretion
was intended, so that no loan could be denied because of a
prior bankruptcy if the lending institution was in the business
of making student loans. Section 1211 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.
Sec. 1212. 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 1212 of the
conference report 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.
This provision is substantively identical to section 1212 of
the House bill and the Senate amendment.
Sec. 1213. Preferences
Section 547 of the Bankruptcy Code authorizes a trustee
to avoid a preferential payment made to a creditor by a debtor
within 90 days of filing, whether the creditor is an insider or
an outsider. To address the concern that a corporate insider
(such as an officer or director who is a creditor of his or her
own corporation has an unfair advantage over outside creditors,
section 547 also authorizes a trustee to avoid a preferential
payment made to an insider creditor between 90 days and one
year before filing. Several recent cases, including
DePrizio,\80\ 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. 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 1213 of
the conference report 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.
This provision is intended to apply to any case, including any
adversary proceeding, that is pending or commenced on or after
the date of enactment of this Act. Section 1213 is
substantively identical to section 1213 of the House bill and
the Senate amendment.
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\80\ Levit v. Ingersoll Rand Fin. Corp., 874 F.2d 1186 (7th Cir.
1989); see, e.g., Ray v. City Bank and Trust Co. (In re C-L Cartage
Co.), 899 F.2d 1490 (6th Cir. 1990); Manufacturers Hanover Leasing
Corp. v. Lowrey (In re Robinson Bros. Drilling, Inc.), 892 F.2d 850
(10th Cir. 1989).
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Sec. 1214. Postpetition transactions
Section 1214 of the conference report amends section
549(c) of the Bankruptcy Code to clarify its application to an
interest in real property. This amendment should be construed
in conjunction with section 1201 of the Act. This provision is
substantively identical to section 1214 of the House bill and
the Senate amendment.
Sec. 1215. Disposition of property of the estate
Section 1215 of the conference report amends section
726(b) of the Bankruptcy Code to strike an erroneous reference.
This provision is substantively identical to section 1215 of
the House bill and the Senate amendment.
Sec. 1216. General provisions
Section 1216 of the conference report amends section
901(a) of the Bankruptcy Code to correct an omission in a list
of sections applicable to cases under chapter 9 of title 11 of
the United States Code. This provision is substantively
identical to section 1216 of the House bill and the Senate
amendment.
Sec. 1217. Abandonment of railroad line
Section 1217 of the conference report amends section
1170(e)(1) of the Bankruptcy Code to reflect the fact 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. This provision
is substantively identical to section 1217 of the House bill
and the Senate amendment.
Sec. 1218. Contents of plan
Section 1218 of the conference report amends section
1172(c)(1) of the Bankruptcy Code to reflect the fact 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. This provision
is substantively identical to section 1218 of the House bill
and the Senate amendment.
Sec. 1219. Bankruptcy cases and proceedings
Section 1219 of the conference report amends section
1334(d) of title 28 of the United States Code to make
clarifying references.\81\ This provision is substantively
identical to section 1220 of the House bill and section 1219 of
the Senate amendment.
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\81\ For a description of the errors, see the appropriate footnote
and amendment notes in the United States Code.
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Sec. 1220. Knowing disregard of bankruptcy law or rule
Section 1220 of the conference report amends section
156(a) of title 18 of the United States Code to make stylistic
changes and correct a reference to the Bankruptcy Code. This
provision is substantively identical to section 1221 of the
House bill and section 1220 of the Senate amendment.
Sec. 1221. Transfers made by nonprofit charitable corporations
Section 1221 of the conference report amends section
363(d) of the Bankruptcy Code to restrict the authority of a
trustee to use, sale, 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 1221 imposes similar restrictions with regard to plan
confirmation requirements for chapter 11 cases. Third, it
amends section 541 of the Bankruptcy Code to provide that any
property of a bankruptcy estate in which 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 enactment or to cases filed after such date. Section
1221 provides that a court may not confirm a plan without
considering whether this provision would substantially affect
the rights of a party in interest who first acquired rights
with respect to the debtor postpetition. Nothing in this
provision may be construed to require the court 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. This provision is substantively identical to
section 1222 of the House bill and section 1221 of the Senate
amendment.
Sec. 1222. Protection of valid purchase money security interests
Section 1222 of the conference report 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. This provision is
substantively identical to section 1223 of the House bill and
section1222 of the Senate amendment.
Sec. 1223. Bankruptcy judgeships
The substantial increase in 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 1223 generally incorporates H.R.
1596 as it passed the House with provisions extending four
existing temporary judgeships. Moreover, it includes the Senate
amendment's provision for additional bankruptcy judgeships for
the districts of South Carolina, Nevada, and Delaware. In
addition, section 1223 of the conference report provides that
the extension periods for the temporary judgeships in the
Northern District of Alabama, the Western District of
Tennessee, and the Districts of Delaware and Puerto Rico begin
from the date of enactment of this Act. The conference report
authorizes two judgeships for the District of Delaware in
addition to the two provided for in the House bill and the
Senate amendment for a total of four judgeships for that
District.
Sec. 1224. Compensating trustees
Section 1224 of the conference report amends section 1326
of the Bankruptcy Code to provide that if a chapter 7 trustee
has been allowed compensation as a result of the conversion or
dismissal of the debtor's prior case pursuant to section 707(b)
and some portion of that compensation remains unpaid, the
amount of any such unpaid compensation must be repaid in the
debtor's subsequent chapter 13 case. This payment must be
prorated over the term of the plan and paid on a monthly basis.
The amount of the monthly payment may not exceed the greater of
$25 or the amount payable to unsecured nonpriority creditors as
provided by the plan, multiplied by five percent and the result
divided by the number of months of the plan. This provision is
substantively identical to section 1225 of the House bill and
section 1224 of the Senate amendment.
Sec. 1225. Amendment to section 362 of title 11, United States Code
Section 1225 of the conference report amends section
362(b) of the Bankruptcy Code to except from the automatic stay
the creation or perfection of a statutory lien for an ad
valorem property tax or for a special tax or special assessment
on real property (whether or not ad valorem) that is imposed by
a governmental unit, if such tax or assessment becomes due
after the filing of the petition. This provision is
substantively identical to section 1226 of the House bill and
section 1225 of the Senate amendment.
Sec. 1226. Judicial education
Section 1226 of the conference report requires the
Director of the Federal Judicial Center, in consultation with
the Director of the Executive Office for United States
Trustees, to develop materials and conduct training as may be
useful to the courts in implementing this Act, including the
needs-based reforms under section 707(b) (as amended by this
Act) and amendments pertaining to reaffirmation agreements.
This provision is substantively identical to section 1227 of
the House bill and section 1226 of the Senate amendment.
Sec. 1227. Reclamation
Section 1227 of the conference report amends section
546(c) of the Bankruptcy Code to provide that the rights of a
trustee under sections 544(a), 545, 547, and 549 are subject to
the rights of a seller of goods to reclaim goods sold in the
ordinary course of business to the debtor if: (1) the debtor
received these goods while insolvent not later than 45 days
prior to the commencement of the case, and (2) written demand
for reclamation of the goods is made not later than 45 days
after receipt of such goods by the debtor or not later than 20
days after the commencement of the case, if the 45-day period
expires after the commencement of the case. If the seller fails
to provide notice in the manner provided in this provision, the
seller may still assert the rights set forth in section
503(b)(7) of the Bankruptcy Code. Section 1227(b) amends
Bankruptcy Code section 503(b) to provide that the value of any
goods received by a debtor not later than within 20 days prior
to the commencement of a bankruptcy case in which the goods
have been sold to the debtor in the ordinary course of the
debtor's business is an allowed administrative expense.
Section 1227 of the conference report reflects section
1227 of the Senate amendment, which clarifies when certain
specified time frames begin. Section 1228 of the House bill did
not include this clarification.
Sec. 1228. Providing requested tax documents to the court
Section 1228 of the conference report is substantively
identical to section 1229 of the House bill and section 1228 of
the Senate amendment. Subsection (a) provides that the court
may not grant a discharge to an individual in a case under
chapter 7 unless requested taxdocuments have been provided to
the court. Section 1228(b) similarly provides that the court may not
confirm a chapter 11 or 13 plan unless requested tax documents have
been filed with the court. Section 1228(c) directs the court to destroy
documents submitted in support of a bankruptcy claim not sooner than
three years after the date of the conclusion of a bankruptcy case filed
by an individual debtor under chapter 7, 11, or 13. In the event of a
pending audit or enforcement action, the court may extend the time for
destruction of such requested tax documents.
Sec. 1229. Encouraging creditworthiness
Section 1229 of the conference report is substantively
identical to section 1230 of the House bill and section 1229 of
the Senate amendment. Subsection (a) expresses the sense of the
Congress that lenders may sometimes offer credit to consumers
indiscriminately and that resulting consumer debt may be a
major contributing factor leading to consumer insolvency.
Section 1229(b) directs the Board of Governors of the Federal
Reserve to study certain consumer credit industry solicitation
and credit granting practices as well as the effect of such
practices on consumer debt and insolvency. The specified
practices involve the solicitation and extension of credit on
an indiscriminate basis that encourages consumers to accumulate
additional debt and where the lender fails to ensure that the
consumer borrower is capable of repaying the debt. Section
1229(c) requires the study described in subsection (b) to be
prepared within 12 months from the date of the Act's enactment.
This provision authorizes the Board to issue regulations
requiring additional disclosures to consumers and permits it to
undertake any other actions consistent with its statutory
authority, which are necessary to ensure responsible industry
practices and to prevent resulting consumer debt and
insolvency.
Sec. 1230. Property no longer subject to redemption
Section 1230 of the conference report is substantively
identical to section 1231 of the House bill and section 1230 of
the Senate amendment. This provision amends section 541(b) of
the Bankruptcy Code to provide that, under certain
circumstances, an interest of the debtor in tangible personal
property (other than securities, or written or printed
evidences of indebtedness or title) that the debtor pledged or
sold as collateral for a loan or advance of money given by a
person licensed under law to make such loan or advance is not
property of the estate. Subject to subchapter III of chapter 5
of the Bankruptcy Code, the provision applies where (a) the
property is in the possession of the pledgee or transferee; (b)
the debtor has no obligation to repay the money, redeem the
collateral, or buy back the property at a stipulated price; and
(c) neither the debtor nor the trustee have exercised any right
to redeem provided under the contract or State law in a timely
manner as provided under State law and section 108(b) of the
Bankruptcy Code.
Sec. 1231. Trustees
Section 1231 of the conference report is substantively
identical to section 1232 of the House bill and section 1231 of
the Senate amendment. The provision establishes a series of
procedural protections for chapter 7 and chapter 13 trustees
concerning final agency decisions relating to trustee
appointments and future case assignments. Section 1231(a)
amends section 586(d) of title 28 of the United States Code to
allow a chapter 7 or chapter 13 trustee to obtain judicial
review of such decisions by commencing an action in the United
States district court after the trustee exhausts all available
administrative remedies. Unless the trustee elects an
administrative hearing on the record, the trustee is deemed to
have exhausted all administrative remedies under this provision
if the agency fails to make a final agency decision within 90
days after the trustee requests an administrative remedy. The
provision requires the Attorney General to promulgate
procedures to implement this provision. It further provides
that the agency's decision must be affirmed by the district
court unless it is unreasonable and without cause based on the
administrative record before the
agency.
Section 1231(b) amends section 586(e) of title 28 of the
United States Code to permit a chapter 13 trustee to obtain
judicial review of certain final agency actions relating to
claims for actual, necessary expenses under section 586(e). The
trustee may commence an action in the United States district
court where the trustee resides. The agency's decision must be
affirmed by the district court unless it is unreasonable and
without cause based on the administrative record before the
agency. It directs the Attorney General to prescribe procedures
to implement this provision.
Sec. 1232. Bankruptcy forms
Section 1232 of the conference report is substantively
identical to section 1233 of the House bill and section 1232 of
the Senate amendment. This provision amends section 2075 of
title 28 of the United States Code to require the bankruptcy
rules promulgated under this provision to prescribe a form for
the statement specified under section 707(b)(2)(C) of the
Bankruptcy Code and to provide general rules on the content of
such statement.
Sec. 1233. Direct appeals of bankruptcy matters to courts of appeals
Under current law, 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 well as a bankruptcy appellate
panel are generally not binding and lack stare decisis value.
To address these problems, section 1233 of the conference
report amends section 158(d) of title 28 to establish a
procedure to facilitate appeals of certain decisions,
judgments, orders and decrees of the bankruptcy courts to the
circuit courts of appeals by means of a two-step certification
process. The first step is a certification by the bankruptcy
court, district court, or bankruptcy appellate panel (acting on
its own motion or on the request of a party, or the appellants
and appellees acting jointly). Such certification must be
issued by the lower court if: (1) the bankruptcy court,
district court, or bankruptcy appellate panel determines that
one or more of certain specified standards are met; or (2) a
majority in number of the appellants and a majority in number
of the appellees request certification and represent that one
or more of the standards are met. The second step is
authorization by the circuit court of appeals. Jurisdiction for
the direct appeal would exist in the circuit court of appeals
only if the court of appeals authorizes the direct appeal.
This procedure is intended to be used to settle
unresolved questions of law where there is a need to establish
clear binding precedent at the court of appeals level, where
the matter is one of public importance, where there is a need
to resolve conflicting decisions on a question of law, or where
an immediate appeal may materially advance the progress of the
case or proceeding. The courts of appeals are encouraged to
authorize direct appeals in these circumstances. Whilefact-
intensive issues may occasionally offer grounds for certification even
when binding precedent already exists on the general legal issue in
question, it is anticipated that this procedure will rarely be used in
that circumstance or in an attempt to bring to the circuit courts of
appeals matters that can appropriately be resolved initially by
district court judges or bankruptcy appellate panels.
Section 1233 reflects a compromise between the House and
Senate conferees. The House provision amends section 158(d) of
title 28 of the United States Code to deem a judgment,
decision, order, or decree of a bankruptcy judge to be a
judgment, decision, order, or decree of the district court
entered 31 days after an appeal of such judgment, decision,
order or decree is filed with the district court, unless: (1)
the district court issues a decision on the appeal within 30
days after such appeal is filed or enters an order extending
the 30-day period for cause upon motion of a party or by the
court sua sponte; or (2) all parties to the appeal file written
consent that the district court may retain such appeal until it
enters a decision. Section 1233 of the Senate amendment, on the
other hand, allows a court of appeals to hear an appeal of a
bankruptcy court order only if the bankruptcy court, district
court, bankruptcy appellate panel, or the parties jointly
certify: (1) the appeal concerns a substantial question of law,
question of law requiring resolution of conflicting decisions,
or a matter of public importance; and (2) an immediate appeal
may materially advance the progress of the case or proceeding.
It further provides that an appeal under this provision does
not stay proceedings in the court from which the order or
decree originated, unless the originating court or the court of
appeals orders such a stay.
Sec. 1234. Involuntary cases
Section 1234 of the conference report amends the
Bankruptcy Code's criteria for commencing an involuntary
bankruptcy case. Current law renders a creditor ineligible if
its claim is contingent as to liability or the subject of a
bona fide dispute. This provision amends section 303(b)(1) to
specify that a creditor would be ineligible to file an
involuntary petition if the creditor's claim was the subject of
a bona fide dispute as to liability or amount. It further
provides that the claims needed to meet the monetary threshold
must be undisputed. The provision makes a conforming revision
to section 303(h)(1). Section 1234 becomes effective on the
date of enactment of this Act and applies to cases commenced
after such date. This provision represents the Senate position
as reflected in section 1235 of the Senate amendment. There is
no counterpart to section 1234 of the conference report in the
House bill.
Sec. 1235. Federal election law fines and penalties as nondischargeable
debt
Section 1235 of the conference report amends section
523(a) of the Bankruptcy Code to make debts incurred to pay
fines or penalties imposed under Federal election law
nondischargeable. This provision represents the Senate's
position as reflected in section 1236 of the Senate amendment.
There is no counterpart to this provision in the House bill.
Title XIII--Consumer Credit Disclosure
Sec. 1301. Enhanced disclosures under an open end credit plan
Section 1301 of the conference report is substantively
identical to section 1301 of the House bill and Senate
amendment. Subsection (a) amends section 127(b) of the Truth in
Lending Act to mandate the inclusion of certain specified
disclosures in billing statements with respect to various open
end credit plans. In general, these statements must contain an
example of the time it would take to repay a stated balance at
a specified interest rate. In addition, they must warn the
borrower that making only the minimum payment will increase the
amount of interest that must be paid and the time it takes to
repay the balance. Further, a toll-free telephone number must
be provided where the borrower can obtain an estimate of the
time it would take to repay the balance if only minimum
payments are made. With respect to a creditor whose compliance
with title 15 of the United States Code is enforced by the
Federal Trade Commission (FTC), the billing statement must
advise the borrower to contact the FTC at a toll-free telephone
number to obtain an estimate of the time it would take to repay
the borrower's balance. Section 1301(a) permits the creditor to
substitute an example based on a higher interest rate. As
necessary, the provision requires the Board of Governors of the
Federal Reserve System (``Board''), to periodically recalculate
by rule the interest rate and repayment periods specified in
Section 1301(a). With respect to the toll-free telephone
number, section 1301(a) permits a third party to establish and
maintain it. Under certain circumstances, the toll-free number
may connect callers to an automated device.
For a period not to exceed 24 months from the effective
date of the Act, the Board is required to establish and
maintain a toll-free telephone number (or provide a toll-free
telephone number established and maintained by a third party)
for use by creditors that are depository institutions (as
defined in section 3 of the Federal Deposit Insurance Act),
including a Federal or State credit union (as defined in
section 101 of the Federal Credit Union Act), with total assets
not exceeding $250 million. Not later than six months prior to
the expiration of the 24-month period, the Board must submit a
report on this program to the Committee on Banking, Housing,
and Urban Affairs of the Senate, and the Committee on Banking
and Financial Services of the House of Representatives. In
addition, section 1301(a) requires the Board to establish a
detailed table illustrating the approximate number of months
that it would take to repay an outstanding balance if a
consumer pays only the required minimum monthly payments and if
no other advances are made. The table should reflect a
significant number of different annual percentage rates, and
account balances, minimum payment amounts. The Board must also
promulgate regulations providing instructional guidance
regarding the manner in which the information contained in the
tables should be used to respond to a request by an obligor
under this provision. Section 1301(a) provides that the
disclosure requirements of this provision are inapplicable to
any charge card account where the primary purpose of which is
to require payment of charges in full each month.
Section 1301(b)(1) requires the Federal Reserve Board to
promulgate regulations implementing section 1301(a)'s
amendments to section 127. Section 1301(b)(2) specifies that
the effective date of the amendments under subsection (a) and
the regulations required under this provision shall not take
effect until the later of 18 months after the date of enactment
of this Act or 12 months after the publication of final
regulations by the Board.
Section 1301(c) authorizes the Federal Reserve Board to
conduct a study to determine the types of information available
to potential borrowers from consumer credit lending
institutions regarding factors qualifying potential borrowers
for credit, repayment requirements, and the consequences of
default. The provision specifies the factors that should be
considered. The study's findings must be submitted to Congress
and include recommendations for legislativeinitiatives, based
on the Board's findings.
Sec. 1302. Enhanced disclosure for credit extensions secured by a
dwelling
Section 1302 of the conference report is identical to
section 1302 of the House bill and the Senate amendment.
Subsection (a)(1) amends section 127A(a)(13) of the Truth in
Lending Act to require a statement in any case in which the
extension of credit exceeds the fair market value of a dwelling
specifying that the interest on the portion of the credit
extension that is greater than the fair market value of the
dwelling is not tax deductible for Federal income tax purposes.
Section 1302(a)(2) amends section 147(b) of the Truth in
Lending Act to require an advertisement relating to an
extension of credit that may exceed the fair market value of a
dwelling and such advertisement is disseminated in paper form
to the public or through the Internet (as opposed to
dissemination by radio or television) to include a specified
statement. The statement must disclose that the interest on the
portion of the credit extension that is greater than the fair
market value of the dwelling is not tax deductible for Federal
income tax purposes and that the consumer should consult a tax
advisor for further information regarding the deductibility of
interest and charges.
With respect to non-open end credit extensions, section
1302(b)(1) amends section 128 of the Truth in Lending Act to
require that a consumer receive a specified statement at the
time he or she applies for credit with respect to a consumer
credit transaction secured by the consumer's principal dwelling
and where the credit extension may exceed the fair market value
of the dwelling must contain a specified statement. The
statement must disclose that the interest on the portion of the
credit extension that exceeds the dwelling's fair market value
is not tax deductible for Federal income tax purposes and that
the consumer should consult a tax advisor for further
information regarding the deductibility of interest and
charges. Section 1302(b)(2) requires certain advertisements
disseminated in paper form to the public or through the
Internet that relate to a consumer credit transaction secured
by a consumer's principal dwelling where the extension of
credit may exceed the dwelling's fair market value to contain
specified statements. These statements advise that the interest
on the portion of the credit extension that is greater than the
fair market value of the dwelling is not tax deductible for
Federal income tax purposes and that the consumer should
consult a tax advisor for further information regarding the
deductibility of interest and charges.
Section 1302(c)(1) requires the Federal Reserve Board to
promulgate regulations implementing the amendments effectuated
by this provision. Section 1302(c)(2) provides that these
regulations shall not take effect until the later of 12 months
following the Act's enactment date or 12 months after the date
of publication of such final regulations by the Board.
Sec. 1303. Disclosures related to ``introductory rates''
Section 1303 of the conference report is substantively
identical to section 1303 of the House bill and the Senate
amendment. Subsection (a) amends section 127(c) of the Truth in
Lending Act by adding a provision to add further requirements
for applications, solicitations and related materials that are
subject to section 127(c)(1). With respect to an application or
solicitation to open a credit card account and all promotional
materials accompanying such application or solicitation
involving an ``introductory rate'' offer, such materials must
do the following if they offer a temporary annual percentage
rate of interest:
(16) the term ``introductory'' in immediate
proximity to each listing of the temporary annual
percentage interest rate applicable to such account;
(17) if the annual percentage interest rate that
will apply after the end of the temporary rate period
will be a fixed rate, the time period in which the
introductory period will end and the annual percentage
rate that will apply after the end of the introductory
period must be clearly and conspicuously stated in a
prominent location closely proximate to the first
listing of the temporary annual percentage rate;
(18) if the annual percentage rate that will apply
after the end of the temporary rate period will vary in
accordance with an index, the time period in which the
introductory period will end and the rate that will
apply after that, based on an annual percentage rate
that was in effect 60 days before the date of mailing
of the application or solicitation must be clearly and
conspicuously stated in a prominent location closely
proximate to the first listing of the temporary annual
percentage rate.
The second and third provisions described above do not
apply to any listing of a temporary annual percentage rate on
an envelope or other enclosure in which an application or
solicitation to open a credit card account is mailed. With
respect to an application or solicitation to open a credit card
account for which disclosure is required pursuant to section
127(c)(1) of the Truth in Lending Act, section 1303(a)
specifies that certain statements be made if the rate of
interest is revocable under any circumstance or upon any event.
The statements must clearly and conspicuously appear in a
prominent manner on or with the application or solicitation.
The disclosures include a general description of the
circumstances that may result in the revocation of the
temporary annual percentage rate and an explanation of the type
of interest rate that will apply upon revocation of the
temporary rate.
To implement this provision, section 1303(b) amends
section 127(c) of the Truth in Lending Act to define various
relevant terms and requires the Board to promulgate
regulations. The provision does not become effective until the
earlier of 12 months after the Act's enactment date or 12
months after the date of publication of such final regulations.
Sec. 1304. Internet-based credit card solicitations
Section 1304 of the conference report is substantively
identical to section 1304 of the House bill and the Senate
amendment. Subsection (a) amends section 127(c) of the Truth in
Lending Act to require any solicitation to open a credit card
account for an open end consumer credit plan through the
Internet or other interactive computer service to clearly and
conspicuously include the disclosures required under section
127(c)(1)(A) and (B). It also specifies that the disclosure
required pursuant to section 127(c)(1)(A) be readily accessible
to consumers in close proximity to the solicitation and be
updated regularly to reflect current policies, terms, and fee
amounts applicable to the credit card account. Section 1304(a)
defines terms relevant to the Internet.
Section 1304(b) requires the Federal Reserve Board to
promulgate regulations implementing this provision. It also
provides that the amendments effectuated by section 1304do not
take effect until the later of 12 months after the Act's enactment date
or 12 months after the date of publication of such regulations.
Sec. 1305. Disclosures related to late payment deadlines and penalties
Section 1305 of the conference report is substantively
identical to section 1305 of the House bill and the Senate
amendment. Subsection (a) amends section 127(b) of the Truth in
Lending Act to provide that if a late payment fee is to be
imposed due to the obligor's failure to make payment on or
before a required payment due date, the billing statement must
specify the date on which that payment is due (or if different
the earliest date on which a late payment fee may be charged)
and the amount of the late payment fee to be imposed if payment
is made after such date.
Section 1305(b) requires the Federal Reserve Board to
promulgate regulations implementing this provision. The
amendments effectuated by this provision and the regulations
promulgated thereunder shall not take effect until the later of
12 months after the Act's enactment date or 12 months after the
date of publication of the regulations.
Sec. 1306. Prohibition on certain actions for failure to incur finance
charges
Section 1306 of the conference report is substantively
identical to section 1306 of the House bill and the Senate
amendment. Subsection (a) amends section 127 of the Truth in
Lending Act to add a provision prohibiting a creditor of an
open end consumer credit plan from terminating an account prior
to its expiration date solely because the consumer has not
incurred finance charges on the account. The provision does not
prevent the creditor from terminating such account for
inactivity for three or more consecutive months.
Section 1306(b) requires the Federal Reserve Board to
promulgate regulations implementing the amendments effectuated
by section 1306(a) and provides that they do not become
effective until the later of 12 months after the Act's
enactment date or 12 months after the date of publication of
such final regulations.
Sec. 1307. Dual use debit card
Section 1307 of the conference report is substantively
identical to section 1307 of the House bill and the Senate
amendment. Subsection (a) provides that the Federal Reserve
Board may conduct a study and submit a report to Congress
containing its analysis of consumer protections under existing
law to limit the liability of consumers for unauthorized use of
a debit card or similar access device. The report must include
recommendations for legislative initiatives, if any, based on
its findings.
Section 1307(b) provides that the Federal Reserve Board,
in preparing its report, may include analysis of section 909 of
the Electronic Fund Transfer Act to the extent this provision
is in effect at the time of the report and the implementing
regulations. In addition, the analysis may pertain to whether
any voluntary industry rules have enhanced or may enhance the
level of protection afforded consumers in connection with such
unauthorized use liability and whether amendments to the
Electronic Fund Transfer Act or implementing regulations are
necessary to further address adequate protection for consumers
concerning unauthorized use liability.
Sec. 1308. Study of bankruptcy impact of credit extended to dependent
students
Section 1308 of the conference report is substantively
identical to section 1308 of the House bill and the Senate
amendment. This provision directs the Board of Governors of the
Federal Reserve to study 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 rate of bankruptcy cases filed. The
report must be submitted to the Senate and House of
Representatives no later than one year from the Act's enactment
date.
Sec. 1309. Clarification of clear and conspicuous
Section 1309 of the conference report is substantively
identical to section 1309 of the House bill and the Senate
amendment. Subsection (a) requires the Board (in consultation
with other Federal banking agencies, the National Credit Union
Administration Board, and the Federal Trade Commission) to
promulgate regulations not later than six months after the
Act's enactment date to provide guidance on the meaning of the
term ``clear and conspicuous'' as it is used in section
127(b)(11)(A), (B) and (C) and section 127(c)(6)(A)(ii) and
(iii) of the Truth in Lending Act.
Section 1309(b) provides that regulations promulgated
under section 1309(a) shall include examples of clear and
conspicuous model disclosures for the purpose of disclosures
required under the Truth in Lending Act provisions set forth
therein.
Section 1309(c) requires the Federal Reserve Board, in
promulgating regulations under this provision, to ensure that
the clear and conspicuous standard required for disclosures
made under the Truth in Lending Act provisions set forth in
section 1309(a) can be implemented in a manner that results in
disclosures which are reasonably understandable and designed to
call attention to the nature and significance of the
information in the notice.
Title XIV--General Effective Date; Application of Amendments
Sec. 1401. Effective date; application of amendments
Section 1401 of the conference report is identical to
section 1401 of the House bill and section 1501 of the Senate
amendment. Subsection (a) states that the Act shall take effect
180 days after the date of enactment, unless otherwise
specified in this Act. Section 1401(b) provides that the
amendments made by this Act shall not apply to cases commenced
under the Bankruptcy Code before the Act's effective date,
unless otherwise specified in this Act. The provision specifies
that the amendments made by sections 308 and 322 shall apply to
cases commenced on or after the date of enactment of this Act.
From the Committee on the Judiciary, for
consideration of the House bill and the Senate
amendment, and modifications committed to
conference:
F. James Sensenbrenner,
Henry J. Hyde,
George W. Gekas,
Lamar Smith,
Steve Chabot,
Bob Barr,
Rick Boucher,
From the Committee on Financial Services, for
consideration of secs. 901-906, 907A-909, 911,
and 1301-1309 of the House bill, and secs. 901-
906, 907A-909, 911, 913-4, and title XIII of
the Senate amendment, and modifications
committed to conference:
Michael G. Oxley,
Spencer Bachus,
From the Committee on Energy and Commerce, for
consideration of title XIV of the Senate
amendment, and modifications committed to
conference:
Billy Tauzin,
Joe Barton,
From the Committee on Education and the
Workforce, for consideration of sec. 1403 of
the Senate amendment, and modifications
committed to conference:
John Boehner,
Michael N. Castle,
Managers on the Part of the House.
Patrick Leahy,
Joe Biden,
Charles Schumer,
Orrin Hatch,
Chuck Grassley,
Jon Kyl,
Mike DeWine,
Jeff Sessions,
Mitch McConnell,
Managers on the Part of the Senate.