II 

109TH CONGRESS 

1ST SESSION S. 329 

To amend title 11, United States Code, to increase the amount of unsecured 

claims for salaries and wages given priority in bankruptcy, to provide 

for cash payments to retirees to compensate for lost health insurance 

benefits resulting from the bankruptcy of their former employer, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 9, 2005 

Mr. ROCKEFELLER (for himself and Mr. LEAHY) introduced the following bill; 

which was read twice and referred to the Committee on the Judiciary 

A BILL 

To amend title 11, United States Code, to increase the 

amount of unsecured claims for salaries and wages given 

priority in bankruptcy, to provide for cash payments 

to retirees to compensate for lost health insurance benefits resulting from the bankruptcy of their former employer, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Bankruptcy Fairness 

5 Act’’. 
2 

•S 329 IS

1 SEC. 2. FAIR TREATMENT OF COMPENSATION IN BANK2 RUPTCY. 

3 (a) INCREASED PRIORITY CLAIM AMOUNT FOR EM4 PLOYEE WAGES AND BENEFITS.—Section 507(a) of title 

5 11, United States Code, is amended— 

6 (1) in paragraph (3)— 

7 (A) by striking ‘‘$4,925’’ and inserting 

8 ‘‘$15,000’’; and 

9 (B) by striking ‘‘within 90 days’’; and 

10 (2) in paragraph (4)(B)(i), by striking 

11 ‘‘$4,925’’ and inserting ‘‘$15,000’’. 

12 (b) RECOVERY OF EXCESSIVE COMPENSATION.—Sec13 tion 547 of title 11, United States Code, is amended by 

14 adding at the end the following: 

15 ‘‘(h) The court, on motion of a party of interest, may 

16 avoid any transfer of compensation made to a present or 

17 former employee, officer, or member of the board of direc18 tors of the debtor on or within 90 days before the date 

19 of the filing of the petition that the court finds, after no20 tice and a hearing, to be— 

21 ‘‘(1) out of the ordinary course of business; or 

22 ‘‘(2) unjust enrichment.’’. 

23 SEC. 3. PAYMENT OF INSURANCE BENEFITS OF RETIREES. 

24 (a) IN GENERAL.—Section 1114(j) of title 11, United 

25 States Code, is amended to read as follows: 
3 

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1 ‘‘(j)(1) No claim for retiree benefits shall be limited 

2 by section 502(b)(7). 

3 ‘‘(2)(A) Each retiree whose benefits are modified pur4 suant to subsection (e)(1) or (g) shall have a claim in an 

5 amount equal to the value of the benefits lost as a result 

6 of such modification. Such claim shall be reduced by the 

7 amount paid by the debtor under subparagraph (B). 

8 ‘‘(B)(i) In accordance with section 1129(a)(13)(B), 

9 the debtor shall pay the retiree with a claim under sub10 paragraph (A) an amount equal to the cost of 18 months 

11 of premiums on behalf of the retiree and the dependents 

12 of the retiree under section 602(3) of the Employee Re13 tirement Income Security Act of 1974 (29 U.S.C. 

14 1162(3)), which amount shall not exceed the amount of 

15 the claim under subparagraph (A). 

16 ‘‘(ii) If a retiree under clause (i) is not eligible for 

17 continuation coverage (as defined in section 602 of the 

18 Employee Retirement Income Security Act of 1974), the 

19 Secretary of Labor shall determine the amount to be paid 

20 by the debtor to the retiree based on the 18-month cost 

21 of a comparable health insurance plan. 

22 ‘‘(C) Any amount of the claim under subparagraph 

23 (A) that is not paid under subparagraph (B) shall be a 

24 general unsecured claim.’’. 
4 

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1 (b) CONFIRMATION OF PLAN.—Section 1129(a)(13) 

2 of title 11, United States Code, is amended to read as 

3 follows: 

4 ‘‘(13) The plan provides— 

5 ‘‘(A) for the continuation after its effective 

6 date of the payment of all retiree benefits (as 

7 defined in section 1114), at the level established 

8 pursuant to subsection (e)(1) or (g) of section 

9 1114, at any time before the confirmation of 

10 the plan, for the duration of the period the 

11 debtor has obligated itself to provide such bene12 fits; and 

13 ‘‘(B) that the holder of a claim under sec14 tion 1114(j)(2)(A) shall receive from the debt15 or, on the effective date of the plan, cash equal 

16 to the amount calculated under section 

17 1114(j)(2)(B).’’. 

18 (c) RULEMAKING.—The Secretary of Labor shall pro19 mulgate rules and regulations to carry out the amend20 ments made by this section. 

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