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Mr. SENSENBRENNER submitted the following conference report and statement on the bill (H.R. 333) to amend title 11, United States Code, and for other purposes:
Conference Report (H. Rept. 107-617]
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.
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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.
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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:``§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 for
care and support of an elderly, chronically ill, or disabled household member or member of the debtor's immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent) and who is unable to pay for such reasonable and necessary expenses.
``(III) In addition, for a debtor eligible for chapter 13, the debtor's monthly expenses may include the actual administrative expenses of administering a chapter 13 plan for the district in which the debtor resides, up to an amount of 10 percent of the projected plan payments, as determined under schedules issued by the Executive Office for United States Trustees.
``(IV) In addition, the debtor's monthly expenses may include the actual expenses for each dependent child less than 18 years of age, not to exceed $1,500 per year per child, to attend a private or public elementary or secondary school if the debtor provides documentation of such expenses and a detailed explanation of why such expenses are reasonable and necessary, and why such expenses are not already accounted for in the National Standards, Local Standards, or Other Necessary Expenses referred to in subclause (I)
``(V) In addition, the debtor's monthly expenses may include an allowance for housing and utilities, in excess of the allowance specified by the Local Standards for housing and utilities issued by the Internal Revenue Service, based on the actual expenses for home energy costs if the debtor provides documentation of such actual expenses and demonstrates that such actual expenses are reasonable and necessary.
``(iii) The debtor's average monthly payments on account of secured debts shall be calculated as the sum of--
``(I) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition; and
``(II) any additional payments to secured creditors necessary for the debtor, in filing a plan under chapter 13 of this title, to maintain possession of the debtor's primary residence, motor vehicle, or other property necessary for the support of the debtor and the debtor's dependents, that serves as collateral for secured debts;
divided by 60.
``(iv) The debtor's expenses for payment of all priority claims (including priority child support and alimony claims) shall be calculated as the total amount of debts entitled to priority, divided by 60.
``(B)(i) In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.
``(ii) In order to establish special circumstances, the debtor shall be required to itemize each additional expense or adjustment of income and to provide--
``(I) documentation for such expense or adjustment to income; and
``(II) a detailed explanation of the special circumstances that make such expenses or adjustment to income necessary and reasonable.
``(iii) The debtor shall attest under oath to the accuracy of any information provided to demonstrate that additional expenses or adjustments to income are required.
``(iv) The presumption of abuse may only be rebutted if the additional expenses or adjustments to income referred to in clause (i) cause the product of the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv) of subparagraph (A) when multiplied by 60 to be less than the lesser of--
``(I) 25 percent of the debtor's nonpriority unsecured claims, or $6,000, whichever is greater; or
``(II) $10,000.
``(C) As part of the schedule of current income and expenditures required under section 521, the debtor shall include a statement of the debtor's current monthly income, and the calculations that determine whether a presumption arises under subparagraph (A)(i), that 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
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``(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
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``(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
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(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:``§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.''.
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(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 $__X is due on __X 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
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``(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, whichever is 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 $__X, and my actual current monthly expenses including monthly payments on post-bankruptcy debt and other reaffirmation agreements total $ __X, leaving $ __X 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: __X.
`` `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:``§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
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``(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'';
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(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;
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``(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)--
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(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
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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 section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 403(b)(8) of the Internal Revenue Code of 1986, and earnings thereon, shall not exceed $1,000,000 in a case filed by a debtor who is an individual, except that such amount may be increased if the interests of justice so require.''.
(2) ADJUSTMENT OF DOLLAR AMOUNTS.--Paragraphs (1) and (2) of section 104(b) of title 11, United States Code, are amended by inserting ``522(n),'' after ``522(d),''.
SEC. 225. PROTECTION OF EDUCATION SAVINGS IN BANKRUPTCY.
(a) EXCLUSIONS.--Section 541 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (4), by striking ``or'' at the end;
(B) by redesignating paragraph (5) as paragraph (9); and
(C) by inserting after paragraph (4) the following:
``(5) funds placed in an education individual retirement account (as defined in section 530(b)(1) of the Internal Revenue Code of 1986) not later than 365 days before the date of 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:``§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
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``(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:``§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:``§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
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``(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:``§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:``§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
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``(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 orders the debtor to deliver any collateral in the debtor's possession to the trustee. If the court does not so determine, the stay provided by subsection (a) shall terminate upon the conclusion of the 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:
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``(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.
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``(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:``§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,
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(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--
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(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
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(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''.
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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:``§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
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(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:``§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
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``(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:``§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').
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``(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:``§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
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``(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:``§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--
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(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:``§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--
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(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: ``§346. Special provisions related to the treatment of State and local taxes
``(a) Whenever the Internal Revenue Code of 1986 provides that a separate taxable estate or entity is created in a case concerning a debtor under this title, and the income, gain, loss, deductions, and credits of such estate shall be taxed to or claimed by the estate, a separate taxable estate is also created for purposes of any State and local law imposing a tax on or measured by income and such income, gain, loss, deductions, and credits shall be taxed to or claimed by the estate and may not be taxed to or claimed by the debtor. The preceding sentence shall not apply if the case is dismissed. The trustee shall make tax returns of income required under any such State or local law.
``(b) Whenever the Internal Revenue Code of 1986 provides that no separate taxable estate shall be created in a case concerning a debtor under this title, and the income, gain, loss, deductions, and credits of an estate shall be taxed to or claimed by the debtor, such income, gain, loss, deductions, and credits shall be taxed to or claimed by the debtor under a State or local law imposing a tax on or measured by income and may not be taxed to or claimed by the estate. The trustee shall make such tax returns of income of corporations and of partnerships as are required under any State or local law, but with respect to partnerships, shall make 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:
``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.
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``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.``§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 ``§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.``§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. ``§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. ``§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. ``§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. ``§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.``§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 ``§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.``§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. ``§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.``§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. ``§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.
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``(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.``§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 ``§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.``§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.``§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.``§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.``§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.``§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.``§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,
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``(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.``§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.``§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.``§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 ``§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.``§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.``§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 ``§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. ``§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.``§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.``§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. ``§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:
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``(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:``§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
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``(II) does not include any repurchase obligation under a participation in a commercial mortgage loan unless the Corporation determines by regulation, resolution, or order to include any such participation within the meaning of such term;
``(III) means any combination of agreements or transactions referred to in subclauses (I) and (IV);
``(IV) means any option to enter into any agreement or transaction referred to in subclause (I) or (III);
``(V) means a master agreement that provides for an agreement or transaction referred to in subclause (I), (III), or (IV), together with all supplements to any such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a repurchase agreement under this clause, except that the master agreement shall be considered to be a repurchase agreement under this subclause only with respect to each agreement or transaction under the master agreement that is referred to in subclause (I), (III), or (IV); and
``(VI) means any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in subclause (I), (III), (IV), or (V), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause.
For purposes of this clause, the term `qualified foreign government security' means a security that is a direct obligation of, or that is fully guaranteed by, the central government of a member of the Organization for Economic Cooperation and Development (as determined by regulation or order adopted by the appropriate Federal banking authority).''.
(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
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``(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 Federal Deposit 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 with which such clearing organization has a netting contract'';
(4) by amending paragraph (14)(A)(i) to read as follows:
``(i) means a contract or agreement between 2 or more financial institutions, clearing organizations, or members that provides for netting present or future payment obligations or payment entitlements (including liquidation or close out values relating to such obligations or entitlements) among the parties to the agreement; and''; and
(5) by adding at the end the following new paragraph:
``(15) PAYMENT.--The term `payment' means a payment of United States dollars, another currency, or a composite currency, and a noncash delivery, including a payment or delivery to liquidate an unmatured obligation.''.
(b) ENFORCEABILITY OF BILATERAL NETTING CONTRACTS.--Section 403 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4403) is amended--
(1) by striking subsection (a) and inserting the following:
``(a) GENERAL RULE.--Notwithstanding any other provision of State or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal Deposit Insurance Act 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
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(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
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``(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 Ð``, pledged to, under the control of,'' after ``held by'';
(B) in paragraph (7), by inserting Ð``, 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
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(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:``§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: ``§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:``§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:``§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:``§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
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``(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:``§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:``§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:``§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
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``(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
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``(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:``§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:``§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
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(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
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(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.
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(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.
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(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: __XXXX.' (the blank space to be filled in by the creditor).
``(B) In the case of an open end credit plan that requires a minimum monthly payment of more than 4 percent of the balance on which finance charges are accruing, the following statement, in a prominent location on the front of the billing statement, disclosed clearly and conspicuously: `Minimum Payment Warning: Making only the required minimum payment will increase the interest you pay and the time it takes to repay your balance. Making a typical 5% minimum monthly payment on a balance of $300 at an interest rate of 17% would take 24 months to repay the balance in full. For an estimate of the time it would take to repay your balance, making only minimum monthly payments, call this toll-free number: __XXXX.' (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: __XXXX.' (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: __XX.' (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
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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
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``(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:
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:
From the Committee on Energy and Commerce, for consideration of title XIV of the Senate amendment, and modifications committed to conference:
From the Committee on Education and the Workforce, for consideration of sec. 1403 of the Senate amendment, and modifications committed to conference:
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 1-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.
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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
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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 also amends 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
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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 not reasonably 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.
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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 of proving 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 Senate amendment. 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
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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 of the 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 must provide 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)
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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 thrift savings 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
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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 enforcement officer 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
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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. \1\ Pub. L. No. 104-134, Section 804(b)(1996).
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 House bill 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
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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 such secured 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
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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 or endangerment 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
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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
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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 value of 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 to provide 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)
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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 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 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
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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 trustee may 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 and Budget) 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.
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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 business debtor 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 possible whether 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.
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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 to convert 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.
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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
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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 each district 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).
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. The manner 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.
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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 on Bankruptcy 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
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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. \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.
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, 60; 19 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, 67-68.
\11\ See Guide at 19, (Model Law) 21 75 (concerning establishment); 21 74 (concerning foreign court); 21 72, 73 and 75 (concerning foreign main and non-main proceedings).
\12\ See id. at 21, 75.
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.
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 United States policy in favor of a general rule that countries other than the home country of the debtor, where a main proceeding would be brought, should usually act through ancillary proceedings in aid of the main proceedings, in preference to a system of full bankruptcies (often called ``secondary'' proceedings) in each state where assets are found. Under the Model Law, notwithstanding the recognition of a foreign main proceeding, full bankruptcy cases are permitted in each country (see sections 1528 and 1529). In the United States, the court will have the power to suspend or dismiss such cases where appropriate under section 305.
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.
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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, 82.
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.
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.
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, 91.
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, 79-83; 27 Art. 9, 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 116-119; 39-40, Art. 18, 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, 93.
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, 97-99.
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, 10-102.
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
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\31\ See id. at 30, 104.
\32\ See id. at 31, 105.
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, 106-109.
\34\ Guide at 33, 111.
\35\ Id. at 31, Art. 14(3)(a).
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, 121.
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.
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, 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.
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, 133, 134.
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.
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, 148, 150.
\50\ Id. at 42, Art. 20(3); 44-45, 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
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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.
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, 158, 160.
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.
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. \56\ Id. at 48-49
\57\ See id. at 49, 166.
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. \58\ Id. at 49.
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. \59\ Id. at 50.
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. \60\ Id. at 51.
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\ \61\ Guide at 51, 53.
\62\ See e.g., In re Maxwell Communication Corp., 93 F.2d 1036 (2d Cir. 1996).
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. \63\ Guide at 54-55.
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.
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. \65\ Id. at 57.
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. \66\ Id. at 58.
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\ \67\ Id. at 59.
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
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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 1 of 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. 360.5.
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
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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 of any 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
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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 clearing organizations and a member common to all such organizations, thus reducing systemic risk in the event of the failure of such a member. Under the current FDICIA provisions, the enforceability of such arrangements depends on a case-by-case determination that clearing organizations could be regarded as members of each other for purposes of FDICIA.
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. 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
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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 Code and 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 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 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
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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 an individual 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
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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. SIPC 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\ \70\ 11 U.S.C. 109(f).
\71\ 11 U.S.C. 101(19).
\72\ 11 U.S.C. 1202.
\73\ 11 U.S.C. 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. 109(e), 101(18).
Chapter 12 was enacted on a temporary seven-year basis as part of the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986 \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\ \76\ Pub. L. No. 99-554, 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. 28,147 (1986) (statement of Rep. Mike Synar (D-Okla.)).
\78\ Pub. L. No. 107-171, 10814 (2002).
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
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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 equals 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
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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 require a 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. This provision 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
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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. \79\ For a description of these errors, see the appropriate footnote and amendment notes in the United States Code.
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 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. \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).
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. \81\ For a description of the errors, see the appropriate footnote and amendment notes in the United States Code.
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
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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 section 1222 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 tax documents 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
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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. While fact-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 legislative initiatives, 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
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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 1304 do 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.
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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:
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:
From the Committee on Energy and Commerce, for consideration of title XIV of the Senate amendment, and modifications committed to conference:
From the Committee on Education and the Workforce, for consideration of sec. 1403 of the Senate amendment, and modifications committed to conference:
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