Bankruptcy Amendments of 1997

Summary: Bankruptcy Amendments of 1997 - Makes technical corrections to Federal bankruptcy, criminal, and judiciary law.  Redefines single asset real estate to exclude family farms, and to increase from $4 million to $15 million the ceiling on the amount of noncontingent, liquidated secured debts on such property.  Defines the term "transfer" to include:  (1) creation of a lien; (2) retention of title as a security interest; (3) foreclosure of the debtor's equity of redemption; and (4) every mode of disposing of property or parting with an interest in property. 
(Sec. 3) Requires triennial adjustment of the $5,000 value of certain implements, professional books, tools of the trade, farm animals, and crops which a debtor may exempt from the property of the estate (protecting it from creditors' liens). 
(Sec. 6) Provides that a trustee or a creditors' and equity security holders' committee may pay a professional person they employ on a fixed or percentage fee basis, as well as on other bases already permitted. 
(Sec. 7) Allows a bankruptcy court to award reasonable compensation out of the debtor's estate to the debtor's attorney in chapter 7 (Liquidation) cases. 
(Sec. 10) Precludes an automatic stay of any transfer that is not avoidable in:  (1) cases where the trustee serves as lien creditor and successor to certain creditors and purchasers; and (2) postpetition transactions. 
(Sec. 11) Modifies guidelines governing assumption by the bankruptcy trustee of certain executory contracts and unexpired leases with specified defaults.  Permits a trustee to assume an unexpired lease of real property without first curing a default arising from any failure to perform nonmonetary obligations under the lease if it is impossible to cure the default by performing nonmonetary acts at and after the time of assumption.  Permits a trustee to assume an executory contract without first curing a default arising from such a failure: (1) if it is impossible to cure the default by performing nonmonetary acts at and after the time of assumption; and (2) if the court determines, based on the equities of the case, that the default should not be cured at and after such time. 
Repeals:  (1) the prohibition against trustee assumption or assignment of unexpired leases of aircraft facilities unless all such leases are assumed or assigned; and (2) the deemed rejection of such a lease if the trustee does not assume or reject it. 
Revises guidelines governing impairment of claims and interests in a Chapter 11 (Reorganization) case to:  (1) reflect the modifications made to executory contracts that are not required to be cured by the bankruptcy trustee; and (2) state that a claim or interest arising from any failure to perform a nonmonetary obligation is not impaired under a Reorganization plan if the plan compensates the claim or interest holder for actual pecuniary loss resulting from such failure. 
(Sec. 13) Excludes from compensable professional services any expenses incurred by an individual member of a creditors' and equity security holders' committee. 
(Sec. 15) Revises the prohibition against debtor avoidance of certain judicial liens in connection with a liability designated as, and actually in the nature of, alimony, maintenance, or support. 
(Sec. 16) Declares nondischargeable in bankruptcy a debt for death or personal injury caused by the debtor's operation of a watercraft or aircraft while intoxicated from alcohol, a drug, or other substance. Limits the nondischargeability of fees imposed by a court to fees so imposed on a prisoner. 
(Sec. 21) Revises guidelines governing preferences to provide that, if the trustee avoids a security interest given between 90 days and one year before the date of the filing of the petition, by the debtor to a non-insider for the benefit of a creditor that is an insider, then such security interest shall be considered to be avoided only with respect to the insider creditor. 
(Sec. 23) Revises setoff recovery rules to exclude from recovery by a trustee setoffs by swap participants. 
(Sec. 26) Requires the U.S. trustee in a chapter 11 (Reorganization) case to file a report certifying the election of an eligible, disinterested trustee at a meeting of creditors.  Declares that upon such filing:  (1) the trustee elected shall be considered to have been selected and appointed; and (2) the service of any trustee previously appointed to fill the term of specified ineligible or incapacitated trustees shall terminate.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Bankruptcy Amendments of 1997''.

SEC. 2. DEFINITIONS.

    Section 101 of title 11, United States Code, is amended--
            (1) by striking ``In this title--'' and inserting ``In this 
        title:'',
            (2) in each paragraph by inserting ``The term'' after the 
        paragraph designation,
            (3) in paragraph (35)(B) by striking ``paragraphs (21B) and 
        (33)(A)'' and inserting ``paragraphs (23) and (35)'',
            (4) in paragraphs (35A) and (38) by striking ``; and'' at 
        the end and inserting a period,
            (5) in paragraph (51B)--
                    (A) by inserting ``who is not a family farmer'' 
                after ``debtor'' the first place it appears, and
                    (B) by striking ``$4,000,000'' and inserting 
                ``$15,000,000 as of the date of the filing of the 
                petition'',
            (6) by amending paragraph (54) to read as follows:
            ``(54) The term `transfer' means--
                    ``(A) creation of a lien;
                    ``(B) retention of title as a security interest;
                    ``(C) foreclosure of the debtor's equity of 
                redemption; or
                    ``(D) every mode, direct or indirect, absolute or 
                conditional, voluntary or involuntary, of disposing of 
                or parting with property or with an interest in 
                property;'',
            (7) in paragraphs (1) through (35), in paragraphs (36) and 
        (37), and in paragraphs (40) through (55), including paragraph 
        (54) as added by this section, by striking the semicolon at the 
        end and inserting a period, and
            (8) by redesignating paragraphs (4) through (55), including 
        paragraph (54) as added by this section, in entirely numerical 
        sequence.

SEC. 3. 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. 4. 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. 5. PENALTY FOR PERSONS WHO NEGLIGENTLY OR FRAUDULENTLY PREPARE 
              BANKRUPTCY PETITIONS.

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

SEC. 6. 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. 7. COMPENSATION TO OFFICERS.

    Section 330(a) of title 11, United States Code, is amended--
            (1) in paragraph (1) by inserting ``, or the debtor's 
        attorney'' after ``1103'', and
            (2) in paragraph (3) by striking ``(3)(A) In'' and 
        inserting ``(3) In''.

SEC. 8. SPECIAL TAX PROVISIONS.

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

SEC. 9. 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. 10. AUTOMATIC STAY.

    Section 362(b) of title 11, United States Code, is amended--
            (1) in paragraph (17) by striking ``or'' at the end,
            (2) in paragraph (18) by striking the period at the end and 
        inserting ``; or'', and
            (3) by adding at the end the following:
            ``(19) under subsection (a) of this section, of any 
        transfer that is not avoidable under section 544 and not 
        avoidable under section 549.''.

SEC. 11. DEFAULTS BASED ON NONMONETARY OBLIGATIONS.

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

SEC. 12. AMENDMENT TO TABLE OF SECTIONS.

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

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

SEC. 13. 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. 14. PRIORITIES.

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

SEC. 15. EXEMPTIONS.

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

SEC. 16. EXCEPTIONS TO DISCHARGE.

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

SEC. 17. EFFECT OF DISCHARGE.

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

SEC. 18. 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. 19. 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. 20. LIMITATIONS ON AVOIDING POWERS.

    Section 546 of title 11, United States Code, is amended by 
redesignating the second subsection (g) as subsection (h).

SEC. 21. PREFERENCES.

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

SEC. 22. POSTPETITION TRANSACTIONS.

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

SEC. 23. SETOFF.

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

SEC. 24. DISPOSITION OF PROPERTY OF THE ESTATE.

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

SEC. 25. GENERAL PROVISIONS.

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

SEC. 26. 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 new paragraph:
    ``(2)(A) If an eligible, disinterested trustee is elected at a 
meeting of creditors under paragraph (1), the United States trustee 
shall file a report certifying that election. Upon the filing of a 
report under the preceding sentence--
            ``(i) the trustee elected under paragraph (1) shall be 
        considered to have been selected and appointed for purposes of 
        this section, and
            ``(ii) the service of any trustee appointed under 
        subsection (d) shall terminate.
    ``(B) In the case of any dispute arising out of an election under 
subparagraph (A), the court shall resolve the dispute.''.

SEC. 27. 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. 28. 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. 29. DISCHARGE.

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

SEC. 30. CONTENTS OF PLAN.

    Section 1322 of title 11, United States Code, is amended--
            (1) in subsection (b) by striking ``(c)'' and inserting 
        ``(d)'', and
            (2) in subsection (e) by striking ``default, shall'' and 
        inserting ``default shall''.

SEC. 31. DISCHARGE.

    Paragraphs (1), (2), and (3) of section 1328(a) of title 11, United 
States Code, are amended to read as follows:
            ``(1) provided for under section 1322(b)(5) of this title;
            ``(2) of the kind specified in paragraph (5), (8), or (9) 
        of section 523(a) of this title; or
            ``(3) for restitution, or a criminal fine, included in a 
        sentence on the debtor's conviction of a crime.''.

SEC. 32. 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. 33. 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. 34. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

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

            Passed the House of Representatives November 12, 1997.

            Attest:

                                                ROBIN H. CARLE,

                                                                 Clerk.