59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–477 

FINANCIAL INSTITUTION BANKRUPTCY ACT OF 2016 

MARCH 23, 2016.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. GOODLATTE, from the Committee on the Judiciary, 

submitted the following 

R E P O R T 

[To accompany H.R. 2947] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on the Judiciary, to whom was referred the bill 

(H.R. 2947) to amend title 11 of the United States Code in order 

to facilitate the resolution of an insolvent financial institution in 

bankruptcy, having considered the same, reports favorably thereon 

with an amendment and recommends that the bill as amended do 

pass. 

CONTENTS 

Page 

The Amendment ...................................................................................................... 1 

Purpose and Summary ............................................................................................ 9 

Background and Need for the Legislation ............................................................. 9 

Hearings ................................................................................................................... 16 

Committee Consideration ........................................................................................ 18 

Committee Votes ...................................................................................................... 18 

Committee Oversight Findings ............................................................................... 19 

New Budget Authority and Tax Expenditures ...................................................... 19 

Congressional Budget Office Cost Estimate .......................................................... 19 

Duplication of Federal Programs ............................................................................ 22 

Disclosure of Directed Rule Makings ..................................................................... 22 

Performance Goals and Objectives ......................................................................... 22 

Advisory on Earmarks ............................................................................................. 22 

Section-by-Section Analysis .................................................................................... 22 

Changes in Existing Law Made by the Bill, as Reported ..................................... 28 

The Amendment 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
2 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Financial Institution Bankruptcy Act of 2016’’. 

SEC. 2. GENERAL PROVISIONS RELATING TO COVERED FINANCIAL CORPORATIONS. 

(a) DEFINITION.—Section 101 of title 11, United States Code, is amended by inserting the following after paragraph (9): 

‘‘(9A) The term ‘covered financial corporation’ means any corporation incorporated or organized under any Federal or State law, other than a stockbroker, 

a commodity broker, or an entity of the kind specified in paragraph (2) or (3) 

of section 109(b), that is— 

‘‘(A) a bank holding company, as defined in section 2(a) of the Bank Holding Company Act of 1956; or 

‘‘(B) a corporation that exists for the primary purpose of owning, controlling and financing its subsidiaries, that has total consolidated assets of 

$50,000,000,000 or greater, and for which, in its most recently completed 

fiscal year— 

‘‘(i) annual gross revenues derived by the corporation and all of its 

subsidiaries from activities that are financial in nature (as defined in 

section 4(k) of the Bank Holding Company Act of 1956) and, if applicable, from the ownership or control of one or more insured depository institutions, represents 85 percent or more of the consolidated annual 

gross revenues of the corporation; or 

‘‘(ii) the consolidated assets of the corporation and all of its subsidiaries related to activities that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 1956) and, if applicable, 

related to the ownership or control of one or more insured depository 

institutions, represents 85 percent or more of the consolidated assets of 

the corporation.’’. 

(b) APPLICABILITY OF CHAPTERS.—Section 103 of title 11, United States Code, is 

amended by adding at the end the following: 

‘‘(l) Subchapter V of chapter 11 of this title applies only in a case under chapter 

11 concerning a covered financial corporation.’’. 

(c) WHO MAY BE A DEBTOR.—Section 109 of title 11, United States Code, is 

amended— 

(1) in subsection (b)— 

(A) in paragraph (2), by striking ‘‘or’’ at the end; 

(B) in paragraph (3)(B), by striking the period at the end and inserting 

‘‘; or’’; and 

(C) by adding at the end the following: 

‘‘(4) a covered financial corporation.’’; and 

(2) in subsection (d)— 

(A) by striking ‘‘and’’ before ‘‘an uninsured State member bank’’; 

(B) by striking ‘‘or’’ before ‘‘a corporation’’; and 

(C) by inserting ‘‘, or a covered financial corporation’’ after ‘‘Federal Deposit Insurance Corporation Improvement Act of 1991’’. 

(d) CONVERSION TO CHAPTER 7.—Section 1112 of title 11, United States Code, is 

amended by adding at the end the following: 

‘‘(g) Notwithstanding section 109(b), the court may convert a case under subchapter V to a case under chapter 7 if— 

‘‘(1) a transfer approved under section 1185 has been consummated; 

‘‘(2) the court has ordered the appointment of a special trustee under section 

1186; and 

‘‘(3) the court finds, after notice and a hearing, that conversion is in the best 

interest of the creditors and the estate.’’. 

(e)(1) Section 726(a)(1) of title 11, United States Code, is amended by inserting 

after ‘‘first,’’ the following: ‘‘in payment of any unpaid fees, costs, and expenses of 

a special trustee appointed under section 1186, and then’’. 

(2) Section 1129(a) of title 11, United States Code, is amended by inserting after 

paragraph (16) the following: 

‘‘(17) In a case under subchapter V, all payable fees, costs, and expenses of 

the special trustee have been paid or the plan provides for the payment of all 

such fees, costs, and expenses on the effective date of the plan. 

‘‘(18) In a case under subchapter V, confirmation of the plan is not likely to 

cause serious adverse effects on financial stability in the United States.’’. 

(f) Section 322(b)(2) of title 11, United States Code, is amended by striking ‘‘The’’ 

and inserting ‘‘In cases under subchapter V, the United States trustee shall recommend to the court, and in all other cases, the’’. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
3 

SEC. 3. LIQUIDATION, REORGANIZATION, OR RECAPITALIZATION OF A COVERED FINANCIAL 

CORPORATION. 

Chapter 11 of title 11, United States Code, is amended by adding at the end the 

following: 

‘‘SUBCHAPTER V—LIQUIDATION, REORGANIZATION, OR 

RECAPITALIZATION OF A COVERED FINANCIAL CORPORATION 

‘‘§ 1181. Inapplicability of other sections 

‘‘Sections 303 and 321(c) do not apply in a case under this subchapter concerning 

a covered financial corporation. Section 365 does not apply to a transfer under section 1185, 1187, or 1188. 

‘‘§ 1182. Definitions for this subchapter 

‘‘In this subchapter, the following definitions shall apply: 

‘‘(1) The term ‘Board’ means the Board of Governors of the Federal Reserve 

System. 

‘‘(2) The term ‘bridge company’ means a newly formed corporation to which 

property of the estate may be transferred under section 1185(a) and the equity 

securities of which may be transferred to a special trustee under section 

1186(a). 

‘‘(3) The term ‘capital structure debt’ means all unsecured debt of the debtor 

for borrowed money for which the debtor is the primary obligor, other than a 

qualified financial contract and other than debt secured by a lien on property 

of the estate that is to be transferred to a bridge company pursuant to an order 

of the court under section 1185(a). 

‘‘(4) The term ‘contractual right’ means a contractual right of a kind defined 

in section 555, 556, 559, 560, or 561. 

‘‘(5) The term ‘qualified financial contract’ means any contract of a kind defined in paragraph (25), (38A), (47), or (53B) of section 101, section 741(7), or 

paragraph (4), (5), (11), or (13) of section 761. 

‘‘(6) The term ‘special trustee’ means the trustee of a trust formed under section 1186(a)(1). 

‘‘§ 1183. Commencement of a case concerning a covered financial corporation 

‘‘(a) A case under this subchapter concerning a covered financial corporation may 

be commenced by the filing of a petition with the court by the debtor under section 

301 only if the debtor states to the best of its knowledge under penalty of perjury 

in the petition that it is a covered financial corporation. 

‘‘(b) The commencement of a case under subsection (a) constitutes an order for relief under this subchapter. 

‘‘(c) The members of the board of directors (or body performing similar functions) 

of a covered financial company shall have no liability to shareholders, creditors, or 

other parties in interest for a good faith filing of a petition to commence a case 

under this subchapter, or for any reasonable action taken in good faith in contemplation of or in connection with such a petition or a transfer under section 1185 

or section 1186, whether prior to or after commencement of the case. 

‘‘(d) Counsel to the debtor shall provide, to the greatest extent practicable without 

disclosing the identity of the potential debtor, sufficient confidential notice to the 

chief judge of the court of appeals for the circuit embracing the district in which 

such counsel intends to file a petition to commence a case under this subchapter 

regarding the potential commencement of such case. The chief judge of such court 

shall randomly assign to preside over such case a bankruptcy judge selected from 

among the bankruptcy judges designated by the Chief Justice of the United States 

under section 298 of title 28. 

‘‘§ 1184. Regulators 

‘‘The Board, the Securities Exchange Commission, the Office of the Comptroller 

of the Currency of the Department of the Treasury, the Commodity Futures Trading 

Commission, and the Federal Deposit Insurance Corporation may raise and may appear and be heard on any issue in any case or proceeding under this subchapter. 

‘‘§ 1185. Special transfer of property of the estate 

‘‘(a) On request of the trustee, and after notice and a hearing that shall occur not 

less than 24 hours after the order for relief, the court may order a transfer under 

this section of property of the estate, and the assignment of executory contracts, unexpired leases, and qualified financial contracts of the debtor, to a bridge company. 

Upon the entry of an order approving such transfer, any property transferred, and 

any executory contracts, unexpired leases, and qualified financial contracts assigned 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
4 

under such order shall no longer be property of the estate. Except as provided under 

this section, the provisions of section 363 shall apply to a transfer and assignment 

under this section. 

‘‘(b) Unless the court orders otherwise, notice of a request for an order under subsection (a) shall consist of electronic or telephonic notice of not less than 24 hours 

to— 

‘‘(1) the debtor; 

‘‘(2) the holders of the 20 largest secured claims against the debtor; 

‘‘(3) the holders of the 20 largest unsecured claims against the debtor; 

‘‘(4) counterparties to any debt, executory contract, unexpired lease, and 

qualified financial contract requested to be transferred under this section; 

‘‘(5) the Board; 

‘‘(6) the Federal Deposit Insurance Corporation; 

‘‘(7) the Secretary of the Treasury and the Office of the Comptroller of the 

Currency of the Treasury; 

‘‘(8) the Commodity Futures Trading Commission; 

‘‘(9) the Securities and Exchange Commission; 

‘‘(10) the United States trustee or bankruptcy administrator; and 

‘‘(11) each primary financial regulatory agency, as defined in section 2(12) of 

the Dodd-Frank Wall Street Reform and Consumer Protection Act, with respect 

to any affiliate the equity securities of which are proposed to be transferred 

under this section. 

‘‘(c) The court may not order a transfer under this section unless the court determines, based upon a preponderance of the evidence, that— 

‘‘(1) the transfer under this section is necessary to prevent serious adverse effects on financial stability in the United States; 

‘‘(2) the transfer does not provide for the assumption of any capital structure 

debt by the bridge company; 

‘‘(3) the transfer does not provide for the transfer to the bridge company of 

any property of the estate that is subject to a lien securing a debt, executory 

contract, unexpired lease or agreement (including a qualified financial contract) 

of the debtor unless— 

‘‘(A)(i) the bridge company assumes such debt, executory contract, unexpired lease or agreement (including a qualified financial contract), including 

any claims arising in respect thereof that would not be allowed secured 

claims under section 506(a)(1) and after giving effect to such transfer, such 

property remains subject to the lien securing such debt, executory contract, 

unexpired lease or agreement (including a qualified financial contract); and 

‘‘(ii) the court has determined that assumption of such debt, executory 

contract, unexpired lease or agreement (including a qualified financial contract) by the bridge company is in the best interests of the estate; or 

‘‘(B) such property is being transferred to the bridge company in accordance with the provisions of section 363; 

‘‘(4) the transfer does not provide for the assumption by the bridge company 

of any debt, executory contract, unexpired lease or agreement (including a qualified financial contract) of the debtor secured by a lien on property of the estate 

unless the transfer provides for such property to be transferred to the bridge 

company in accordance with paragraph (3)(A) of this subsection; 

‘‘(5) the transfer does not provide for the transfer of the equity of the debtor; 

‘‘(6) the trustee has demonstrated that the bridge company is not likely to fail 

to meet the obligations of any debt, executory contract, qualified financial contract, or unexpired lease assumed and assigned to the bridge company; 

‘‘(7) the transfer provides for the transfer to a special trustee all of the equity 

securities in the bridge company and appointment of a special trustee in accordance with section 1186; 

‘‘(8) after giving effect to the transfer, adequate provision has been made for 

the fees, costs, and expenses of the estate and special trustee; and 

‘‘(9) the bridge company will have governing documents, and initial directors 

and senior officers, that are in the best interest of creditors and the estate. 

‘‘(d) Immediately before a transfer under this section, the bridge company that is 

the recipient of the transfer shall— 

‘‘(1) not have any property, executory contracts, unexpired leases, qualified financial contracts, or debts, other than any property acquired or executory contracts, unexpired leases, or debts assumed when acting as a transferee of a 

transfer under this section; and 

‘‘(2) have equity securities that are property of the estate, which may be sold 

or distributed in accordance with this title. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
5 

‘‘§ 1186. Special trustee 

‘‘(a)(1) An order approving a transfer under section 1185 shall require the trustee 

to transfer to a qualified and independent special trustee, who is appointed by the 

court, all of the equity securities in the bridge company that is the recipient of a 

transfer under section 1185 to hold in trust for the sole benefit of the estate, subject 

to satisfaction of the special trustee’s fees, costs, and expenses. The trust of which 

the special trustee is the trustee shall be a newly formed trust governed by a trust 

agreement approved by the court as in the best interests of the estate, and shall 

exist for the sole purpose of holding and administering, and shall be permitted to 

dispose of, the equity securities of the bridge company in accordance with the trust 

agreement. 

‘‘(2) In connection with the hearing to approve a transfer under section 1185, the 

trustee shall confirm to the court that the Board has been consulted regarding the 

identity of the proposed special trustee and advise the court of the results of such 

consultation. 

‘‘(b) The trust agreement governing the trust shall provide— 

‘‘(1) for the payment of the fees, costs, expenses, and indemnities of the special trustee from the assets of the debtor’s estate; 

‘‘(2) that the special trustee provide— 

‘‘(A) quarterly reporting to the estate, which shall be filed with the court; 

and 

‘‘(B) information about the bridge company reasonably requested by a 

party in interest to prepare a disclosure statement for a plan providing for 

distribution of any securities of the bridge company if such information is 

necessary to prepare such disclosure statement; 

‘‘(3) that for as long as the equity securities of the bridge company are held 

by the trust, the special trustee shall file a notice with the court in connection 

with— 

‘‘(A) any change in a director or senior officer of the bridge company; 

‘‘(B) any modification to the governing documents of the bridge company; 

and 

‘‘(C) any material corporate action of the bridge company, including— 

‘‘(i) recapitalization; 

‘‘(ii) a material borrowing; 

‘‘(iii) termination of an intercompany debt or guarantee; 

‘‘(iv) a transfer of a substantial portion of the assets of the bridge 

company; or 

‘‘(v) the issuance or sale of any securities of the bridge company; 

‘‘(4) that any sale of any equity securities of the bridge company shall not be 

consummated until the special trustee consults with the Federal Deposit Insurance Corporation and the Board regarding such sale and discloses the results 

of such consultation with the court; 

‘‘(5) that, subject to reserves for payments permitted under paragraph (1) provided for in the trust agreement, the proceeds of the sale of any equity securities of the bridge company by the special trustee be held in trust for the benefit 

of or transferred to the estate; 

‘‘(6) the process and guidelines for the replacement of the special trustee; and 

‘‘(7) that the property held in trust by the special trustee is subject to distribution in accordance with subsection (c). 

‘‘(c)(1) The special trustee shall distribute the assets held in trust— 

‘‘(A) if the court confirms a plan in the case, in accordance with the plan on 

the effective date of the plan; or 

‘‘(B) if the case is converted to a case under chapter 7, as ordered by the 

court. 

‘‘(2) As soon as practicable after a final distribution under paragraph (1), the office 

of the special trustee shall terminate, except as may be necessary to wind up and 

conclude the business and financial affairs of the trust. 

‘‘(d) After a transfer to the special trustee under this section, the special trustee 

shall be subject only to applicable nonbankruptcy law, and the actions and conduct 

of the special trustee shall no longer be subject to approval by the court in the case 

under this subchapter. 

‘‘§ 1187. Temporary and supplemental automatic stay; assumed debt 

‘‘(a)(1) A petition filed under section 1183 operates as a stay, applicable to all entities, of the termination, acceleration, or modification of any debt, contract, lease, or 

agreement of the kind described in paragraph (2), or of any right or obligation under 

any such debt, contract, lease, or agreement, solely because of— 

‘‘(A) a default by the debtor under any such debt, contract, lease, or agreement; or 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
6 

‘‘(B) a provision in such debt, contract, lease, or agreement, or in applicable 

nonbankruptcy law, that is conditioned on— 

‘‘(i) the insolvency or financial condition of the debtor at any time before 

the closing of the case; 

‘‘(ii) the commencement of a case under this title concerning the debtor; 

‘‘(iii) the appointment of or taking possession by a trustee in a case under 

this title concerning the debtor or by a custodian before the commencement 

of the case; or 

‘‘(iv) a credit rating agency rating, or absence or withdrawal of a credit 

rating agency rating— 

‘‘(I) of the debtor at any time after the commencement of the case; 

‘‘(II) of an affiliate during the period from the commencement of the 

case until 48 hours after such order is entered; 

‘‘(III) of the bridge company while the trustee or the special trustee 

is a direct or indirect beneficial holder of more than 50 percent of the 

equity securities of— 

‘‘(aa) the bridge company; or 

‘‘(bb) the affiliate, if all of the direct or indirect interests in the 

affiliate that are property of the estate are transferred under section 1185; or 

‘‘(IV) of an affiliate while the trustee or the special trustee is a direct 

or indirect beneficial holder of more than 50 percent of the equity securities of— 

‘‘(aa) the bridge company; or 

‘‘(bb) the affiliate, if all of the direct or indirect interests in the 

affiliate that are property of the estate are transferred under section 1185. 

‘‘(2) A debt, contract, lease, or agreement described in this paragraph is— 

‘‘(A) any debt (other than capital structure debt), executory contract, or unexpired lease of the debtor (other than a qualified financial contract); 

‘‘(B) any agreement under which the debtor issued or is obligated for debt 

(other than capital structure debt); 

‘‘(C) any debt, executory contract, or unexpired lease of an affiliate (other 

than a qualified financial contract); or 

‘‘(D) any agreement under which an affiliate issued or is obligated for debt. 

‘‘(3) The stay under this subsection terminates— 

‘‘(A) for the benefit of the debtor, upon the earliest of— 

‘‘(i) 48 hours after the commencement of the case; 

‘‘(ii) assumption of the debt, contract, lease, or agreement by the bridge 

company under an order authorizing a transfer under section 1185; 

‘‘(iii) a final order of the court denying the request for a transfer under 

section 1185; or 

‘‘(iv) the time the case is dismissed; and 

‘‘(B) for the benefit of an affiliate, upon the earliest of— 

‘‘(i) the entry of an order authorizing a transfer under section 1185 in 

which the direct or indirect interests in the affiliate that are property of the 

estate are not transferred under section 1185; 

‘‘(ii) a final order by the court denying the request for a transfer under 

section 1185; 

‘‘(iii) 48 hours after the commencement of the case if the court has not 

ordered a transfer under section 1185; or 

‘‘(iv) the time the case is dismissed. 

‘‘(4) Subsections (d), (e), (f), and (g) of section 362 apply to a stay under this subsection. 

‘‘(b) A debt, executory contract (other than a qualified financial contract), or unexpired lease of the debtor, or an agreement under which the debtor has issued or is 

obligated for any debt, may be assumed by a bridge company in a transfer under 

section 1185 notwithstanding any provision in an agreement or in applicable nonbankruptcy law that— 

‘‘(1) prohibits, restricts, or conditions the assignment of the debt, contract, 

lease, or agreement; or 

‘‘(2) accelerates, terminates, or modifies, or permits a party other than the 

debtor to terminate or modify, the debt, contract, lease, or agreement on account of— 

‘‘(A) the assignment of the debt, contract, lease, or agreement; or 

‘‘(B) a change in control of any party to the debt, contract, lease, or agreement. 

‘‘(c)(1) A debt, contract, lease, or agreement of the kind described in subparagraph 

(A) or (B) of subsection (a)(2) may not be accelerated, terminated, or modified, and 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
7 

any right or obligation under such debt, contract, lease, or agreement may not be 

accelerated, terminated, or modified, as to the bridge company solely because of a 

provision in the debt, contract, lease, or agreement or in applicable nonbankruptcy 

law— 

‘‘(A) of the kind described in subsection (a)(1)(B) as applied to the debtor; 

‘‘(B) that prohibits, restricts, or conditions the assignment of the debt, contract, lease, or agreement; or 

‘‘(C) that accelerates, terminates, or modifies, or permits a party other than 

the debtor to terminate or modify, the debt, contract, lease or agreement on account of— 

‘‘(i) the assignment of the debt, contract, lease, or agreement; or 

‘‘(ii) a change in control of any party to the debt, contract, lease, or agreement. 

‘‘(2) If there is a default by the debtor under a provision other than the kind described in paragraph (1) in a debt, contract, lease or agreement of the kind described 

in subparagraph (A) or (B) of subsection (a)(2), the bridge company may assume 

such debt, contract, lease, or agreement only if the bridge company— 

‘‘(A) shall cure the default; 

‘‘(B) compensates, or provides adequate assurance in connection with a transfer under section 1185 that the bridge company will promptly compensate, a 

party other than the debtor to the debt, contract, lease, or agreement, for any 

actual pecuniary loss to the party resulting from the default; and 

‘‘(C) provides adequate assurance in connection with a transfer under section 

1185 of future performance under the debt, contract, lease, or agreement, as determined by the court under section 1185(c)(4). 

‘‘§ 1188. Treatment of qualified financial contracts and affiliate contracts 

‘‘(a) Notwithstanding sections 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 362(o), 

555, 556, 559, 560, and 561, a petition filed under section 1183 operates as a stay, 

during the period specified in section 1187(a)(3)(A), applicable to all entities, of the 

exercise of a contractual right— 

‘‘(1) to cause the modification, liquidation, termination, or acceleration of a 

qualified financial contract of the debtor or an affiliate; 

‘‘(2) to offset or net out any termination value, payment amount, or other 

transfer obligation arising under or in connection with a qualified financial contract of the debtor or an affiliate; or 

‘‘(3) under any security agreement or arrangement or other credit enhancement forming a part of or related to a qualified financial contract of the debtor 

or an affiliate. 

‘‘(b)(1) During the period specified in section 1187(a)(3)(A), the trustee or the affiliate shall perform all payment and delivery obligations under such qualified financial contract of the debtor or the affiliate, as the case may be, that become due after 

the commencement of the case. The stay provided under subsection (a) terminates 

as to a qualified financial contract of the debtor or an affiliate immediately upon 

the failure of the trustee or the affiliate, as the case may be, to perform any such 

obligation during such period. 

‘‘(2) Any failure by a counterparty to any qualified financial contract of the debtor 

or any affiliate to perform any payment or delivery obligation under such qualified 

financial contract, including during the pendency of the stay provided under subsection (a), shall constitute a breach of such qualified financial contract by the 

counterparty. 

‘‘(c) Subject to the court’s approval, a qualified financial contract between an entity and the debtor may be assigned to or assumed by the bridge company in a transfer under, and in accordance with, section 1185 if and only if— 

‘‘(1) all qualified financial contracts between the entity and the debtor are assigned to and assumed by the bridge company in the transfer under section 

1185; 

‘‘(2) all claims of the entity against the debtor in respect of any qualified financial contract between the entity and the debtor (other than any claim that, 

under the terms of the qualified financial contract, is subordinated to the claims 

of general unsecured creditors) are assigned to and assumed by the bridge company; 

‘‘(3) all claims of the debtor against the entity under any qualified financial 

contract between the entity and the debtor are assigned to and assumed by the 

bridge company; and 

‘‘(4) all property securing or any other credit enhancement furnished by the 

debtor for any qualified financial contract described in paragraph (1) or any 

claim described in paragraph (2) or (3) under any qualified financial contract 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
8 

between the entity and the debtor is assigned to and assumed by the bridge 

company. 

‘‘(d) Notwithstanding any provision of a qualified financial contract or of applicable nonbankruptcy law, a qualified financial contract of the debtor that is assumed 

or assigned in a transfer under section 1185 may not be accelerated, terminated, 

or modified, after the entry of the order approving a transfer under section 1185, 

and any right or obligation under the qualified financial contract may not be accelerated, terminated, or modified, after the entry of the order approving a transfer 

under section 1185 solely because of a condition described in section 1187(c)(1), 

other than a condition of the kind specified in section 1187(b) that occurs after property of the estate no longer includes a direct beneficial interest or an indirect beneficial interest through the special trustee, in more than 50 percent of the equity securities of the bridge company. 

‘‘(e) Notwithstanding any provision of any agreement or in applicable nonbankruptcy law, an agreement of an affiliate (including an executory contract, an unexpired lease, qualified financial contract, or an agreement under which the affiliate 

issued or is obligated for debt) and any right or obligation under such agreement 

may not be accelerated, terminated, or modified, solely because of a condition described in section 1187(c)(1), other than a condition of the kind specified in section 

1187(b) that occurs after the bridge company is no longer a direct or indirect beneficial holder of more than 50 percent of the equity securities of the affiliate, at any 

time after the commencement of the case if— 

‘‘(1) all direct or indirect interests in the affiliate that are property of the estate are transferred under section 1185 to the bridge company within the period 

specified in subsection (a); 

‘‘(2) the bridge company assumes— 

‘‘(A) any guarantee or other credit enhancement issued by the debtor relating to the agreement of the affiliate; and 

‘‘(B) any obligations in respect of rights of setoff, netting arrangement, or 

debt of the debtor that directly arises out of or directly relates to the guarantee or credit enhancement; and 

‘‘(3) any property of the estate that directly serves as collateral for the guarantee or credit enhancement is transferred to the bridge company. 

‘‘§ 1189. Licenses, permits, and registrations 

‘‘(a) Notwithstanding any otherwise applicable nonbankruptcy law, if a request is 

made under section 1185 for a transfer of property of the estate, any Federal, State, 

or local license, permit, or registration that the debtor or an affiliate had immediately before the commencement of the case and that is proposed to be transferred 

under section 1185 may not be accelerated, terminated, or modified at any time 

after the request solely on account of— 

‘‘(1) the insolvency or financial condition of the debtor at any time before the 

closing of the case; 

‘‘(2) the commencement of a case under this title concerning the debtor; 

‘‘(3) the appointment of or taking possession by a trustee in a case under this 

title concerning the debtor or by a custodian before the commencement of the 

case; or 

‘‘(4) a transfer under section 1185. 

‘‘(b) Notwithstanding any otherwise applicable nonbankruptcy law, any Federal, 

State, or local license, permit, or registration that the debtor had immediately before 

the commencement of the case that is included in a transfer under section 1185 

shall be valid and all rights and obligations thereunder shall vest in the bridge company. 

‘‘§ 1190. Exemption from securities laws 

‘‘For purposes of section 1145, a security of the bridge company shall be deemed 

to be a security of a successor to the debtor under a plan if the court approves the 

disclosure statement for the plan as providing adequate information (as defined in 

section 1125(a)) about the bridge company and the security. 

‘‘§ 1191. Inapplicability of certain avoiding powers 

‘‘A transfer made or an obligation incurred by the debtor to an affiliate prior to 

or after the commencement of the case, including any obligation released by the 

debtor or the estate to or for the benefit of an affiliate, in contemplation of or in 

connection with a transfer under section 1185 is not avoidable under section 544, 

547, 548(a)(1)(B), or 549, or under any similar nonbankruptcy law. 

‘‘§ 1192. Consideration of financial stability 

‘‘The court may consider the effect that any decision in connection with this subchapter may have on financial stability in the United States.’’. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
9 

SEC. 4. AMENDMENTS TO TITLE 28, UNITED STATES CODE. 

(a) AMENDMENT TO CHAPTER 13.—Chapter 13 of title 28, United States Code, is 

amended by adding at the end the following: 

‘‘§ 298. Judge for a case under subchapter V of chapter 11 of title 11 

‘‘(a)(1) Notwithstanding section 295, the Chief Justice of the United States shall 

designate not fewer than 10 bankruptcy judges to be available to hear a case under 

subchapter V of chapter 11 of title 11. Bankruptcy judges may request to be considered by the Chief Justice of the United States for such designation. 

‘‘(2) Notwithstanding section 155, a case under subchapter V of chapter 11 of title 

11 shall be heard under section 157 by a bankruptcy judge designated under paragraph (1), who shall be randomly assigned to hear such case by the chief judge of 

the court of appeals for the circuit embracing the district in which the case is pending. To the greatest extent practicable, the approvals required under section 155 

should be obtained. 

‘‘(3) If the bankruptcy judge assigned to hear a case under paragraph (2) is not 

assigned to the district in which the case is pending, the bankruptcy judge shall be 

temporarily assigned to the district. 

‘‘(b) A case under subchapter V of chapter 11 of title 11, and all proceedings in 

the case, shall take place in the district in which the case is pending. 

‘‘(c) In this section, the term ‘covered financial corporation’ has the meaning given 

that term in section 101(9A) of title 11.’’. 

(b) AMENDMENT TO SECTION 1334 OF TITLE 28.—Section 1334 of title 28, United 

States Code, is amended by adding at the end the following: 

‘‘(f) This section does not grant jurisdiction to the district court after a transfer 

pursuant to an order under section 1185 of title 11 of any proceeding related to a 

special trustee appointed, or to a bridge company formed, in connection with a case 

under subchapter V of chapter 11 of title 11.’’. 

(c) TECHNICAL AND CONFORMING AMENDMENT.—The table of sections for chapter 

13 of title 28, United States Code, is amended by adding at the end the following: 

‘‘298. Judge for a case under subchapter V of chapter 11 of title 11.’’. 

Purpose and Summary 

The U.S. bankruptcy process is not optimally designed for the orderly resolution of financial institutions for many reasons, including these institutions’ interconnectedness and, in the case of larger 

and more interconnected institutions, a potential to pose ‘‘systemic 

risk’’ to the broader financial system. H.R. 2947, the ‘‘Financial Institution Bankruptcy Act of 2016,’’ amends chapter 11 of Title 11 

of the United States Code (Bankruptcy Code) to address better the 

unique challenges presented by the insolvency of a financial institution and better allow such an institution to be resolved through 

the bankruptcy process. 

Background and Need for the Legislation 

A. BRIEF OVERVIEW OF CHAPTER 11

Chapter 11 of the Bankruptcy Code is designed primarily to 

allow a business to restructure its debt obligations while maintaining its operations. The underlying principle is that a business in 

its entirety is more valuable than each of its assets valued independently. Preservation of a business through chapter 11, and in 

turn its enterprise value, can benefit both creditors, who should receive a higher recovery as a result of a debtor’s restructuring than 

they would otherwise obtain through a liquidation, and debtors, 

who benefit from the ability to continue their business operations. 

Employees, suppliers, customers and others can also benefit if debtors continue their business operations. 

A chapter 11 case begins by the filing of a petition for relief with 

the relevant bankruptcy court. Once the petition is filed, an ‘‘automatic stay’’ is put into place that prevents, with some exceptions, 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
10 

1See Federal Deposit Insurance Corporation and the Bank of England, Resolving Globally 

Active, Systemically Important, Financial Institutions (Dec. 10, 2012), available at http:// 

www.bankofengland.co.uk/publications/Documents/news/2012/nr156.pdf. 2 Id. 

3Pub. L. No. 111–203 §§ 202(e), 216, 217 (2010). 

creditors from taking actions to recover their debts. The automatic 

stay allows a debtor the breathing room necessary to organize its 

operations, negotiate with creditors, and achieve consensus on a 

chapter 11 plan. The inflection point of a chapter 11 case is the 

chapter 11 plan, which dictates what each of the creditors will receive as a recovery. The chapter 11 plan must be approved by the 

debtor’s creditors and the bankruptcy court. Once a chapter 11 plan 

is approved, creditors of the debtor may only pursue recoveries as 

provided by the chapter 11 plan, and the reorganized company is 

treated as a new corporate entity. 

There are generally two primary paths for a debtor to restructure 

under chapter 11. The first path is a traditional reorganization of 

a debtor’s capital structure. A simple example of this type of reorganization would involve a debtor’s shareholders not receiving any 

recovery on account of their shares, and the debtor’s secured creditors becoming the new equity holders of the reorganized company. 

The second path is a sale of a debtor’s primary business, with the 

proceeds of the sale used to provide recoveries to the debtor’s creditors. The sale of a business as a whole is distinct from a liquidation, in that the enterprise typically will continue to operate in a 

substantially similar form under new, third party ownership. In a 

liquidation, the debtor’s assets likely will be sold in piecemeal fashion or simply handed over to creditors. 

B. THE EXISTING BANKRUPTCY CODE AND ADDRESSING FINANCIAL

INSTITUTION INSOLVENCIES

The bankruptcy process has been the traditional mechanism for 

handling the orderly resolution of distressed companies in the U.S. 

because of bankruptcy’s established history of laws, precedent and 

impartial administration. According to a report by the Federal Deposit Insurance Corporation (FDIC) and the Bank of England, 

‘‘[t]he U.S. would prefer that large financial organizations be resolvable through ordinary bankruptcy.’’ 1 However, the report 

added that ‘‘the U.S. bankruptcy process may not be able to handle 

the failure of a systemic financial institution without significant 

disruption to the financial system.’’ 2 Of note, smaller financial institutions can also restructure their operations under the Bankruptcy Code in the event of material financial distress or failure. 

In the wake of the 2008 financial crisis, the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Pub. L. No. 111–203, 

directed the Board of Governors of the Federal Reserve System 

(Federal Reserve) and the Governmental Accountability Office 

(GAO) to study the Bankruptcy Code and international issues related to the insolvency of financial institutions as part of an overall 

effort to reduce systemic risk within the financial sector.3 The studies identified a number of issues specific to the resolution of insolvent financial institutions and discussed theories regarding how to 

address such issues, without offering specific recommendations or 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
11 

4See the Board of Governors of the Federal Reserve System, Study on the International Coordination Relating to Bankruptcy Process for Nonbank Financial Institutions (July 2011); see 

also Government Accountability Office, Complex Financial Institutions and International Coordinate Pose Challenges (July 2011). 5 Resolution of Systemically Important Financial Institutions: The Single Point of Entry Strategy, 78 Fed. Reg. 76,614 (Dec. 18, 2013). 6 Id. 

7 Id. 

8See The Bankruptcy Code and Financial Institution Insolvencies: Hearing Before the 

Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary, 113th Cong. 12 (2013) (hereinafter December Bankruptcy Hearing) (statement of Donald S. 

Bernstein). 9Letter from Stephen E. Hessler, Partner, Kirkland & Ellis LLP to Bob Goodlatte et al., 

Chairman, House of Representatives Committee on the Judiciary (Mar. 14, 2016) (on file with 

the Committee). 

independent opinions regarding potential revisions to the Bankruptcy Code.4

Following these reports, the FDIC published a notice detailing its 

intended method for implementing its resolution/orderly liquidation 

authority under Title II of the Dodd-Frank Act, a non-bankruptcy 

resolution process the Dodd-Frank legislation made available for 

large, ‘‘systemically important’’ financial institutions.5 The FDIC’s 

method, referred to as ‘‘single point of entry,’’ relies on placing a 

parent holding company into receivership while maintaining the 

operations and solvency of its operating subsidiaries.6 Under this 

approach, the FDIC would be appointed as the receiver of the parent holding company and could transfer the parent company’s assets into a bridge financial holding company, impose losses on the 

shareholders and creditors of the parent company, and eventually 

transition ownership of the bridge financial company into private 

hands.7

Some commentators have suggested that the ‘‘single point of 

entry’’ approach should also be made available in the Bankruptcy 

Code.8 One of the proposed methods to amend the Bankruptcy 

Code to facilitate the use of this approach creates an entirely new 

subchapter within chapter 11, referred to as ‘‘subchapter V,’’ dedicated to addressing the insolvency of a financial institution. 

Another leading proposal is referred to as ‘‘chapter 14’’ and would 

introduce an entirely new chapter to the Bankruptcy Code, with 

substantially similar amendments to the Bankruptcy Code as subchapter V. One significant difference between these two approaches 

is that chapter 14 may not incorporate the relevant case law related to other components of chapter 11 that remain undisturbed 

under both approaches, while subchapter V clearly maintains such 

case law.9

As explained in additional detail below, the subchapter V proposal is designed to address the unique issues presented by a financial institution’s bankruptcy. Subchapter V would, among other 

elements: apply to financial institutions; confer explicit standing to 

the financial institution’s primary regulators in the institution’s 

bankruptcy proceeding; designate a select group of bankruptcy 

judges to oversee these bankruptcies; and, provide specialized 

treatment for derivative contracts. Advocates of this approach 

argue that a transparent judicial process that allows for the reorganization, rather than liquidation, of a large financial institution is 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
12 

10 H.R. ____, the ‘‘Financial INstitution Bankruptcy Act of 2014’’: Hearing Before the 

Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary, 113th Cong. (2014) at 34 (hereinafter July FIBA Hearing) (statement of Donald S. Bernstein). 11See, e.g., Too Big To Fail: The Role for Bankruptcy and Antitrust Law in Financial Regulation Reform (Part I): Hearing before the Subcomm. on Commercial and Administrative Law of 

the H. Comm. on the Judiciary, 111th Cong. 64–79 (2009) (statement of Harvey R. Miller). 12See, e.g., July FIBA Hearing (statements of Donald Bernstein & Thomas Jackson). 13Given the sensitivity of banking relationships and the financial marketplace, practicalities 

dictate that this transfer must be performed over the course of a period when the financial markets are not open. 

a preferable resolution strategy because of, among other things, the 

benefits of due process.10

C. THE CHALLENGES PRESENTED BY A FINANCIAL INSTITUTION INSOLVENCY AND HOW THE FINANCIAL INSTITUTION BANKRUPTCY ACT ADDRESSES THESE CHALLENGES

There are a number of challenges posed by the insolvency of a 

financial institution, particularly the insolvency of a large, multinational financial institution. The resolution of a financial institution must be swift, transparent and account for the potential impact on the general financial system, due to the typically liquid and 

quickly transferable assets of a financial institution. While the existing Bankruptcy Code possesses many of the provisions necessary 

to resolve a large, failing firm, commentators have suggested that 

improvements are necessary to resolve effectively a financial institution.11

As explained above, commentators generally agree that the ‘‘single point of entry’’ approach is the most efficient proposal to provide for an expeditious resolution of a financial firm.12 H.R. 2947, 

the ‘‘Financial Institution Bankruptcy Act of 2016,’’ adopts the proposed method of creating a new subchapter within chapter 11 of 

the Bankruptcy Code to allow the ‘‘single point of entry’’ approach 

to be utilized in the bankruptcy process. H.R. 2947 allows the debtor holding company that sits atop the financial firm’s corporate 

structure to transfer its assets, including the equity in all of its operating subsidiaries, to a newly-formed bridge company over a single weekend.13 The debt, any remaining assets, and equity of the 

holding company will remain in the bankruptcy process and absorb 

the losses of the financial institution. Identifying the debt and equity to remain in the bankruptcy process allows existing creditors 

of the debtor to price appropriately their dealings and investment 

with the debtor prior to any bankruptcy proceeding. 

Furthermore, the subchapter V ‘‘single point of entry’’ approach 

allows all of the financial institution’s operating subsidiaries to remain out of the bankruptcy process. Keeping these entities out of 

an insolvency proceeding is particularly helpful for multi-national 

firms that otherwise could be required to comply with multiple, and 

potentially conflicting, insolvency jurisdictions. The following is a 

graphical representation of the ‘‘single point of entry’’ approach in 

bankruptcy. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
13 


smartinez on DSK4TPTVN1PROD with REPORTS-HSEHR2947A-1.eps
14 

The amendments to the Bankruptcy Code contained in H.R. 2947 

also account for the potential of a financial firm’s insolvency to impact the general financial markets, often referred to as systemic 

risk. H.R. 2947 provides that key financial regulators are granted 

explicit standing in subchapter V cases in order to give the presiding bankruptcy judge the benefit of their views when considering pending motions. Additionally, the legislation allows the presiding bankruptcy judge to consider the impact of a decision on financial stability in the United States before issuing a final judgment on any motion. Both of these provisions are designed to account for the potential of systemic risk in a subchapter V case. 

An additional element of H.R. 2947 intended to address systemic 

risk is its amendments to the Bankruptcy Code that deal with the 

types of transactions through which systemic contagion can most 

readily spread and that financial institutions engage in routinely, 

namely, derivative and similarly-structured transactions. Currently, the Bankruptcy Code contains exemptions for counterparties to derivative and similarly-structured transactions to collect on 

outstanding debts notwithstanding the commencement of a chapter 

11 case and the consequent ‘‘automatic stay.’’ This exemption 

stands in contrast to the treatment of other contracts and debts 

under the Bankruptcy Code, which typically results in requiring 

creditors to wait until a chapter 11 plan is approved before they 

receive a recovery on account of their relationship with the debtor. 

H.R. 2947 overrides the exemption for derivative and similarlyVerDate Sep 11 2014 04:24 Mar 24, 2016 Jkt 059006 PO 00000 Frm 00014 Fmt 6659 Sfmt 6601 E:\HR\OC\HR477.XXX HR477

smartinez on DSK4TPTVN1PROD with REPORTS-HSEHR2947A-2.eps
15 

14July FIBA Hearing (statement of Stephen E. Hessler). 15 H.R. 2947 § 1188(b). 16 H.R. 2947 § 1188(c)(1). 17 H.R. 2947 §§ 1188(c)(2)-(4). 18 International Swaps and Derivatives Association, Major Banks Agree to Sign ISDA Resolution Stay Protocol (Oct. 11, 2014), available at http://www2.isda.org/news/major-banks-agree-tosign-isda-resolution-stay-protocol. The 18 financial institutions subject to the agreement are: 

Bank of America Merrill Lynch; Bank of Tokyo-Mitsubishi UFJ; Barclays; BNP Paribas; 

Citigroup; Cre ́dit Agricole; Credit Suisse; Deutsche Bank; Goldman Sachs; HSBC; JP Morgan 

Chase; Mizuho Financial Group; Morgan Stanley; Nomura; Royal Bank of Scotland; Socie ́te ́

Ge ́ne ́rale; Sumitomo Mitsui Financial Group; and UBS. 

structured transactions contained in the Bankruptcy Code by imposing a temporary 2-day stay that would allow for the effective 

transfer of the financial institution’s operations to a bridge company. Without this override of the existing exemption, counterparties to derivatives and similarly-structured transactions could terminate their relationships with a financial institution debtor upon 

the commencement of a bankruptcy case, which likely would endanger the successful transfer and continued operation of the 

bridge company and potentially threaten other entities within the 

broader financial system.14

H.R. 2947 contains key protections for counterparties to derivative contracts. For example, new section 1188(b) under the bill requires the financial institution to perform its contractual obligations during the stay, the failure of which results in the termination of the stay.15 This provision ensures that the financial institution continues to perform such that counterparties are protected 

during the brief stay period. Additionally, to the extent the financial institution wishes to transfer its derivative contracts to the 

bridge institution, all of the contracts between the financial institution and the counterparty must be transferred.16 This ensures that 

the financial institution cannot ‘‘cherry pick’’ between the contracts 

it has with a particular counterparty. Additionally, the financial institution must transfer all related claims and collateral along with 

the to-be transferred derivative contracts.17 This provision ensures 

that the counterparty has all of its rights and collateral preserved 

at the bridge company. Finally, immediately following the transfer, 

a derivative contract counterparty may terminate the contract 

based on any provision predicated on the non-performance of a contractual obligation. In sum, derivative contract counterparties have 

a host of protections afforded to them within H.R. 2947. 

Notably, 18 major financial institutions have separately and voluntarily agreed to include a 48-hour stay in their derivative contracts with each other to the extent any of the financial institutions 

are subject to a ‘‘resolution action.’’ 18 In other words, these institutions already have voluntarily incorporated the 48-hour stay concept included in H.R. 2947. However, these voluntary agreements 

are not comprehensive and some parties who enter into derivative 

contracts are not subject to the voluntary 48-hour stay. 

H.R. 2947 also expressly acknowledges the speed by which a financial institution must be resolved in order to mitigate financial 

contagion. To that end, the legislation includes specific and expedient timeframes for the commencement of a case as well as court 

approval of the transfer of assets to the bridge company. 

The bill also recognizes that overseeing a subchapter V case requires a presiding bankruptcy judge to have a certain level of expertise and experience with either financial industry cases or large 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
16 

19See, e.g., H.R. 2947, the ‘‘Financial Institution Bankruptcy Act of 2015’’: Hearing Before the 

Subcomm. on Regulatory Reform, Commercial and Antitrust Law of the H. Comm. on the Judiciary, 114th Cong. 18 (2015) (statement of Stephen E. Hessler). 20December Bankruptcy Hearing. 21 Exploring Chapter 11 Reform: Corporate and Financial Institution Insolvencies; Treatment 

of Derivatives: Hearing Before the Subcomm. on Regulatory Reform, Commercial and Antitrust 

Law of the H. Comm. on the Judiciary, 113th Cong. (2014). 

corporate reorganizations. To that end, H.R. 2947 contains provisions that require the advance designation of bankruptcy judges 

who can be available to hear these cases. 

D. THE AMENDMENT TO THE FINANCIAL INSTITUTION

BANKRUPTCY ACT

During Committee consideration of the Financial Institution 

Bankruptcy Act, a substitute amendment was adopted by the Committee. The amendment makes several revisions to the introduced 

version of the bill. First, it removes the Federal Reserve’s ability 

to initiate an involuntary bankruptcy petition and the related expedited judicial review process for such a petition. All of the witnesses at the July 9, 2015 Subcommittee hearing testified in support of this revision, stating that the Federal Reserve already has 

sufficient regulatory power to induce a financial institution to seek 

a subchapter V bankruptcy.19 Second, the amendment clarifies that 

the chief judge of the Court of Appeals for the district in which the 

subchapter V case will be commenced will be the person who randomly selects the bankruptcy judge from the pre-designated pool of 

judges. This revision reflects comments provided by the Administrative Office of the U.S. Courts. Finally, the legislation makes several clarifying technical revisions to the introduced text. For example, the amendment clarifies that the term ‘‘agreement’’ includes 

‘‘qualified financial contracts’’ and revises the short title to refer to 

the year 2016 rather than 2015. 

Hearings 

Last Congress, the Committee conducted two separate hearings 

on the topic of enhancing the Bankruptcy Code to address the resolution of a financial institution through the bankruptcy process. 

Additionally, the Committee conducted a legislative hearing on a 

discussion draft of the ‘‘Financial Institution Bankruptcy Act,’’ 

which served as the foundation for the later-introduced bill. 

On December 3, 2013, the Subcommittee on Regulatory Reform, 

Commercial and Antitrust Law (hereinafter, the ‘‘Subcommittee’’) 

conducted a hearing entitled ‘‘The Bankruptcy Code and Financial 

Institution Insolvencies.’’ 20 The witnesses at the hearing were: the 

Honorable Jeffrey M. Lacker, President of the Federal Reserve 

Bank of Richmond; Professor Mark J. Roe, David Berg Professor of 

Law, Harvard Law School; and Donald S. Bernstein, Esq., partner 

and head of Davis Polk & Wardwell LLP’s Insolvency and Restructuring Practice and past chair of the National Bankruptcy Conference. At the hearing, witnesses testified that a financial institution’s bankruptcy presents unique issues that the existing Bankruptcy Code could be equipped better to address. 

On March 26, 2014, the Subcommittee conducted a hearing entitled ‘‘Exploring Chapter 11 Reform: Corporate and Financial Institution Insolvencies; Treatment of Derivatives.’’ 21 The witnesses at 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
17 

22 Id. (testimony of Prof. Jackson). 

the hearing were: Professor Michelle Harner, Reporter for the 

American Bankruptcy Institute Commission to Study the Reform of 

Chapter 11, University of Maryland; Professor Thomas H. Jackson, 

William E. Simon School of Business, University of Rochester; the 

Honorable Christopher Sontchi, U.S. Bankruptcy Court for the District of Delaware; Seth Grosshandler, Esq., Partner, Cleary Gottlieb Steen & Hamilton, LLP; and Jane Vris, Millstein & Co, on behalf of the National Bankruptcy Conference. During this hearing, 

the Committee received testimony in support of amending the 

Bankruptcy Code to create a subchapter V under chapter 11 to 

allow the resolution of a financial institution through the bankruptcy process, using the single-point-of-entry approach.22

In addition, on July 15, 2014, the Subcommittee conducted a legislative hearing on a discussion draft of the Financial Institution 

Bankruptcy Act. The witnesses at the hearing were: Donald S. 

Bernstein, Esq., partner and head of Davis Polk & Wardwell LLP’s 

Insolvency and Restructuring Practice and past chair of the National Bankruptcy Conference; Stephen E. Hessler, Esq., Partner, 

Kirkland & Ellis, LLP; Professor Thomas H. Jackson, William E. 

Simon School of Business, University of Rochester; and, Professor 

Stephen J. Lubben, Seton Hall University School of Law. All four 

witnesses, including the Minority witness, testified that they believed the Financial Institution Bankruptcy Act, subject to certain 

modifications, should be enacted into law. 

Following the July 2014 hearing, the Committee received informal staff-level comments on the discussion draft of the Financial 

Institution Bankruptcy Act from, among others, the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency, the 

Administrative Office of the U.S. Courts, the National Conference 

of Bankruptcy Judges, the National Bankruptcy Conference, and 

the International Swaps and Derivatives Association. The comments received from these parties served as the basis for revisions 

to the discussion draft. 

On September 9, 2014, Rep. Spencer Bachus (R–AL), together 

with Rep. Bob Goodlatte (R–VA) and Rep. John Conyers, Jr. (D– 

MI) introduced H.R. 5421, the ‘‘Financial Institution Bankruptcy 

Act of 2014.’’ On September 10, 2014, the full Committee reported 

H.R. 5421 favorably to the House by voice vote. On December 1, 

2014, the House passed H.R. 5421 under suspension of the rules. 

The introduced version of H.R. 2947 is identical to the Housepassed version of H.R. 5421. 

This Congress, on July 9, 2015, the Subcommittee conducted a 

legislative hearing on H.R 2947. The witnesses at the hearing 

were: Donald S. Bernstein, Esq., partner and head of Davis Polk 

& Wardwell LLP’s Insolvency and Restructuring Practice and past 

chair of the National Bankruptcy Conference; Stephen E. Hessler, 

Esq., Partner, Kirkland & Ellis, LLP; and, Richard Levin, Esq., 

partner, Jenner & Block, LLP on behalf of the National Bankruptcy Conference. All of the witnesses testified in support of the 

Financial Institution Bankruptcy Act, subject to certain modifications. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
18 

Committee Consideration 

On February 11, 2016, the Committee met in open session and 

ordered the bill H.R. 2947 favorably reported, with an amendment, 

by a vote of 25–0, a quorum being present. 

Committee Votes 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the following 

rollcall votes occurred during the Committee’s consideration of H.R. 

2947: 

1. Motion to report H.R. 2947, as amended, favorably to the 

House of Representatives. Agreed to by a vote of 25 ayes to 0 noes. 

ROLLCALL NO. 1 

Ayes Nays Present 

Mr. Goodlatte (VA), Chairman ................................. X 

Mr. Sensenbrenner, Jr. (WI) .....................................

Mr. Smith (TX) ..........................................................

Mr. Chabot (OH) ........................................................ X 

Mr. Issa (CA) ..............................................................

Mr. Forbes (VA) ......................................................... X 

Mr. King (IA) ............................................................. X 

Mr. Franks (AZ) ......................................................... X 

Mr. Gohmert (TX) ...................................................... X 

Mr. Jordan (OH) ........................................................

Mr. Poe (TX) ............................................................... X 

Mr. Chaffetz (UT) ...................................................... X 

Mr. Marino (PA) ........................................................ X 

Mr. Gowdy (SC) ......................................................... X 

Mr. Labrador (ID) ...................................................... X 

Mr. Farenthold (TX) ..................................................

Mr. Collins (GA) ........................................................ X 

Mr. DeSantis (FL) ..................................................... X 

Ms. Walters (CA) .......................................................

Mr. Buck (CO) ............................................................ X 

Mr. Ratcliffe (TX) ....................................................... X 

Mr. Trott (MI) ............................................................ X 

Mr. Bishop (MI) ......................................................... X 

Mr. Conyers, Jr. (MI), Ranking Member ................. X 

Mr. Nadler (NY) ......................................................... X 

Ms. Lofgren (CA) ....................................................... X 

Ms. Jackson Lee (TX) ................................................

Mr. Cohen (TN) .......................................................... X 

Mr. Johnson, Jr. (GA) ...............................................

Mr. Pierluisi (PR) ......................................................

Ms. Chu (CA) ............................................................. X 

Mr. Deutch (FL) .........................................................

Mr. Gutierrez (IL) ......................................................

Ms. Bass (CA) ............................................................

Mr. Richmond (LA) ....................................................

Ms. DelBene (WA) ..................................................... X 

Mr. Jeffries (NY) ........................................................

Mr. Cicilline (RI) ........................................................ X 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
19 

ROLLCALL NO. 1—Continued 

Ayes Nays Present 

Mr. Peters (CA) .......................................................... X 

Total ............................................................. 25 0 

Committee Oversight Findings 

In compliance with clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the findings 

and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report. 

New Budget Authority and Tax Expenditures 

Clause 3(c)(2) of rule XIII of the Rules of the House of Representatives is inapplicable because this legislation does not provide new 

budgetary authority or increased tax expenditures. 

Congressional Budget Office Cost Estimate 

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, the Committee sets forth, with respect to 

the bill, H.R. 2947, the following estimate and comparison prepared 

by the Director of the Congressional Budget Office under section 

402 of the Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, March 21, 2016. 

Hon. BOB GOODLATTE, CHAIRMAN, 

Committee on the Judiciary, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 2947, the ‘‘Financial Institution Bankruptcy Act of 2016.’’ 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Kathleen Gramp, who 

can be reached at 226–2860. 

Sincerely, 

KEITH HALL, 

DIRECTOR. 

Enclosure 

cc: Honorable John Conyers, Jr. 

Ranking Member 

H.R. 2947—Financial Institution Bankruptcy Act of 2016. 

As ordered reported by the House Committee on the Judiciary 

on February 11, 2016. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
20 

SUMMARY

H.R. 2947 would establish a new bankruptcy process for certain 

financial institutions with assets of more than $50 billion. The new 

process could assist institutions that may be too complex to resolve 

a bankruptcy under existing laws. CBO estimates that enacting the 

legislation would have no significant effect on the Federal budget. 

Pay-as-you-go procedures apply because enacting the legislation 

could affect direct spending and revenues related to bankruptcy 

proceedings and other programs aimed at resolving the failure of 

banks and other financial firms. However, CBO estimates that 

those effects would not be significant. 

CBO estimates that enacting H.R. 2947 would not increase net 

direct spending or on-budget deficits in any of the four consecutive 

10-year period beginning in 2027. 

H.R. 2947 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA). 

H.R. 2947 would impose a private-sector mandate, as defined in 

UMRA, on entities that have certain types of contracts with bank 

holding companies or large financial institutions that have entered 

the bankruptcy process established under the bill. Because of uncertainty about both the number and size of contracts that would 

be affected and the amount of losses that would occur as a result 

of this provision, CBO cannot determine whether the cost of the 

mandate would exceed the threshold established in UMRA for private-sector mandates ($154 million in 2016, adjusted for inflation). 

BASIS OF ESTIMATE

The new bankruptcy procedures in H.R. 2947 could affect the 

cash flows of Federal programs that are currently available to resolve the failure of financial institutions. For example, it is possible 

that some firms eligible to use the new bankruptcy process also 

could use the current procedures of the Federal Deposit Insurance 

Corporation (FDIC) to resolve their financial difficulties. FDIC is 

authorized to resolve financial problems for large, systemically important financial firms that become insolvent or are in danger of 

becoming insolvent. 

Using FDIC’s resolution program under current law is contingent 

on certain conditions, including a finding by the Secretary of the 

Treasury that the bankruptcy process would not be appropriate for 

the resolution of a firm’s financial difficulties. If the necessary conditions are met, the FDIC may borrow funds from the Treasury to 

finance resolution activities and must collect fees from other large 

financial firms to offset the cost of any losses; those transactions 

occur through the Orderly Liquidation Fund (OLF). Although any 

spending from the OLF for resolution activities would initially increase Federal outlays, those costs would subsequently be offset by 

income received from selling the assets of the firm or from assessing fees. CBO anticipates that the secretary would use the OLF 

primarily during times of economic distress for complex financial 

institutions that require significant levels of capital or liquidity 

support. There is a very small chance that such a condition could 

occur in any year. 

CBO expects that implementing H.R. 2947 would increase the 

probability that some financial firms would use the bankruptcy 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
21 

process instead of the FDIC process described above. The effects of 

that change on the cash flows of the OLF would depend on economic, legal, and strategic factors that are difficult to quantify. 

CBO expects that the types of financial institutions with difficulties 

that could be resolved under the bankruptcy provisions in H.R. 

2947 would be those that otherwise would have had a negligible 

net effect on the budget (for example, the failure of a single firm 

with financial losses and liquidity requirements that largely could 

be covered by non-federal resources). Shifting those types of cases 

from the FDIC to the bankruptcy courts probably would have no 

significant net effect on the budget. 

PAY-AS-YOU-GO CONSIDERATIONS

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct 

spending or revenues. CBO estimates that any changes in direct 

spending and revenues under H.R. 2947 would be insignificant over 

the 2016–2026 period. 

INCREASE IN LONG-TERM DIRECT SPENDING AND DEFICITS

CBO estimates that enacting the legislation would not increase 

net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2027. 

ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

H.R. 2947 contains no intergovernmental mandates as defined in 

UMRA. 

ESTIMATED IMPACT ON THE PRIVATE SECTOR

H.R. 2947 would impose a private-sector mandate, as defined in 

UMRA, on entities that have certain types of contracts with bank 

holding companies or large financial institutions that have entered 

the bankruptcy process established under the bill. The bill would 

limit the contractual rights that those entities have under current 

law by imposing a temporary stay on actions to terminate or modify such contracts for 48 hours after a bankruptcy petition is filed. 

Limiting the ability of those entities to take actions such as collecting collateral or accelerating debt during that 2-day period 

could cause them to incur losses. The cost of the mandate would 

total any losses sustained by such parties as a result of the stay. 

As the bankruptcy process under the bill is reserved for large financial institutions, the potential losses for the parties affected by 

a stay could be quite substantial. However, because of uncertainty 

about both the number and size of contracts that would be affected 

and the amount of losses that would occur as a result of this provision, CBO cannot determine whether the cost of the mandate 

would exceed the threshold established in UMRA for private-sector 

mandates ($154 million in 2016, adjusted for inflation). 

ESTIMATE PREPARED BY: 

Federal Costs: Kathleen Gramp 

Impact on State, Local, and Tribal Governments: Rachel Austin 

Impact on the Private Sector: Logan Smith 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
22 

23See 12 U.S.C. § 1841(a) (2016). 24See 12 U.S.C. § 1843(k) (2016). 

ESTIMATE APPROVED BY: 

H. Samuel Papenfuss 

Deputy Assistant Director for Budget Analysis 

Duplication of Federal Programs 

No provision of H.R. 2947 establishes or reauthorizes a program 

of the Federal Government known to be duplicative of another Federal program, a program that was included in any report from GAO 

to Congress pursuant to section 21 of Public Law 111–139, or a 

program related to a program identified in the most recent Catalog 

of Federal Domestic Assistance. 

Disclosure of Directed Rule Makings 

The Committee estimates that H.R. 2947 specifically directs to be 

completed no specific rule makings within the meaning of 5 U.S.C. 

§ 551. 

Performance Goals and Objectives 

The Committee states that pursuant to clause 3(c)(4) of rule XIII 

of the Rules of the House of Representatives, H.R. 2947 amends 

title 11 of the United States Code in order to facilitate the resolution of an insolvent financial institution in bankruptcy. 

Advisory on Earmarks 

In accordance with clause 9 of rule XXI of the Rules of the House 

of Representatives, H.R. 2947 does not contain any congressional 

earmarks, limited tax benefits, or limited tariff benefits as defined 

in clause 9(e), 9(f) or 9(g) of Rule XXI. 

Section-by-Section Analysis 

The following discussion describes the bill as reported by the 

Committee. 

Section 1. Short Title. 

Sets forth the short title of the legislation as the ‘‘Financial Institution Bankruptcy Act of 2016.’’ 

Section 2. General Provisions Relating to Covered Financial Corporations. 

Subsection (a) amends Bankruptcy Code section 101, which defines various terms used throughout the Bankruptcy Code, to add 

the definition of ‘‘covered financial corporation.’’ In sum, the term 

is defined as a bank holding company, as defined in the Bank Holding Company Act of 1956 (BHCA),23 or a corporation that: exists 

for the primary purpose of owning subsidiaries; has consolidated 

assets of $50 billion or more; and derives annual gross revenues 

from activities that are financial in nature as defined in the BHCA 

or with respect to which at least 85% of the company’s consolidated 

assets are financial in nature as defined in the BHCA.24


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
23 

Subsection (b) of the bill amends Bankruptcy Code section 103, 

which specifies those provisions that apply to the Bankruptcy 

Code’s substantive titles. Subsection (b) provides that subchapter V 

of chapter 11 (as added by the legislation) will only apply to chapter 11 cases in which a covered financial corporation is the debtor. 

To be clear, to the extent a covered financial corporation could utilize the chapter 11 process and chooses not to invoke the subchapter V process, that covered financial corporation can still 

choose to pursue a ‘‘traditional’’ chapter 11 case. 

Subsection (c) amends Bankruptcy Code section 109, which sets 

forth the eligibility criteria to be a bankruptcy debtor, to provide 

that a covered financial corporation is eligible to be a chapter 11 

debtor. 

Subsection (d) amends Bankruptcy Code section 1112, which authorizes conversion of a chapter 11 case to a chapter 7 case or the 

dismissal of the chapter 11 case, under certain, specified circumstances. This subsection adds new subsection (g) to section 

1112 to permit the conversion of a subchapter V case to a chapter 

7 case, if: (1) a transfer approved under section 1185 (as added by 

the bill) has been consummated; (2) the court has ordered the appointment of a special trustee under section 1186 (as added by the 

bill); and (3) the court finds that such conversion is in the best interest of creditors and the estate. 

Subsection (e)(1) amends Bankruptcy Code section 726(a)(1) to 

accord first payment priority to the fees, costs and expenses of a 

special trustee appointed under section 1186. Subsection (e)(2) 

makes two amendments to Bankruptcy Code section 1129(a), which 

sets forth the requirements for confirmation of a chapter 11 case. 

First, it requires the fees, costs and expenses of a special trustee 

to have been paid or for the subchapter V plan to provide for such 

payment. Second, it requires the court to find that confirmation of 

a subchapter V plan is not likely to cause adverse effects on financial stability in the United States. 

Subsection (f) provides that a U.S. Trustee will recommend to the 

court the amount of a bond necessary in the event of a trustee appointment in a subchapter V case. 

Section 3. Liquidation, Reorganization, or Recapitalization of a 

Covered Financial Corporation. 

Section 3 inserts a new subchapter V into chapter 11 designed 

to address a bankruptcy of a covered financial corporation. All further references are to the new sections added to chapter 11 by the 

bill. 

§ 1181. Inapplicability of other sections. 

Specifies that Bankruptcy Code sections 303 (authorizing the 

commencement of an involuntary bankruptcy case, under certain 

circumstances) and 321(c) (which permits the United States Trustee to serve as a trustee in a bankruptcy case) do not apply to a subchapter V case. Also, specifies that Bankruptcy Code section 365 

does not apply to the transfer under subchapter V. Sections 1185, 

1187 and 1188 provide a complete list of considerations for the 

bankruptcy court regarding the transfer of assets, executory contracts, unexpired leases and qualified financial contracts such that 

section 365, which deals with the transfer and assignment of execuVerDate Sep 11 2014 04:24 Mar 24, 2016 Jkt 059006 PO 00000 Frm 00023 Fmt 6659 Sfmt 6601 E:\HR\OC\HR477.XXX HR477

smartinez on DSK4TPTVN1PROD with REPORTS-HSE
24 

tory contracts and unexpired leases, is unnecessary in the context 

of a subchapter V case. 

§ 1182. Definitions for this chapter. 

Defines the following terms: Board; bridge company; capital 

structure debt; contractual right; qualified financial contract; and 

special trustee. 

§ 1183. Commencement of a case concerning a covered financial 

corporation. 

Subsection (a) authorizes the voluntary commencement of a subchapter V case if the debtor states under penalty of perjury that 

it is a covered financial corporation. 

Subsection (b) provides that a subchapter V case commenced by 

the debtor constitutes an order for relief. 

Subsection (c) shields a debtor’s board of directors from any liability to shareholders, creditors or other parties in interest for a 

good faith filing of a subchapter V petition or with respect to a 

transfer under sections 1185 and 1186, as added by the bill. 

Subsection (d) requires the debtor’s counsel to provide as much 

advance notice as practicable, without disclosing the identity of the 

potential debtor, to the Chief Judge of the Court of Appeals for the 

Circuit embracing the district in which the debtor’s counsel intends 

to file the petition for relief about the potential subchapter V case. 

This allows time for the Chief Judge to select randomly the presiding bankruptcy judge from the pool of pre-designated experienced bankruptcy judges. Additionally, this allows the selected 

bankruptcy judge time to prepare for weekend bankruptcy proceedings. 

§ 1184. Regulators. 

Provides the Federal Reserve, the Securities and Exchange Commission, the Office of the Comptroller of the Currency of the Department of the Treasury, the Commodity Futures Trading Commission, and the FDIC with standing in a subchapter V bankruptcy 

case. 

§ 1185. Special transfer of property of the estate. 

On request of the debtor, subsection (a) authorizes the bankruptcy court to order a transfer of estate property and the assignment of executory contracts and unexpired leases to a bridge company after notice and a hearing that must occur not less than 24 

hours after commencement of the case. This subsection also clarifies that all property transferred is no longer property of the estate. 

Subsection (a) further provides that Bankruptcy Code section 363 

(concerning sales of bankruptcy case assets) apply to such transfer, 

unless otherwise specified. 

Subsection (b) requires not less than 24 hours’ notice of the hearing under subsection (a), to be provided either by electronic or telephonic means, and identifies who must receive such notice. 

Subsection (c) provides that the court may not order a transfer 

unless it determines by a preponderance of the evidence that: (1) 

the transfer is necessary to prevent serious adverse effects on financial stability in the United States; (2) the transfer does not provide for the assumption of any capital structure debt by the bridge 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
25 

company; (3) the transfer does not provide for the transfer of the 

debtor’s equity; (4) the debtor has demonstrated that the bridge 

company is not likely to fail to meet the obligations of any debt, 

executory contract, qualified financial contract or unexpired lease 

assumed and assigned to such company; (5) the bridge company 

after the transfer has adequate provision for fees, costs and expenses of the special trustee; (6) all of the bridge company’s equity 

securities are transferred to a special trustee; (7) adequate provision has been made for the payment of the expenses of the bankruptcy estate and the special trustee; and (8) the bridge company 

has governing documents and initial directors and senior officers 

that are in the best interests of creditors and the estate. 

With respect to property of the estate that is subject to a lien securing a debt, executory contract, unexpired lease or agreement of 

the debtor, subsection (c)(3) specifies that the transfer of this secured property may not be authorized unless: 

(A) the bridge company assumes such debt, executory contract, unexpired lease, qualified financial contract or 

agreement, and the property remains subject to such lien 

securing such debt, executory contract, unexpired lease, 

qualified financial contract or agreement and the court determines that assumption of such debt, executory contract, 

unexpired lease, qualified financial contract or agreement 

by the bridge company is in the best interests of the estate; or 

(B) such property is being transferred to the bridge company in accordance with the provisions of section 363. 

Subsection (d) requires the bridge company to: (1) not have any 

property (e.g., executory contracts, unexpired leases, qualified financial contracts) or debts immediately prior to the transfer; and 

(2) have equity securities that are property of the estate, which 

may be sold or distributed subject to the limitations contained in 

subchapter V. 

§ 1186. Special Trustee. 

Requires the section 1185 transfer order to provide that the debtor transfer to the special trustee all of the equity securities in the 

bridge company, and for the bridge company’s equity to be held in 

trust for the sole benefit of the estate, subject to the payment of 

the special trustee’s fees, costs and expenses. The court must approve the trust agreement as being in the best interests of the estate. The trust must exist solely for the purpose of holding, administering and disposing of the bridge company’s equity securities. 

Subsection (a)(2) requires the debtor to confirm to the court that 

the Federal Reserve was consulted regarding the identity of the 

proposed special trustee and advise the court of the results of such 

consultation. 

Subsection (b) specifies that the trust agreement governing the 

trust must satisfy certain requirements. These requirements include: (1) the trust must provide for the payment of the special 

trustee’s fees, costs, expenses and indemnities from the assets of 

the debtor’s estate; (2) the special trustee must prepare a quarterly 

report to the estate that is filed with the court; (3) the special 

trustee must provide information about the bridge company as reaVerDate Sep 11 2014 04:24 Mar 24, 2016 Jkt 059006 PO 00000 Frm 00025 Fmt 6659 Sfmt 6601 E:\HR\OC\HR477.XXX HR477

smartinez on DSK4TPTVN1PROD with REPORTS-HSE
26 

sonably requested by a party in interest to prepare a disclosure 

statement for a plan providing for distribution of any securities of 

the bridge company; (4) as long as the equity securities of the 

bridge company are held by the trust, the special trustee must file 

with the court a notice regarding any change in the management 

of the bridge company, its governing documents and any material 

corporate action of the company; (5) any sale of any equity securities of the bridge company may not be consummated until the special trustee consults with the FDIC and the Federal Reserve regarding such sale, and discloses the results of such consultation 

with the court; and (6) the proceeds of the sale of any equity securities of the bridge company by the special trustee must be held in 

trust for the benefit of, or transferred to, the estate. 

Subsection (c)(1) requires the special trustee to distribute the 

trust assets in accordance with a confirmed chapter 11 plan on its 

effective date or as ordered by the court if the subchapter V case 

is converted to a case under chapter 7. Subsection (c)(2) specifies 

that the office of the special trustee terminates as soon as practicable after final distribution. 

Subsection (d) specifies that after the transfer of the bridge company’s equity is made to the special trustee under this section, such 

trustee is subject only to applicable nonbankruptcy law and the 

trustee is no longer subject to the control of the bankruptcy court. 

§ 1187. Temporary and supplemental automatic stay; assumed 

debt. 

Extends the ‘‘automatic stay’’ triggered by the filing of a chapter 

11 case to creditors who entered into contracts, leases, agreements 

and debt contracts with the debtor or its affiliates. Contrary to the 

typical automatic stay, which often can extend for the duration of 

the bankruptcy case and only is for the benefit of the entities that 

file for bankruptcy, the stay provided for under this section extends 

both to the debtor and to its affiliates. This section provides for 

temporary relief so that the debtor’s and its affiliates’ essential contracts, leases and agreements that are critical for the future operation of the bridge company can be transferred without disruption. 

The stay that benefits the debtor expires no later than 48 hours 

after the commencement of the case, or earlier if the transfer order 

is entered, or the case is dismissed, within the 48-hour time period. 

In order to allow the bridge company to operate, the stay covering 

ipso facto clauses, or contract provisions that relate to the insolvency of the debtor or the commencement of a bankruptcy case, 

continues for the benefit of affiliates. This extension of the stay to 

affiliates terminates if the transfer order does not provide for the 

transfer of the affiliate’s interests to the bridge company, the case 

is dismissed, a transfer order is denied, or after 48 hours if a transfer order has not been ordered. 

This section also provides that certain Bankruptcy Code provisions authorizing the termination of the automatic stay apply, subject to the satisfaction of the relevant conditions contained in those 

sections of the Bankruptcy Code. 

In addition, section 1187 also allows the bridge company to assume debts, executory contracts (other than a qualified financial 

contract), or unexpired leases of the debtor notwithstanding antiassignment provisions contained in those contracts. To the extent 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
27 

that a default has occurred in these contracts, other than a default 

predicated on the assignment of the contract, the bridge company 

must cure the default, compensate the counterparty for the default, 

and demonstrate to the bankruptcy court that the bridge company 

will satisfy its obligations under the contract going forward. 

Qualified financial contracts are excluded from this section because their treatment is provided for in section 1188. Capital structure debt is also excluded from this section because that debt remains in the bankruptcy case and those creditors will receive their 

recoveries through the traditional bankruptcy process. 

§ 1188. Treatment of qualified financial contracts and affiliate 

contracts. 

Extends the ‘‘automatic stay’’ triggered by the filing of a chapter 

11 case to creditors who entered into derivative, repurchase and 

similarly constructed contracts with the debtor and its affiliates. In 

a typical chapter 11 case, these contracts are not subject to the 

automatic stay and creditors may exercise certain contractual remedies upon the filing of a bankruptcy case. This section provides 

that creditors are prohibited from exercising a limited set of rights. 

The stay with respect to qualified financial contracts of the debtor 

expires on the earlier of: (1) 48 hours from the commencement of 

the case; (2) the transfer of the contracts to the bridge company; 

or (3) the bankruptcy court’s entry of an order denying the transfer 

to the bridge company. The stay with respect to qualified financial 

contracts of the debtor’s affiliates expires on the earlier of: (1) 48 

hours from the commencement of the case if the bankruptcy court 

does not enter a section 1185 transfer order; (2) entry of an order 

denying a section 1185 transfer; (3) entry of a section 1185 transfer 

order that does not include the transfer of the affiliate’s qualified 

financial contracts; or (4) the case is dismissed. The anti-assignment provisions of qualified financial contracts are restored when 

more than fifty percent of the bridge company’s equity is no longer 

held by the special trustee. 

While the automatic stay is in place, the debtor and its affiliates 

are required to perform all payment and delivery obligations under 

the qualified financial contracts. Any failure to fulfill these obligations results in an automatic termination of the stay. Furthermore, 

any failure to fulfill these obligations during any period of time results in a breach of the relevant qualified financial contract. 

In order to transfer a qualified financial contract to the bridge 

company, the terms of the contract must continue to be honored 

and all of the obligations must continue to be performed. Furthermore, all of the qualified financial contracts between the entity and 

the debtor and/or its affiliates must be transferred to the bridge 

company. This provision is intended to prevent against ‘‘cherry 

picking’’ transfers of only a select number of contracts. Additionally, the financial institution must transfer all related claims and 

collateral along with the to-be transferred derivative contracts. 

This provision ensures that the counterparty has all of its rights 

and collateral preserved at the bridge company. 

Section 1188 is critical to ensure that the bridge company can 

continue to operate the debtor’s business in the normal course following the transfer. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
28 

§ 1189. Licenses, permits, and registrations. 

Provides that the bridge company will retain the debtor’s and its 

affiliates’ rights and obligations under the debtor’s and its affiliates’ licenses, permits and registrations. In other words, the bridge 

company will continue to operate under these contracts just as the 

debtor operated prior to the commencement of the bankruptcy. Furthermore, the bridge company will be subject to the same regulatory oversight as the debtor following the transfer. This section 

also overrides all nonbankruptcy laws to prevent the termination 

or modification of any federal, state or local license, permit, or registration that the debtor or an affiliate had immediately before the 

commencement of the case, if a request is made to transfer property of the estate under section 1185 and such default is based on 

certain ipso facto events. 

§ 1190. Exemption from securities laws and special tax provisions. 

Provides the same exemption granted to the securities (or equity) 

of a typical debtor company to the securities of the bridge company. 

Specifically, this provision clarifies that with respect to Bankruptcy 

Code section 1145 (which exempts the offer or sale of securities 

from certain federal, state and local laws requiring registration of 

such offer and sale if it occurs under a plan), a bridge company’s 

security shall be deemed to be the security of the debtor’s successor 

under a plan if the court approves the disclosure statement for the 

plan as having adequate information about the bridge company 

and its securities. 

§ 1191. Inapplicability of certain avoiding powers. 

Provides for an exemption from the avoidance powers contained 

in the Bankruptcy Code for the transfer from the debtor to the 

bridge company. In other words, this prevents a subchapter V 

transfer, or certain aspects of the transfer, from being unwound at 

a later date. 

§ 1192. Consideration of Financial Stability. 

Allows, but does not require, the bankruptcy court to consider 

the financial stability of the United States when rendering decisions related to a subchapter V case. 

Section 4. Amendments to Title 28, United States Code. 

§ 298. Judge for a case under Subchapter V of title 11. 

Requires the Chief Justice of the United States to designate at 

least ten experienced bankruptcy judges to be available to hear 

subchapter V bankruptcy cases. Bankruptcy judges may request 

that they be considered for such designation by the Chief Justice. 

Further, this provision clarifies that the district courts will not 

have jurisdiction over the issues related to the appointment of a 

special trustee and the formation of the bridge company. 

Changes in Existing Law Made by the Bill, as Reported 

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
29 

and existing law in which no change is proposed is shown in 

roman): 

TITLE 11, UNITED STATES CODE 

* * * * * * * 

CHAPTER 1—GENERAL PROVISIONS 

§ 101. Definitions 

In this title the following definitions shall apply: 

(1) The term ‘‘accountant’’ means accountant authorized 

under applicable law to practice public accounting, and includes professional accounting association, corporation, or partnership, if so authorized. 

(2) The term ‘‘affiliate’’ means— 

(A) entity that directly or indirectly owns, controls, or 

holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor, other than an entity that holds such securities— 

(i) in a fiduciary or agency capacity without sole discretionary power to vote such securities; or 

(ii) solely to secure a debt, if such entity has not in 

fact exercised such power to vote; 

(B) corporation 20 percent or more of whose outstanding 

voting securities are directly or indirectly owned, controlled, or held with power to vote, by the debtor, or by an 

entity that directly or indirectly owns, controls, or holds 

with power to vote, 20 percent or more of the outstanding 

voting securities of the debtor, other than an entity that 

holds such securities— 

(i) in a fiduciary or agency capacity without sole discretionary power to vote such securities; or 

(ii) solely to secure a debt, if such entity has not in 

fact exercised such power to vote; 

(C) person whose business is operated under a lease or 

operating agreement by a debtor, or person substantially 

all of whose property is operated under an operating 

agreement with the debtor; or 

(D) entity that operates the business or substantially all 

of the property of the debtor under a lease or operating 

agreement. 

(3) The term ‘‘assisted person’’ means any person whose 

debts consist primarily of consumer debts and the value of 

whose nonexempt property is less than $150,000. 

(4) The term ‘‘attorney’’ means attorney, professional law association, corporation, or partnership, authorized under applicable law to practice law. 

(4A) The term ‘‘bankruptcy assistance’’ means any goods or 

services sold or otherwise provided to an assisted person with 

the express or implied purpose of providing information, advice, counsel, document preparation, or filing, or attendance at 

a creditors’ meeting or appearing in a case or proceeding on behalf of another or providing legal representation with respect 

to a case or proceeding under this title. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
30 

(5) The term ‘‘claim’’ means— 

(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or 

(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, 

whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, 

disputed, undisputed, secured, or unsecured. 

(6) The term ‘‘commodity broker’’ means futures commission 

merchant, foreign futures commission merchant, clearing organization, leverage transaction merchant, or commodity options 

dealer, as defined in section 761 of this title, with respect to 

which there is a customer, as defined in section 761 of this 

title. 

(7) The term ‘‘community claim’’ means claim that arose before the commencement of the case concerning the debtor for 

which property of the kind specified in section 541(a)(2) of this 

title is liable, whether or not there is any such property at the 

time of the commencement of the case. 

(7A) The term ‘‘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) The term ‘‘commercial fishing vessel’’ means a vessel 

used by a family fisherman to carry out a commercial fishing 

operation. 

(8) The term ‘‘consumer debt’’ means debt incurred by an individual primarily for a personal, family, or household purpose. 

(9) The term ‘‘corporation’’— 

(A) includes— 

(i) association having a power or privilege that a private corporation, but not an individual or a partnership, possesses; 

(ii) partnership association organized under a law 

that makes only the capital subscribed responsible for 

the debts of such association; 

(iii) joint-stock company; 

(iv) unincorporated company or association; or 

(v) business trust; but 

(B) does not include limited partnership. 

(9A) The term ‘‘covered financial corporation’’ means any corporation incorporated or organized under any Federal or State 

law, other than a stockbroker, a commodity broker, or an entity 

of the kind specified in paragraph (2) or (3) of section 109(b), 

that is— 

(A) a bank holding company, as defined in section 2(a) 

of the Bank Holding Company Act of 1956; or 

(B) a corporation that exists for the primary purpose of 

owning, controlling and financing its subsidiaries, that has 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
31 

total consolidated assets of $50,000,000,000 or greater, and 

for which, in its most recently completed fiscal year— 

(i) annual gross revenues derived by the corporation 

and all of its subsidiaries from activities that are financial in nature (as defined in section 4(k) of the 

Bank Holding Company Act of 1956) and, if applicable, from the ownership or control of one or more insured depository institutions, represents 85 percent or 

more of the consolidated annual gross revenues of the 

corporation; or 

(ii) the consolidated assets of the corporation and all 

of its subsidiaries related to activities that are financial in nature (as defined in section 4(k) of the Bank 

Holding Company Act of 1956) and, if applicable, related to the ownership or control of one or more insured depository institutions, represents 85 percent or 

more of the consolidated assets of the corporation. 

(10) The term ‘‘creditor’’ means— 

(A) entity that has a claim against the debtor that arose 

at the time of or before the order for relief concerning the 

debtor; 

(B) entity that has a claim against the estate of a kind 

specified in section 348(d), 502(f), 502(g), 502(h) or 502(i) 

of this title; or 

(C) entity that has a community claim. 

(10A) The term ‘‘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. 

(11) The term ‘‘custodian’’ means— 

(A) receiver or trustee of any of the property of the debtor, appointed in a case or proceeding not under this title; 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
32 

(B) assignee under a general assignment for the benefit 

of the debtor’s creditors; or 

(C) trustee, receiver, or agent under applicable law, or 

under a contract, that is appointed or authorized to take 

charge of property of the debtor for the purpose of enforcing a lien against such property, or for the purpose of general administration of such property for the benefit of the 

debtor’s creditors. 

(12) The term ‘‘debt’’ means liability on a claim. 

(12A) The term ‘‘debt relief agency’’ means any person who 

provides any bankruptcy assistance to an assisted person in return for the payment of money or other valuable consideration, 

or who is a bankruptcy petition preparer under section 110, 

but does not include— 

(A) any person who is an officer, director, employee, or 

agent of a person who provides such assistance or of the 

bankruptcy petition preparer; 

(B) a nonprofit organization that 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. 

(13) The term ‘‘debtor’’ means person or municipality concerning which a case under this title has been commenced. 

(13A) The term ‘‘debtor’s principal residence’’— 

(A) means a residential structure if used as the principal 

residence by the debtor, 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 if used as 

the principal residence by the debtor. 

(14) The term ‘‘disinterested person’’ means a person that— 

(A) is not a creditor, an equity security holder, or an insider; 

(B) is not and was not, within 2 years before the date 

of the filing of the petition, a director, officer, or employee 

of the debtor; and 

(C) does not have an interest materially adverse to the 

interest of the estate or of any class of creditors or equity 

security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtor, or 

for any other reason. 

(14A) The term ‘‘domestic support obligation’’ means a debt 

that accrues before, on, or after the date of the order for relief 

in a case under this title, including interest that accrues on 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
33 

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, on, or 

after the date of the order for relief in a case 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 of the debtor, or such child’s parent, 

legal guardian, or responsible relative for the purpose of 

collecting the debt. 

(15) The term ‘‘entity’’ includes person, estate, trust, governmental unit, and United States trustee. 

(16) The term ‘‘equity security’’ means— 

(A) share in a corporation, whether or not transferable 

or denominated ‘‘stock’’, or similar security; 

(B) interest of a limited partner in a limited partnership; 

or 

(C) warrant or right, other than a right to convert, to 

purchase, sell, or subscribe to a share, security, or interest 

of a kind specified in subparagraph (A) or (B) of this paragraph. 

(17) The term ‘‘equity security holder’’ means holder of an equity security of the debtor. 

(18) The term ‘‘family farmer’’ means— 

(A) individual or individual and spouse engaged in a 

farming operation whose aggregate debts do not exceed 

$3,237,000 and not less than 50 percent of whose aggregate noncontingent, liquidated debts (excluding a debt for 

the principal residence of such individual or such individual and spouse unless such debt arises out of a farming 

operation), on the date the case is filed, arise out of a 

farming operation owned or operated by such individual or 

such individual and spouse, and such individual or such 

individual and spouse receive from such farming operation 

more than 50 percent of such individual’s or such individual and spouse’s gross income for— 

(i) the taxable year preceding; or 

(ii) each of the 2d and 3d taxable years preceding; 

the taxable year in which the case concerning such individual or such individual and spouse was filed; or 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
34 

(B) corporation or partnership in which more than 50 

percent of the outstanding stock or equity is held by one 

family, or by one family and the relatives of the members 

of such family, and such family or such relatives conduct 

the farming operation, and 

(i) more than 80 percent of the value of its assets 

consists of assets related to the farming operation; (ii) its aggregate debts do not exceed $3,237,000 and 

not less than 50 percent of its aggregate noncontingent, liquidated debts (excluding a debt for one dwelling which is owned by such corporation or partnership 

and which a shareholder or partner maintains as a 

principal residence, unless such debt arises out of a 

farming operation), on the date the case is filed, arise 

out of the farming operation owned or operated by 

such corporation or such partnership; and 

(iii) if such corporation issues stock, such stock is 

not publicly traded. 

(19) The term ‘‘family farmer with regular annual income’’ 

means family farmer whose annual income is sufficiently stable and regular to enable such family farmer to make payments under a plan under chapter 12 of this title. 

(19A) The term ‘‘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 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
35 

which a shareholder or partner maintains as a principal residence, unless such debt arises out of a commercial fishing operation), on the date the case is filed, 

arise out of a commercial fishing operation owned or 

operated by such corporation or such partnership; and 

(III) if such corporation issues stock, such stock is 

not publicly traded. 

(19B) The term ‘‘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. 

(20) The term ‘‘farmer’’ means (except when such term appears in the term ‘‘family farmer’’) person that received more 

than 80 percent of such person’s gross income during the taxable year of such person immediately preceding the taxable 

year of such person during which the case under this title concerning such person was commenced from a farming operation 

owned or operated by such person. 

(21) The term ‘‘farming operation’’ includes farming, tillage 

of the soil, dairy farming, ranching, production or raising of 

crops, poultry, or livestock, and production of poultry or livestock products in an unmanufactured state. 

(21A) The term ‘‘farmout agreement’’ means a written agreement in which— 

(A) the owner of a right to drill, produce, or operate liquid or gaseous hydrocarbons on property agrees or has 

agreed to transfer or assign all or a part of such right to 

another entity; and 

(B) such other entity (either directly or through its 

agents or its assigns), as consideration, agrees to perform 

drilling, reworking, recompleting, testing, or similar or related operations, to develop or produce liquid or gaseous 

hydrocarbons on the property. 

(21B) The term ‘‘Federal depository institutions regulatory 

agency’’ means— 

(A) with respect to an insured depository institution (as 

defined in section 3(c)(2) of the Federal Deposit Insurance 

Act) for which no conservator or receiver has been appointed, the appropriate Federal banking agency (as defined in section 3(q) of such Act); 

(B) with respect to an insured credit union (including an 

insured credit union for which the National Credit Union 

Administration has been appointed conservator or liquidating agent), the National Credit Union Administration; 

(C) with respect to any insured depository institution for 

which the Resolution Trust Corporation has been appointed conservator or receiver, the Resolution Trust Corporation; and 

(D) with respect to any insured depository institution for 

which the Federal Deposit Insurance Corporation has been 

appointed conservator or receiver, the Federal Deposit Insurance Corporation. 

(22) The term ‘‘financial institution’’ means— 

(A) a Federal reserve bank, or an entity that is a commercial or savings bank, industrial savings bank, savings 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
36 

and loan association, trust company, federally-insured 

credit union, or receiver, liquidating agent, or conservator 

for such entity and, when any such Federal reserve bank, 

receiver, liquidating agent, conservator or entity is acting 

as agent or custodian for a customer (whether or not a 

‘‘customer’’, as defined in section 741) 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. 

(22A) The term ‘‘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 date 

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 (aggregated across counterparties) at 

such time or on any day during the 15-month period preceding the date of the filing of the petition, 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) at such time or on any day 

during the 15-month period preceding the date of the filing 

of the petition; or 

(B) a clearing organization (as defined in section 402 of 

the Federal Deposit Insurance Corporation Improvement 

Act of 1991). 

(23) The term ‘‘foreign proceeding’’ means a collective judicial 

or administrative proceeding in a foreign country, including an 

interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the assets and affairs of 

the debtor are subject to control or supervision by a foreign 

court, for the purpose of reorganization or liquidation. 

(24) The term ‘‘foreign representative’’ means a person or 

body, including a person or body appointed on an interim basis, 

authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor’s assets or affairs or 

to act as a representative of such foreign proceeding. 

(25) The term ‘‘forward contract’’ means— 

(A) a contract (other than a commodity contract, as defined in section 761) for the purchase, sale, or transfer of 

a commodity, as defined in section 761(8) of this title, or 

any similar good, article, service, right, or interest which 

is presently or in the future becomes the subject of dealing 

in the forward contract trade, or product or byproduct 

thereof, with a maturity date more than two days after the 

date the contract is entered into, including, but not limited 

to, a repurchase or reverse repurchase transaction (whether or not such repurchase or reverse repurchase transaction is a ‘‘repurchase agreement’’, as defined in this secVerDate Sep 11 2014 04:24 Mar 24, 2016 Jkt 059006 PO 00000 Frm 00036 Fmt 6659 Sfmt 6601 E:\HR\OC\HR477.XXX HR477

smartinez on DSK4TPTVN1PROD with REPORTS-HSE
37 

tion) consignment, lease, swap, hedge transaction, deposit, 

loan, option, allocated transaction, unallocated transaction, 

or any other similar agreement; 

(B) any combination of agreements or transactions referred to in subparagraphs (A) and (C); 

(C) any option to enter into an agreement or transaction 

referred to in subparagraph (A) or (B); 

(D) a master agreement that provides for an agreement 

or transaction referred to in subparagraph (A), (B), or (C), 

together with all supplements to any such master agreement, without regard to whether such master agreement 

provides for an agreement or transaction that is not a forward contract under this paragraph, except that such master agreement shall be considered to be a forward contract 

under this paragraph only with respect to each agreement 

or transaction under such master agreement that is referred to in subparagraph (A), (B), or (C); or 

(E) 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. 

(26) The term ‘‘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. 

(27) The term ‘‘governmental unit’’ means United States; 

State; Commonwealth; District; Territory; municipality; foreign 

state; department, agency, or instrumentality of the United 

States (but not a United States trustee while serving as a 

trustee in a case under this title), a State, a Commonwealth, 

a District, a Territory, a municipality, or a foreign state; or 

other foreign or domestic government. 

(27A) The term ‘‘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; 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
38 

(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. 

(27B) The term ‘‘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 property 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. 

(28) The term ‘‘indenture’’ means mortgage, deed of trust, or 

indenture, under which there is outstanding a security, other 

than a voting-trust certificate, constituting a claim against the 

debtor, a claim secured by a lien on any of the debtor’s property, or an equity security of the debtor. 

(29) The term ‘‘indenture trustee’’ means trustee under an 

indenture. 

(30) The term ‘‘individual with regular income’’ means individual whose income is sufficiently stable and regular to enable 

such individual to make payments under a plan under chapter 

13 of this title, other than a stockbroker or a commodity 

broker. 

(31) The term ‘‘insider’’ includes— 

(A) if the debtor is an individual— 

(i) relative of the debtor or of a general partner of 

the debtor; 

(ii) partnership in which the debtor is a general 

partner; 

(iii) general partner of the debtor; or 

(iv) corporation of which the debtor is a director, officer, or person in control; 

(B) if the debtor is a corporation— 

(i) director of the debtor; 

(ii) officer of the debtor; 

(iii) person in control of the debtor; 

(iv) partnership in which the debtor is a general 

partner; 

(v) general partner of the debtor; or 

(vi) relative of a general partner, director, officer, or 

person in control of the debtor; 

(C) if the debtor is a partnership— 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
39 

(i) general partner in the debtor; 

(ii) relative of a general partner in, general partner 

of, or person in control of the debtor; 

(iii) partnership in which the debtor is a general 

partner; 

(iv) general partner of the debtor; or 

(v) person in control of the debtor; 

(D) if the debtor is a municipality, elected official of the 

debtor or relative of an elected official of the debtor; 

(E) affiliate, or insider of an affiliate as if such affiliate 

were the debtor; and 

(F) managing agent of the debtor. 

(32) The term ‘‘insolvent’’ means— 

(A) with reference to an entity other than a partnership 

and a municipality, financial condition such that the sum 

of such entity’s debts is greater than all of such entity’s 

property, at a fair valuation, exclusive of— 

(i) property transferred, concealed, or removed with 

intent to hinder, delay, or defraud such entity’s creditors; and 

(ii) property that may be exempted from property of 

the estate under section 522 of this title; 

(B) with reference to a partnership, financial condition 

such that the sum of such partnership’s debts is greater 

than the aggregate of, at a fair valuation— 

(i) all of such partnership’s property, exclusive of 

property of the kind specified in subparagraph (A)(i) of 

this paragraph; and 

(ii) the sum of the excess of the value of each general partner’s nonpartnership property, exclusive of 

property of the kind specified in subparagraph (A) of 

this paragraph, over such partner’s nonpartnership 

debts; and 

(C) with reference to a municipality, financial condition 

such that the municipality is— 

(i) generally not paying its debts as they become due 

unless such debts are the subject of a bona fide dispute; or 

(ii) unable to pay its debts as they become due. 

(33) The term ‘‘institution-affiliated party’’— 

(A) with respect to an insured depository institution (as 

defined in section 3(c)(2) of the Federal Deposit Insurance 

Act), has the meaning given it in section 3(u) of the Federal Deposit Insurance Act; and 

(B) with respect to an insured credit union, has the 

meaning given it in section 206(r) of the Federal Credit 

Union Act. 

(34) The term ‘‘insured credit union’’ has the meaning given 

it in section 101(7) of the Federal Credit Union Act. 

(35) The term ‘‘insured depository institution’’— 

(A) has the meaning given it in section 3(c)(2) of the 

Federal Deposit Insurance Act; and 

(B) includes an insured credit union (except in the case 

of paragraphs (21B) and (33)(A) of this subsection). 

(35A) The term ‘‘intellectual property’’ means— 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
40 

(A) trade secret; 

(B) invention, process, design, or plant protected under 

title 35; 

(C) patent application; 

(D) plant variety; 

(E) work of authorship protected under title 17; or 

(F) mask work protected under chapter 9 of title 17; 

to the extent protected by applicable nonbankruptcy law. 

(36) The term ‘‘judicial lien’’ means lien obtained by judgment, levy, sequestration, or other legal or equitable process or 

proceeding. 

(37) The term ‘‘lien’’ means charge against or interest in 

property to secure payment of a debt or performance of an obligation. 

(38) The term ‘‘margin payment’’ means, for purposes of the 

forward contract provisions of this title, payment or deposit of 

cash, a security or other property, that is commonly known in 

the forward contract trade as original margin, initial margin, 

maintenance margin, or variation margin, including mark-tomarket payments, or variation payments. 

(38A) The term ‘‘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) The term ‘‘master netting agreement participant’’ 

means an entity that, at any time before the date of the filing 

of the petition, is a party to an outstanding master netting 

agreement with the debtor. 

(39) The term ‘‘mask work’’ has the meaning given it in section 901(a)(2) of title 17. 

(39A) The term ‘‘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 occurVerDate Sep 11 2014 04:24 Mar 24, 2016 Jkt 059006 PO 00000 Frm 00040 Fmt 6659 Sfmt 6601 E:\HR\OC\HR477.XXX HR477

smartinez on DSK4TPTVN1PROD with REPORTS-HSE
41 

ring after such most recent year and before such current 

year. 

(40) The term ‘‘municipality’’ means political subdivision or 

public agency or instrumentality of a State. 

(40A) The term ‘‘patient’’ means any individual who obtains 

or receives services from a health care business. 

(40B) The term ‘‘patient records’’ means any record relating 

to a patient, including a written document or a record recorded 

in a magnetic, optical, or other form of electronic medium. 

(41) The term ‘‘person’’ includes individual, partnership, and 

corporation, but does not include governmental unit, except 

that a governmental unit that— 

(A) acquires an asset from a person— 

(i) as a result of the operation of a loan guarantee 

agreement; or 

(ii) as receiver or liquidating agent of a person; 

(B) is a guarantor of a pension benefit payable by or on 

behalf of the debtor or an affiliate of the debtor; or 

(C) is the legal or beneficial owner of an asset of— 

(i) an employee pension benefit plan that is a governmental plan, as defined in section 414(d) of the Internal Revenue Code of 1986; or 

(ii) an eligible deferred compensation plan, as defined in section 457(b) of the Internal Revenue Code of 

1986; 

shall be considered, for purposes of section 1102 of this title, 

to be a person with respect to such asset or such benefit. 

(41A) The term ‘‘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. 

(42) The term ‘‘petition’’ means petition filed under section 

301, 302, 303 and 1504 of this title, as the case may be, commencing a case under this title. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
42 

(42A) The term ‘‘production payment’’ means a term overriding royalty satisfiable in cash or in kind— 

(A) contingent on the production of a liquid or gaseous 

hydrocarbon from particular real property; and 

(B) from a specified volume, or a specified value, from 

the liquid or gaseous hydrocarbon produced from such 

property, and determined without regard to production 

costs. 

(43) The term ‘‘purchaser’’ means transferee of a voluntary 

transfer, and includes immediate or mediate transferee of such 

a transferee. 

(44) The term ‘‘railroad’’ means common carrier by railroad 

engaged in the transportation of individuals or property or 

owner of trackage facilities leased by such a common carrier. 

(45) The term ‘‘relative’’ means individual related by affinity 

or consanguinity within the third degree as determined by the 

common law, or individual in a step or adoptive relationship 

within such third degree. 

(46) The term ‘‘repo participant’’ means an entity that, at 

any time before the filing of the petition, has an outstanding 

repurchase agreement with the debtor. 

(47) The term ‘‘repurchase agreement’’ (which definition also 

applies to a reverse repurchase agreement)— 

(A) means— 

(i) an agreement, including related terms, which 

provides for the transfer of 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 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
43 

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. 

(48) The term ‘‘securities clearing agency’’ means person that 

is registered as a clearing agency under section 17A of the Securities Exchange Act of 1934, or exempt from such registration under such section pursuant to an order of the Securities 

and Exchange Commission, or whose business is confined to 

the performance of functions of a clearing agency with respect 

to exempted securities, as defined in section 3(a)(12) of such 

Act for the purposes of such section 17A. 

(48A) The term ‘‘securities self regulatory organization’’ 

means either a securities association registered with the Securities and Exchange Commission under section 15A of the Securities Exchange Act of 1934 or a national securities exchange 

registered with the Securities and Exchange Commission 

under section 6 of the Securities Exchange Act of 1934. 

(49) The term ‘‘security’’— 

(A) includes— 

(i) note; 

(ii) stock; 

(iii) treasury stock; 

(iv) bond; 

(v) debenture; 

(vi) collateral trust certificate; 

(vii) pre-organization certificate or subscription; 

(viii) transferable share; 

(ix) voting-trust certificate; 

(x) certificate of deposit; 

(xi) certificate of deposit for security; 

(xii) investment contract or certificate of interest or 

participation in a profit-sharing agreement or in an 

oil, gas, or mineral royalty or lease, if such contract or 

interest is required to be the subject of a registration 

statement filed with the Securities and Exchange 

Commission under the provisions of the Securities Act 

of 1933, or is exempt under section 3(b) of such Act 

from the requirement to file such a statement; 

(xiii) interest of a limited partner in a limited partnership; 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
44 

(xiv) other claim or interest commonly known as ‘‘security’’; and 

(xv) certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant 

or right to subscribe to or purchase or sell, a security; 

but 

(B) does not include— 

(i) currency, check, draft, bill of exchange, or bank 

letter of credit; 

(ii) leverage transaction, as defined in section 761 of 

this title; 

(iii) commodity futures contract or forward contract; 

(iv) option, warrant, or right to subscribe to or purchase or sell a commodity futures contract; 

(v) option to purchase or sell a commodity; 

(vi) contract or certificate of a kind specified in subparagraph (A)(xii) of this paragraph that is not required to be the subject of a registration statement 

filed with the Securities and Exchange Commission 

and is not exempt under section 3(b) of the Securities 

Act of 1933 from the requirement to file such a statement; or 

(vii) debt or evidence of indebtedness for goods sold 

and delivered or services rendered. 

(50) The term ‘‘security agreement’’ means agreement that 

creates or provides for a security interest. 

(51) The term ‘‘security interest’’ means lien created by an 

agreement. 

(51A) The term ‘‘settlement payment’’ means, for purposes of 

the forward contract provisions of this title, a preliminary settlement payment, a partial settlement payment, an interim 

settlement payment, a settlement payment on account, a final 

settlement payment, a net settlement payment, or any other 

similar payment commonly used in the forward contract trade. 

(51B) The term ‘‘single asset real estate’’ means real property 

constituting a single property or project, other than residential 

real property with fewer than 4 residential units, which generates substantially all of the gross income of a debtor who is 

not a family farmer and on which no substantial business is 

being conducted by a debtor other than the business of operating the real property and activities incidental thereto. 

(51C) The term ‘‘small business case’’ means a case filed 

under chapter 11 of this title in which the debtor is a small 

business debtor. 

(51D) The term ‘‘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 

filing of the petition or the date of 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 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
45 

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). 

(52) The term ‘‘State’’ includes the District of Columbia and 

Puerto Rico, except for the purpose of defining who may be a 

debtor under chapter 9 of this title. 

(53) The term ‘‘statutory lien’’ means lien arising solely by 

force of a statute on specified circumstances or conditions, or 

lien of distress for rent, whether or not statutory, but does not 

include security interest or judicial lien, whether or not such 

interest or lien is provided by or is dependent on a statute and 

whether or not such interest or lien is made fully effective by 

statute. 

(53A) The term ‘‘stockbroker’’ means person— 

(A) with respect to which there is a customer, as defined 

in section 741 of this title; and 

(B) that is engaged in the business of effecting transactions in securities— 

(i) for the account of others; or 

(ii) with members of the general public, from or for 

such person’s own account. 

(53B) The term ‘‘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, precious metals, or other commodity 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; 

(VIII) a weather swap, option, future, or forward agreement; 

(IX) an emissions swap, option, future, or forward agreement; or 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
46 

(X) an inflation swap, option, future, or forward 

agreement; 

(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 or other derivatives markets (including terms and conditions incorporated by reference therein); and 

(II) is a forward, swap, future, option, or spot 

transaction 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; 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 Gramm-Leach-Bliley Act, the Legal Certainty 

for Bank Products Act of 2000, the securities laws (as such 

term is defined in section 3(a)(47) of the Securities Exchange Act of 1934) and the Commodity Exchange Act. 

(53C) The term ‘‘swap participant’’ means an entity that, at 

any time before the filing of the petition, has an outstanding 

swap agreement with the debtor. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
47 

(56A) The term ‘‘term overriding royalty’’ means an interest 

in liquid or gaseous hydrocarbons in place or to be produced 

from particular real property that entitles the owner thereof to 

a share of production, or the value thereof, for a term limited 

by time, quantity, or value realized. 

(53D) The term ‘‘timeshare plan’’ means and shall include 

that interest purchased in any arrangement, plan, scheme, or 

similar device, but not including exchange programs, whether 

by membership, agreement, tenancy in common, sale, lease, 

deed, rental agreement, license, right to use agreement, or by 

any other means, whereby a purchaser, in exchange for consideration, receives a right to use accommodations, facilities, or 

recreational sites, whether improved or unimproved, for a specific period of time less than a full year during any given year, 

but not necessarily for consecutive years, and which extends 

for a period of more than three years. A ‘‘timeshare interest’’ 

is that interest purchased in a timeshare plan which grants 

the purchaser the right to use and occupy accommodations, facilities, or recreational sites, whether improved or unimproved, 

pursuant to a timeshare plan. 

(54) 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. 

(54A) The term ‘‘uninsured State member bank’’ means a 

State member bank (as defined in section 3 of the Federal Deposit Insurance Act) the deposits of which are not insured by 

the Federal Deposit Insurance Corporation. 

(55) The term ‘‘United States’’, when used in a geographical 

sense, includes all locations where the judicial jurisdiction of 

the United States extends, including territories and possessions of the United States. 

* * * * * * * 

§ 103. Applicability of chapters 

(a) Except as provided in section 1161 of this title, chapters 1, 

3, and 5 of this title apply in a case under chapter 7, 11, 12, or 

13 of this title, and this chapter, sections 307, 362(o), 555 through 

557, and 559 through 562 apply in a case under chapter 15. 

(b) Subchapters I and II of chapter 7 of this title apply only in 

a case under such chapter. 

(c) Subchapter III of chapter 7 of this title applies only in a case 

under such chapter concerning a stockbroker. 

(d) Subchapter IV of chapter 7 of this title applies only in a case 

under such chapter concerning a commodity broker. 

(e) SCOPE OF APPLICATION.—Subchapter V of chapter 7 of this 

title shall apply only in a case under such chapter concerning the 

liquidation of an uninsured State member bank, or a corporation 

organized under section 25A of the Federal Reserve Act, which operates, or operates as, a multilateral clearing organization pursuVerDate Sep 11 2014 04:24 Mar 24, 2016 Jkt 059006 PO 00000 Frm 00047 Fmt 6659 Sfmt 6601 E:\HR\OC\HR477.XXX HR477

smartinez on DSK4TPTVN1PROD with REPORTS-HSE
48 

ant to section 409 of the Federal Deposit Insurance Corporation 

Improvement Act of 1991. 

(f) Except as provided in section 901 of this title, only chapters 

1 and 9 of this title apply in a case under such chapter 9. 

(g) Except as provided in section 901 of this title, subchapters I, 

II, and III of chapter 11 of this title apply only in a case under 

such chapter. 

(h) Subchapter IV of chapter 11 of this title applies only in a case 

under such chapter concerning a railroad. 

(i) Chapter 13 of this title applies only in a case under such chapter. 

(j) Chapter 12 of this title applies only in a case under such chapter. 

(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. 

(l) Subchapter V of chapter 11 of this title applies only in a case 

under chapter 11 concerning a covered financial corporation. 

* * * * * * * 

§ 109. Who may be a debtor 

(a) Notwithstanding any other provision of this section, only a 

person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under 

this title. 

(b) A person may be a debtor under chapter 7 of this title only 

if such person is not— 

(1) a railroad; 

(2) a domestic insurance company, bank, savings bank, cooperative bank, savings and loan association, building and loan 

association, homestead association, a New Markets Venture 

Capital company as defined in section 351 of the Small Business Investment Act of 1958, a small business investment company licensed by the Small Business Administration under section 301 of the Small Business Investment Act of 1958, credit 

union, or industrial bank or similar institution which is an insured bank as defined in section 3(h) of the Federal Deposit Insurance Act, except that an uninsured State member bank, or 

a corporation organized under section 25A of the Federal Reserve Act, which operates, or operates as, a multilateral clearing organization pursuant to section 409 of the Federal Deposit 

Insurance Corporation Improvement Act of 1991 may be a 

debtor if a petition is filed at the direction of the Board of Governors of the Federal Reserve System; øor¿ 

(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 

Statesø.¿; or 

(4) a covered financial corporation. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
49 

(c) An entity may be a debtor under chapter 9 of this title if and 

only if such entity— 

(1) is a municipality; 

(2) is specifically authorized, in its capacity as a municipality 

or by name, to be a debtor under such chapter by State law, 

or by a governmental officer or organization empowered by 

State law to authorize such entity to be a debtor under such 

chapter; 

(3) is insolvent; 

(4) desires to effect a plan to adjust such debts; and 

(5)(A) has obtained the agreement of creditors holding at 

least a majority in amount of the claims of each class that such 

entity intends to impair under a plan in a case under such 

chapter; 

(B) has negotiated in good faith with creditors and has failed 

to obtain the agreement of creditors holding at least a majority 

in amount of the claims of each class that such entity intends 

to impair under a plan in a case under such chapter; 

(C) is unable to negotiate with creditors because such negotiation is impracticable; or 

(D) reasonably believes that a creditor may attempt to obtain 

a transfer that is avoidable under section 547 of this title. 

(d) Only a railroad, a person that may be a debtor under chapter 

7 of this title (except a stockbroker or a commodity broker), øand¿ 

an uninsured State member bank, øor¿ a corporation organized 

under section 25A of the Federal Reserve Act, which operates, or 

operates as, a multilateral clearing organization pursuant to section 409 of the Federal Deposit Insurance Corporation Improvement Act of 1991, or a covered financial corporation may be a debtor under chapter 11 of this title. 

(e) Only an individual with regular income that owes, on the date 

of the filing of the petition, noncontingent, liquidated, unsecured 

debts of less than $250,000 and noncontingent, liquidated, secured 

debts of less than $750,000, or an individual with regular income 

and such individual’s spouse, except a stockbroker or a commodity 

broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $250,000 

and noncontingent, liquidated, secured debts of less than $750,000 

may be a debtor under chapter 13 of this title. 

(f) Only a family farmer or family fisherman with regular annual 

income may be a debtor under chapter 12 of this title. 

(g) Notwithstanding any other provision of this section, no individual or family farmer may be a debtor under this title who has 

been a debtor in a case pending under this title at any time in the 

preceding 180 days if— 

(1) the case was dismissed by the court for willful failure of 

the debtor to abide by orders of the court, or to appear before 

the court in proper prosecution of the case; or 

(2) the debtor requested and obtained the voluntary dismissal of the case following the filing of a request for relief 

from the automatic stay provided by section 362 of this title. 

(h)(1) Subject to paragraphs (2) and (3), and notwithstanding any 

other provision of this section other than paragraph (4) of this subsection, an individual may not be a debtor under this title unless 

such individual has, during the 180-day period ending on the date 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
50 

of filing of the petition by such 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 such 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 the 

bankruptcy administrator, if any) determines that the approved 

nonprofit budget and credit counseling agencies for such district 

are not reasonably able to provide adequate services to the additional individuals who would otherwise seek credit counseling from 

such agencies by reason of the requirements of paragraph (1). 

(B) The United States trustee (or the bankruptcy administrator, 

if any) who makes a determination described in subparagraph (A) 

shall review such determination not later than 1 year after the 

date of such determination, and not less frequently than annually 

thereafter. Notwithstanding the preceding sentence, a nonprofit 

budget and credit counseling agency may be disapproved by the 

United States trustee (or the bankruptcy administrator, if any) 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 7-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. 

(4) The requirements of paragraph (1) shall not apply with respect to a debtor whom the court determines, after notice and hearing, is unable to complete those requirements because of incapacity, 

disability, or active military duty in a military combat zone. For 

the purposes of this paragraph, incapacity means that the debtor 

is impaired by reason of mental illness or mental deficiency so that 

he is incapable of realizing and making rational decisions with respect to his financial responsibilities; and ‘‘disability’’ means that 

the debtor is so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet 

briefing required under paragraph (1). 

* * * * * * * 

CHAPTER 3—CASE ADMINISTRATION 

* * * * * * * 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
51 

SUBCHAPTER II—OFFICERS 

* * * * * * * 

§ 322. Qualification of trustee 

(a) Except as provided in subsection (b)(1), a person selected 

under section 701, 702, 703, 1104, 1163, 1202, or 1302 of this title 

to serve as trustee in a case under this title qualifies if before 

seven days after such selection, and before beginning official duties, 

such person has filed with the court a bond in favor of the United 

States conditioned on the faithful performance of such official duties. 

(b)(1) The United States trustee qualifies wherever such trustee 

serves as trustee in a case under this title. 

(2) øThe¿ In cases under subchapter V, the United States trustee 

shall recommend to the court, and in all other cases, the United 

States trustee shall determine— 

(A) the amount of a bond required to be filed under subsection (a) of this section; and 

(B) the sufficiency of the surety on such bond. 

(c) A trustee is not liable personally or on such trustee’s bond in 

favor of the United States for any penalty or forfeiture incurred by 

the debtor. 

(d) A proceeding on a trustee’s bond may not be commenced after 

two years after the date on which such trustee was discharged. 

* * * * * * * 

CHAPTER 7—LIQUIDATION 

* * * * * * * 

SUBCHAPTER II—COLLECTION, LIQUIDATION, AND 

DISTRIBUTION OF THE ESTATE 

* * * * * * * 

§ 726. Distribution of property of the estate 

(a) Except as provided in section 510 of this title, property of the 

estate shall be distributed— 

(1) first, in payment of any unpaid fees, costs, and expenses 

of a special trustee appointed under section 1186, and then in 

payment of claims of the kind specified in, and in the order 

specified in, section 507 of this title, proof of which is timely 

filed under section 501 of this title or tardily filed 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; 

(2) second, in payment of any allowed unsecured claim, other 

than a claim of a kind specified in paragraph (1), (3), or (4) of 

this subsection, proof of which is— 

(A) timely filed under section 501(a) of this title; 

(B) timely filed under section 501(b) or 501(c) of this 

title; or 

(C) tardily filed under section 501(a) of this title, if— 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
52 

(i) the creditor that holds such claim did not have 

notice or actual knowledge of the case in time for timely filing of a proof of such claim under section 501(a) 

of this title; and 

(ii) proof of such claim is filed in time to permit payment of such claim; 

(3) third, in payment of any allowed unsecured claim proof 

of which is tardily filed under section 501(a) of this title, other 

than a claim of the kind specified in paragraph (2)(C) of this 

subsection; 

(4) fourth, in payment of any allowed claim, whether secured 

or unsecured, for any fine, penalty, or forfeiture, or for multiple, exemplary, or punitive damages, arising before the earlier of the order for relief or the appointment of a trustee, to 

the extent that such fine, penalty, forfeiture, or damages are 

not compensation for actual pecuniary loss suffered by the 

holder of such claim; 

(5) fifth, in payment of interest at the legal rate from the 

date of the filing of the petition, on any claim paid under paragraph (1), (2), (3), or (4) of this subsection; and 

(6) sixth, to the debtor. 

(b) Payment on claims of a kind specified in paragraph (1), (2), 

(3), (4), (5), (6), (7), (8), (9), or (10) of section 507(a) of this title, 

or in paragraph (2), (3), (4), or (5) of subsection (a) of this section, 

shall be made pro rata among claims of the kind specified in each 

such particular paragraph, except that in a case that has been converted to this chapter under section 1112, 1208, or 1307 of this 

title, a claim allowed under section 503(b) of this title incurred 

under this chapter after such conversion has priority over a claim 

allowed under section 503(b) of this title incurred under any other 

chapter of this title or under this chapter before such conversion 

and over any expenses of a custodian superseded under section 543 

of this title. 

(c) Notwithstanding subsections (a) and (b) of this section, if 

there is property of the kind specified in section 541(a)(2) of this 

title, or proceeds of such property, in the estate, such property or 

proceeds shall be segregated from other property of the estate, and 

such property or proceeds and other property of the estate shall be 

distributed as follows: 

(1) Claims allowed under section 503 of this title shall be 

paid either from property of the kind specified in section 

541(a)(2) of this title, or from other property of the estate, as 

the interest of justice requires. 

(2) Allowed claims, other than claims allowed under section 

503 of this title, shall be paid in the order specified in subsection (a) of this section, and, with respect to claims of a kind 

specified in a particular paragraph of section 507 of this title 

or subsection (a) of this section, in the following order and 

manner: 

(A) First, community claims against the debtor or the 

debtor’s spouse shall be paid from property of the kind 

specified in section 541(a)(2) of this title, except to the extent that such property is solely liable for debts of the 

debtor. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
53 

(B) Second, to the extent that community claims against 

the debtor are not paid under subparagraph (A) of this 

paragraph, such community claims shall be paid from 

property of the kind specified in section 541(a)(2) of this 

title that is solely liable for debts of the debtor. 

(C) Third, to the extent that all claims against the debtor including community claims against the debtor are not 

paid under subparagraph (A) or (B) of this paragraph such 

claims shall be paid from property of the estate other than 

property of the kind specified in section 541(a)(2) of this 

title. 

(D) Fourth, to the extent that community claims against 

the debtor or the debtor’s spouse are not paid under subparagraph (A), (B), or (C) of this paragraph, such claims 

shall be paid from all remaining property of the estate. 

* * * * * * * 

CHAPTER 11—REORGANIZATION 

SUBCHAPTER I—OFFICERS AND ADMINISTRATION 

* * * * * * * 

§ 1112. Conversion or dismissal 

(a) The debtor may convert a case under this chapter to a case 

under chapter 7 of this title unless— 

(1) the debtor is not a debtor in possession; 

(2) the case originally was commenced as an involuntary 

case under this chapter; or 

(3) the case was converted to a case under this chapter other 

than on the debtor’s request. 

(b)(1) Except as provided in paragraph (2) and subsection (c), on 

request of a party in interest, and after notice and a hearing, the 

court shall convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best 

interests of creditors and the estate, for cause unless the court determines that the appointment under section 1104(a) of a trustee 

or an examiner is in the best interests of creditors and the estate. 

(2) The court may not convert a case under this chapter to a case 

under chapter 7 or dismiss a case under this chapter if the court 

finds and specifically identifies unusual circumstances establishing 

that converting or dismissing the case is not in the best interests 

of creditors and the estate, and the debtor or any other party in 

interest 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 converting or dismissing the case 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. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
54 

(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, if any); 

(I) failure timely to pay taxes owed after the date of the 

order for relief or to file tax returns due after the date of 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 of the filing of 

the petition. 

(c) The court may not convert a case under this chapter to a case 

under chapter 7 of this title if the debtor is a farmer or a corporation that is not a moneyed, business, or commercial corporation, 

unless the debtor requests such conversion. 

(d) The court may convert a case under this chapter to a case 

under chapter 12 or 13 of this title only if— 

(1) the debtor requests such conversion; 

(2) the debtor has not been discharged under section 1141(d) 

of this title; and 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
55 

(3) if the debtor requests conversion to chapter 12 of this 

title, such conversion is equitable. 

(e) Except as provided in subsections (c) and (f), the court, on request of the United States trustee, may convert a case under this 

chapter to a case under chapter 7 of this title or may dismiss a 

case under this chapter, whichever is in the best interest of creditors and the estate if the debtor in a voluntary case fails to file, 

within fifteen days after the filing of the petition commencing such 

case or such additional time as the court may allow, the information required by paragraph (1) of section 521(a), including a list 

containing the names and addresses of the holders of the twenty 

largest unsecured claims (or of all unsecured claims if there are 

fewer than twenty unsecured claims), and the approximate dollar 

amounts of each of such claims. 

(f) Notwithstanding any other provision of this section, a case 

may not be converted to a case under another chapter of this title 

unless the debtor may be a debtor under such chapter. 

(g) Notwithstanding section 109(b), the court may convert a case 

under subchapter V to a case under chapter 7 if— 

(1) a transfer approved under section 1185 has been consummated; 

(2) the court has ordered the appointment of a special trustee 

under section 1186; and 

(3) the court finds, after notice and a hearing, that conversion 

is in the best interest of the creditors and the estate. 

* * * * * * * 

SUBCHAPTER II—THE PLAN 

* * * * * * * 

§ 1129. Confirmation of plan 

(a) The court shall confirm a plan only if all of the following requirements are met: 

(1) The plan complies with the applicable provisions of this 

title. 

(2) The proponent of the plan complies with the applicable 

provisions of this title. 

(3) The plan has been proposed in good faith and not by any 

means forbidden by law. 

(4) Any payment made or to be made by the proponent, by 

the debtor, or by a person issuing securities or acquiring property under the plan, for services or for costs and expenses in 

or in connection with the case, or in connection with the plan 

and incident to the case, has been approved by, or is subject 

to the approval of, the court as reasonable. 

(5)(A)(i) The proponent of the plan has disclosed the identity 

and affiliations of any individual proposed to serve, after confirmation of the plan, as a director, officer, or voting trustee of 

the debtor, an affiliate of the debtor participating in a joint 

plan with the debtor, or a successor to the debtor under the 

plan; and 

(ii) the appointment to, or continuance in, such office of such 

individual, is consistent with the interests of creditors and equity security holders and with public policy; and 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
56 

(B) the proponent of the plan has disclosed the identity of 

any insider that will be employed or retained by the reorganized debtor, and the nature of any compensation for such insider. 

(6) Any governmental regulatory commission with jurisdiction, after confirmation of the plan, over the rates of the debtor 

has approved any rate change provided for in the plan, or such 

rate change is expressly conditioned on such approval. 

(7) With respect to each impaired class of claims or interests— 

(A) each holder of a claim or interest of such class— 

(i) has accepted the plan; or 

(ii) will receive or retain under the plan on account 

of such claim or interest property of a value, as of the 

effective date of the plan, that is not less than the 

amount that such holder would so receive or retain if 

the debtor were liquidated under chapter 7 of this title 

on such date; or 

(B) if section 1111(b)(2) of this title applies to the claims 

of such class, each holder of a claim of such class will receive or retain under the plan on account of such claim 

property of a value, as of the effective date of the plan, 

that is not less than the value of such holder’s interest in 

the estate’s interest in the property that secures such 

claims. 

(8) With respect to each class of claims or interests— 

(A) such class has accepted the plan; or 

(B) such class is not impaired under the plan. 

(9) Except to the extent that the holder of a particular claim 

has agreed to a different treatment of such claim, the plan provides that— 

(A) with respect to a claim of a kind specified in section 

507(a)(2) or 507(a)(3) of this title, on the effective date of 

the plan, the holder of such claim will receive on account 

of such claim cash equal to the allowed amount of such 

claim; 

(B) with respect to a class of claims of a kind specified 

in section 507(a)(1), 507(a)(4), 507(a)(5), 507(a)(6), or 

507(a)(7) of this title, each holder of a claim of such class 

will receive— 

(i) if such class has accepted the plan, deferred cash 

payments of a value, as of the effective date of the 

plan, equal to the allowed amount of such claim; or 

(ii) if such class has not accepted the plan, cash on 

the effective date of the plan equal to the allowed 

amount of such claim; 

(C) with respect to a claim of a kind specified in section 

507(a)(8) of this title, the holder of such claim will receive 

on account of such claim 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 order for relief under section 301, 302, 

or 303; and 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
57 

(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 

(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). 

(10) If a class of claims is impaired under the plan, at least 

one class of claims that is impaired under the plan has accepted the plan, determined without including any acceptance of 

the plan by any insider. 

(11) Confirmation of the plan is not likely to be followed by 

the liquidation, or the need for further financial reorganization, of the debtor or any successor to the debtor under the 

plan, unless such liquidation or reorganization is proposed in 

the plan. 

(12) All fees payable under section 1930 of title 28, as determined by the court at the hearing on confirmation of the plan, 

have been paid or the plan provides for the payment of all such 

fees on the effective date of the plan. 

(13) The plan provides for the continuation after its effective 

date of payment of all retiree benefits, as that term is defined 

in section 1114 of this title, at the level established pursuant 

to subsection (e)(1)(B) or (g) of section 1114 of this title, at any 

time prior to confirmation of the plan, for the duration of the 

period the debtor has obligated itself to provide such benefits. 

(14) If the debtor is required by a judicial or administrative 

order, or by statute, to pay a domestic support obligation, the 

debtor has paid all amounts payable under such order or such 

statute for such obligation that first become payable after the 

date of the filing of the petition. 

(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. 

(16) All transfers of property under 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. 

(17) In a case under subchapter V, all payable fees, costs, and 

expenses of the special trustee have been paid or the plan proVerDate Sep 11 2014 04:24 Mar 24, 2016 Jkt 059006 PO 00000 Frm 00057 Fmt 6659 Sfmt 6603 E:\HR\OC\HR477.XXX HR477

smartinez on DSK4TPTVN1PROD with REPORTS-HSE
58 

vides for the payment of all such fees, costs, and expenses on 

the effective date of the plan. 

(18) In a case under subchapter V, confirmation of the plan 

is not likely to cause serious adverse effects on financial stability in the United States. 

(b)(1) Notwithstanding section 510(a) of this title, if all of the applicable requirements of subsection (a) of this section other than 

paragraph (8) are met with respect to a plan, the court, on request 

of the proponent of the plan, shall confirm the plan notwithstanding the requirements of such paragraph if the plan does not 

discriminate unfairly, and is fair and equitable, with respect to 

each class of claims or interests that is impaired under, and has 

not accepted, the plan. 

(2) For the purpose of this subsection, the condition that a plan 

be fair and equitable with respect to a class includes the following 

requirements: 

(A) With respect to a class of secured claims, the plan provides— 

(i)(I) that the holders of such claims retain the liens securing such claims, whether the property subject to such 

liens is retained by the debtor or transferred to another 

entity, to the extent of the allowed amount of such claims; 

and 

(II) that each holder of a claim of such class receive on 

account of such claim deferred cash payments totaling at 

least the allowed amount of such claim, of a value, as of 

the effective date of the plan, of at least the value of such 

holder’s interest in the estate’s interest in such property; 

(ii) for the sale, subject to section 363(k) of this title, of 

any property that is subject to the liens securing such 

claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of 

such liens on proceeds under clause (i) or (iii) of this subparagraph; or 

(iii) for the realization by such holders of the indubitable 

equivalent of such claims. 

(B) With respect to a class of unsecured claims— 

(i) the plan provides that each holder of a claim of such 

class receive or retain on account of such claim property of 

a value, as of the effective date of the plan, equal to the 

allowed amount of such claim; or 

(ii) the holder of any claim or interest that is junior to 

the claims of such class will not receive or retain under the 

plan on account of such junior claim or interest any property, except that in a case in which the debtor is an individual, the debtor may retain property included in the estate under section 1115, subject to the requirements of 

subsection (a)(14) of this section. 

(C) With respect to a class of interests— 

(i) the plan provides that each holder of an interest of 

such class receive or retain on account of such interest 

property of a value, as of the effective date of the plan, 

equal to the greatest of the allowed amount of any fixed 

liquidation preference to which such holder is entitled, any 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
59 

fixed redemption price to which such holder is entitled, or 

the value of such interest; or 

(ii) the holder of any interest that is junior to the interests of such class will not receive or retain under the plan 

on account of such junior interest any property. 

(c) Notwithstanding subsections (a) and (b) of this section and except as provided in section 1127(b) of this title, the court may confirm only one plan, unless the order of confirmation in the case has 

been revoked under section 1144 of this title. If the requirements 

of subsections (a) and (b) of this section are met with respect to 

more than one plan, the court shall consider the preferences of 

creditors and equity security holders in determining which plan to 

confirm. 

(d) Notwithstanding any other provision of this section, on request of a party in interest that is a governmental unit, the court 

may not confirm a plan if the principal purpose of the plan is the 

avoidance of taxes or the avoidance of the application of section 5 

of the Securities Act of 1933. In any hearing under this subsection, 

the governmental unit has the burden of proof on the issue of 

avoidance. 

(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 the 

plan is filed unless the time for confirmation is extended in accordance with section 1121(e)(3). 

* * * * * * * 

SUBCHAPTER V—LIQUIDATION, REORGANIZATION, OR RECAPITALIZATION OF A COVERED FINANCIAL CORPORATION 

§ 1181. Inapplicability of other sections 

Sections 303 and 321(c) do not apply in a case under this subchapter concerning a covered financial corporation. Section 365 does 

not apply to a transfer under section 1185, 1187, or 1188. 

§ 1182. Definitions for this subchapter 

In this subchapter, the following definitions shall apply: 

(1) The term ‘‘Board’’ means the Board of Governors of the 

Federal Reserve System. 

(2) The term ‘‘bridge company’’ means a newly formed corporation to which property of the estate may be transferred 

under section 1185(a) and the equity securities of which may be 

transferred to a special trustee under section 1186(a). 

(3) The term ‘‘capital structure debt’’ means all unsecured 

debt of the debtor for borrowed money for which the debtor is 

the primary obligor, other than a qualified financial contract 

and other than debt secured by a lien on property of the estate 

that is to be transferred to a bridge company pursuant to an 

order of the court under section 1185(a). 

(4) The term ‘‘contractual right’’ means a contractual right of 

a kind defined in section 555, 556, 559, 560, or 561. 

(5) The term ‘‘qualified financial contract’’ means any contract of a kind defined in paragraph (25), (38A), (47), or (53B) 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
60 

of section 101, section 741(7), or paragraph (4), (5), (11), or (13) 

of section 761. 

(6) The term ‘‘special trustee’’ means the trustee of a trust 

formed under section 1186(a)(1). 

§ 1183. Commencement of a case concerning a covered financial corporation 

(a) A case under this subchapter concerning a covered financial 

corporation may be commenced by the filing of a petition with the 

court by the debtor under section 301 only if the debtor states to the 

best of its knowledge under penalty of perjury in the petition that 

it is a covered financial corporation. 

(b) The commencement of a case under subsection (a) constitutes 

an order for relief under this subchapter. 

(c) The members of the board of directors (or body performing 

similar functions) of a covered financial company shall have no liability to shareholders, creditors, or other parties in interest for a 

good faith filing of a petition to commence a case under this subchapter, or for any reasonable action taken in good faith in contemplation of or in connection with such a petition or a transfer 

under section 1185 or section 1186, whether prior to or after commencement of the case. 

(d) Counsel to the debtor shall provide, to the greatest extent practicable without disclosing the identity of the potential debtor, sufficient confidential notice to the chief judge of the court of appeals for 

the circuit embracing the district in which such counsel intends to 

file a petition to commence a case under this subchapter regarding 

the potential commencement of such case. The chief judge of such 

court shall randomly assign to preside over such case a bankruptcy 

judge selected from among the bankruptcy judges designated by the 

Chief Justice of the United States under section 298 of title 28. 

§ 1184. Regulators 

The Board, the Securities Exchange Commission, the Office of the 

Comptroller of the Currency of the Department of the Treasury, the 

Commodity Futures Trading Commission, and the Federal Deposit 

Insurance Corporation may raise and may appear and be heard on 

any issue in any case or proceeding under this subchapter. 

§ 1185. Special transfer of property of the estate 

(a) On request of the trustee, and after notice and a hearing that 

shall occur not less than 24 hours after the order for relief, the court 

may order a transfer under this section of property of the estate, and 

the assignment of executory contracts, unexpired leases, and qualified financial contracts of the debtor, to a bridge company. Upon the 

entry of an order approving such transfer, any property transferred, 

and any executory contracts, unexpired leases, and qualified financial contracts assigned under such order shall no longer be property 

of the estate. Except as provided under this section, the provisions 

of section 363 shall apply to a transfer and assignment under this 

section. 

(b) Unless the court orders otherwise, notice of a request for an 

order under subsection (a) shall consist of electronic or telephonic 

notice of not less than 24 hours to— 

(1) the debtor; 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
61 

(2) the holders of the 20 largest secured claims against the 

debtor; 

(3) the holders of the 20 largest unsecured claims against the 

debtor; 

(4) counterparties to any debt, executory contract, unexpired 

lease, and qualified financial contract requested to be transferred under this section; 

(5) the Board; 

(6) the Federal Deposit Insurance Corporation; 

(7) the Secretary of the Treasury and the Office of the Comptroller of the Currency of the Treasury; 

(8) the Commodity Futures Trading Commission; 

(9) the Securities and Exchange Commission; 

(10) the United States trustee or bankruptcy administrator; 

and 

(11) each primary financial regulatory agency, as defined in 

section 2(12) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, with respect to any affiliate the equity securities of which are proposed to be transferred under this section. 

(c) The court may not order a transfer under this section unless 

the court determines, based upon a preponderance of the evidence, 

that— 

(1) the transfer under this section is necessary to prevent serious adverse effects on financial stability in the United States; 

(2) the transfer does not provide for the assumption of any 

capital structure debt by the bridge company; 

(3) the transfer does not provide for the transfer to the bridge 

company of any property of the estate that is subject to a lien 

securing a debt, executory contract, unexpired lease or agreement (including a qualified financial contract) of the debtor unless— 

(A)(i) the bridge company assumes such debt, executory 

contract, unexpired lease or agreement (including a qualified financial contract), including any claims arising in respect thereof that would not be allowed secured claims 

under section 506(a)(1) and after giving effect to such 

transfer, such property remains subject to the lien securing 

such debt, executory contract, unexpired lease or agreement 

(including a qualified financial contract); and 

(ii) the court has determined that assumption of such 

debt, executory contract, unexpired lease or agreement (including a qualified financial contract) by the bridge company is in the best interests of the estate; or 

(B) such property is being transferred to the bridge company in accordance with the provisions of section 363; 

(4) the transfer does not provide for the assumption by the 

bridge company of any debt, executory contract, unexpired lease 

or agreement (including a qualified financial contract) of the 

debtor secured by a lien on property of the estate unless the 

transfer provides for such property to be transferred to the 

bridge company in accordance with paragraph (3)(A) of this 

subsection; 

(5) the transfer does not provide for the transfer of the equity 

of the debtor; 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
62 

(6) the trustee has demonstrated that the bridge company is 

not likely to fail to meet the obligations of any debt, executory 

contract, qualified financial contract, or unexpired lease assumed and assigned to the bridge company; 

(7) the transfer provides for the transfer to a special trustee 

all of the equity securities in the bridge company and appointment of a special trustee in accordance with section 1186; 

(8) after giving effect to the transfer, adequate provision has 

been made for the fees, costs, and expenses of the estate and special trustee; and 

(9) the bridge company will have governing documents, and 

initial directors and senior officers, that are in the best interest 

of creditors and the estate. 

(d) Immediately before a transfer under this section, the bridge 

company that is the recipient of the transfer shall— 

(1) not have any property, executory contracts, unexpired 

leases, qualified financial contracts, or debts, other than any 

property acquired or executory contracts, unexpired leases, or 

debts assumed when acting as a transferee of a transfer under 

this section; and 

(2) have equity securities that are property of the estate, 

which may be sold or distributed in accordance with this title. 

§ 1186. Special trustee 

(a)(1) An order approving a transfer under section 1185 shall require the trustee to transfer to a qualified and independent special 

trustee, who is appointed by the court, all of the equity securities in 

the bridge company that is the recipient of a transfer under section 

1185 to hold in trust for the sole benefit of the estate, subject to satisfaction of the special trustee’s fees, costs, and expenses. The trust 

of which the special trustee is the trustee shall be a newly formed 

trust governed by a trust agreement approved by the court as in the 

best interests of the estate, and shall exist for the sole purpose of 

holding and administering, and shall be permitted to dispose of, the 

equity securities of the bridge company in accordance with the trust 

agreement. 

(2) In connection with the hearing to approve a transfer under 

section 1185, the trustee shall confirm to the court that the Board 

has been consulted regarding the identity of the proposed special 

trustee and advise the court of the results of such consultation. 

(b) The trust agreement governing the trust shall provide— 

(1) for the payment of the fees, costs, expenses, and indemnities of the special trustee from the assets of the debtor’s estate; 

(2) that the special trustee provide— 

(A) quarterly reporting to the estate, which shall be filed 

with the court; and 

(B) information about the bridge company reasonably requested by a party in interest to prepare a disclosure statement for a plan providing for distribution of any securities 

of the bridge company if such information is necessary to 

prepare such disclosure statement; 

(3) that for as long as the equity securities of the bridge company are held by the trust, the special trustee shall file a notice 

with the court in connection with— 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
63 

(A) any change in a director or senior officer of the bridge 

company; 

(B) any modification to the governing documents of the 

bridge company; and 

(C) any material corporate action of the bridge company, 

including— 

(i) recapitalization; 

(ii) a material borrowing; 

(iii) termination of an intercompany debt or guarantee; 

(iv) a transfer of a substantial portion of the assets 

of the bridge company; or 

(v) the issuance or sale of any securities of the bridge 

company; 

(4) that any sale of any equity securities of the bridge company shall not be consummated until the special trustee 

consults with the Federal Deposit Insurance Corporation and 

the Board regarding such sale and discloses the results of such 

consultation with the court; 

(5) that, subject to reserves for payments permitted under 

paragraph (1) provided for in the trust agreement, the proceeds 

of the sale of any equity securities of the bridge company by the 

special trustee be held in trust for the benefit of or transferred 

to the estate; 

(6) the process and guidelines for the replacement of the special trustee; and 

(7) that the property held in trust by the special trustee is 

subject to distribution in accordance with subsection (c). 

(c)(1) The special trustee shall distribute the assets held in trust— 

(A) if the court confirms a plan in the case, in accordance 

with the plan on the effective date of the plan; or 

(B) if the case is converted to a case under chapter 7, as ordered by the court. 

(2) As soon as practicable after a final distribution under paragraph (1), the office of the special trustee shall terminate, except as 

may be necessary to wind up and conclude the business and financial affairs of the trust. 

(d) After a transfer to the special trustee under this section, the 

special trustee shall be subject only to applicable nonbankruptcy 

law, and the actions and conduct of the special trustee shall no 

longer be subject to approval by the court in the case under this subchapter. 

§ 1187. Temporary and supplemental automatic stay; assumed debt 

(a)(1) A petition filed under section 1183 operates as a stay, applicable to all entities, of the termination, acceleration, or modification 

of any debt, contract, lease, or agreement of the kind described in 

paragraph (2), or of any right or obligation under any such debt, 

contract, lease, or agreement, solely because of— 

(A) a default by the debtor under any such debt, contract, 

lease, or agreement; or 

(B) a provision in such debt, contract, lease, or agreement, or 

in applicable nonbankruptcy law, that is conditioned on— 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
64 

(i) the insolvency or financial condition of the debtor at 

any time before the closing of the case; 

(ii) the commencement of a case under this title concerning the debtor; 

(iii) the appointment of or taking possession by a trustee 

in a case under this title concerning the debtor or by a custodian before the commencement of the case; or 

(iv) a credit rating agency rating, or absence or withdrawal of a credit rating agency rating— 

(I) of the debtor at any time after the commencement 

of the case; 

(II) of an affiliate during the period from the commencement of the case until 48 hours after such order 

is entered; 

(III) of the bridge company while the trustee or the 

special trustee is a direct or indirect beneficial holder 

of more than 50 percent of the equity securities of— 

(aa) the bridge company; or 

(bb) the affiliate, if all of the direct or indirect 

interests in the affiliate that are property of the estate are transferred under section 1185; or 

(IV) of an affiliate while the trustee or the special 

trustee is a direct or indirect beneficial holder of more 

than 50 percent of the equity securities of— 

(aa) the bridge company; or 

(bb) the affiliate, if all of the direct or indirect 

interests in the affiliate that are property of the estate are transferred under section 1185. 

(2) A debt, contract, lease, or agreement described in this paragraph is— 

(A) any debt (other than capital structure debt), executory 

contract, or unexpired lease of the debtor (other than a qualified 

financial contract); 

(B) any agreement under which the debtor issued or is obligated for debt (other than capital structure debt); 

(C) any debt, executory contract, or unexpired lease of an affiliate (other than a qualified financial contract); or 

(D) any agreement under which an affiliate issued or is obligated for debt. 

(3) The stay under this subsection terminates— 

(A) for the benefit of the debtor, upon the earliest of— 

(i) 48 hours after the commencement of the case; 

(ii) assumption of the debt, contract, lease, or agreement 

by the bridge company under an order authorizing a transfer under section 1185; 

(iii) a final order of the court denying the request for a 

transfer under section 1185; or 

(iv) the time the case is dismissed; and 

(B) for the benefit of an affiliate, upon the earliest of— 

(i) the entry of an order authorizing a transfer under section 1185 in which the direct or indirect interests in the affiliate that are property of the estate are not transferred 

under section 1185; 

(ii) a final order by the court denying the request for a 

transfer under section 1185; 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
65 

(iii) 48 hours after the commencement of the case if the 

court has not ordered a transfer under section 1185; or 

(iv) the time the case is dismissed. 

(4) Subsections (d), (e), (f), and (g) of section 362 apply to a stay 

under this subsection. 

(b) A debt, executory contract (other than a qualified financial 

contract), or unexpired lease of the debtor, or an agreement under 

which the debtor has issued or is obligated for any debt, may be assumed by a bridge company in a transfer under section 1185 notwithstanding any provision in an agreement or in applicable nonbankruptcy law that— 

(1) prohibits, restricts, or conditions the assignment of the 

debt, contract, lease, or agreement; or 

(2) accelerates, terminates, or modifies, or permits a party 

other than the debtor to terminate or modify, the debt, contract, 

lease, or agreement on account of— 

(A) the assignment of the debt, contract, lease, or agreement; or 

(B) a change in control of any party to the debt, contract, 

lease, or agreement. 

(c)(1) A debt, contract, lease, or agreement of the kind described 

in subparagraph (A) or (B) of subsection (a)(2) may not be accelerated, terminated, or modified, and any right or obligation under 

such debt, contract, lease, or agreement may not be accelerated, terminated, or modified, as to the bridge company solely because of a 

provision in the debt, contract, lease, or agreement or in applicable 

nonbankruptcy law— 

(A) of the kind described in subsection (a)(1)(B) as applied to 

the debtor; 

(B) that prohibits, restricts, or conditions the assignment of 

the debt, contract, lease, or agreement; or 

(C) that accelerates, terminates, or modifies, or permits a 

party other than the debtor to terminate or modify, the debt, 

contract, lease or agreement on account of— 

(i) the assignment of the debt, contract, lease, or agreement; or 

(ii) a change in control of any party to the debt, contract, 

lease, or agreement. 

(2) If there is a default by the debtor under a provision other than 

the kind described in paragraph (1) in a debt, contract, lease or 

agreement of the kind described in subparagraph (A) or (B) of subsection (a)(2), the bridge company may assume such debt, contract, 

lease, or agreement only if the bridge company— 

(A) shall cure the default; 

(B) compensates, or provides adequate assurance in connection with a transfer under section 1185 that the bridge company 

will promptly compensate, a party other than the debtor to the 

debt, contract, lease, or agreement, for any actual pecuniary loss 

to the party resulting from the default; and 

(C) provides adequate assurance in connection with a transfer 

under section 1185 of future performance under the debt, contract, lease, or agreement, as determined by the court under section 1185(c)(4). 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
66 

§ 1188. Treatment of qualified financial contracts and affiliate contracts 

(a) Notwithstanding sections 362(b)(6), 362(b)(7), 362(b)(17), 

362(b)(27), 362(o), 555, 556, 559, 560, and 561, a petition filed 

under section 1183 operates as a stay, during the period specified 

in section 1187(a)(3)(A), applicable to all entities, of the exercise of 

a contractual right— 

(1) to cause the modification, liquidation, termination, or acceleration of a qualified financial contract of the debtor or an 

affiliate; 

(2) to offset or net out any termination value, payment 

amount, or other transfer obligation arising under or in connection with a qualified financial contract of the debtor or an affiliate; or 

(3) under any security agreement or arrangement or other 

credit enhancement forming a part of or related to a qualified 

financial contract of the debtor or an affiliate. 

(b)(1) During the period specified in section 1187(a)(3)(A), the 

trustee or the affiliate shall perform all payment and delivery obligations under such qualified financial contract of the debtor or the 

affiliate, as the case may be, that become due after the commencement of the case. The stay provided under subsection (a) terminates 

as to a qualified financial contract of the debtor or an affiliate immediately upon the failure of the trustee or the affiliate, as the case 

may be, to perform any such obligation during such period. 

(2) Any failure by a counterparty to any qualified financial contract of the debtor or any affiliate to perform any payment or delivery obligation under such qualified financial contract, including 

during the pendency of the stay provided under subsection (a), shall 

constitute a breach of such qualified financial contract by the 

counterparty. 

(c) Subject to the court’s approval, a qualified financial contract 

between an entity and the debtor may be assigned to or assumed by 

the bridge company in a transfer under, and in accordance with, 

section 1185 if and only if— 

(1) all qualified financial contracts between the entity and the 

debtor are assigned to and assumed by the bridge company in 

the transfer under section 1185; 

(2) all claims of the entity against the debtor in respect of any 

qualified financial contract between the entity and the debtor 

(other than any claim that, under the terms of the qualified financial contract, is subordinated to the claims of general unsecured creditors) are assigned to and assumed by the bridge 

company; 

(3) all claims of the debtor against the entity under any 

qualified financial contract between the entity and the debtor 

are assigned to and assumed by the bridge company; and 

(4) all property securing or any other credit enhancement furnished by the debtor for any qualified financial contract described in paragraph (1) or any claim described in paragraph 

(2) or (3) under any qualified financial contract between the entity and the debtor is assigned to and assumed by the bridge 

company. 

(d) Notwithstanding any provision of a qualified financial contract or of applicable nonbankruptcy law, a qualified financial conVerDate Sep 11 2014 04:24 Mar 24, 2016 Jkt 059006 PO 00000 Frm 00066 Fmt 6659 Sfmt 6603 E:\HR\OC\HR477.XXX HR477

smartinez on DSK4TPTVN1PROD with REPORTS-HSE
67 

tract of the debtor that is assumed or assigned in a transfer under 

section 1185 may not be accelerated, terminated, or modified, after 

the entry of the order approving a transfer under section 1185, and 

any right or obligation under the qualified financial contract may 

not be accelerated, terminated, or modified, after the entry of the 

order approving a transfer under section 1185 solely because of a 

condition described in section 1187(c)(1), other than a condition of 

the kind specified in section 1187(b) that occurs after property of the 

estate no longer includes a direct beneficial interest or an indirect 

beneficial interest through the special trustee, in more than 50 percent of the equity securities of the bridge company. 

(e) Notwithstanding any provision of any agreement or in applicable nonbankruptcy law, an agreement of an affiliate (including an 

executory contract, an unexpired lease, qualified financial contract, 

or an agreement under which the affiliate issued or is obligated for 

debt) and any right or obligation under such agreement may not be 

accelerated, terminated, or modified, solely because of a condition 

described in section 1187(c)(1), other than a condition of the kind 

specified in section 1187(b) that occurs after the bridge company is 

no longer a direct or indirect beneficial holder of more than 50 percent of the equity securities of the affiliate, at any time after the 

commencement of the case if— 

(1) all direct or indirect interests in the affiliate that are 

property of the estate are transferred under section 1185 to the 

bridge company within the period specified in subsection (a); 

(2) the bridge company assumes— 

(A) any guarantee or other credit enhancement issued by 

the debtor relating to the agreement of the affiliate; and 

(B) any obligations in respect of rights of setoff, netting 

arrangement, or debt of the debtor that directly arises out 

of or directly relates to the guarantee or credit enhancement; and 

(3) any property of the estate that directly serves as collateral 

for the guarantee or credit enhancement is transferred to the 

bridge company. 

§ 1189. Licenses, permits, and registrations 

(a) Notwithstanding any otherwise applicable nonbankruptcy law, 

if a request is made under section 1185 for a transfer of property 

of the estate, any Federal, State, or local license, permit, or registration that the debtor or an affiliate had immediately before the commencement of the case and that is proposed to be transferred under 

section 1185 may not be accelerated, terminated, or modified at any 

time after the request solely on account of— 

(1) the insolvency or financial condition of the debtor at any 

time before the closing of the case; 

(2) the commencement of a case under this title concerning 

the debtor; 

(3) the appointment of or taking possession by a trustee in a 

case under this title concerning the debtor or by a custodian before the commencement of the case; or 

(4) a transfer under section 1185. 

(b) Notwithstanding any otherwise applicable nonbankruptcy law, 

any Federal, State, or local license, permit, or registration that the 

debtor had immediately before the commencement of the case that 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
68 

is included in a transfer under section 1185 shall be valid and all 

rights and obligations thereunder shall vest in the bridge company. 

§ 1190. Exemption from securities laws 

For purposes of section 1145, a security of the bridge company 

shall be deemed to be a security of a successor to the debtor under 

a plan if the court approves the disclosure statement for the plan 

as providing adequate information (as defined in section 1125(a)) 

about the bridge company and the security. 

§ 1191. Inapplicability of certain avoiding powers 

A transfer made or an obligation incurred by the debtor to an affiliate prior to or after the commencement of the case, including any 

obligation released by the debtor or the estate to or for the benefit 

of an affiliate, in contemplation of or in connection with a transfer 

under section 1185 is not avoidable under section 544, 547, 

548(a)(1)(B), or 549, or under any similar nonbankruptcy law. 

§ 1192. Consideration of financial stability 

The court may consider the effect that any decision in connection 

with this subchapter may have on financial stability in the United 

States. 

* * * * * * * 

TITLE 28, UNITED STATES CODE 

PART I—ORGANIZATION OF COURTS 

* * * * * * * 

CHAPTER 13—ASSIGNMENT OF JUDGES TO OTHER 

COURTS 

Sec. 

291. Circuit judges. 

* * * * * * * 

298. Judge for a case under subchapter V of chapter 11 of title 11. 

* * * * * * * 

§ 298. Judge for a case under subchapter V of chapter 11 of 

title 11 

(a)(1) Notwithstanding section 295, the Chief Justice of the 

United States shall designate not fewer than 10 bankruptcy judges 

to be available to hear a case under subchapter V of chapter 11 of 

title 11. Bankruptcy judges may request to be considered by the 

Chief Justice of the United States for such designation. 

(2) Notwithstanding section 155, a case under subchapter V of 

chapter 11 of title 11 shall be heard under section 157 by a bankruptcy judge designated under paragraph (1), who shall be randomly assigned to hear such case by the chief judge of the court of 

appeals for the circuit embracing the district in which the case is 

pending. To the greatest extent practicable, the approvals required 

under section 155 should be obtained. 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
69 

(3) If the bankruptcy judge assigned to hear a case under paragraph (2) is not assigned to the district in which the case is pending, the bankruptcy judge shall be temporarily assigned to the district. 

(b) A case under subchapter V of chapter 11 of title 11, and all 

proceedings in the case, shall take place in the district in which the 

case is pending. 

(c) In this section, the term ‘‘covered financial corporation’’ has the 

meaning given that term in section 101(9A) of title 11. 

* * * * * * * 

PART IV—JURISDICTION AND VENUE 

* * * * * * * 

CHAPTER 85—DISTRICT COURTS; JURISDICTION 

* * * * * * * 

§ 1334. Bankruptcy cases and proceedings 

(a) Except as provided in subsection (b) of this section, the district courts shall have original and exclusive jurisdiction of all 

cases under title 11. 

(b) Except as provided in subsection (e)(2), and notwithstanding 

any Act of Congress that confers exclusive jurisdiction on a court 

or courts other than the district courts, the district courts shall 

have original but not exclusive jurisdiction of all civil proceedings 

arising under title 11, or arising in or related to cases under title 

11. 

(c)(1) Except with respect to a case under chapter 15 of title 11, 

nothing in this section prevents a district court in the interest of 

justice, or in the interest of comity with State courts or respect for 

State law, from abstaining from hearing a particular proceeding 

arising under title 11 or arising in or related to a case under title 

11. 

(2) Upon timely motion of a party in a proceeding based 

upon a State law claim or State law cause of action, related to 

a case under title 11 but not arising under title 11 or arising 

in a case under title 11, with respect to which an action could 

not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, 

and can be timely adjudicated, in a State forum of appropriate 

jurisdiction. 

(d) Any decision to abstain or not to abstain made under subsection (c) (other than a decision not to abstain in a proceeding described in subsection (c)(2)) is not reviewable by appeal or otherwise by the court of appeals under section 158(d), 1291, or 1292 of 

this title or by the Supreme Court of the United States under section 1254 of this title. Subsection (c) and this subsection shall not 

be construed to limit the applicability of the stay provided for by 

section 362 of title 11, United States Code, as such section applies 

to an action affecting the property of the estate in bankruptcy. 

(e) The district court in which a case under title 11 is commenced 

or is pending shall have exclusive jurisdiction— 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE
70 

(1) of all the property, wherever located, of the debtor as of 

the 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. 

(f) This section does not grant jurisdiction to the district court 

after a transfer pursuant to an order under section 1185 of title 11 

of any proceeding related to a special trustee appointed, or to a 

bridge company formed, in connection with a case under subchapter 

V of chapter 11 of title 11. 

* * * * * * * 

Æ 


smartinez on DSK4TPTVN1PROD with REPORTS-HSE