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107TH CONGRESS REPORT " HOUSE OF REPRESENTATIVES ! 2d Session 107–617

BANKRUPTCY ABUSE PREVENTION AND CONSUMER 

PROTECTION ACT OF 2002

JULY 26 (legislative day, JULY 25), 2002.—Ordered to be printed 

Mr. SENSENBRENNER, from the committee of conference, 

submitted the following 

CONFERENCE REPORT 

[To accompany H.R. 333] 

The committee of conference on the disagreeing votes of the 

two Houses on the amendment of the Senate to the bill (H.R. 333), 

to amend title 11, United States Code, and for other purposes, having met, after full and free conference, have agreed to recommend 

and do recommend to their respective House as follows: 

That the House recede from its disagreement to the amendment of the Senate and agree to the same with an amendment as 

follows: 

In lieu of the matter proposed to be inserted by the Senate 

amendment, insert the following:

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Bankruptcy 

Abuse Prevention and Consumer Protection Act of 2002’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is 

as follows:

Sec. 1. Short title; references; table of contents. 

TITLE I—NEEDS-BASED BANKRUPTCY 

Sec. 101. Conversion. 

Sec. 102. Dismissal or conversion. 

Sec. 103. Sense of Congress and study. 

Sec. 104. Notice of alternatives. 

Sec. 105. Debtor financial management training test program. 

Sec. 106. Credit counseling. 

Sec. 107. Schedules of reasonable and necessary expenses. 

TITLE II—ENHANCED CONSUMER PROTECTION 

Subtitle A—Penalties for Abusive Creditor Practices 

Sec. 201. Promotion of alternative dispute resolution. 

Sec. 202. Effect of discharge. 

Sec. 203. Discouraging abuse of reaffirmation practices. 

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Sec. 204. Preservation of claims and defenses upon sale of predatory loans. 

Sec. 205. GAO study and report on reaffirmation process. 

Subtitle B—Priority Child Support 

Sec. 211. Definition of domestic support obligation. 

Sec. 212. Priorities for claims for domestic support obligations. 

Sec. 213. Requirements to obtain confirmation and discharge in cases involving domestic support obligations. 

Sec. 214. Exceptions to automatic stay in domestic support obligation proceedings. 

Sec. 215. Nondischargeability of certain debts for alimony, maintenance, and support. 

Sec. 216. Continued liability of property. 

Sec. 217. Protection of domestic support claims against preferential transfer motions. 

Sec. 218. Disposable income defined. 

Sec. 219. Collection of child support. 

Sec. 220. Nondischargeability of certain educational benefits and loans. 

Subtitle C—Other Consumer Protections 

Sec. 221. Amendments to discourage abusive bankruptcy filings. 

Sec. 222. Sense of Congress. 

Sec. 223. Additional amendments to title 11, United States Code. 

Sec. 224. Protection of retirement savings in bankruptcy. 

Sec. 225. Protection of education savings in bankruptcy. 

Sec. 226. Definitions. 

Sec. 227. Restrictions on debt relief agencies. 

Sec. 228. Disclosures. 

Sec. 229. Requirements for debt relief agencies. 

Sec. 230. GAO study. 

Sec. 231. Protection of personally identifiable information. 

Sec. 232. Consumer privacy ombudsman. 

Sec. 233. Prohibition on disclosure of name of minor children. 

TITLE III—DISCOURAGING BANKRUPTCY ABUSE 

Sec. 301. Reinforcement of the fresh start. 

Sec. 302. Discouraging bad faith repeat filings. 

Sec. 303. Curbing abusive filings. 

Sec. 304. Debtor retention of personal property security. 

Sec. 305. Relief from the automatic stay when the debtor does not complete intended 

surrender of consumer debt collateral. 

Sec. 306. Giving secured creditors fair treatment in chapter 13. 

Sec. 307. Domiciliary requirements for exemptions. 

Sec. 308. Reduction of homestead exemption for fraud. 

Sec. 309. Protecting secured creditors in chapter 13 cases. 

Sec. 310. Limitation on luxury goods. 

Sec. 311. Automatic stay. 

Sec. 312. Extension of period between bankruptcy discharges. 

Sec. 313. Definition of household goods and antiques. 

Sec. 314. Debt incurred to pay nondischargeable debts. 

Sec. 315. Giving creditors fair notice in chapters 7 and 13 cases. 

Sec. 316. Dismissal for failure to timely file schedules or provide required information. 

Sec. 317. Adequate time to prepare for hearing on confirmation of the plan. 

Sec. 318. Chapter 13 plans to have a 5-year duration in certain cases. 

Sec. 319. Sense of Congress regarding expansion of rule 9011 of the Federal Rules 

of Bankruptcy Procedure. 

Sec. 320. Prompt relief from stay in individual cases. 

Sec. 321. Chapter 11 cases filed by individuals. 

Sec. 322. Limitations on homestead exemption. 

Sec. 323. Excluding employee benefit plan participant contributions and other property from the estate. 

Sec. 324. Exclusive jurisdiction in matters involving bankruptcy professionals. 

Sec. 325. United States trustee program filing fee increase. 

Sec. 326. Sharing of compensation. 

Sec. 327. Fair valuation of collateral. 

Sec. 328. Defaults based on nonmonetary obligations. 

Sec. 329. Clarification of postpetition wages and benefits. 

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Sec. 330. Nondischargeability of debts incurred through violations of laws relating 

to the provision of lawful goods and services. 

Sec. 331 Delay of discharge during pendency of certain proceedings. 

TITLE IV—GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS 

Subtitle A—General Business Bankruptcy Provisions 

Sec. 401. Adequate protection for investors. 

Sec. 402. Meetings of creditors and equity security holders. 

Sec. 403. Protection of refinance of security interest. 

Sec. 404. Executory contracts and unexpired leases. 

Sec. 405. Creditors and equity security holders committees. 

Sec. 406. Amendment to section 546 of title 11, United States Code. 

Sec. 407. Amendments to section 330(a) of title 11, United States Code. 

Sec. 408. Postpetition disclosure and solicitation. 

Sec. 409. Preferences. 

Sec. 410. Venue of certain proceedings. 

Sec. 411. Period for filing plan under chapter 11. 

Sec. 412. Fees arising from certain ownership interests. 

Sec. 413. Creditor representation at first meeting of creditors. 

Sec. 414. Definition of disinterested person. 

Sec. 415. Factors for compensation of professional persons. 

Sec. 416. Appointment of elected trustee. 

Sec. 417. Utility service. 

Sec. 418. Bankruptcy fees. 

Sec. 419. More complete information regarding assets of the estate. 

Subtitle B—Small Business Bankruptcy Provisions 

Sec. 431. Flexible rules for disclosure statement and plan. 

Sec. 432. Definitions. 

Sec. 433. Standard form disclosure statement and plan. 

Sec. 434. Uniform national reporting requirements. 

Sec. 435. Uniform reporting rules and forms for small business cases. 

Sec. 436. Duties in small business cases. 

Sec. 437. Plan filing and confirmation deadlines. 

Sec. 438. Plan confirmation deadline. 

Sec. 439. Duties of the United States trustee. 

Sec. 440. Scheduling conferences. 

Sec. 441. Serial filer provisions. 

Sec. 442. Expanded grounds for dismissal or conversion and appointment of trustee. 

Sec. 443. Study of operation of title 11, United States Code, with respect to small 

businesses. 

Sec. 444. Payment of interest. 

Sec. 445. Priority for administrative expenses. 

Sec. 446. Duties with respect to a debtor who is a plan administrator of an employee 

benefit plan. 

Sec. 447. Appointment of committee of retired employees. 

TITLE V—MUNICIPAL BANKRUPTCY PROVISIONS 

Sec. 501. Petition and proceedings related to petition. 

Sec. 502. Applicability of other sections to chapter 9. 

TITLE VI—BANKRUPTCY DATA 

Sec. 601. Improved bankruptcy statistics. 

Sec. 602. Uniform rules for the collection of bankruptcy data. 

Sec. 603. Audit procedures. 

Sec. 604. Sense of Congress regarding availability of bankruptcy data. 

TITLE VII—BANKRUPTCY TAX PROVISIONS 

Sec. 701. Treatment of certain liens. 

Sec. 702. Treatment of fuel tax claims. 

Sec. 703. Notice of request for a determination of taxes. 

Sec. 704. Rate of interest on tax claims. 

Sec. 705. Priority of tax claims. 

Sec. 706. Priority property taxes incurred. 

Sec. 707. No discharge of fraudulent taxes in chapter 13. 

Sec. 708. No discharge of fraudulent taxes in chapter 11. 

Sec. 709. Stay of tax proceedings limited to prepetition taxes. 

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Sec. 710. Periodic payment of taxes in chapter 11 cases. 

Sec. 711. Avoidance of statutory tax liens prohibited. 

Sec. 712. Payment of taxes in the conduct of business. 

Sec. 713. Tardily filed priority tax claims. 

Sec. 714. Income tax returns prepared by tax authorities. 

Sec. 715. Discharge of the estate’s liability for unpaid taxes. 

Sec. 716. Requirement to file tax returns to confirm chapter 13 plans. 

Sec. 717. Standards for tax disclosure. 

Sec. 718. Setoff of tax refunds. 

Sec. 719. Special provisions related to the treatment of State and local taxes. 

Sec. 720. Dismissal for failure to timely file tax returns. 

TITLE VIII—ANCILLARY AND OTHER CROSS-BORDER CASES 

Sec. 801. Amendment to add chapter 15 to title 11, United States Code. 

Sec. 802. Other amendments to titles 11 and 28, United States Code. 

TITLE IX—FINANCIAL CONTRACT PROVISIONS 

Sec. 901. Treatment of certain agreements by conservators or receivers of insured depository institutions. 

Sec. 902. Authority of the corporation with respect to failed and failing institutions. 

Sec. 903. Amendments relating to transfers of qualified financial contracts. 

Sec. 904. Amendments relating to disaffirmance or repudiation of qualified financial contracts. 

Sec. 905. Clarifying amendment relating to master agreements. 

Sec. 906. Federal Deposit Insurance Corporation Improvement Act of 1991. 

Sec. 907. Bankruptcy law amendments. 

Sec. 908. Recordkeeping requirements. 

Sec. 909. Exemptions from contemporaneous execution requirement. 

Sec. 910. Damage measure. 

Sec. 911. SIPC stay. 

TITLE X—PROTECTION OF FAMILY FARMERS AND FAMILY FISHERMEN 

Sec. 1001. Permanent reenactment of chapter 12. 

Sec. 1002. Debt limit increase. 

Sec. 1003. Certain claims owed to governmental units. 

Sec. 1004. Definition of family farmer. 

Sec. 1005. Elimination of requirement that family farmer and spouse receive over 50 

percent of income from farming operation in year prior to bankruptcy. 

Sec. 1006. Prohibition of retroactive assessment of disposable income. 

Sec. 1007. Family fishermen. 

TITLE XI—HEALTH CARE AND EMPLOYEE BENEFITS

Sec. 1101. Definitions. 

Sec. 1102. Disposal of patient records. 

Sec. 1103. Administrative expense claim for costs of closing a health care business 

and other administrative expenses. 

Sec. 1104. Appointment of ombudsman to act as patient advocate. 

Sec. 1105. Debtor in possession; duty of trustee to transfer patients. 

Sec. 1106. Exclusion from program participation not subject to automatic stay. 

TITLE XII—TECHNICAL AMENDMENTS 

Sec. 1201. Definitions. 

Sec. 1202. Adjustment of dollar amounts. 

Sec. 1203. Extension of time. 

Sec. 1204. Technical amendments. 

Sec. 1205. Penalty for persons who negligently or fraudulently prepare bankruptcy 

petitions. 

Sec. 1206. Limitation on compensation of professional persons. 

Sec. 1207. Effect of conversion. 

Sec. 1208. Allowance of administrative expenses. 

Sec. 1209. Exceptions to discharge. 

Sec. 1210. Effect of discharge. 

Sec. 1211. Protection against discriminatory treatment. 

Sec. 1212. Property of the estate. 

Sec. 1213. Preferences. 

Sec. 1214. Postpetition transactions. 

Sec. 1215. Disposition of property of the estate. 

Sec. 1216. General provisions. 

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Sec. 1217. Abandonment of railroad line. 

Sec. 1218. Contents of plan. 

Sec. 1219. Bankruptcy cases and proceedings. 

Sec. 1220. Knowing disregard of bankruptcy law or rule. 

Sec. 1221. Transfers made by nonprofit charitable corporations. 

Sec. 1222. Protection of valid purchase money security interests. 

Sec. 1223. Bankruptcy judgeships. 

Sec. 1224. Compensating trustees. 

Sec. 1225. Amendment to section 362 of title 11, United States Code. 

Sec. 1226. Judicial education. 

Sec. 1227. Reclamation. 

Sec. 1228. Providing requested tax documents to the court. 

Sec. 1229. Encouraging creditworthiness. 

Sec. 1230. Property no longer subject to redemption. 

Sec. 1231. Trustees. 

Sec. 1232. Bankruptcy forms. 

Sec. 1233. Direct appeals of bankruptcy matters to courts of appeals. 

Sec. 1234. Involuntary cases. 

Sec. 1235. Federal election law fines and penalties as nondischargeable debt. 

TITLE XIII—CONSUMER CREDIT DISCLOSURE 

Sec. 1301. Enhanced disclosures under an open end credit plan. 

Sec. 1302. Enhanced disclosure for credit extensions secured by a dwelling. 

Sec. 1303. Disclosures related to ‘‘introductory rates’’. 

Sec. 1304. Internet-based credit card solicitations. 

Sec. 1305. Disclosures related to late payment deadlines and penalties. 

Sec. 1306. Prohibition on certain actions for failure to incur finance charges. 

Sec. 1307. Dual use debit card. 

Sec. 1308. Study of bankruptcy impact of credit extended to dependent students. 

Sec. 1309. Clarification of clear and conspicuous. 

TITLE XIV—GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS 

Sec. 1401. Effective date; application of amendments.

TITLE I—NEEDS-BASED BANKRUPTCY 

SEC. 101. CONVERSION. 

Section 706(c) of title 11, United States Code, is amended by inserting ‘‘or consents to’’ after ‘‘requests’’. 

SEC. 102. DISMISSAL OR CONVERSION. 

(a) IN GENERAL.—Section 707 of title 11, United States Code, 

is amended—

(1) by striking the section heading and inserting the following: 

‘‘§ 707. Dismissal of a case or conversion to a case under 

chapter 11 or 13’’; 

and 

(2) in subsection (b)—

(A) by inserting ‘‘(1)’’ after ‘‘(b)’’; 

(B) in paragraph (1), as so redesignated by subparagraph (A) of this paragraph—

(i) in the first sentence—

(I) by striking ‘‘but not at the request or suggestion of’’ and inserting ‘‘trustee, bankruptcy administrator, or’’; 

(II) by inserting ‘‘, or, with the debtor’s consent, convert such a case to a case under chapter 

11 or 13 of this title,’’ after ‘‘consumer debts’’; and 

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(III) by striking ‘‘a substantial abuse’’ and inserting ‘‘an abuse’’; and 

(ii) by striking the next to last sentence; and 

(C) by adding at the end the following: ‘‘(2)(A)(i) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the 

court shall presume abuse exists if the debtor’s current monthly income reduced by the amounts determined under clauses (ii), (iii), 

and (iv), and multiplied by 60 is not less than the lesser of— ‘‘(I) 25 percent of the debtor’s nonpriority unsecured claims in the case, or $6,000, whichever is greater; or ‘‘(II) $10,000. ‘‘(ii)(I) The debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses 

issued by the Internal Revenue Service for the area in which the 

debtor resides, as in effect on the date of the entry of the order for 

relief, for the debtor, the dependents of the debtor, and the spouse 

of the debtor in a joint case, if the spouse is not otherwise a dependent. Notwithstanding any other provision of this clause, the monthly 

expenses of the debtor shall not include any payments for debts. In 

addition, the debtor’s monthly expenses shall include the debtor’s 

reasonably necessary expenses incurred to maintain the safety of the 

debtor and the family of the debtor from family violence as identified under section 309 of the Family Violence Prevention and Services Act, or other applicable Federal law. The expenses included in 

the debtor’s monthly expenses described in the preceding sentence 

shall be kept confidential by the court. In addition, if it is demonstrated that it is reasonable and necessary, the debtor’s monthly 

expenses may also include an additional allowance for food and 

clothing of up to 5 percent of the food and clothing categories as 

specified by the National Standards issued by the Internal Revenue 

Service. 

‘‘(II) In addition, the debtor’s monthly expenses may include, if 

applicable, the continuation of actual expenses paid by the debtor 

that are reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the 

debtor’s immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of 

the debtor, and the spouse of the debtor in a joint case who is not 

a dependent) and who is unable to pay for such reasonable and necessary expenses. 

‘‘(III) In addition, for a debtor eligible for chapter 13, the debtor’s monthly expenses may include the actual administrative expenses of administering a chapter 13 plan for the district in which 

the debtor resides, up to an amount of 10 percent of the projected 

plan payments, as determined under schedules issued by the Executive Office for United States Trustees. 

‘‘(IV) In addition, the debtor’s monthly expenses may include the 

actual expenses for each dependent child less than 18 years of age, 

not to exceed $1,500 per year per child, to attend a private or public 

elementary or secondary school if the debtor provides documentation 

of such expenses and a detailed explanation of why such expenses 

are reasonable and necessary, and why such expenses are not alVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00006 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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ready accounted for in the National Standards, Local Standards, or 

Other Necessary Expenses referred to in subclause (I). ‘‘(V) In addition, the debtor’s monthly expenses may include an 

allowance for housing and utilities, in excess of the allowance specified by the Local Standards for housing and utilities issued by the 

Internal Revenue Service, based on the actual expenses for home energy costs if the debtor provides documentation of such actual expenses and demonstrates that such actual expenses are reasonable 

and necessary. ‘‘(iii) The debtor’s average monthly payments on account of secured debts shall be calculated as the sum of— ‘‘(I) the total of all amounts scheduled as contractually due 

to secured creditors in each month of the 60 months following 

the date of the petition; and ‘‘(II) any additional payments to secured creditors necessary 

for the debtor, in filing a plan under chapter 13 of this title, 

to maintain possession of the debtor’s primary residence, motor 

vehicle, or other property necessary for the support of the debtor 

and the debtor’s dependents, that serves as collateral for secured debts; 

divided by 60. ‘‘(iv) The debtor’s expenses for payment of all priority claims 

(including priority child support and alimony claims) shall be calculated as the total amount of debts entitled to priority, divided by 

60. ‘‘(B)(i) In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special 

circumstances that justify additional expenses or adjustments of 

current monthly income for which there is no reasonable alternative. ‘‘(ii) In order to establish special circumstances, the debtor shall 

be required to itemize each additional expense or adjustment of income and to provide— ‘‘(I) documentation for such expense or adjustment to income; and 

‘‘(II) a detailed explanation of the special circumstances 

that make such expenses or adjustment to income necessary and 

reasonable. 

‘‘(iii) The debtor shall attest under oath to the accuracy of any 

information provided to demonstrate that additional expenses or adjustments to income are required. 

‘‘(iv) The presumption of abuse may only be rebutted if the additional expenses or adjustments to income referred to in clause (i) 

cause the product of the debtor’s current monthly income reduced by 

the amounts determined under clauses (ii), (iii), and (iv) of subparagraph (A) when multiplied by 60 to be less than the lesser of—

‘‘(I) 25 percent of the debtor’s nonpriority unsecured claims, 

or $6,000, whichever is greater; or 

‘‘(II) $10,000. 

‘‘(C) As part of the schedule of current income and expenditures 

required under section 521, the debtor shall include a statement of 

the debtor’s current monthly income, and the calculations that determine whether a presumption arises under subparagraph (A)(i), 

that shows how each such amount is calculated. 

‘‘(3) In considering under paragraph (1) whether the granting 

of relief would be an abuse of the provisions of this chapter in a 

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case in which the presumption in subparagraph (A)(i) of such paragraph does not apply or has been rebutted, the court shall consider— ‘‘(A) whether the debtor filed the petition in bad faith; or 

‘‘(B) the totality of the circumstances (including whether the 

debtor seeks to reject a personal services contract and the financial need for such rejection as sought by the debtor) of the debtor’s financial situation demonstrates abuse. ‘‘(4)(A) The court, on its own initiative or on the motion of a 

party in interest, in accordance with the procedures described in 

rule 9011 of the Federal Rules of Bankruptcy Procedure, may order 

the attorney for the debtor to reimburse the trustee for all reasonable 

costs in prosecuting a motion filed under section 707(b), including 

reasonable attorneys’ fees, if— ‘‘(i) a trustee files a motion for dismissal or conversion 

under this subsection; and ‘‘(ii) the court— ‘‘(I) grants such motion; and 

‘‘(II) finds that the action of the attorney for the debtor 

in filing under this chapter violated rule 9011 of the Federal Rules of Bankruptcy Procedure. ‘‘(B) If the court finds that the attorney for the debtor violated 

rule 9011 of the Federal Rules of Bankruptcy Procedure, the court, 

on its own initiative or on the motion of a party in interest, in accordance with such procedures, may order— ‘‘(i) the assessment of an appropriate civil penalty against 

the attorney for the debtor; and ‘‘(ii) the payment of such civil penalty to the trustee, the 

United States trustee, or the bankruptcy administrator. 

‘‘(C) In the case of a petition, pleading, or written motion, the 

signature of an attorney shall constitute a certification that the attorney has—

‘‘(i) performed a reasonable investigation into the circumstances that gave rise to the petition, pleading, or written 

motion; and 

‘‘(ii) determined that the petition, pleading, or written motion—

‘‘(I) is well grounded in fact; and 

‘‘(II) is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing 

law and does not constitute an abuse under paragraph (1). 

‘‘(D) The signature of an attorney on the petition shall constitute 

a certification that the attorney has no knowledge after an inquiry 

that the information in the schedules filed with such petition is incorrect. 

‘‘(5)(A) Except as provided in subparagraph (B) and subject to 

paragraph (6), the court, on its own initiative or on the motion of 

a party in interest, in accordance with the procedures described in 

rule 9011 of the Federal Rules of Bankruptcy Procedure, may award 

a debtor all reasonable costs (including reasonable attorneys’ fees) 

in contesting a motion filed by a party in interest (other than a 

trustee, United States trustee, or bankruptcy administrator) under 

this subsection if—

‘‘(i) the court does not grant the motion; and 

‘‘(ii) the court finds that—

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‘‘(I) the position of the party that filed the motion violated rule 9011 of the Federal Rules of Bankruptcy Procedure; or ‘‘(II) the attorney (if any) who filed the motion did not 

comply with the requirements of clauses (i) and (ii) of paragraph (4)(C), and the motion was made solely for the purpose of coercing a debtor into waiving a right guaranteed 

to the debtor under this title. ‘‘(B) A small business that has a claim of an aggregate amount less than $1,000 shall not be subject to subparagraph (A)(ii)(I). ‘‘(C) For purposes of this paragraph— ‘‘(i) the term ‘small business’ means an unincorporated 

business, partnership, corporation, association, or organization 

that— ‘‘(I) has fewer than 25 full-time employees as determined on the date on which the motion is filed; and ‘‘(II) is engaged in commercial or business activity; and ‘‘(ii) the number of employees of a wholly owned subsidiary 

of a corporation includes the employees of— ‘‘(I) a parent corporation; and 

‘‘(II) any other subsidiary corporation of the parent corporation. ‘‘(6) Only the judge, United States trustee, or bankruptcy administrator may file a motion under section 707(b), if the current 

monthly income of the debtor, or in a joint case, the debtor and the 

debtor’s spouse, as of the date of the order for relief, when multiplied by 12, is equal to or less than— ‘‘(A) in the case of a debtor in a household of 1 person, the 

median family income of the applicable State for 1 earner; ‘‘(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable 

State for a family of the same number or fewer individuals; or ‘‘(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable 

State for a family of 4 or fewer individuals, plus $525 per 

month for each individual in excess of 4.

‘‘(7)(A) No judge, United States trustee, trustee, bankruptcy administrator, or other party in interest may file a motion under paragraph (2) if the current monthly income of the debtor and the debtor’s spouse combined, as of the date of the order for relief when multiplied by 12, is equal to or less than—

‘‘(i) in the case of a debtor in a household of 1 person, the 

median family income of the applicable State for 1 earner; 

‘‘(ii) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable 

State for a family of the same number or fewer individuals; or 

‘‘(iii) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable 

State for a family of 4 or fewer individuals, plus $525 per 

month for each individual in excess of 4. 

‘‘(B) In a case that is not a joint case, current monthly income 

of the debtor’s spouse shall not be considered for purposes of subparagraph (A) if—

‘‘(i)(I) the debtor and the debtor’s spouse are separated 

under applicable nonbankruptcy law; or 

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‘‘(II) the debtor and the debtor’s spouse are living separate 

and apart, other than for the purpose of evading subparagraph 

(A); and ‘‘(ii) the debtor files a statement under penalty of perjury— ‘‘(I) specifying that the debtor meets the requirement of 

subclause (I) or (II) of clause (i); and ‘‘(II) disclosing the aggregate, or best estimate of the 

aggregate, amount of any cash or money payments received 

from the debtor’s spouse attributed to the debtor’s current 

monthly income.’’. (b) DEFINITION.—Section 101 of title 11, United States Code, is 

amended by inserting after paragraph (10) the following: ‘‘(10A) ‘current monthly income’— ‘‘(A) means the average monthly income from all 

sources that the debtor receives (or in a joint case the debtor 

and the debtor’s spouse receive) without regard to whether 

such income is taxable income, derived during the 6-month 

period ending on— ‘‘(i) the last day of the calendar month immediately 

preceding the date of the commencement of the case if 

the debtor files the schedule of current income required 

by section 521(a)(1)(B)(ii); or ‘‘(ii) the date on which current income is determined by the court for purposes of this title if the debtor does not file the schedule of current income required 

by section 521(a)(1)(B)(ii); and 

‘‘(B) includes any amount paid by any entity other than 

the debtor (or in a joint case the debtor and the debtor’s 

spouse), on a regular basis for the household expenses of 

the debtor or the debtor’s dependents (and in a joint case 

the debtor’s spouse if not otherwise a dependent), but excludes benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity 

on account of their status as victims of such crimes, and 

payments to victims of international terrorism (as defined 

in section 2331 of title 18) or domestic terrorism (as defined 

in section 2331 of title 18) on account of their status as victims of such terrorism;’’. 

(c) UNITED STATES TRUSTEE AND BANKRUPTCY ADMINISTRATOR

DUTIES.—Section 704 of title 11, United States Code, is amended—

(1) by inserting ‘‘(a)’’ before ‘‘The trustee shall—’’; and 

(2) by adding at the end the following: 

‘‘(b)(1) With respect to a debtor who is an individual in a case 

under this chapter—

‘‘(A) the United States trustee or bankruptcy administrator 

shall review all materials filed by the debtor and, not later than 

10 days after the date of the first meeting of creditors, file with 

the court a statement as to whether the debtor’s case would be 

presumed to be an abuse under section 707(b); and ‘‘(B) not later than 5 days after receiving a statement under 

subparagraph (A), the court shall provide a copy of the statement to all creditors. 

‘‘(2) The United States trustee or bankruptcy administrator 

shall, not later than 30 days after the date of filing a statement 

under paragraph (1), either file a motion to dismiss or convert 

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under section 707(b) or file a statement setting forth the reasons the 

United States trustee or bankruptcy administrator does not believe 

that such a motion would be appropriate, if the United States trustee or bankruptcy administrator determines that the debtor’s case 

should be presumed to be an abuse under section 707(b) and the 

product of the debtor’s current monthly income, multiplied by 12 is 

not less than—

‘‘(A) in the case of a debtor in a household of 1 person, the 

median family income of the applicable State for 1 earner; or 

‘‘(B) in the case of a debtor in a household of 2 or more individuals, the highest median family income of the applicable 

State for a family of the same number or fewer individuals .’’. 

(d) NOTICE.—Section 342 of title 11, United States Code, is 

amended by adding at the end the following: 

‘‘(d) In a case under chapter 7 of this title in which the debtor 

is an individual and in which the presumption of abuse is triggered 

under section 707(b), the clerk shall give written notice to all creditors not later than 10 days after the date of the filing of the petition 

that the presumption of abuse has been triggered.’’. 

(e) NONLIMITATION OF INFORMATION.—Nothing in this title 

shall limit the ability of a creditor to provide information to a judge 

(except for information communicated ex parte, unless otherwise 

permitted by applicable law), United States trustee, bankruptcy administrator or trustee. 

(f) DISMISSAL FOR CERTAIN CRIMES.—Section 707 of title 11, 

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

‘‘(c)(1) In this subsection—

‘‘(A) the term ‘crime of violence’ has the meaning given such 

term in section 16 of title 18; and 

‘‘(B) the term ‘drug trafficking crime’ has the meaning given 

such term in section 924(c)(2) of title 18. 

‘‘(2) Except as provided in paragraph (3), after notice and a 

hearing, the court, on a motion by the victim of a crime of violence 

or a drug trafficking crime, may when it is in the best interest of 

the victim dismiss a voluntary case filed under this chapter by a 

debtor who is an individual if such individual was convicted of 

such crime. 

‘‘(3) The court may not dismiss a case under paragraph (2) if 

the debtor establishes by a preponderance of the evidence that the 

filing of a case under this chapter is necessary to satisfy a claim for 

a domestic support obligation.’’. 

(g) CONFIRMATION OF PLAN.—Section 1325(a) of title 11, United 

States Code, is amended—

(1) in paragraph (5), by striking ‘‘and’’ at the end; 

(2) in paragraph (6), by striking the period and inserting 

a semicolon; and 

(3) by inserting after paragraph (6) the following: 

‘‘(7) the action of the debtor in filing the petition was in 

good faith;’’. 

(h) APPLICABILITY OF MEANS TEST TO CHAPTER 13.—Section 

1325(b) of title 11, United States Code, is amended—

(1) in paragraph (1)(B), by inserting ‘‘to unsecured creditors’’ after ‘‘to make payments’’; and

(2) by striking paragraph (2) and inserting the following: 

12

‘‘(2) For purposes of this subsection, the term ‘disposable income’ means current monthly income received by the debtor 

(other than child support payments, foster care payments, or 

disability payments for a dependent child made in accordance 

with applicable nonbankruptcy law to the extent reasonably 

necessary to be expended for such child) less amounts reasonably necessary to be expended— ‘‘(A) for the maintenance or support of the debtor or a 

dependent of the debtor or for a domestic support obligation 

that first becomes payable after the date the petition is filed 

and for charitable contributions (that meet the definition of 

‘charitable contribution’ under section 548(d)(3) to a qualified religious or charitable entity or organization (as defined in section 548(d)(4)) in an amount not to exceed 15 

percent of gross income of the debtor for the year in which 

the contributions are made; and ‘‘(B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business. 

‘‘(3) Amounts reasonably necessary to be expended under 

paragraph (2) shall be determined in accordance with subparagraphs (A) and (B) of section 707(b)(2), if the debtor has current 

monthly income, when multiplied by 12, greater than— ‘‘(A) in the case of a debtor in a household of 1 person, 

the median family income of the applicable State for 1 

earner; ‘‘(B) in the case of a debtor in a household of 2, 3, or 

4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or ‘‘(C) in the case of a debtor in a household exceeding 

4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus 

$525 per month for each individual in excess of 4.’’.

(i) SPECIAL ALLOWANCE FOR HEALTH INSURANCE.—Section 

1329(a) of title 11, United States Code, is amended— (1) in paragraph (2) by striking ‘‘or’’ at the end; 

(2) in paragraph (3) by striking the period at the end and 

inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(4) reduce amounts to be paid under the plan by the actual 

amount expended by the debtor to purchase health insurance 

for the debtor (and for any dependent of the debtor if such dependent does not otherwise have health insurance coverage) if 

the debtor documents the cost of such insurance and demonstrates that— ‘‘(A) such expenses are reasonable and necessary; 

‘‘(B)(i) if the debtor previously paid for health insurance, the amount is not materially larger than the cost the 

debtor previously paid or the cost necessary to maintain the 

lapsed policy; or 

‘‘(ii) if the debtor did not have health insurance, the 

amount is not materially larger than the reasonable cost 

that would be incurred by a debtor who purchases health 

insurance, who has similar income, expenses, age, and 

13

health status, and who lives in the same geographical location with the same number of dependents who do not otherwise have health insurance coverage; and 

‘‘(C) the amount is not otherwise allowed for purposes 

of determining disposable income under section 1325(b) of 

this title; 

and upon request of any party in interest, files proof that a 

health insurance policy was purchased.’’.

(j) ADJUSTMENT OF DOLLAR AMOUNTS.—Section 104(b) of title 

11, United States Code, is amended by striking ‘‘and 523(a)(2)(C)’’

each place it appears and inserting ‘‘523(a)(2)(C), 707(b), and 

1325(b)(3)’’.

(k) DEFINITION OF ‘MEDIAN FAMILY INCOME’.—Section 101 of 

title 11, United States Code, is amended by inserting after paragraph (39) the following: 

‘‘(39A) ‘median family income’ means for any year—

‘‘(A) the median family income both calculated and reported by the Bureau of the Census in the then most recent 

year; and 

‘‘(B) if not so calculated and reported in the then current year, adjusted annually after such most recent year 

until the next year in which median family income is both 

calculated and reported by the Bureau of the Census, to reflect the percentage change in the Consumer Price Index for 

All Urban Consumers during the period of years occurring 

after such most recent year and before such current year;’’. 

(k) CLERICAL AMENDMENT.—The table of sections for chapter 7 

of title 11, United States Code, is amended by striking the item relating to section 707 and inserting the following:

‘‘707. Dismissal of a case or conversion to a case under chapter 11 or 13.’’.

SEC. 103. SENSE OF CONGRESS AND STUDY. 

(a) SENSE OF CONGRESS.—It is the sense of Congress that the 

Secretary of the Treasury has the authority to alter the Internal 

Revenue Service standards established to set guidelines for repayment plans as needed to accommodate their use under section 

707(b) of title 11, United States Code. 

(b) STUDY.—

(1) IN GENERAL.—Not later than 2 years after the date of 

enactment of this Act, the Director of the Executive Office for 

United States Trustees shall submit a report to the Committee 

on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives containing the findings of 

the Director regarding the utilization of Internal Revenue Service standards for determining—

(A) the current monthly expenses of a debtor under section 707(b) of title 11, United States Code; and

(B) the impact that the application of such standards 

has had on debtors and on the bankruptcy courts. 

(2) RECOMMENDATION.—The report under paragraph (1) 

may include recommendations for amendments to title 11, 

United States Code, that are consistent with the findings of the 

Director under paragraph (1). 

14

SEC. 104. NOTICE OF ALTERNATIVES. 

Section 342(b) of title 11, United States Code, is amended to 

read as follows: ‘‘(b) Before the commencement of a case under this title by an 

individual whose debts are primarily consumer debts, the clerk 

shall give to such individual written notice containing— ‘‘(1) a brief description of— ‘‘(A) chapters 7, 11, 12, and 13 and the general purpose, benefits, and costs of proceeding under each of those 

chapters; and ‘‘(B) the types of services available from credit counseling agencies; and 

‘‘(2) statements specifying that—

‘‘(A) a person who knowingly and fraudulently conceals 

assets or makes a false oath or statement under penalty of 

perjury in connection with a bankruptcy case shall be subject to fine, imprisonment, or both; and 

‘‘(B) all information supplied by a debtor in connection 

with a bankruptcy case is subject to examination by the Attorney General.’’. 

SEC. 105. DEBTOR FINANCIAL MANAGEMENT TRAINING TEST PROGRAM. 

(a) DEVELOPMENT OF FINANCIAL MANAGEMENT AND TRAINING

CURRICULUM AND MATERIALS.—The Director of the Executive Office 

for United States Trustees (in this section referred to as the ‘‘Director’’) shall consult with a wide range of individuals who are experts 

in the field of debtor education, including trustees who serve in 

cases under chapter 13 of title 11, United States Code, and who operate financial management education programs for debtors, and 

shall develop a financial management training curriculum and materials that can be used to educate debtors who are individuals on 

how to better manage their finances. 

(b) TEST.—

(1) SELECTION OF DISTRICTS.—The Director shall select 6 

judicial districts of the United States in which to test the effectiveness of the financial management training curriculum and 

materials developed under subsection (a). 

(2) USE.—For an 18-month period beginning not later than 

270 days after the date of enactment of this Act, such curriculum and materials shall be, for the 6 judicial districts selected under paragraph (1), used as the instructional course 

concerning personal financial management for purposes of section 111 of title 11, United States Code. 

(c) EVALUATION.—

(1) IN GENERAL.—During the 18-month period referred to in 

subsection (b), the Director shall evaluate the effectiveness of—

(A) the financial management training curriculum and 

materials developed under subsection (a); and 

(B) a sample of existing consumer education programs 

such as those described in the Report of the National Bankruptcy Review Commission (October 20, 1997) that are representative of consumer education programs carried out by 

the credit industry, by trustees serving under chapter 13 of 

title 11, United States Code, and by consumer counseling 

groups. 

15

(2) REPORT.—Not later than 3 months after concluding 

such evaluation, the Director shall submit a report to the 

Speaker of the House of Representatives and the President pro 

tempore of the Senate, for referral to the appropriate committees 

of the Congress, containing the findings of the Director regarding the effectiveness of such curriculum, such materials, and 

such programs and their costs. 

SEC. 106. CREDIT COUNSELING. 

(a) WHO MAY BE A DEBTOR.—Section 109 of title 11, United 

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

‘‘(h)(1) Subject to paragraphs (2) and (3), and notwithstanding 

any other provision of this section, an individual may not be a debtor under this title unless that individual has, during the 180-day 

period preceding the date of filing of the petition of that individual, 

received from an approved nonprofit budget and credit counseling 

agency described in section 111(a) an individual or group briefing 

(including a briefing conducted by telephone or on the Internet) that 

outlined the opportunities for available credit counseling and assisted that individual in performing a related budget analysis. 

‘‘(2)(A) Paragraph (1) shall not apply with respect to a debtor 

who resides in a district for which the United States trustee or 

bankruptcy administrator of the bankruptcy court of that district 

determines that the approved nonprofit budget and credit counseling agencies for that district are not reasonably able to provide 

adequate services to the additional individuals who would otherwise 

seek credit counseling from that agency by reason of the requirements of paragraph (1). 

‘‘(B) Each United States trustee or bankruptcy administrator 

that makes a determination described in subparagraph (A) shall review that determination not later than 1 year after the date of that 

determination, and not less frequently than every year thereafter. 

Notwithstanding the preceding sentence, a nonprofit budget and 

credit counseling agency may be disapproved by the United States 

trustee or bankruptcy administrator at any time. 

‘‘(3)(A) Subject to subparagraph (B), the requirements of paragraph (1) shall not apply with respect to a debtor who submits to 

the court a certification that—

‘‘(i) describes exigent circumstances that merit a waiver of 

the requirements of paragraph (1); 

‘‘(ii) states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling 

agency, but was unable to obtain the services referred to in 

paragraph (1) during the 5-day period beginning on the date on 

which the debtor made that request; and

‘‘(iii) is satisfactory to the court. 

‘‘(B) With respect to a debtor, an exemption under subparagraph (A) shall cease to apply to that debtor on the date on which 

the debtor meets the requirements of paragraph (1), but in no case 

may the exemption apply to that debtor after the date that is 30 

days after the debtor files a petition, except that the court, for cause, 

may order an additional 15 days.’’. 

(b) CHAPTER 7 DISCHARGE.—Section 727(a) of title 11, United 

States Code, is amended—

(1) in paragraph (9), by striking ‘‘or’’ at the end; 

16

(2) in paragraph (10), by striking the period and inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(11) after the filing of the petition, the debtor failed to 

complete an instructional course concerning personal financial 

management described in section 111, except that this paragraph shall not apply with respect to a debtor who resides in 

a district for which the United States trustee or bankruptcy administrator of such district determines that the approved instructional courses are not adequate to service the additional 

individuals required to complete such instructional courses 

under this section (Each United States trustee or bankruptcy 

administrator who makes a determination described in this 

paragraph shall review such determination not later than 1 

year after the date of such determination, and not less frequently than annually thereafter.).’’. (c) CHAPTER 13 DISCHARGE.—Section 1328 of title 11, United 

States Code, is amended by adding at the end the following: ‘‘(g)(1) The court shall not grant a discharge under this section 

to a debtor unless after filing a petition the debtor has completed 

an instructional course concerning personal financial management 

described in section 111. ‘‘(2) Paragraph (1) shall not apply with respect to a debtor who 

resides in a district for which the United States trustee or bankruptcy administrator of such district determines that the approved 

instructional courses are not adequate to service the additional individuals who would be required to complete such instructional course 

by reason of the requirements of this section. ‘‘(3) Each United States trustee or bankruptcy administrator 

who makes a determination described in paragraph (2) shall review 

such determination not later than 1 year after the date of such determination, and not less frequently than annually thereafter.’’. (c) CHAPTER 13 DISCHARGE.—Section 1328 of title 11, United 

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

‘‘(g) The court shall not grant a discharge under this section to 

a debtor, unless after filing a petition the debtor has completed an 

instructional course concerning personal financial management described in section 111. 

‘‘(h) Subsection (g) shall not apply with respect to a debtor who 

resides in a district for which the United States trustee or bankruptcy administrator of the bankruptcy court of that district determines that the approved instructional courses are not adequate to 

service the additional individuals who would be required to complete the instructional course by reason of the requirements of this 

section. 

‘‘(i) Each United States trustee or bankruptcy administrator 

that makes a determination described in subsection (h) shall review 

that determination not later than 1 year after the date of that determination, and not less frequently than every year thereafter.’’. 

(d) DEBTOR’S DUTIES.—Section 521 of title 11, United States 

Code, is amended— (1) by inserting ‘‘(a)’’ before ‘‘The debtor shall—’’; and 

(2) by adding at the end the following: ‘‘(b) In addition to the requirements under subsection (a), a 

debtor who is an individual shall file with the court—

17

‘‘(1) a certificate from the approved nonprofit budget and 

credit counseling agency that provided the debtor services under 

section 109(h) describing the services provided to the debtor; 

and ‘‘(2) a copy of the debt repayment plan, if any, developed 

under section 109(h) through the approved nonprofit budget 

and credit counseling agency referred to in paragraph (1).’’. (e) GENERAL PROVISIONS.— (1) IN GENERAL.—Chapter 1 of title 11, United States Code, 

is amended by adding at the end the following: 

‘‘§ 111. Credit counseling agencies; financial management instructional courses 

‘‘(a) The clerk shall maintain a publicly available list of— ‘‘(1) credit counseling agencies that provide 1 or more programs described in section 109(h) currently approved by the 

United States trustee or the bankruptcy administrator for the 

district, as applicable; and ‘‘(2) instructional courses concerning personal financial 

management currently approved by the United States trustee or 

the bankruptcy administrator for the district, as applicable. 

‘‘(b) The United States trustee or bankruptcy administrator 

shall only approve a credit counseling agency or instructional course 

concerning personal financial management as follows: ‘‘(1) The United States trustee or bankruptcy administrator 

shall have thoroughly reviewed the qualifications of the credit 

counseling agency or of the provider of the instructional course 

under the standards set forth in this section, and the programs 

or instructional courses which will be offered by such agency or 

provider, and may require an agency or provider of an instructional course which has sought approval to provide information 

with respect to such review. ‘‘(2) The United States trustee or bankruptcy administrator 

shall have determined that the credit counseling agency or instructional course fully satisfies the applicable standards set 

forth in this section. 

‘‘(3) When an agency or instructional course is initially approved, such approval shall be for a probationary period not to 

exceed 6 months. An agency or instructional course is initially 

approved if it did not appear on the approved list for the district under subsection (a) immediately prior to approval. 

‘‘(4) At the conclusion of the probationary period under 

paragraph (3), the United States trustee or bankruptcy administrator may only approve for an additional 1-year period, and 

for successive 1-year periods thereafter, any agency or instructional course which has demonstrated during the probationary 

or subsequent period that such agency or instructional course—

‘‘(A) has met the standards set forth under this section 

during such period; and 

‘‘(B) can satisfy such standards in the future. 

‘‘(5) Not later than 30 days after any final decision under 

paragraph (4), that occurs either after the expiration of the initial probationary period, or after any 2-year period thereafter, 

an interested person may seek judicial review of such decision 

in the appropriate district court of the United States. 

18

‘‘(c)(1) The United States trustee or bankruptcy administrator 

shall only approve a credit counseling agency that demonstrates 

that it will provide qualified counselors, maintain adequate provision for safekeeping and payment of client funds, provide adequate 

counseling with respect to client credit problems, and deal responsibly and effectively with other matters as relate to the quality, effectiveness, and financial security of such programs. ‘‘(2) To be approved by the United States trustee or bankruptcy 

administrator, a credit counseling agency shall, at a minimum— ‘‘(A) be a nonprofit budget and credit counseling agency, the 

majority of the board of directors of which— ‘‘(i) are not employed by the agency; and 

‘‘(ii) will not directly or indirectly benefit financially 

from the outcome of a credit counseling session; 

‘‘(B) if a fee is charged for counseling services, charge a reasonable fee, and provide services without regard to ability to 

pay the fee; ‘‘(C) provide for safekeeping and payment of client funds, 

including an annual audit of the trust accounts and appropriate employee bonding; ‘‘(D) provide full disclosures to clients, including funding 

sources, counselor qualifications, possible impact on credit reports, and any costs of such program that will be paid by the 

debtor and how such costs will be paid; ‘‘(E) provide adequate counseling with respect to client credit problems that includes an analysis of their current situation, 

what brought them to that financial status, and how they can 

develop a plan to handle the problem without incurring negative amortization of their debts; ‘‘(F) provide trained counselors who receive no commissions 

or bonuses based on the counseling session outcome, and who 

have adequate experience, and have been adequately trained to 

provide counseling services to individuals in financial difficulty, including the matters described in subparagraph (E); 

‘‘(G) demonstrate adequate experience and background in 

providing credit counseling; and 

‘‘(H) have adequate financial resources to provide continuing support services for budgeting plans over the life of any 

repayment plan. 

‘‘(d) The United States trustee or bankruptcy administrator 

shall only approve an instructional course concerning personal financial management—

‘‘(1) for an initial probationary period under subsection 

(b)(3) if the course will provide at a minimum—

‘‘(A) trained personnel with adequate experience and 

training in providing effective instruction and services; 

‘‘(B) learning materials and teaching methodologies designed to assist debtors in understanding personal financial management and that are consistent with stated objectives directly related to the goals of such instructional 

course; 

‘‘(C) adequate facilities situated in reasonably convenient locations at which such instructional course is offered, 

except that such facilities may include the provision of such 

instructional course or program by telephone or through the 

19

Internet, if such instructional course or program is effective; 

and 

‘‘(D) the preparation and retention of reasonable 

records (which shall include the debtor’s bankruptcy case 

number) to permit evaluation of the effectiveness of such instructional course or program, including any evaluation of 

satisfaction of instructional course or program requirements for each debtor attending such instructional course 

or program, which shall be available for inspection and 

evaluation by the Executive Office for United States Trustees, the United States trustee, bankruptcy administrator, or 

chief bankruptcy judge for the district in which such instructional course or program is offered; and 

‘‘(2) for any 1-year period if the provider thereof has demonstrated that the course meets the standards of paragraph (1) 

and, in addition—

‘‘(A) has been effective in assisting a substantial number of debtors to understand personal financial management; and 

‘‘(B) is otherwise likely to increase substantially debtor 

understanding of personal financial management. 

‘‘(e) The district court may, at any time, investigate the qualifications of a credit counseling agency referred to in subsection (a), 

and request production of documents to ensure the integrity and effectiveness of such credit counseling agencies. The district court 

may, at any time, remove from the approved list under subsection 

(a) a credit counseling agency upon finding such agency does not 

meet the qualifications of subsection (b). 

‘‘(f) The United States trustee or bankruptcy administrator shall 

notify the clerk that a credit counseling agency or an instructional 

course is no longer approved, in which case the clerk shall remove 

it from the list maintained under subsection (a). 

‘‘(g)(1) No credit counseling agency may provide to a credit reporting agency information concerning whether a debtor who has received or sought instruction concerning personal financial management from the credit counseling agency. 

‘‘(2) A credit counseling agency that willfully or negligently fails 

to comply with any requirement under this title with respect to a 

debtor shall be liable for damages in an amount equal to the sum 

of—

‘‘(A) any actual damages sustained by the debtor as a result 

of the violation; and 

‘‘(B) any court costs or reasonable attorneys’ fees (as determined by the court) incurred in an action to recover those damages.’’. 

(2) CLERICAL AMENDMENT.—The table of sections for chapter 1 of title 11, United States Code, is amended by adding at 

the end the following:

‘‘111. Credit counseling agencies; financial management instructional courses.’’.

(f) LIMITATION.—Section 362 of title 11, United States Code, is 

amended by adding at the end the following: 

‘‘(i) If a case commenced under chapter 7, 11, or 13 is dismissed 

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section (c)(3), any subsequent case commenced by the debtor under 

any such chapter shall not be presumed to be filed not in good faith. 

‘‘(j) On request of a party in interest, the court shall issue an 

order under subsection (c) confirming that the automatic stay has 

been terminated.’’. 

SEC. 107. SCHEDULES OF REASONABLE AND NECESSARY EXPENSES. 

For purposes of section 707(b) of title 11, United States Code, 

as amended by this Act, the Director of the Executive Office for 

United States Trustees shall, not later than 180 days after the date 

of enactment of this Act, issue schedules of reasonable and necessary 

administrative expenses of administering a chapter 13 plan for each 

judicial district of the United States. 

TITLE II—ENHANCED CONSUMER 

PROTECTION 

Subtitle A—Penalties for Abusive Creditor 

Practices 

SEC. 201. PROMOTION OF ALTERNATIVE DISPUTE RESOLUTION. 

(a) REDUCTION OF CLAIM.—Section 502 of title 11, United 

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

‘‘(k)(1) The court, on the motion of the debtor and after a hearing, may reduce a claim filed under this section based in whole on 

an unsecured consumer debt by not more than 20 percent of the 

claim, if—

‘‘(A) the claim was filed by a creditor who unreasonably refused to negotiate a reasonable alternative repayment schedule 

proposed by an approved credit counseling agency described in 

section 111 acting on behalf of the debtor; 

‘‘(B) the offer of the debtor under subparagraph (A)—

‘‘(i) was made at least 60 days before the filing of the 

petition; and 

‘‘(ii) provided for payment of at least 60 percent of the 

amount of the debt over a period not to exceed the repayment period of the loan, or a reasonable extension thereof; 

and 

‘‘(C) no part of the debt under the alternative repayment 

schedule is nondischargeable. 

‘‘(2) The debtor shall have the burden of proving, by clear and 

convincing evidence, that—

‘‘(A) the creditor unreasonably refused to consider the debtor’s proposal; and 

‘‘(B) the proposed alternative repayment schedule was made 

prior to expiration of the 60-day period specified in paragraph 

(1)(B)(i).’’.

(b) LIMITATION ON AVOIDABILITY.—Section 547 of title 11, 

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

‘‘(h) The trustee may not avoid a transfer if such transfer was 

made as a part of an alternative repayment plan between the debtor 

and any creditor of the debtor created by an approved credit counseling agency.’’.

21

SEC. 202. EFFECT OF DISCHARGE. 

Section 524 of title 11, United States Code, is amended by adding at the end the following: 

‘‘(i) The willful failure of a creditor to credit payments received 

under a plan confirmed under this title, unless the order confirming 

the plan is revoked, the plan is in default, or the creditor has not 

received payments required to be made under the plan in the manner required by the plan (including crediting the amounts required 

under the plan), shall constitute a violation of an injunction under 

subsection (a)(2) if the act of the creditor to collect and failure to 

credit payments in the manner required by the plan caused material 

injury to the debtor. 

‘‘(j) Subsection (a)(2) does not operate as an injunction against 

an act by a creditor that is the holder of a secured claim, if—

‘‘(1) such creditor retains a security interest in real property 

that is the principal residence of the debtor; 

‘‘(2) such act is in the ordinary course of business between 

the creditor and the debtor; and 

‘‘(3) such act is limited to seeking or obtaining periodic payments associated with a valid security interest in lieu of pursuit 

of in rem relief to enforce the lien.’’. 

SEC. 203. DISCOURAGING ABUSE OF REAFFIRMATION PRACTICES. 

(a) IN GENERAL.—Section 524 of title 11, United States Code, 

as amended section 202, is amended—

(1) in subsection (c), by striking paragraph (2) and inserting the following: 

‘‘(2) the debtor received the disclosures described in subsection (k) at or before the time at which the debtor signed the 

agreement;’’; and 

(2) by adding at the end the following: 

‘‘(k)(1) The disclosures required under subsection (c)(2) shall 

consist of the disclosure statement described in paragraph (3), completed as required in that paragraph, together with the agreement, 

statement, declaration, motion and order described, respectively, in 

paragraphs (4) through (8), and shall be the only disclosures required in connection with the reaffirmation. 

‘‘(2) Disclosures made under paragraph (1) shall be made clearly and conspicuously and in writing. The terms ‘Amount Reaffirmed’ and ‘Annual Percentage Rate’ shall be disclosed more conspicuously than other terms, data or information provided in connection with this disclosure, except that the phrases ‘Before agreeing 

to reaffirm a debt, review these important disclosures’ and ‘Summary of Reaffirmation Agreement’ may be equally conspicuous. Disclosures may be made in a different order and may use terminology 

different from that set forth in paragraphs (2) through (8), except 

that the terms ‘Amount Reaffirmed’ and ‘Annual Percentage Rate’

must be used where indicated. 

‘‘(3) The disclosure statement required under this paragraph 

shall consist of the following: 

‘‘(A) The statement: ‘Part A: Before agreeing to reaffirm a 

debt, review these important disclosures:’; 

‘‘(B) Under the heading ‘Summary of Reaffirmation Agreement’, the statement: ‘This Summary is made pursuant to the 

requirements of the Bankruptcy Code’; 

22

‘‘(C) The ‘Amount Reaffirmed’, using that term, which shall 

be— ‘‘(i) the total amount which the debtor agrees to reaffirm, and ‘‘(ii) the total of any other fees or cost accrued as of the 

date of the disclosure statement. 

‘‘(D) In conjunction with the disclosure of the ‘Amount Reaffirmed’, the statements— ‘‘(i) ‘The amount of debt you have agreed to reaffirm’; 

and ‘‘(ii) ‘Your credit agreement may obligate you to pay additional amounts which may come due after the date of this 

disclosure. Consult your credit agreement.’. ‘‘(E) The ‘Annual Percentage Rate’, using that term, which 

shall be disclosed as— ‘‘(i) if, at the time the petition is filed, the debt is an 

extension of credit under an open end credit plan, as the 

terms ‘credit’ and ‘open end credit plan’ are defined in section 103 of the Truth in Lending Act, then— ‘‘(I) the annual percentage rate determined under 

paragraphs (5) and (6) of section 127(b) of the Truth 

in Lending Act, as applicable, as disclosed to the debtor in the most recent periodic statement prior to the 

agreement or, if no such periodic statement has been 

given to the debtor during the prior 6 months, the annual percentage rate as it would have been so disclosed 

at the time the disclosure statement is given to the 

debtor, or to the extent this annual percentage rate is 

not readily available or not applicable, then ‘‘(II) the simple interest rate applicable to the 

amount reaffirmed as of the date the disclosure statement is given to the debtor, or if different simple interest rates apply to different balances, the simple interest 

rate applicable to each such balance, identifying the 

amount of each such balance included in the amount 

reaffirmed, or 

‘‘(III) if the entity making the disclosure elects, to 

disclose the annual percentage rate under subclause (I) 

and the simple interest rate under subclause (II); 

‘‘(ii) if, at the time the petition is filed, the debt is an 

extension of credit other than under an open end credit 

plan, as the terms ‘credit’ and ‘open end credit plan’ are defined in section 103 of the Truth in Lending Act, then—

‘‘(I) the annual percentage rate under section 

128(a)(4) of the Truth in Lending Act, as disclosed to 

the debtor in the most recent disclosure statement given 

to the debtor prior to the reaffirmation agreement with 

respect to the debt, or, if no such disclosure statement 

was given to the debtor, the annual percentage rate as 

it would have been so disclosed at the time the disclosure statement is given to the debtor, or to the extent 

this annual percentage rate is not readily available or 

not applicable, then 

‘‘(II) the simple interest rate applicable to the 

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ment is given to the debtor, or if different simple interest rates apply to different balances, the simple interest 

rate applicable to each such balance, identifying the 

amount of such balance included in the amount reaffirmed, or ‘‘(III) if the entity making the disclosure elects, to 

disclose the annual percentage rate under (I) and the 

simple interest rate under (II). ‘‘(F) If the underlying debt transaction was disclosed as a 

variable rate transaction on the most recent disclosure given 

under the Truth in Lending Act, by stating ‘The interest rate on 

your loan may be a variable interest rate which changes from 

time to time, so that the annual percentage rate disclosed here 

may be higher or lower.’. ‘‘(G) If the debt is secured by a security interest which has 

not been waived in whole or in part or determined to be void 

by a final order of the court at the time of the disclosure, by disclosing that a security interest or lien in goods or property is 

asserted over some or all of the obligations the debtor is reaffirming and listing the items and their original purchase 

price that are subject to the asserted security interest, or if not 

a purchase-money security interest then listing by items or types 

and the original amount of the loan. ‘‘(H) At the election of the creditor, a statement of the repayment schedule using 1 or a combination of the following— ‘‘(i) by making the statement: ‘Your first payment in the amount of $lll is due on lll but the future payment 

amount may be different. Consult your reaffirmation or 

credit agreement, as applicable.’, and stating the amount of 

the first payment and the due date of that payment in the 

places provided; ‘‘(ii) by making the statement: ‘Your payment schedule 

will be:’, and describing the repayment schedule with the 

number, amount and due dates or period of payments 

scheduled to repay the obligations reaffirmed to the extent 

then known by the disclosing party; or 

‘‘(iii) by describing the debtor’s repayment obligations 

with reasonable specificity to the extent then known by the 

disclosing party. 

‘‘(I) The following statement: ‘Note: When this disclosure refers to what a creditor ‘‘may’’ do, it does not use the word ‘‘may’’

to give the creditor specific permission. The word ‘‘may’’ is used 

to tell you what might occur if the law permits the creditor to 

take the action. If you have questions about your reaffirmation 

or what the law requires, talk to the attorney who helped you 

negotiate this agreement. If you don’t have an attorney helping 

you, the judge will explain the effect of your reaffirmation when 

the reaffirmation hearing is held.’. 

‘‘(J)(i) The following additional statements: 

‘‘ ‘Reaffirming a debt is a serious financial decision. The law requires you to take certain steps to make sure the decision is in your 

best interest. If these steps are not completed, the reaffirmation 

agreement is not effective, even though you have signed it. 

‘‘ ‘1. Read the disclosures in this Part A carefully. Consider 

the decision to reaffirm carefully. Then, if you want to reaffirm, 

24

sign the reaffirmation agreement in Part B (or you may use a 

separate agreement you and your creditor agree on). ‘‘ ‘2. Complete and sign Part D and be sure you can afford 

to make the payments you are agreeing to make and have received a copy of the disclosure statement and a completed and 

signed reaffirmation agreement. ‘‘ ‘3. If you were represented by an attorney during the negotiation of the reaffirmation agreement, the attorney must have 

signed the certification in Part C. ‘‘ ‘4. If you were not represented by an attorney during the 

negotiation of the reaffirmation agreement, you must have completed and signed Part E. ‘‘ ‘5. The original of this disclosure must be filed with the 

court by you or your creditor. If a separate reaffirmation agreement (other than the one in Part B) has been signed, it must 

be attached. ‘‘ ‘6. If you were represented by an attorney during the negotiation of the reaffirmation agreement, your reaffirmation agreement becomes effective upon filing with the court unless the reaffirmation is presumed to be an undue hardship as explained 

in Part D. ‘‘ ‘7. If you were not represented by an attorney during the 

negotiation of the reaffirmation agreement, it will not be effective unless the court approves it. The court will notify you of the 

hearing on your reaffirmation agreement. You must attend this 

hearing in bankruptcy court where the judge will review your 

agreement. The bankruptcy court must approve the agreement 

as consistent with your best interests, except that no court approval is required if the agreement is for a consumer debt secured by a mortgage, deed of trust, security deed or other lien 

on your real property, like your home. 

‘‘ ‘Your right to rescind a reaffirmation. You may rescind (cancel) your reaffirmation at any time before the bankruptcy court enters a discharge order or within 60 days after the agreement is filed 

with the court, whichever is longer. To rescind or cancel, you must 

notify the creditor that the agreement is canceled. 

‘‘ ‘What are your obligations if you reaffirm the debt? A reaffirmed debt remains your personal legal obligation. It is not discharged in your bankruptcy. That means that if you default on your 

reaffirmed debt after your bankruptcy is over, your creditor may be 

able to take your property or your wages. Otherwise, your obligations will be determined by the reaffirmation agreement which may 

have changed the terms of the original agreement. For example, if 

you are reaffirming an open end credit agreement, the creditor may 

be permitted by that agreement or applicable law to change the 

terms of the agreement in the future under certain conditions. 

‘‘ ‘Are you required to enter into a reaffirmation agreement by 

any law? No, you are not required to reaffirm a debt by any law. 

Only agree to reaffirm a debt if it is in your best interest. Be sure 

you can afford the payments you agree to make. 

‘‘ ‘What if your creditor has a security interest or lien? Your 

bankruptcy discharge does not eliminate any lien on your property. 

A ‘‘lien’’ is often referred to as a security interest, deed of trust, 

mortgage or security deed. Even if you do not reaffirm and your personal liability on the debt is discharged, because of the lien your 

25

creditor may still have the right to take the security property if you 

do not pay the debt or default on it. If the lien is on an item of personal property that is exempt under your State’s law or that the 

trustee has abandoned, you may be able to redeem the item rather 

than reaffirm the debt. To redeem, you make a single payment to 

the creditor equal to the current value of the security property, as 

agreed by the parties or determined by the court.’. ‘‘(ii) In the case of a reaffirmation under subsection (m)(2), 

numbered paragraph 6 in the disclosures required by clause (i) 

of this subparagraph shall read as follows: ‘‘ ‘6. If you were represented by an attorney during the negotiation of the reaffirmation agreement, your reaffirmation agreement becomes effective upon filing with the court.’. ‘‘(4) The form of reaffirmation agreement required under this 

paragraph shall consist of the following: ‘‘ ‘Part B: Reaffirmation Agreement. I/we agree to reaffirm the 

obligations arising under the credit agreement described below. ‘‘ ‘Brief description of credit agreement: 

‘‘ ‘Description of any changes to the credit agreement made as 

part of this reaffirmation agreement: ‘‘ ‘Signature: Date: 

‘‘ ‘Borrower: 

‘‘ ‘Co-borrower, if also reaffirming: 

‘‘ ‘Accepted by creditor: 

‘‘ ‘Date of creditor acceptance:’. ‘‘(5)(A) The declaration shall consist of the following: 

‘‘ ‘Part C: Certification by Debtor’s Attorney (If Any). ‘‘ ‘I hereby certify that (1) this agreement represents a fully informed and voluntary agreement by the debtor(s); (2) this agreement 

does not impose an undue hardship on the debtor or any dependent 

of the debtor; and (3) I have fully advised the debtor of the legal 

effect and consequences of this agreement and any default under 

this agreement. ‘‘ ‘Signature of Debtor’s Attorney: Date:’. 

‘‘(B) In the case of reaffirmations in which a presumption of 

undue hardship has been established, the certification shall state 

that in the opinion of the attorney, the debtor is able to make the 

payment. 

‘‘(C) In the case of a reaffirmation agreement under subsection 

(m)(2), subparagraph (B) is not applicable. 

‘‘(6)(A) The statement in support of reaffirmation agreement, 

which the debtor shall sign and date prior to filing with the court, 

shall consist of the following: 

‘‘ ‘Part D: Debtor’s Statement in Support of Reaffirmation Agreement. 

‘‘ ‘1. I believe this agreement will not impose an undue hardship 

on my dependents or me. I can afford to make the payments on the 

reaffirmed debt because my monthly income (take home pay plus 

any other income received) is $lll, and my actual current 

monthly expenses including monthly payments on post-bankruptcy 

debt and other reaffirmation agreements total $lll, leaving 

$lll to make the required payments on this reaffirmed debt. I 

understand that if my income less my monthly expenses does not 

leave enough to make the payments, this reaffirmation agreement is 

presumed to be an undue hardship on me and must be reviewed by 

26

the court. However, this presumption may be overcome if I explain 

to the satisfaction of the court how I can afford to make the payments here: lll. ‘‘ ‘2. I received a copy of the Reaffirmation Disclosure Statement 

in Part A and a completed and signed reaffirmation agreement.’. ‘‘(B) Where the debtor is represented by an attorney and is reaffirming a debt owed to a creditor defined in section 19(b)(1)(A)(iv) 

of the Federal Reserve Act, the statement of support of the reaffirmation agreement, which the debtor shall sign and date prior to filing 

with the court, shall consist of the following: ‘‘ ‘I believe this agreement is in my financial interest. I can afford to make the payments on the reaffirmed debt. I received a copy 

of the Reaffirmation Disclosure Statement in Part A and a completed and signed reaffirmation agreement.’. ‘‘(7) The motion, which may be used if approval of the agreement by the court is required in order for it to be effective and shall 

be signed and dated by the moving party, shall consist of the following: ‘‘ ‘Part E: Motion for Court Approval (To be completed only 

where debtor is not represented by an attorney.). I (we), the debtor, 

affirm the following to be true and correct: ‘‘ ‘I am not represented by an attorney in connection with this 

reaffirmation agreement. ‘‘ ‘I believe this agreement is in my best interest based on the income and expenses I have disclosed in my Statement in Support of 

this reaffirmation agreement above, and because (provide any additional relevant reasons the court should consider): ‘‘ ‘Therefore, I ask the court for an order approving this reaffirmation agreement.’. ‘‘(8) The court order, which may be used to approve a reaffirmation, shall consist of the following: ‘‘ ‘Court Order: The court grants the debtor’s motion and approves the reaffirmation agreement described above.’. ‘‘(l) Notwithstanding any other provision of this title the following shall apply: 

‘‘(1) A creditor may accept payments from a debtor before 

and after the filing of a reaffirmation agreement with the court. 

‘‘(2) A creditor may accept payments from a debtor under 

a reaffirmation agreement which the creditor believes in good 

faith to be effective. 

‘‘(3) The requirements of subsections (c)(2) and (k) shall be 

satisfied if disclosures required under those subsections are 

given in good faith. 

‘‘(m)(1) Until 60 days after a reaffirmation agreement is filed 

with the court (or such additional period as the court, after notice 

and a hearing and for cause, orders before the expiration of such 

period), it shall be presumed that the reaffirmation agreement is an 

undue hardship on the debtor if the debtor’s monthly income less 

the debtor’s monthly expenses as shown on the debtor’s completed 

and signed statement in support of the reaffirmation agreement required under subsection (k)(6)(A) is less than the scheduled payments on the reaffirmed debt. This presumption shall be reviewed 

by the court. The presumption may be rebutted in writing by the 

debtor if the statement includes an explanation which identifies additional sources of funds to make the payments as agreed upon 

27

under the terms of the reaffirmation agreement. If the presumption 

is not rebutted to the satisfaction of the court, the court may disapprove the agreement. No agreement shall be disapproved without 

notice and a hearing to the debtor and creditor and such hearing 

shall be concluded before the entry of the debtor’s discharge. ‘‘(2) This subsection does not apply to reaffirmation agreements 

where the creditor is a credit union, as defined in section 

19(b)(1)(A)(iv) of the Federal Reserve Act.’’. (b) LAW ENFORCEMENT.— (1) IN GENERAL.—Chapter 9 of title 18, United States Code, 

is amended by adding at the end the following: 

‘‘§ 158. Designation of United States attorneys and agents of 

the Federal Bureau of Investigation to address abusive reaffirmations of debt and materially fraudulent statements in bankruptcy schedules 

‘‘(a) IN GENERAL.—The Attorney General of the United States 

shall designate the individuals described in subsection (b) to have 

primary responsibility in carrying out enforcement activities in addressing violations of section 152 or 157 relating to abusive reaffirmations of debt. In addition to addressing the violations referred to in the preceding sentence, the individuals described under 

subsection (b) shall address violations of section 152 or 157 relating 

to materially fraudulent statements in bankruptcy schedules that 

are intentionally false or intentionally misleading. ‘‘(b) UNITED STATES DISTRICT ATTORNEYS AND AGENTS OF THE

FEDERAL BUREAU OF INVESTIGATION.—The individuals referred to 

in subsection (a) are— ‘‘(1) a United States attorney for each judicial district of the 

United States; and ‘‘(2) an agent of the Federal Bureau of Investigation (within 

the meaning of section 3107) for each field office of the Federal 

Bureau of Investigation. 

‘‘(c) BANKRUPTCY INVESTIGATIONS.—Each United States attorney designated under this section shall, in addition to any other responsibilities, have primary responsibility for carrying out the duties of a United States attorney under section 3057. 

‘‘(d) BANKRUPTCY PROCEDURES.—The bankruptcy courts shall 

establish procedures for referring any case which may contain a materially fraudulent statement in a bankruptcy schedule to the individuals designated under this section.’’. (2) CLERICAL AMENDMENT.—The analysis for chapter 9 of 

title 18, United States Code, is amended by adding at the end 

the following:

‘‘158. Designation of United States attorneys and agents of the Federal Bureau of Investigation to address abusive reaffirmations of debt and materially 

fraudulent statements in bankruptcy schedules.’’.

SEC. 204. PRESERVATION OF CLAIMS AND DEFENSES UPON SALE OF 

PREDATORY LOANS. 

Section 363 of title 11, United States Code, is amended— (1) by redesignating subsection (o) as subsection (p), and 

(2) by inserting after subsection (n) the following: ‘‘(o) Notwithstanding subsection (f), if a person purchases any 

interest in a consumer credit transaction that is subject to the Truth 

in Lending Act or any interest in a consumer credit contract (as deVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00027 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
28

fined in section 433.1 of title 16 of the Code of Federal Regulations 

(January 1, 2001), as amended from time to time), and if such interest is purchased through a sale under this section, then such person shall remain subject to all claims and defenses that are related 

to such consumer credit transaction or such consumer credit contract, to the same extent as such person would be subject to such 

claims and defenses of the consumer had such interest been purchased at a sale not under this section.’’.

SEC. 205. GAO STUDY AND REPORT ON REAFFIRMATION PROCESS. 

(a) STUDY.—The Comptroller General of the United States shall 

conduct a study of the reaffirmation process that occurs under title 

11 of the United States Code, to determine the overall treatment of 

consumers within the context of such process, and shall include in 

such study consideration of—

(1) the policies and activities of creditors with respect to reaffirmation; and 

(2) whether consumers are fully, fairly, and consistently informed of their rights pursuant to such title. 

(b) REPORT TO THE CONGRESS.—Not later than 18 months after 

the date of enactment of this Act, the Comptroller General shall submit to the President pro tempore of the Senate and the Speaker of 

the House of Representatives a report on the results of the study conducted under subsection (a), together with recommendations for legislation (if any) to address any abusive or coercive tactics found in 

connection with the reaffirmation process that occurs under title 11 

of the United States Code.

Subtitle B—Priority Child Support 

SEC. 211. DEFINITION OF DOMESTIC SUPPORT OBLIGATION. 

Section 101 of title 11, United States Code, is amended—

(1) by striking paragraph (12A); and 

(2) by inserting after paragraph (14) the following: 

‘‘(14A) ‘domestic support obligation’ means a debt that accrues before or after the entry of an order for relief under this 

title, including interest that accrues on that debt as provided 

under applicable nonbankruptcy law notwithstanding any other 

provision of this title, that is—

‘‘(A) owed to or recoverable by—

‘‘(i) a spouse, former spouse, or child of the debtor 

or such child’s parent, legal guardian, or responsible 

relative; or 

‘‘(ii) a governmental unit; 

‘‘(B) in the nature of alimony, maintenance, or support 

(including assistance provided by a governmental unit) of 

such spouse, former spouse, or child of the debtor or such 

child’s parent, without regard to whether such debt is expressly so designated; 

‘‘(C) established or subject to establishment before or 

after entry of an order for relief under this title, by reason 

of applicable provisions of—

‘‘(i) a separation agreement, divorce decree, or 

property settlement agreement; 

‘‘(ii) an order of a court of record; or 

29

‘‘(iii) a determination made in accordance with applicable nonbankruptcy law by a governmental unit; 

and 

‘‘(D) not assigned to a nongovernmental entity, unless 

that obligation is assigned voluntarily by the spouse, 

former spouse, child, or parent, legal guardian, or responsible relative of the child for the purpose of collecting the 

debt;’’.

SEC. 212. PRIORITIES FOR CLAIMS FOR DOMESTIC SUPPORT OBLIGATIONS. 

Section 507(a) of title 11, United States Code, is amended—

(1) by striking paragraph (7); 

(2) by redesignating paragraphs (1) through (6) as paragraphs (2) through (7), respectively; 

(3) in paragraph (2), as so redesignated, by striking ‘‘First’’

and inserting ‘‘Second’’; 

(4) in paragraph (3), as so redesignated, by striking ‘‘Second’’ and inserting ‘‘Third’’; 

(5) in paragraph (4), as so redesignated—

(A) by striking ‘‘Third’’ and inserting ‘‘Fourth’’; and 

(B) by striking the semicolon at the end and inserting 

a period; 

(6) in paragraph (5), as so redesignated, by striking 

‘‘Fourth’’ and inserting ‘‘Fifth’’; 

(7) in paragraph (6), as so redesignated, by striking ‘‘Fifth’’

and inserting ‘‘Sixth’’; 

(8) in paragraph (7), as so redesignated, by striking ‘‘Sixth’’

and inserting ‘‘Seventh’’; and 

(9) by inserting before paragraph (2), as so redesignated, 

the following: 

‘‘(1) First: 

‘‘(A) Allowed unsecured claims for domestic support obligations that, as of the date of the filing of the petition, are 

owed to or recoverable by a spouse, former spouse, or child 

of the debtor, or the parent, legal guardian, or responsible 

relative of such child, without regard to whether the claim 

is filed by such person or is filed by a governmental unit 

on behalf of that person, on the condition that funds received under this paragraph by a governmental unit under 

this title after the date of the filing of the petition shall be 

applied and distributed in accordance with applicable nonbankruptcy law. 

‘‘(B) Subject to claims under subparagraph (A), allowed unsecured claims for domestic support obligations 

that, as of the date the petition was filed are assigned by 

a spouse, former spouse, child of the debtor, or such child’s 

parent, legal guardian, or responsible relative to a governmental unit (unless such obligation is assigned voluntarily 

by the spouse, former spouse, child, parent, legal guardian, 

or responsible relative of the child for the purpose of collecting the debt) or are owed directly to or recoverable by 

a governmental unit under applicable nonbankruptcy law, 

on the condition that funds received under this paragraph 

by a governmental unit under this title after the date of the 

30

filing of the petition be applied and distributed in accordance with applicable nonbankruptcy law. 

‘‘(C) If a trustee is appointed or elected under section 

701, 702, 703, 1104, 1202, or 1302, the administrative expenses of the trustee allowed under paragraphs (1)(A), (2), 

and (6) of section 503(b) shall be paid before payment of 

claims under subparagraphs (A) and (B), to the extent that 

the trustee administers assets that are otherwise available 

for the payment of such claims.’’. 

SEC. 213. REQUIREMENTS TO OBTAIN CONFIRMATION AND DISCHARGE IN CASES INVOLVING DOMESTIC SUPPORT OBLIGATIONS. 

Title 11, United States Code, is amended—

(1) in section 1129(a), by adding at the end the following: 

‘‘(14) If the debtor is required by a judicial or administrative order or statute to pay a domestic support obligation, the 

debtor has paid all amounts payable under such order or statute for such obligation that first become payable after the date 

on which the petition is filed.’’; 

(2) in section 1208(c)—

(A) in paragraph (8), by striking ‘‘or’’ at the end; 

(B) in paragraph (9), by striking the period at the end 

and inserting ‘‘; and’’; and 

(C) by adding at the end the following:

‘‘(10) failure of the debtor to pay any domestic support obligation that first becomes payable after the date on which the petition is filed.’’; 

(3) in section 1222(a)—

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

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

and inserting ‘‘; and’’; and 

(C) by adding at the end the following: 

‘‘(4) notwithstanding any other provision of this section, a 

plan may provide for less than full payment of all amounts 

owed for a claim entitled to priority under section 507(a)(1)(B) 

only if the plan provides that all of the debtor’s projected disposable income for a 5-year period, beginning on the date that 

the first payment is due under the plan, will be applied to make 

payments under the plan.’’; 

(4) in section 1222(b)—

(A) by redesignating paragraph (11) as paragraph (12); 

and 

(B) by inserting after paragraph (10) the following: 

‘‘(11) provide for the payment of interest accruing after the 

date of the filing of the petition on unsecured claims that are 

nondischargeable under section 1228(a), except that such interest may be paid only to the extent that the debtor has disposable 

income available to pay such interest after making provision for 

full payment of all allowed claims;’’; 

(5) in section 1225(a)—

(A) in paragraph (5), by striking ‘‘and’’ at the end; 

(B) in paragraph (6), by striking the period at the end 

and inserting ‘‘; and’’; and 

(C) by adding at the end the following: 

31

‘‘(7) if the debtor is required by a judicial or administrative 

order or statute to pay a domestic support obligation, the debtor 

has paid all amounts payable under such order for such obligation that first become payable after the date on which the petition is filed.’’; 

(6) in section 1228(a), in the matter preceding paragraph 

(1), by inserting ‘‘, and in the case of a debtor who is required 

by a judicial or administrative order to pay a domestic support 

obligation, after such debtor certifies that all amounts payable 

under such order or statute that are due on or before the date 

of the certification (including amounts due before the petition 

was filed, but only to the extent provided for by the plan) have 

been paid’’ after ‘‘completion by the debtor of all payments 

under the plan’’; 

(7) in section 1307(c)— (A) in paragraph (9), by striking ‘‘or’’ at the end; 

(B) in paragraph (10), by striking the period at the end 

and inserting ‘‘; or’’; and 

(C) by adding at the end the following: ‘‘(11) failure of the debtor to pay any domestic support obligation that first becomes payable after the date on which the petition is filed.’’; 

(8) in section 1322(a)— (A) in paragraph (2), by striking ‘‘and’’ at the end; 

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

and inserting ‘‘; and’’; and 

(C) by adding at the end the following: ‘‘(4) notwithstanding any other provision of this section, a 

plan may provide for less than full payment of all amounts 

owed for a claim entitled to priority under section 507(a)(1)(B) 

only if the plan provides that all of the debtor’s projected disposable income for a 5-year period beginning on the date that 

the first payment is due under the plan will be applied to make 

payments under the plan.’’; 

(9) in section 1322(b)—

(A) in paragraph (9), by striking ‘‘; and’’ and inserting 

a semicolon; 

(B) by redesignating paragraph (10) as paragraph (11); 

and 

(C) inserting after paragraph (9) the following: 

‘‘(10) provide for the payment of interest accruing after the 

date of the filing of the petition on unsecured claims that are 

nondischargeable under section 1328(a), except that such interest may be paid only to the extent that the debtor has disposable 

income available to pay such interest after making provision for 

full payment of all allowed claims; and’’; 

(10) in section 1325(a), as amended by section 102, by inserting after paragraph (7) the following: 

‘‘(8) the debtor is required by a judicial or administrative 

order or statute to pay a domestic support obligation, the debtor 

has paid all amounts payable under such order or statute for 

such obligation that first becomes payable after the date on 

which the petition is filed; and’’; 

(11) in section 1328(a), in the matter preceding paragraph 

(1), by inserting ‘‘, and in the case of a debtor who is required 

32

by a judicial or administrative order to pay a domestic support 

obligation, after such debtor certifies that all amounts payable 

under such order or statute that are due on or before the date 

of the certification (including amounts due before the petition 

was filed, but only to the extent provided for by the plan) have 

been paid’’ after ‘‘completion by the debtor of all payments 

under the plan’’. 

SEC. 214. EXCEPTIONS TO AUTOMATIC STAY IN DOMESTIC SUPPORT 

OBLIGATION PROCEEDINGS. 

Section 362(b) of title 11, United States Code, is amended by 

striking paragraph (2) and inserting the following: ‘‘(2) under subsection (a)— ‘‘(A) of the commencement or continuation of a civil action or proceeding— ‘‘(i) for the establishment of paternity; 

‘‘(ii) for the establishment or modification of an 

order for domestic support obligations; ‘‘(iii) concerning child custody or visitation; 

‘‘(iv) for the dissolution of a marriage, except to the 

extent that such proceeding seeks to determine the division of property that is property of the estate; or ‘‘(v) regarding domestic violence; ‘‘(B) of the collection of a domestic support obligation 

from property that is not property of the estate; ‘‘(C) with respect to the withholding of income that is 

property of the estate or property of the debtor for payment 

of a domestic support obligation under a judicial or administrative order; ‘‘(D) of the withholding, suspension, or restriction of 

drivers’ licenses, professional and occupational licenses, 

and recreational licenses under State law, as specified in 

section 466(a)(16) of the Social Security Act; ‘‘(E) of the reporting of overdue support owed by a parent to any consumer reporting agency as specified in section 

466(a)(7) of the Social Security Act; ‘‘(F) of the interception of tax refunds, as specified in 

sections 464 and 466(a)(3) of the Social Security Act or 

under an analogous State law; or ‘‘(G) of the enforcement of medical obligations as specified under title IV of the Social Security Act;’’. 

SEC. 215. NONDISCHARGEABILITY OF CERTAIN DEBTS FOR ALIMONY, 

MAINTENANCE, AND SUPPORT. 

Section 523 of title 11, United States Code, is amended—

(1) in subsection (a)—

(A) by striking paragraph (5) and inserting the following: 

‘‘(5) for a domestic support obligation;’’; and 

(B) by striking paragraph (18); 

(2) in subsection (c), by striking ‘‘(6), or (15)’’ each place it 

appears and inserting ‘‘or (6)’’; and 

(3) in paragraph (15), as added by Public Law 103–394 

(108 Stat. 4133)—

(A) by inserting ‘‘to a spouse, former spouse, or child of 

the debtor and’’ before ‘‘not of the kind’’; 

(B) by inserting ‘‘or’’ after ‘‘court of record,’’; and 

33

(C) by striking ‘‘unless—’’ and all that follows through 

the end of the paragraph and inserting a semicolon.

SEC. 216. CONTINUED LIABILITY OF PROPERTY. 

Section 522 of title 11, United States Code, is amended— (1) in subsection (c), by striking paragraph (1) and inserting the following: ‘‘(1) a debt of a kind specified in paragraph (1) or (5) of section 523(a) (in which case, notwithstanding any provision of applicable nonbankruptcy law to the contrary, such property shall 

be liable for a debt of a kind specified in section 523(a)(5));’’; 

(2) in subsection (f)(1)(A), by striking the dash and all that 

follows through the end of the subparagraph and inserting ‘‘of 

a kind that is specified in section 523(a)(5); or’’; and 

(3) in subsection (g)(2), by striking ‘‘subsection (f)(2)’’ and 

inserting ‘‘subsection (f)(1)(B)’’. 

SEC. 217. PROTECTION OF DOMESTIC SUPPORT CLAIMS AGAINST 

PREFERENTIAL TRANSFER MOTIONS. 

Section 547(c)(7) of title 11, United States Code, is amended to 

read as follows: ‘‘(7) to the extent such transfer was a bona fide payment of 

a debt for a domestic support obligation;’’. 

SEC. 218. DISPOSABLE INCOME DEFINED. 

Section 1225(b)(2)(A) of title 11, United States Code, is amended by inserting ‘‘or for a domestic support obligation that first becomes payable after the date on which the petition is filed’’ after ‘‘dependent of the debtor’’.

SEC. 219. COLLECTION OF CHILD SUPPORT. 

(a) DUTIES OF TRUSTEE UNDER CHAPTER 7.—Section 704 of 

title 11, United States Code, as amended by section 102, is amended— (1) in subsection (a)— (A) in paragraph (8), by striking ‘‘and’’ at the end; 

(B) in paragraph (9), by striking the period and inserting a semicolon; and 

(C) by adding at the end the following: ‘‘(10) if with respect to the debtor there is a claim for a domestic support obligation, provide the applicable notice specified in subsection (c); and’’; and 

(2) by adding at the end the following: ‘‘(c)(1) In a case described in subsection (a)(10) to which subsection (a)(10) applies, the trustee shall— ‘‘(A)(i) provide written notice to the holder of the claim described in subsection (a)(10) of such claim and of the right of 

such holder to use the services of the State child support enforcement agency established under sections 464 and 466 of the 

Social Security Act for the State in which such holder resides, 

for assistance in collecting child support during and after the 

case under this title; ‘‘(ii) include in the notice provided under clause (i) the address and telephone number of such State child support enforcement agency; and ‘‘(iii) include in the notice provided under clause (i) an explanation of the rights of such holder to payment of such claim 

under this chapter; 

34

‘‘(B)(i) provide written notice to such State child support enforcement agency of such claim; and 

‘‘(ii) include in the notice provided under clause (i) the 

name, address, and telephone number of such holder; and 

‘‘(C) at such time as the debtor is granted a discharge 

under section 727, provide written notice to such holder and to 

such State child support enforcement agency of—

‘‘(i) the granting of the discharge; 

‘‘(ii) the last recent known address of the debtor; 

‘‘(iii) the last recent known name and address of the 

debtor’s employer; and 

‘‘(iv) the name of each creditor that holds a claim 

that—

‘‘(I) is not discharged under paragraph (2), (4), or 

(14A) of section 523(a); or 

‘‘(II) was reaffirmed by the debtor under section 

524(c). 

‘‘(2)(A) The holder of a claim described in subsection (a)(10) or 

the State child support enforcement agency of the State in which 

such holder resides may request from a creditor described in paragraph (1)(C)(iv) the last known address of the debtor. 

‘‘(B) Notwithstanding any other provision of law, a creditor that 

makes a disclosure of a last known address of a debtor in connection with a request made under subparagraph (A) shall not be liable by reason of making such disclosure.’’. 

(b) DUTIES OF TRUSTEE UNDER CHAPTER 11.—Section 1106 of 

title 11, United States Code, is amended—

(1) in subsection (a)—

(A) in paragraph (6), by striking ‘‘and’’ at the end; 

(B) in paragraph (7), by striking the period and inserting ‘‘; and’’; and

(C) by adding at the end the following: 

‘‘(8) if with respect to the debtor there is a claim for a domestic support obligation, provide the applicable notice specified in subsection (c).’’; and 

(2) by adding at the end the following: 

‘‘(c)(1) In a case described in subsection (a)(8) to which subsection (a)(8) applies, the trustee shall—

‘‘(A)(i) provide written notice to the holder of the claim described in subsection (a)(8) of such claim and of the right of 

such holder to use the services of the State child support enforcement agency established under sections 464 and 466 of the 

Social Security Act for the State in which such holder resides, 

for assistance in collecting child support during and after the 

case under this title; and 

‘‘(ii) include in the notice required by clause (i) the address 

and telephone number of such State child support enforcement 

agency; 

‘‘(B)(i) provide written notice to such State child support enforcement agency of such claim; and 

‘‘(ii) include in the notice required by clasue (i) the name, 

address, and telephone number of such holder; and 

‘‘(C) at such time as the debtor is granted a discharge 

under section 1141, provide written notice to such holder of 

35

such claim and to such State child support enforcement agency 

of— ‘‘(i) the granting of the discharge; 

‘‘(ii) the last recent known address of the debtor; 

‘‘(iii) the last recent known name and address of the debtor’s employer; and 

‘‘(iv) the name of each creditor that holds a claim that— ‘‘(I) is not discharged under paragraph (2), (3), or (14A) of 

section 523(a); or ‘‘(II) was reaffirmed by the debtor under section 524(c). ‘‘(2)(A) The holder of a claim described in subsection (a)(8) or 

the State child enforcement support agency of the State in which 

such holder resides may request from a creditor described in paragraph (1)(C)(iv) the last known address of the debtor. ‘‘(B) Notwithstanding any other provision of law, a creditor that 

makes a disclosure of a last known address of a debtor in connection with a request made under subparagraph (A) shall not be liable by reason of making such disclosure.’’. (c) DUTIES OF TRUSTEE UNDER CHAPTER 12.—Section 1202 of 

title 11, United States Code, is amended— (1) in subsection (b)— (A) in paragraph (4), by striking ‘‘and’’ at the end; 

(B) in paragraph (5), by striking the period and inserting ‘‘; and’’; and 

(C) by adding at the end the following: ‘‘(6) if with respect to the debtor there is a claim for a domestic support obligation, provide the applicable notice specified in subsection (c).’’; and 

(2) by adding at the end the following: ‘‘(c)(1) In a case described in subsection (b)(6) to which subsection (b)(6) applies, the trustee shall— ‘‘(A)(i) provide written notice to the holder of the claim described in subsection (b)(6) of such claim and of the right of 

such holder to use the services of the State child support enforcement agency established under sections 464 and 466 of the 

Social Security Act for the State in which such holder resides, 

for assistance in collecting child support during and after the 

case under this title; and 

‘‘(ii) include in the notice provided under clause (i) the address and telephone number of such State child support enforcement agency; 

‘‘(B)(i) provide written notice to such State child support enforcement agency of such claim; and 

‘‘(ii) include in the notice provided under clause (i) the 

name, address, and telephone number of such holder; and 

‘‘(C) at such time as the debtor is granted a discharge 

under section 1228, provide written notice to such holder and 

to such State child support enforcement agency of—

‘‘(i) the granting of the discharge; 

‘‘(ii) the last recent known address of the debtor; 

‘‘(iii) the last recent known name and address of the debtor’s employer; and 

‘‘(iv) the name of each creditor that holds a claim that—

‘‘(I) is not discharged under paragraph (2), (4), or (14A) of 

section 523(a); or 

36

‘‘(II) was reaffirmed by the debtor under section 524(c). 

‘‘(2)(A) The holder of a claim described in subsection (b)(6) or 

the State child support enforcement agency of the State in which 

such holder resides may request from a creditor described in paragraph (1)(C)(iv) the last known address of the debtor. 

‘‘(B) Notwithstanding any other provision of law, a creditor that 

makes a disclosure of a last known address of a debtor in connection with a request made under subparagraph (A) shall not be liable by reason of making that disclosure.’’. 

(d) DUTIES OF TRUSTEE UNDER CHAPTER 13.—Section 1302 of 

title 11, United States Code, is amended—

(1) in subsection (b)—

(A) in paragraph (4), by striking ‘‘and’’ at the end; 

(B) in paragraph (5), by striking the period and inserting ‘‘; and’’; and 

(C) by adding at the end the following: 

‘‘(6) if with respect to the debtor there is a claim for a domestic support obligation, provide the applicable notice specified in subsection (d).’’; and 

(2) by adding at the end the following: 

‘‘(d)(1) In a case described in subsection (b)(6) to which subsection (b)(6) applies, the trustee shall—

‘‘(A)(i) provide written notice to the holder of the claim described in subsection (b)(6) of such claim and of the right of 

such holder to use the services of the State child support enforcement agency established under sections 464 and 466 of the 

Social Security Act for the State in which such holder resides, 

for assistance in collecting child support during and after the 

case under this title; and 

‘‘(ii) include in the notice provided under clause (i) the address and telephone number of such State child support enforcement agency; 

‘‘(B)(i) provide written notice to such State child support enforcement agency of such claim; and 

‘‘(ii) include in the notice provided under clause (i) the 

name, address, and telephone number of such holder; and 

‘‘(C) at such time as the debtor is granted a discharge 

under section 1328, provide written notice to such holder and 

to such State child support enforcement agency of—

‘‘(i) the granting of the discharge; 

‘‘(ii) the last recent known address of the debtor; 

‘‘(iii) the last recent known name and address of the 

debtor’s employer; and 

‘‘(iv) the name of each creditor that holds a claim 

that—

‘‘(I) is not discharged under paragraph (2) or (4) of section 

523(a); or 

‘‘(II) was reaffirmed by the debtor under section 524(c). 

‘‘(2)(A) The holder of a claim described in subsection (b)(6) or 

the State child support enforcement agency of the State in which 

such holder resides may request from a creditor described in paragraph (1)(C)(iv) the last known address of the debtor. 

‘‘(B) Notwithstanding any other provision of law, a creditor that 

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37

tion with a request made under subparagraph (A) shall not be liable by reason of making that disclosure.’’.

SEC. 220. NONDISCHARGEABILITY OF CERTAIN EDUCATIONAL BENEFITS AND LOANS. 

Section 523(a) of title 11, United States Code, is amended by 

striking paragraph (8) and inserting the following: 

‘‘(8) unless excepting such debt from discharge under this 

paragraph would impose an undue hardship on the debtor and 

the debtor’s dependents, for—

‘‘(A)(i) an educational benefit overpayment or loan 

made, insured, or guaranteed by a governmental unit, or 

made under any program funded in whole or in part by a 

governmental unit or nonprofit institution; or 

‘‘(ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or 

‘‘(B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal 

Revenue Code of 1986, incurred by a debtor who is an individual;’’. 

Subtitle C—Other Consumer Protections 

SEC. 221. AMENDMENTS TO DISCOURAGE ABUSIVE BANKRUPTCY FILINGS. 

Section 110 of title 11, United States Code, is amended—

(1) in subsection (a)(1), by striking ‘‘or an employee of an 

attorney’’ and inserting ‘‘for the debtor or an employee of such 

attorney under the direct supervision of such attorney’’; 

(2) in subsection (b)—

(A) in paragraph (1), by adding at the end the following: ‘‘If a bankruptcy petition preparer is not an individual, then an officer, principal, responsible person, or 

partner of the preparer shall be required to—

‘‘(A) sign the document for filing; and 

‘‘(B) print on the document the name and address of that 

officer, principal, responsible person or partner.’’; and 

(B) by striking paragraph (2) and inserting the following: 

‘‘(2)(A) Before preparing any document for filing or accepting 

any fees from a debtor, the bankruptcy petition preparer shall provide to the debtor a written notice to debtors concerning bankruptcy 

petition preparers, which shall be on an official form issued by the 

Judicial Conference of the United States. 

‘‘(B) The notice under subparagraph (A)—

‘‘(i) shall inform the debtor in simple language that a bankruptcy petition preparer is not an attorney and may not practice 

law or give legal advice; 

‘‘(ii) may contain a description of examples of legal advice 

that a bankruptcy petition preparer is not authorized to give, in 

addition to any advice that the preparer may not give by reason 

of subsection (e)(2); and

‘‘(iii) shall—

‘‘(I) be signed by the debtor and, under penalty of perjury, by the bankruptcy petition preparer; and 

38

‘‘(II) be filed with any document for filing.’’; 

(3) in subsection (c)— (A) in paragraph (2)— (i) by striking ‘‘(2) For purposes’’ and inserting ‘‘(2)(A) Subject to subparagraph (B), for purposes’’; and 

(ii) by adding at the end the following: ‘‘(B) If a bankruptcy petition preparer is not an individual, the 

identifying number of the bankruptcy petition preparer shall be the 

Social Security account number of the officer, principal, responsible 

person, or partner of the preparer.’’; and 

(B) by striking paragraph (3); 

(4) in subsection (d)— (A) by striking ‘‘(d)(1)’’ and inserting ‘‘(d)’’; and 

(B) by striking paragraph (2);

(5) in subsection (e)— (A) by striking paragraph (2); and 

(B) by adding at the end the following: ‘‘(2)(A) A bankruptcy petition preparer may not offer a potential 

bankruptcy debtor any legal advice, including any legal advice described in subparagraph (B). ‘‘(B) The legal advice referred to in subparagraph (A) includes 

advising the debtor— ‘‘(i) whether— ‘‘(I) to file a petition under this title; or 

‘‘(II) commencing a case under chapter 7, 11, 12, or 13 

is appropriate; 

‘‘(ii) whether the debtor’s debts will be eliminated or discharged in a case under this title; ‘‘(iii) whether the debtor will be able to retain the debtor’s 

home, car, or other property after commencing a case under this 

title; ‘‘(iv) concerning— ‘‘(I) the tax consequences of a case brought under this 

title; or 

‘‘(II) the dischargeability of tax claims; 

‘‘(v) whether the debtor may or should promise to repay 

debts to a creditor or enter into a reaffirmation agreement with 

a creditor to reaffirm a debt; 

‘‘(vi) concerning how to characterize the nature of the debtor’s interests in property or the debtor’s debts; or 

‘‘(vii) concerning bankruptcy procedures and rights.’’; 

(6) in subsection (f)—

(A) by striking ‘‘(f)(1)’’ and inserting ‘‘(f)’’; and 

(B) by striking paragraph (2); 

(7) in subsection (g)—

(A) by striking ‘‘(g)(1)’’ and inserting ‘‘(g)’’; and 

(B) by striking paragraph (2); 

(8) in subsection (h)—

(A) by redesignating paragraphs (1) through (4) as 

paragraphs (2) through (5), respectively; 

(B) by inserting before paragraph (2), as so redesignated, the following: 

‘‘(1) The Supreme Court may promulgate rules under section 

2075 of title 28, or the Judicial Conference of the United States may 

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39

able by a bankruptcy petition preparer. A bankruptcy petition preparer shall notify the debtor of any such maximum amount before 

preparing any document for filing for a debtor or accepting any fee 

from the debtor.’’; 

(C) in paragraph (2), as so redesignated— (i) by striking ‘‘Within 10 days after the date of filing 

a petition, a bankruptcy petition preparer shall file a’’ and 

inserting ‘‘A’’; 

(ii) by inserting ‘‘by the bankruptcy petition preparer 

shall be filed together with the petition,’’ after ‘‘perjury’’; 

and 

(iii) by adding at the end the following: ‘‘If rules or 

guidelines setting a maximum fee for services have been 

promulgated or prescribed under paragraph (1), the declaration under this paragraph shall include a certification 

that the bankruptcy petition preparer complied with the notification requirement under paragraph (1).’’; 

(D) by striking paragraph (3), as so redesignated, and 

inserting the following: ‘‘(3)(A) The court shall disallow and order the immediate turnover to the bankruptcy trustee any fee referred to in paragraph (2) 

found to be in excess of the value of any services— ‘‘(i) rendered by the preparer during the 12-month period 

immediately preceding the date of filing of the petition; or ‘‘(ii) found to be in violation of any rule or guideline promulgated or prescribed under paragraph (1). 

‘‘(B) All fees charged by a bankruptcy petition preparer may be 

forfeited in any case in which the bankruptcy petition preparer fails 

to comply with this subsection or subsection (b), (c), (d), (e), (f), or 

(g). ‘‘(C) An individual may exempt any funds recovered under this 

paragraph under section 522(b).’’; and 

(E) in paragraph (4), as so redesignated, by striking ‘‘or the United States trustee’’ and inserting ‘‘the United 

States trustee, the bankruptcy administrator, or the court, 

on the initiative of the court,’’; 

(9) in subsection (i)(1), by striking the matter preceding 

subparagraph (A) and inserting the following: 

‘‘(i)(1) If a bankruptcy petition preparer violates this section or 

commits any act that the court finds to be fraudulent, unfair, or deceptive, on the motion of the debtor, trustee, United States trustee, 

or bankruptcy administrator, and after the court holds a hearing 

with respect to that violation or act, the court shall order the bankruptcy petition preparer to pay to the debtor—’’; 

(10) in subsection (j)—

(A) in paragraph (2)—

(i) in subparagraph (A)(i)(I), by striking ‘‘a violation of 

which subjects a person to criminal penalty’’; 

(ii) in subparagraph (B)—

(I) by striking ‘‘or has not paid a penalty’’ and inserting ‘‘has not paid a penalty’’; and 

(II) by inserting ‘‘or failed to disgorge all fees ordered 

by the court’’ after ‘‘a penalty imposed under this section,’’; 

(B) by redesignating paragraph (3) as paragraph (4); 

and 

40

(C) by inserting after paragraph (2) the following: ‘‘(3) The court, as part of its contempt power, may enjoin a 

bankruptcy petition preparer that has failed to comply with a previous order issued under this section. The injunction under this 

paragraph may be issued on the motion of the court, the trustee, the 

United States trustee, or the bankruptcy administrator.’’; and

(11) by adding at the end the following: ‘‘(l)(1) A bankruptcy petition preparer who fails to comply with 

any provision of subsection (b), (c), (d), (e), (f), (g), or (h) may be 

fined not more than $500 for each such failure. ‘‘(2) The court shall triple the amount of a fine assessed under 

paragraph (1) in any case in which the court finds that a bankruptcy petition preparer— ‘‘(A) advised the debtor to exclude assets or income that 

should have been included on applicable schedules; ‘‘(B) advised the debtor to use a false Social Security account number; ‘‘(C) failed to inform the debtor that the debtor was filing 

for relief under this title; or ‘‘(D) prepared a document for filing in a manner that failed 

to disclose the identity of the preparer. 

‘‘(3) The debtor, the trustee, a creditor, the United States trustee, or the bankruptcy administrator may file a motion for an order 

imposing a fine on the bankruptcy petition preparer for each violation of this section. ‘‘(4)(A) Fines imposed under this subsection in judicial districts 

served by United States trustees shall be paid to the United States 

trustee, who shall deposit an amount equal to such fines in a special 

account of the United States Trustee System Fund referred to in section 586(e)(2) of title 28. Amounts deposited under this subparagraph shall be available to fund the enforcement of this section on 

a national basis. ‘‘(B) Fines imposed under this subsection in judicial districts 

served by bankruptcy administrators shall be deposited as offsetting 

receipts to the fund established under section 1931 of title 28, and 

shall remain available until expended to reimburse any appropriation for the amount paid out of such appropriation for expenses of 

the operation and maintenance of the courts of the United States.’’. 

SEC. 222. SENSE OF CONGRESS. 

It is the sense of Congress that States should develop curricula 

relating to the subject of personal finance, designed for use in elementary and secondary schools. 

SEC. 223. ADDITIONAL AMENDMENTS TO TITLE 11, UNITED STATES 

CODE. 

Section 507(a) of title 11, United States Code, is amended by 

inserting after paragraph (9) the following: 

‘‘(10) Tenth, allowed claims for death or personal injuries 

resulting from the operation of a motor vehicle or vessel if such 

operation was unlawful because the debtor was intoxicated from 

using alcohol, a drug, or another substance.’’. 

SEC. 224. PROTECTION OF RETIREMENT SAVINGS IN BANKRUPTCY. 

(a) IN GENERAL.—Section 522 of title 11, United States Code, 

is amended—

(1) in subsection (b)—

41

(A) in paragraph (2)—

(i) in subparagraph (A), by striking ‘‘and’’ at the 

end; 

(ii) in subparagraph (B), by striking the period at 

the end and inserting ‘‘; and’’; 

(iii) by adding at the end the following: 

‘‘(C) retirement funds to the extent that those funds are in 

a fund or account that is exempt from taxation under section 

401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue 

Code of 1986.’’; and 

(iv) by striking ‘‘(2)(A) any property’’ and inserting: 

‘‘(3) Property listed in this paragraph is—

‘‘(A) any property’’; 

(B) by striking paragraph (1) and inserting: 

‘‘(2) Property listed in this paragraph is property that is specified under subsection (d), unless the State law that is applicable to 

the debtor under paragraph (3)(A) specifically does not so authorize.’’; 

(C) by striking ‘‘(b) Notwithstanding’’ and inserting 

‘‘(b)(1) Notwithstanding’’; 

(D) by striking ‘‘paragraph (2)’’ each place it appears 

and inserting ‘‘paragraph (3)’’; 

(E) by striking ‘‘paragraph (1)’’ each place it appears 

and inserting ‘‘paragraph (2)’’; 

(F) by striking ‘‘Such property is—’’; and 

(G) by adding at the end the following: 

‘‘(4) For purposes of paragraph (3)(C) and subsection (d)(12), 

the following shall apply: 

‘‘(A) If the retirement funds are in a retirement fund that 

has received a favorable determination under section 7805 of 

the Internal Revenue Code of 1986, and that determination is 

in effect as of the date of the commencement of the case under 

section 301, 302, or 303 of this title, those funds shall be presumed to be exempt from the estate. 

‘‘(B) If the retirement funds are in a retirement fund that 

has not received a favorable determination under such section 

7805, those funds are exempt from the estate if the debtor demonstrates that—

‘‘(i) no prior determination to the contrary has been 

made by a court or the Internal Revenue Service; and 

‘‘(ii)(I) the retirement fund is in substantial compliance 

with the applicable requirements of the Internal Revenue 

Code of 1986; or 

‘‘(II) the retirement fund fails to be in substantial compliance with the applicable requirements of the Internal 

Revenue Code of 1986 and the debtor is not materially responsible for that failure. 

‘‘(C) A direct transfer of retirement funds from 1 fund or account that is exempt from taxation under section 401, 403, 408, 

408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986, 

under section 401(a)(31) of the Internal Revenue Code of 1986, 

or otherwise, shall not cease to qualify for exemption under 

paragraph (3)(C) or subsection (d)(12) by reason of that direct 

transfer. 

42

‘‘(D)(i) Any distribution that qualifies as an eligible rollover 

distribution within the meaning of section 402(c) of the Internal 

Revenue Code of 1986 or that is described in clause (ii) shall 

not cease to qualify for exemption under paragraph (3)(C) or 

subsection (d)(12) by reason of that distribution. 

‘‘(ii) A distribution described in this clause is an amount 

that—

‘‘(I) has been distributed from a fund or account that 

is exempt from taxation under section 401, 403, 408, 408A, 

414, 457, or 501(a) of the Internal Revenue Code of 1986; 

and 

‘‘(II) to the extent allowed by law, is deposited in such 

a fund or account not later than 60 days after the distribution of that amount.’’; and 

(2) in subsection (d)—

(A) in the matter preceding paragraph (1), by striking 

‘‘subsection (b)(1)’’ and inserting ‘‘subsection (b)(2)’’; and 

(B) by adding at the end the following: 

‘‘(12) Retirement funds to the extent that those funds are in 

a fund or account that is exempt from taxation under section 

401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue 

Code of 1986.’’. 

(b) AUTOMATIC STAY.—Section 362(b) of title 11, United States 

Code, is amended—

(1) in paragraph (17), by striking ‘‘or’’ at the end; 

(2) in paragraph (18), by striking the period and inserting 

a semicolon; and 

(3) by inserting after paragraph (18) the following: 

‘‘(19) under subsection (a), of withholding of income from a 

debtor’s wages and collection of amounts withheld, under the 

debtor’s agreement authorizing that withholding and collection 

for the benefit of a pension, profit-sharing, stock bonus, or other 

plan established under section 401, 403, 408, 408A, 414, 457, 

or 501(c) of the Internal Revenue Code of 1986, that is sponsored by the employer of the debtor, or an affiliate, successor, 

or predecessor of such employer—

‘‘(A) to the extent that the amounts withheld and collected are used solely for payments relating to a loan from 

a plan that satisfies the requirements of section 408(b)(1) of 

the Employee Retirement Income Security Act of 1974 or is 

subject to section 72(p) of the Internal Revenue Code of 

1986; or 

‘‘(B) in the case of a loan from a thrift savings plan described in subchapter III of chapter 84 of title 5, that satisfies the requirements of section 8433(g) of such title; 

but this paragraph may not be construed to provide that any 

loan made under a governmental plan under section 414(d), or 

a contract or account under section 403(b) of the Internal Revenue Code of 1986 constitutes a claim or a debt under this 

title;’’. 

(c) EXCEPTIONS TO DISCHARGE.—Section 523(a) of title 11, 

United States Code, as amended by section 215, is amended by adding at the end the following: 

43

‘‘(19) owed to a pension, profit-sharing, stock bonus, or 

other plan established under section 401, 403, 408, 408A, 414, 

457, or 501(c) of the Internal Revenue Code of 1986, under— ‘‘(A) a loan permitted under section 408(b)(1) of the 

Employee Retirement Income Security Act of 1974, or subject to section 72(p) of the Internal Revenue Code of 1986; 

or ‘‘(B) a loan from the thrift savings plan described in 

subchapter III of chapter 84 of title 5, that satisfies the requirements of section 8433(g) of such title; 

but nothing in this paragraph may be construed to provide that 

any loan made under a governmental plan under section 

414(d), or a contract or account under section 403(b), of the Internal Revenue Code of 1986 constitutes a claim or a debt under 

this title.’’. (d) PLAN CONTENTS.—Section 1322 of title 11, United States 

Code, is amended by adding at the end the following: ‘‘(f) A plan may not materially alter the terms of a loan described in section 362(b)(19) and any amounts required to repay 

such loan shall not constitute ‘disposable income’ under section 

1325.’’. 

(e) ASSET LIMITATION.— (1) LIMITATION.—Section 522 of title 11, United States 

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

‘‘(n) For assets in individual retirement accounts described in 

section 408 or 408A of the Internal Revenue Code of 1986, other 

than a simplified employee pension under section 408(k) of that 

Code or a simple retirement account under section 408(p) of that 

Code, the aggregate value of such assets exempted under this section, without regard to amounts attributable to rollover contributions under sections 402(c), 402(e)(6), 403(a)(4), 403(a)(5), and 

403(b)(8) of the Internal Revenue Code of 1986, and earnings thereon, shall not exceed $1,000,000 in a case filed by a debtor who is 

an individual, except that such amount may be increased if the interests of justice so require.’’. (2) ADJUSTMENT OF DOLLAR AMOUNTS.—Paragraphs (1) 

and (2) of section 104(b) of title 11, United States Code, are 

amended by inserting ‘‘522(n),’’ after ‘‘522(d),’’. 

SEC. 225. PROTECTION OF EDUCATION SAVINGS IN BANKRUPTCY. 

(a) EXCLUSIONS.—Section 541 of title 11, United States Code, is 

amended—

(1) in subsection (b)—

(A) in paragraph (4), by striking ‘‘or’’ at the end; 

(B) by redesignating paragraph (5) as paragraph (9); 

and 

(C) by inserting after paragraph (4) the following: 

‘‘(5) funds placed in an education individual retirement account (as defined in section 530(b)(1) of the Internal Revenue 

Code of 1986) not later than 365 days before the date of filing 

of the petition, but—

‘‘(A) only if the designated beneficiary of such account 

was a son, daughter, stepson, stepdaughter, grandchild, or 

step-grandchild of the debtor for the taxable year for which 

funds were placed in such account; 

‘‘(B) only to the extent that such funds—

44

‘‘(i) are not pledged or promised to any entity in 

connection with any extension of credit; and 

‘‘(ii) are not excess contributions (as described in 

section 4973(e) of the Internal Revenue Code of 1986); 

and 

‘‘(C) in the case of funds placed in all such accounts 

having the same designated beneficiary not earlier than 

720 days nor later than 365 days before such date, only so 

much of such funds as does not exceed $5,000; 

‘‘(6) funds used to purchase a tuition credit or certificate or 

contributed to an account in accordance with section 

529(b)(1)(A) of the Internal Revenue Code of 1986 under a 

qualified State tuition program (as defined in section 529(b)(1) 

of such Code) not later than 365 days before the date of filing 

of the petition, but—

‘‘(A) only if the designated beneficiary of the amounts 

paid or contributed to such tuition program was a son, 

daughter, stepson, stepdaughter, grandchild, or step-grandchild of the debtor for the taxable year for which funds 

were paid or contributed; 

‘‘(B) with respect to the aggregate amount paid or contributed to such program having the same designated beneficiary, only so much of such amount as does not exceed the 

total contributions permitted under section 529(b)(7) of 

such Code with respect to such beneficiary, as adjusted beginning on the date of the filing of the petition by the annual increase or decrease (rounded to the nearest tenth of 

1 percent) in the education expenditure category of the Consumer Price Index prepared by the Department of Labor; 

and 

‘‘(C) in the case of funds paid or contributed to such 

program having the same designated beneficiary not earlier 

than 720 days nor later than 365 days before such date, 

only so much of such funds as does not exceed $5,000;’’; 

and 

(2) by adding at the end the following: 

‘‘(e) In determining whether any of the relationships specified in 

paragraph (5)(A) or (6)(A) of subsection (b) exists, a legally adopted 

child of an individual (and a child who is a member of an individual’s household, if placed with such individual by an authorized 

placement agency for legal adoption by such individual), or a foster 

child of an individual (if such child has as the child’s principal 

place of abode the home of the debtor and is a member of the debtor’s household) shall be treated as a child of such individual by 

blood.’’. 

(b) DEBTOR’S DUTIES.—Section 521 of title 11, United States 

Code, as amended by section 106, is amended by adding at the end 

the following: 

‘‘(c) In addition to meeting the requirements under subsection 

(a), a debtor shall file with the court a record of any interest that 

a debtor has in an education individual retirement account (as defined in section 530(b)(1) of the Internal Revenue Code of 1986) or 

under a qualified State tuition program (as defined in section 

529(b)(1) of such Code).’’. 

45

SEC. 226. DEFINITIONS. 

(a) DEFINITIONS.—Section 101 of title 11, United States Code, 

is amended— (1) by inserting after paragraph (2) the following: 

‘‘(3) ‘assisted person’ means any person whose debts consist 

primarily of consumer debts and the value of whose nonexempt 

property is less than $150,000;’’;

(2) by inserting after paragraph (4) the following: 

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

sold or otherwise provided to an assisted person with the express or implied purpose of providing information, advice, counsel, document preparation, or filing, or attendance at a creditors’ meeting or appearing in a proceeding on behalf of another 

or providing legal representation with respect to a case or proceeding under this title;’’; and 

(3) by inserting after paragraph (12) the following: 

‘‘(12A) ‘debt relief agency’ means any person who provides 

any bankruptcy assistance to an assisted person in return for 

the payment of money or other valuable consideration, or who 

is a bankruptcy petition preparer under section 110, but does 

not include— ‘‘(A) any person that is an officer, director, employee, or 

agent of a person who provides such assistance or of such 

preparer; ‘‘(B) a nonprofit organization which is exempt from taxation under section 501(c)(3) of the Internal Revenue Code 

of 1986; ‘‘(C) a creditor of such assisted person, to the extent 

that the creditor is assisting such assisted person to restructure any debt owed by such assisted person to the creditor; 

‘‘(D) a depository institution (as defined in section 3 of 

the Federal Deposit Insurance Act) or any Federal credit 

union or State credit union (as those terms are defined in 

section 101 of the Federal Credit Union Act), or any affiliate or subsidiary of such depository institution or credit 

union; or ‘‘(E) an author, publisher, distributor, or seller of 

works subject to copyright protection under title 17, when 

acting in such capacity.’’. (b) CONFORMING AMENDMENT.—Section 104(b) of title 11, 

United States Code, is amended by inserting ‘‘101(3),’’ after ‘‘sections’’ each place it appears. 

SEC. 227. RESTRICTIONS ON DEBT RELIEF AGENCIES. 

(a) ENFORCEMENT.—Subchapter II of chapter 5 of title 11, 

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

‘‘§ 526. Restrictions on debt relief agencies 

‘‘(a) A debt relief agency shall not—

‘‘(1) fail to perform any service that such agency informed 

an assisted person or prospective assisted person it would provide in connection with a case or proceeding under this title; 

‘‘(2) make any statement, or counsel or advise any assisted 

person or prospective assisted person to make a statement in a 

document filed in a case or proceeding under this title, that is 

46

untrue and misleading, or that upon the exercise of reasonable 

care, should have been known by such agency to be untrue or 

misleading; ‘‘(3) misrepresent to any assisted person or prospective assisted person, directly or indirectly, affirmatively or by material 

omission, with respect to— ‘‘(i) the services that such agency will provide to such 

person; or ‘‘(ii) the benefits and risks that may result if such person becomes a debtor in a case under this title; or 

‘‘(4) advise an assisted person or prospective assisted person 

to incur more debt in contemplation of such person filing a case 

under this title or to pay an attorney or bankruptcy petition preparer fee or charge for services performed as part of preparing 

for or representing a debtor in a case under this title. 

‘‘(b) Any waiver by any assisted person of any protection or 

right provided under this section shall not be enforceable against 

the debtor by any Federal or State court or any other person, but 

may be enforced against a debt relief agency. ‘‘(c)(1) Any contract for bankruptcy assistance between a debt relief agency and an assisted person that does not comply with the 

material requirements of this section, section 527, or section 528 

shall be void and may not be enforced by any Federal or State court 

or by any other person, other than such assisted person. ‘‘(2) Any debt relief agency shall be liable to an assisted person 

in the amount of any fees or charges in connection with providing 

bankruptcy assistance to such person that such debt relief agency 

has received, for actual damages, and for reasonable attorneys’ fees 

and costs if such agency is found, after notice and a hearing, to 

have— ‘‘(A) intentionally or negligently failed to comply with any 

provision of this section, section 527, or section 528 with respect 

to a case or proceeding under this title for such assisted person; ‘‘(B) provided bankruptcy assistance to an assisted person 

in a case or proceeding under this title that is dismissed or converted to a case under another chapter of this title because of 

such agency’s intentional or negligent failure to file any required document including those specified in section 521; or 

‘‘(C) intentionally or negligently disregarded the material 

requirements of this title or the Federal Rules of Bankruptcy 

Procedure applicable to such agency. 

‘‘(3) In addition to such other remedies as are provided under 

State law, whenever the chief law enforcement officer of a State, or 

an official or agency designated by a State, has reason to believe 

that any person has violated or is violating this section, the State—

‘‘(A) may bring an action to enjoin such violation; 

‘‘(B) may bring an action on behalf of its residents to recover the actual damages of assisted persons arising from such 

violation, including any liability under paragraph (2); and 

‘‘(C) in the case of any successful action under subparagraph (A) or (B), shall be awarded the costs of the action and 

reasonable attorney fees as determined by the court. 

‘‘(4) The district court of the United States for any district located in the State shall have concurrent jurisdiction of any action 

under subparagraph (A) or (B) of paragraph (3).

47

‘‘(5) Notwithstanding any other provision of Federal law and in 

addition to any other remedy provided under Federal or State law, 

if the court, on its own motion or on the motion of the United States 

trustee or the debtor, finds that a person intentionally violated this 

section, or engaged in a clear and consistent pattern or practice of 

violating this section, the court may—

‘‘(A) enjoin the violation of such section; or 

‘‘(B) impose an appropriate civil penalty against such person. 

‘‘(d) No provision of this section, section 527, or section 528 

shall—

‘‘(1) annul, alter, affect, or exempt any person subject to 

such sections from complying with any law of any State except 

to the extent that such law is inconsistent with those sections, 

and then only to the extent of the inconsistency; or 

‘‘(2) be deemed to limit or curtail the authority or ability—

‘‘(A) of a State or subdivision or instrumentality thereof, to determine and enforce qualifications for the practice 

of law under the laws of that State; or 

‘‘(B) of a Federal court to determine and enforce the 

qualifications for the practice of law before that court.’’. 

(b) CONFORMING AMENDMENT.—The table of sections for chapter 5 of title 11, United States Code, is amended by inserting after 

the item relating to section 525, the following:

‘‘526. Restrictions on debt relief agencies.’’.

SEC. 228. DISCLOSURES. 

(a) DISCLOSURES.—Subchapter II of chapter 5 of title 11, 

United States Code, as amended by section 227, is amended by adding at the end the following: 

‘‘§ 527. Disclosures 

‘‘(a) A debt relief agency providing bankruptcy assistance to an 

assisted person shall provide—

‘‘(1) the written notice required under section 342(b)(1) of 

this title; and 

‘‘(2) to the extent not covered in the written notice described 

in paragraph (1), and not later than 3 business days after the 

first date on which a debt relief agency first offers to provide 

any bankruptcy assistance services to an assisted person, a 

clear and conspicuous written notice advising assisted persons 

that—

‘‘(A) all information that the assisted person is required 

to provide with a petition and thereafter during a case 

under this title is required to be complete, accurate, and 

truthful; ‘‘(B) all assets and all liabilities are required to be 

completely and accurately disclosed in the documents filed 

to commence the case, and the replacement value of each 

asset as defined in section 506 of this title must be stated 

in those documents where requested after reasonable inquiry to establish such value; 

‘‘(C) current monthly income, the amounts specified in 

section 707(b)(2), and, in a case under chapter 13, disposable income (determined in accordance with section 

48

707(b)(2), are required to be stated after reasonable inquiry; 

and 

‘‘(D) information that an assisted person provides during their case may be audited pursuant to this title, and 

that failure to provide such information may result in dismissal of the case under this title or other sanction including, in some instances, criminal sanctions. 

‘‘(b) A debt relief agency providing bankruptcy assistance to an 

assisted person shall provide each assisted person at the same time 

as the notices required under subsection (a)(1) with the following 

statement, to the extent applicable, or one substantially similar. The 

statement shall be clear and conspicuous and shall be in a single 

document separate from other documents or notices provided to the 

assisted person: 

‘‘ ‘IMPORTANT INFORMATION ABOUT BANKRUPTCY ASSISTANCE SERVICES FROM AN ATTORNEY OR BANKRUPTCY PETITION PREPARER. 

‘‘ ‘If you decide to seek bankruptcy relief, you can represent 

yourself, you can hire an attorney to represent you, or you can get 

help in some localities from a bankruptcy petition preparer who is 

not an attorney. THE LAW REQUIRES AN ATTORNEY OR 

BANKRUPTCY PETITION PREPARER TO GIVE YOU A WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY OR 

BANKRUPTCY PETITION PREPARER WILL DO FOR YOU AND 

HOW MUCH IT WILL COST. Ask to see the contract before you 

hire anyone. 

‘‘ ‘The following information helps you understand what must 

be done in a routine bankruptcy case to help you evaluate how much 

service you need. Although bankruptcy can be complex, many cases 

are routine. 

‘‘ ‘Before filing a bankruptcy case, either you or your attorney 

should analyze your eligibility for different forms of debt relief made 

available by the Bankruptcy Code and which form of relief is most 

likely to be beneficial for you. Be sure you understand the relief you 

can obtain and its limitations. To file a bankruptcy case, documents 

called a Petition, Schedules and Statement of Financial Affairs, as 

well as in some cases a Statement of Intention need to be prepared 

correctly and filed with the bankruptcy court. You will have to pay 

a filing fee to the bankruptcy court. Once your case starts, you will 

have to attend the required first meeting of creditors where you may 

be questioned by a court official called a ‘trustee’ and by creditors. 

‘‘ ‘If you choose to file a chapter 7 case, you may be asked by 

a creditor to reaffirm a debt. You may want help deciding whether 

to do so and a creditor is not permitted to coerce you into reaffirming your debts. 

‘‘ ‘If you choose to file a chapter 13 case in which you repay your 

creditors what you can afford over 3 to 5 years, you may also want 

help with preparing your chapter 13 plan and with the confirmation 

hearing on your plan which will be before a bankruptcy judge. 

‘‘ ‘If you select another type of relief under the Bankruptcy Code 

other than chapter 7 or chapter 13, you will want to find out what 

needs to be done from someone familiar with that type of relief.

‘‘ ‘Your bankruptcy case may also involve litigation. You are 

generally permitted to represent yourself in litigation in bankruptcy 

49

court, but only attorneys, not bankruptcy petition preparers, can 

give you legal advice.’. 

‘‘(c) Except to the extent the debt relief agency provides the required information itself after reasonably diligent inquiry of the assisted person or others so as to obtain such information reasonably 

accurately for inclusion on the petition, schedules or statement of financial affairs, a debt relief agency providing bankruptcy assistance 

to an assisted person, to the extent permitted by nonbankruptcy law, 

shall provide each assisted person at the time required for the notice 

required under subsection (a)(1) reasonably sufficient information 

(which shall be provided in a clear and conspicuous writing) to the 

assisted person on how to provide all the information the assisted 

person is required to provide under this title pursuant to section 

521, including—

‘‘(1) how to value assets at replacement value, determine 

current monthly income, the amounts specified in section 

707(b)(2) and, in a chapter 13 case, how to determine disposable income in accordance with section 707(b)(2) and related 

calculations; 

‘‘(2) how to complete the list of creditors, including how to 

determine what amount is owed and what address for the creditor should be shown; and 

‘‘(3) how to determine what property is exempt and how to 

value exempt property at replacement value as defined in section 506 of this title. 

‘‘(d) A debt relief agency shall maintain a copy of the notices required under subsection (a) of this section for 2 years after the date 

on which the notice is given the assisted person.’’. 

(b) CONFORMING AMENDMENT.—The table of sections for chapter 5 of title 11, United States Code, as amended by section 227, is 

amended by inserting after the item relating to section 526 the following:

‘‘527. Disclosures.’’.

SEC. 229. REQUIREMENTS FOR DEBT RELIEF AGENCIES. 

(a) ENFORCEMENT.—Subchapter II of chapter 5 of title 11, 

United States Code, as amended by sections 227 and 228, is amended by adding at the end the following: 

‘‘§ 528. Requirements for debt relief agencies 

‘‘(a) A debt relief agency shall—

‘‘(1) not later than 5 business days after the first date on 

which such agency provides any bankruptcy assistance services 

to an assisted person, but prior to such assisted person’s petition under this title being filed, execute a written contract with 

such assisted person that explains clearly and conspicuously—

‘‘(A) the services such agency will provide to such assisted person; and 

‘‘(B) the fees or charges for such services, and the terms 

of payment; 

‘‘(2) provide the assisted person with a copy of the fully executed and completed contract; 

‘‘(3) clearly and conspicuously disclose in any advertisement 

of bankruptcy assistance services or of the benefits of bankruptcy directed to the general public (whether in general media, 

50

seminars or specific mailings, telephonic or electronic messages, 

or otherwise) that the services or benefits are with respect to 

bankruptcy relief under this title; and 

‘‘(4) clearly and conspicuously use the following statement 

in such advertisement: ‘We are a debt relief agency. We help 

people file for bankruptcy relief under the Bankruptcy Code.’ or 

a substantially similar statement. 

‘‘(b)(1) An advertisement of bankruptcy assistance services or of 

the benefits of bankruptcy directed to the general public includes—

‘‘(A) descriptions of bankruptcy assistance in connection 

with a chapter 13 plan whether or not chapter 13 is specifically 

mentioned in such advertisement; and 

‘‘(B) statements such as ‘federally supervised repayment 

plan’ or ‘Federal debt restructuring help’ or other similar statements that could lead a reasonable consumer to believe that 

debt counseling was being offered when in fact the services were 

directed to providing bankruptcy assistance with a chapter 13 

plan or other form of bankruptcy relief under this title. 

‘‘(2) An advertisement, directed to the general public, indicating 

that the debt relief agency provides assistance with respect to credit 

defaults, mortgage foreclosures, eviction proceedings, excessive debt, 

debt collection pressure, or inability to pay any consumer debt 

shall—

‘‘(A) disclose clearly and conspicuously in such advertisement that the assistance may involve bankruptcy relief under 

this title; and 

‘‘(B) include the following statement: ‘We are a debt relief 

agency. We help people file for bankruptcy relief under the 

Bankruptcy Code.’ or a substantially similar statement.’’. 

(b) CONFORMING AMENDMENT.—The table of sections for chapter 5 of title 11, United States Code, as amended by section 227 and 

228, is amended by inserting after the item relating to section 527, 

the following:

‘‘528. Requirements for debt relief agencies.’’.

SEC. 230. GAO STUDY. 

(a) STUDY.—Not later than 270 days after the date of enactment 

of this Act, the Comptroller General of the United States shall conduct a study of the feasibility, effectiveness, and cost of requiring 

trustees appointed under title 11, United States Code, or the bankruptcy courts, to provide to the Office of Child Support Enforcement 

promptly after the commencement of cases by debtors who are individuals under such title, the names and social security numbers of 

such debtors for the purposes of allowing such Office to determine 

whether such debtors have outstanding obligations for child support 

(as determined on the basis of information in the Federal Case Registry or other national database). 

(b) REPORT.—Not later than 300 days after the date of enactment of this Act, the Comptroller General shall submit to the President pro tempore of the Senate and the Speaker of the House of Representatives a report containing the results of the study required by 

subsection (a).

51

SEC. 231. PROTECTION OF PERSONALLY IDENTIFIABLE INFORMATION. 

(a) LIMITATION.—Section 363(b)(1) of title 11, United States 

Code, is amended by striking the period at the end and inserting 

the following: 

‘‘, except that if the debtor in connection with offering a product or 

a service discloses to an individual a policy prohibiting the transfer 

of personally identifiable information about individuals to persons 

that are not affiliated with the debtor and if such policy is in effect 

on the date of the commencement of the case, then the trustee may 

not sell or lease personally identifiable information to any person 

unless—‘‘(A) such sale or such lease is consistent with such policy; 

or ‘‘(B) after appointment of a consumer privacy ombudsman 

in accordance with section 332, and after notice and a hearing, 

the court approves such sale or such lease— ‘‘(i) giving due consideration to the facts, circumstances, and conditions of such sale or such lease; and ‘‘(ii) finding that no showing was made that such sale 

or such lease would violate applicable nonbankruptcy 

law.’’. (b) DEFINITION.—Section 101 of title 11, United States Code, is 

amended by inserting after paragraph (41) the following: ‘‘(41A) ‘personally identifiable information’ means— ‘‘(A) if provided by an individual to the debtor in connection with obtaining a product or a service from the debtor primarily for personal, family, or household purposes— ‘‘(i) the first name (or initial) and last name of 

such individual, whether given at birth or time of 

adoption, or resulting from a lawful change of name; ‘‘(ii) the geographical address of a physical place of 

residence of such individual; 

‘‘(iii) an electronic address (including an e-mail 

address) of such individual; 

‘‘(iv) a telephone number dedicated to contacting 

such individual at such physical place of residence; 

‘‘(v) a social security account number issued to 

such individual; or 

‘‘(vi) the account number of a credit card issued to 

such individual; or 

‘‘(B) if identified in connection with 1 or more of the 

items of information specified in subparagraph (A)—

‘‘(i) a birth date, the number of a certificate of 

birth or adoption, or a place of birth; or 

‘‘(ii) any other information concerning an identified 

individual that, if disclosed, will result in contacting 

or identifying such individual physically or electronically;’’.

SEC. 232. CONSUMER PRIVACY OMBUDSMAN. 

(a) CONSUMER PRIVACY OMBUDSMAN.—Title 11 of the United 

States Code is amended by inserting after section 331 the following: 

‘‘§ 332. Consumer privacy ombudsman 

‘‘(a) If a hearing is required under section 363(b)(1)(B) of this 

title, the court shall order the United States trustee to appoint, not 

52

later than 5 days before the commencement of the hearing, 1 disinterested person (other than the United States trustee) to serve as the 

consumer privacy ombudsman in the case and shall require that notice of such hearing be timely given to such ombudsman. ‘‘(b) The consumer privacy ombudsman may appear and be 

heard at such hearing and shall provide to the court information 

to assist the court in its consideration of the facts, circumstances, 

and conditions of the proposed sale or lease of personally identifiable information under section 363(b)(1)(B) of this title. Such information may include presentation of— ‘‘(1) the debtor’s privacy policy; ‘‘(2) the potential losses or gains of privacy to consumers if 

such sale or such lease is approved by the court; ‘‘(3) the potential costs or benefits to consumers if such sale 

or such lease is approved by the court; and ‘‘(4) the potential alternatives that would mitigate potential 

privacy losses or potential costs to consumers. 

‘‘(c) A consumer privacy ombudsman shall not disclose any personally identifiable information obtained by the ombudsman under 

this title.’’. (b) COMPENSATION OF CONSUMER PRIVACY OMBUDSMAN.—Section 330(a)(1) of title 11, United States Code, is amended in the 

matter preceding subparagraph (A), by inserting ‘‘a consumer privacy ombudsman appointed under section 332,’’ before ‘‘an examiner’’. 

(c) CONFORMING AMENDMENT.—The table of sections for subchapter II of chapter 3 of title 11, United States Code, is amended 

by adding at the end the following:

‘‘332. Consumer privacy ombudsman.’’.

SEC. 233. PROHIBITION ON DISCLOSURE OF NAME OF MINOR CHILDREN. 

(a) PROHIBITION.—Title 11 of the United States Code, as 

amended by section 106, is amended by inserting after section 111 

the following: 

‘‘§ 112. Prohibition on disclosure of name of minor children 

‘‘The debtor may be required to provide information regarding 

a minor child involved in matters under this title but may not be 

required to disclose in the public records in the case the name of 

such minor child. The debtor may be required to disclose the name 

of such minor child in a nonpublic record that is maintained by the 

court and made available by the court for examination by the 

United States trustee, the trustee, and the auditor (if any) appointed 

under section 586(f) of title 28, in the case. The court, the United 

States trustee, the trustee, and such auditor shall not disclose the 

name of such minor child maintained in such nonpublic record.’’. (b) CLERICAL AMENDMENT.—The table of sections for chapter 1 

of title 11, United States Code, as amended by section 106, is 

amended by inserting after the item relating to section 111 the following:

‘‘112. Prohibition on disclosure of name of minor children.’’.

(c) CONFORMING AMENDMENT.—Section 107(a) of title 11, 

United States Code, is amended by inserting ‘‘and subject to section 

112 of this title’’ after ‘‘section’’. 

53

TITLE III—DISCOURAGING 

BANKRUPTCY ABUSE 

SEC. 301. REINFORCEMENT OF THE FRESH START. 

Section 523(a)(17) of title 11, United States Code, is amended—

(1) by striking ‘‘by a court’’ and inserting ‘‘on a prisoner by 

any court’’; 

(2) by striking ‘‘section 1915(b) or (f)’’ and inserting ‘‘subsection (b) or (f)(2) of section 1915’’; and 

(3) by inserting ‘‘(or a similar non-Federal law)’’ after ‘‘title 

28’’ each place it appears. 

SEC. 302. DISCOURAGING BAD FAITH REPEAT FILINGS. 

Section 362(c) of title 11, United States Code, is amended—

(1) in paragraph (1), by striking ‘‘and’’ at the end; 

(2) in paragraph (2), by striking the period at the end and 

inserting a semicolon; and 

(3) by adding at the end the following:

‘‘(3) if a single or joint case is filed by or against debtor 

who is an individual in a case under chapter 7, 11, or 13, and 

if a single or joint case of the debtor was pending within the 

preceding 1-year period but was dismissed, other than a case 

refiled under a chapter other than chapter 7 after dismissal 

under section 707(b)—

‘‘(A) the stay under subsection (a) with respect to any 

action taken with respect to a debt or property securing 

such debt or with respect to any lease shall terminate with 

respect to the debtor on the 30th day after the filing of the 

later case; 

‘‘(B) on the motion of a party in interest for continuation of the automatic stay and upon notice and a hearing, 

the court may extend the stay in particular cases as to any 

or all creditors (subject to such conditions or limitations as 

the court may then impose) after notice and a hearing completed before the expiration of the 30-day period only if the 

party in interest demonstrates that the filing of the later 

case is in good faith as to the creditors to be stayed; and 

‘‘(C) for purposes of subparagraph (B), a case is presumptively filed not in good faith (but such presumption 

may be rebutted by clear and convincing evidence to the 

contrary)—

‘‘(i) as to all creditors, if—

‘‘(I) more than 1 previous case under any of 

chapters 7, 11, and 13 in which the individual was 

a debtor was pending within the preceding 1-year 

period; 

‘‘(II) a previous case under any of chapters 7, 

11, and 13 in which the individual was a debtor 

was dismissed within such 1-year period, after the 

debtor failed to—

‘‘(aa) file or amend the petition or other 

documents as required by this title or the court 

without substantial excuse (but mere inadvertence or negligence shall not be a substantial 

54

excuse unless the dismissal was caused by the 

negligence of the debtor’s attorney); ‘‘(bb) provide adequate protection as ordered by the court; or ‘‘(cc) perform the terms of a plan confirmed by the court; or 

‘‘(III) there has not been a substantial change 

in the financial or personal affairs of the debtor 

since the dismissal of the next most previous case 

under chapter 7, 11, or 13 or any other reason to 

conclude that the later case will be concluded— ‘‘(aa) if a case under chapter 7, with a discharge; or ‘‘(bb) if a case under chapter 11 or 13, 

with a confirmed plan that will be fully performed; and ‘‘(ii) as to any creditor that commenced an action 

under subsection (d) in a previous case in which the individual was a debtor if, as of the date of dismissal of 

such case, that action was still pending or had been resolved by terminating, conditioning, or limiting the 

stay as to actions of such creditor; and ‘‘(4)(A)(i) if a single or joint case is filed by or against a 

debtor who is an individual under this title, and if 2 or more 

single or joint cases of the debtor were pending within the previous year but were dismissed, other than a case refiled under 

section 707(b), the stay under subsection (a) shall not go into effect upon the filing of the later case; and ‘‘(ii) on request of a party in interest, the court shall 

promptly enter an order confirming that no stay is in effect; ‘‘(B) if, within 30 days after the filing of the later case, a 

party in interest requests the court may order the stay to take 

effect in the case as to any or all creditors (subject to such conditions or limitations as the court may impose), after notice and 

a hearing, only if the party in interest demonstrates that the filing of the later case is in good faith as to the creditors to be 

stayed; 

‘‘(C) a stay imposed under subparagraph (B) shall be effective on the date of entry of the order allowing the stay to go into 

effect; and 

‘‘(D) for purposes of subparagraph (B), a case is presumptively not filed in good faith (but such presumption may be rebutted by clear and convincing evidence to the contrary)—

‘‘(i) as to all creditors if—

‘‘(I) 2 or more previous cases under this title in 

which the individual was a debtor were pending within the 1-year period; 

‘‘(II) a previous case under this title in which the 

individual was a debtor was dismissed within the time 

period stated in this paragraph after the debtor failed 

to file or amend the petition or other documents as required by this title or the court without substantial excuse (but mere inadvertence or negligence shall not be 

substantial excuse unless the dismissal was caused by 

the negligence of the debtor’s attorney), failed to proVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00054 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
55

vide adequate protection as ordered by the court, or 

failed to perform the terms of a plan confirmed by the 

court; or ‘‘(III) there has not been a substantial change in 

the financial or personal affairs of the debtor since the 

dismissal of the next most previous case under this 

title, or any other reason to conclude that the later case 

will not be concluded, if a case under chapter 7, with 

a discharge, and if a case under chapter 11 or 13, with 

a confirmed plan that will be fully performed; or 

‘‘(ii) as to any creditor that commenced an action under 

subsection (d) in a previous case in which the individual 

was a debtor if, as of the date of dismissal of such case, 

such action was still pending or had been resolved by terminating, conditioning, or limiting the stay as to action of 

such creditor.’’. 

SEC. 303. CURBING ABUSIVE FILINGS. 

(a) IN GENERAL.—Section 362(d) of title 11, United States Code, 

is amended— (1) in paragraph (2), by striking ‘‘or’’ at the end; 

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

inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(4) with respect to a stay of an act against real property 

under subsection (a), by a creditor whose claim is secured by an 

interest in such real estate, if the court finds that the filing of 

the bankruptcy petition was part of a scheme to delay, hinder, 

and defraud creditors that involved either— ‘‘(A) transfer of all or part ownership of, or other interest in, the real property without the consent of the secured 

creditor or court approval; or ‘‘(B) multiple bankruptcy filings affecting the real property. 

If recorded in compliance with applicable State laws governing notices of interests or liens in real property, an order entered under 

this subsection shall be binding in any other case under this title 

purporting to affect the real property filed not later than 2 years 

after the date of entry of such order by the court, except that a debtor in a subsequent case may move for relief from such order based 

upon changed circumstances or for good cause shown, after notice 

and a hearing. Any Federal, State, or local governmental unit that 

accepts notices of interests or liens in real property shall accept any 

certified copy of an order described in this subsection for indexing 

and recording.’’. (b) AUTOMATIC STAY.—Section 362(b) of title 11, United States 

Code, as amended by section 224, is amended by inserting after 

paragraph (19), the following: 

‘‘(20) under subsection (a), of any act to enforce any lien 

against or security interest in real property following the entry 

of an order under section 362(d)(4) as to that property in any 

prior bankruptcy case for a period of 2 years after entry of such 

an order, except that the debtor, in a subsequent case, may 

move the court for relief from such order based upon changed 

circumstances or for other good cause shown, after notice and 

a hearing; 

56

‘‘(21) under subsection (a), of any act to enforce any lien 

against or security interest in real property— ‘‘(A) if the debtor is ineligible under section 109(g) to 

be a debtor in a bankruptcy case; or ‘‘(B) if the bankruptcy case was filed in violation of a 

bankruptcy court order in a prior bankruptcy case prohibiting the debtor from being a debtor in another bankruptcy 

case;’’. 

SEC. 304. DEBTOR RETENTION OF PERSONAL PROPERTY SECURITY. 

Title 11, United States Code, is amended— (1) in section 521(a), as so designated by section 106— (A) in paragraph (4), by striking ‘‘, and’’ at the end and 

inserting a semicolon; 

(B) in paragraph (5), by striking the period at the end 

and inserting ‘‘; and’’; and 

(C) by adding at the end the following: ‘‘(6) in a case under chapter 7 of this title in which the 

debtor is an individual, not retain possession of personal property as to which a creditor has an allowed claim for the purchase price secured in whole or in part by an interest in that 

personal property unless the debtor, not later than 45 days after 

the first meeting of creditors under section 341(a), either— ‘‘(A) enters into an agreement with the creditor pursuant to section 524(c) of this title with respect to the claim 

secured by such property; or ‘‘(B) redeems such property from the security interest 

pursuant to section 722 of this title. 

If the debtor fails to so act within the 45-day period referred to in 

paragraph (6), the stay under section 362(a) of this title is terminated with respect to the personal property of the estate or of the 

debtor which is affected, such property shall no longer be property 

of the estate, and the creditor may take whatever action as to such 

property as is permitted by applicable nonbankruptcy law, unless 

the court determines on the motion of the trustee filedbefore the expiration of such 45-day period, and after notice and a hearing, that 

such property is of consequential value or benefit to the estate, orders appropriate adequate protection of the creditor’s interest, and 

orders the debtor to deliver any collateral in the debtor’s possession 

to the trustee.’’; and 

(2) in section 722, by inserting ‘‘in full at the time of redemption’’ before the period at the end. 

SEC. 305. RELIEF FROM THE AUTOMATIC STAY WHEN THE DEBTOR 

DOES NOT COMPLETE INTENDED SURRENDER OF CONSUMER DEBT COLLATERAL. 

Title 11, United States Code, is amended—

(1) in section 362, as amended by section 106—

(A) in subsection (c), by striking ‘‘(e), and (f)’’ and inserting ‘‘(e), (f), and (h)’’; 

(B) by redesignating subsection (h) as subsection (k) 

and transferring such subsection so as to insert it after subjection (j) as added by section 106; and 

(C) by inserting after subsection (g) the following: 

‘‘(h)(1) In a case in which the debtor is an individual, the stay 

provided by subsection (a) is terminated with respect to personal 

property of the estate or of the debtor securing in whole or in part 

57

a claim, or subject to an unexpired lease, and such personal property shall no longer be property of the estate if the debtor fails within the applicable time set by section 521(a)(2) of this title— ‘‘(A) to file timely any statement of intention required under 

section 521(a)(2) of this title with respect to that property or to 

indicate in that statement that the debtor will either surrender 

the property or retain it and, if retaining it, either redeem the 

property pursuant to section 722 of this title, reaffirm the debt 

it secures pursuant to section 524(c) of this title, or assume the 

unexpired lease pursuant to section 365(p) of this title if the 

trustee does not do so, as applicable; and ‘‘(B) to take timely the action specified in that statement of 

intention, as it may be amended before expiration of the period 

for taking action, unless the statement of intention specifies reaffirmation and the creditor refuses to reaffirm on the original 

contract terms. 

‘‘(2) Paragraph (1) does not apply if the court determines, on the 

motion of the trustee filed before the expiration of the applicable 

time set by section 521(a)(2), after notice and a hearing, that such 

property is of consequential value or benefit to the estate, and orders 

appropriate adequate protection of the creditor’s interest, and orders

the debtor to deliver any collateral in the debtor’s possession to the 

trustee. If the court does not so determine, the stay provided by subsection (a) shall terminate upon the conclusion of the proceeding on 

the motion.’’; and 

(2) in section 521, as amended by sections 106 and 225—

(A) in subsection (a)(2) by striking ‘‘consumer’’; 

(B) in subsection (a)(2)(B)—

(i) by striking ‘‘forty-five days after the filing of a 

notice of intent under this section’’ and inserting ‘‘30 

days after the first date set for the meeting of creditors 

under section 341(a) of this title’’; and 

(ii) by striking ‘‘forty-five day’’ and inserting ‘‘30-

day’’; 

(C) in subsection (a)(2)(C) by inserting ‘‘, except as provided in section 362(h) of this title’’ before the semicolon; 

and 

(D) by adding at the end the following: ‘‘(d) If the debtor fails timely to take the action specified in subsection (a)(6) of this section, or in paragraphs (1) and (2) of section 

362(h) of this title, with respect to property which a lessor or bailor 

owns and has leased, rented, or bailed to the debtor or as to which 

a creditor holds a security interest not otherwise voidable under section 522(f), 544, 545, 547, 548, or 549 of this title, nothing in this 

title shall prevent or limit the operation of a provision in the underlying lease or agreement which has the effect of placing the debtor 

in default under such lease or agreement by reason of the occurrence, pendency, or existence of a proceeding under this title or the 

insolvency of the debtor. Nothing in this subsection shall be deemed 

to justify limiting such a provision in any other circumstance.’’. 

SEC. 306. GIVING SECURED CREDITORS FAIR TREATMENT IN CHAPTER 

13. 

(a) IN GENERAL.—Section 1325(a)(5)(B)(i) of title 11, United 

States Code, is amended to read as follows: 

‘‘(i) the plan provides that—

58

‘‘(I) the holder of such claim retain the lien securing such claim until the earlier of—

‘‘(aa) the payment of the underlying debt determined under nonbankruptcy law; or 

‘‘(bb) discharge under section 1328; and 

‘‘(II) if the case under this chapter is dismissed or 

converted without completion of the plan, such lien 

shall also be retained by such holder to the extent recognized by applicable nonbankruptcy law; and’’. 

(b) RESTORING THE FOUNDATION FOR SECURED CREDIT.—Section 1325(a) of title 11, United States Code, is amended by adding 

at the end the following: 

‘‘For purposes of paragraph (5), section 506 shall not apply to a 

claim described in that paragraph if the creditor has a purchase 

money security interest securing the debt that is the subject of the 

claim, the debt was incurred within the 910-day preceding the filing 

of the petition, and the collateral for that debt consists of a motor 

vehicle (as defined in section 30102 of title 49) acquired for the personal use of the debtor, or if collateral for that debt consists of any 

other thing of value, if the debt was incurred during the 1-year period preceding that filing.’’. 

(c) DEFINITIONS.—Section 101 of title 11, United States Code, 

is amended—

(1) by inserting after paragraph (13) the following: 

‘‘(13A) ‘debtor’s principal residence’—

‘‘(A) means a residential structure, including incidental 

property, without regard to whether that structure is attached to real property; and 

‘‘(B) includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer;’’; and 

(2) by inserting after paragraph (27), the following: 

‘‘(27A) ‘incidental property’ means, with respect to a debtor’s principal residence—

‘‘(A) property commonly conveyed with a principal residence in the area where the real estate is located; 

‘‘(B) all easements, rights, appurtenances, fixtures, 

rents, royalties, mineral rights, oil or gas rights or profits, 

water rights, escrow funds, or insurance proceeds; and 

‘‘(C) all replacements or additions;’’. 

SEC. 307. DOMICILIARY REQUIREMENTS FOR EXEMPTIONS. 

Section 522(b)(3) of title 11, United States Code, as so designated by section 106, is amended—

(1) in subparagraph (A)—

(A) by striking ‘‘180 days’’ and inserting ‘‘730 days’’; 

and 

(B) by striking ‘‘, or for a longer portion of such 180-

day period than in any other place’’ and inserting ‘‘or if the 

debtor’s domicile has not been located at a single State for 

such 730-day period, the place in which the debtor’s domicile was located for 180 days immediately preceding the 

730-day period or for a longer portion of such 180-day period than in any other place’’; and 

(2) by adding at the end the following: 

59

‘‘If the effect of the domiciliary requirement under subparagraph (A) 

is to render the debtor ineligible for any exemption, the debtor may 

elect to exempt property that is specified under subsection (d).’’.

SEC. 308. REDUCTION OF HOMESTEAD EXEMPTION FOR FRAUD. 

Section 522 of title 11, United States Code, as amended by section 224, is amended—

(1) in subsection (b)(3)(A), as so designated by this Act, by 

inserting ‘‘subject to subsections (o) and (p),’’ before ‘‘any property’’; and 

(2) by adding at the end the following: 

‘‘(o) For purposes of subsection (b)(3)(A), and notwithstanding 

subsection (a), the value of an interest in—

‘‘(1) real or personal property that the debtor or a dependent of the debtor uses as a residence; 

‘‘(2) a cooperative that owns property that the debtor or a 

dependent of the debtor uses as a residence;

‘‘(3) a burial plot for the debtor or a dependent of the debtor; or 

‘‘(4) real or personal property that the debtor or a dependent of the debtor claims as a homestead; 

shall be reduced to the extent that such value is attributable to any 

portion of any property that the debtor disposed of in the 10-year 

period ending on the date of the filing of the petition with the intent 

to hinder, delay, or defraud a creditor and that the debtor could not 

exempt, or that portion that the debtor could not exempt, under subsection (b), if on such date the debtor had held the property so disposed of.’’. 

SEC. 309. PROTECTING SECURED CREDITORS IN CHAPTER 13 CASES. 

(a) STOPPING ABUSIVE CONVERSIONS FROM CHAPTER 13.—Section 348(f)(1) of title 11, United States Code, is amended—

(1) in subparagraph (A), by striking ‘‘and’’ at the end; 

(2) in subparagraph (B)—

(A) by striking ‘‘in the converted case, with allowed secured claims’’ and inserting ‘‘only in a case converted to a 

case under chapter 11 or 12, but not in a case converted to 

a case under chapter 7, with allowed secured claims in 

cases under chapters 11 and 12’’; and 

(B) by striking the period and inserting ‘‘; and’’; and 

(3) by adding at the end the following: 

‘‘(C) with respect to cases converted from chapter 13—

‘‘(i) the claim of any creditor holding security as of the 

date of the petition shall continue to be secured by that security unless the full amount of such claim determined 

under applicable nonbankruptcy law has been paid in full 

as of the date of conversion, notwithstanding any valuation 

or determination of the amount of an allowed secured claim 

made for the purposes of the case under chapter 13; and 

‘‘(ii) unless a prebankruptcy default has been fully 

cured under the plan at the time of conversion, in any proceeding under this title or otherwise, the default shall have 

the effect given under applicable nonbankruptcy law.’’. 

(b) GIVING DEBTORS THE ABILITY TO KEEP LEASED PERSONAL

PROPERTY BY ASSUMPTION.—Section 365 of title 11, United States 

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

60

‘‘(p)(1) If a lease of personal property is rejected or not timely 

assumed by the trustee under subsection (d), the leased property is 

no longer property of the estate and the stay under section 362(a) 

is automatically terminated. 

‘‘(2)(A) If the debtor in a case under chapter 7 is an individual, 

the debtor may notify the creditor in writing that the debtor desires 

to assume the lease. Upon being so notified, the creditor may, at its 

option, notify the debtor that it is willing to have the lease assumed 

by the debtor and may condition such assumption on cure of any 

outstanding default on terms set by the contract. 

‘‘(B) If, not later than 30 days after notice is provided under 

subparagraph (A), the debtor notifies the lessor in writing that the 

lease is assumed, the liability under the lease will be assumed by 

the debtor and not by the estate. 

‘‘(C) The stay under section 362 and the injunction under section 524(a)(2) shall not be violated by notification of the debtor and 

negotiation of cure under this subsection. 

‘‘(3) In a case under chapter 11 in which the debtor is an individual and in a case under chapter 13, if the debtor is the lessee 

with respect to personal property and the lease is not assumed in 

the plan confirmed by the court, the lease is deemed rejected as of 

the conclusion of the hearing on confirmation. If the lease is rejected, the stay under section 362 and any stay under section 1301 

is automatically terminated with respect to the property subject to 

the lease.’’. 

(c) ADEQUATE PROTECTION OF LESSORS AND PURCHASE MONEY

SECURED CREDITORS.—

(1) CONFIRMATION OF PLAN.—Section 1325(a)(5)(B) of title 

11, United States Code, as amended by section 306, is amended—

(A) in clause (i), by striking ‘‘and’’ at the end; 

(B) in clause (ii), by striking ‘‘or’’ at the end and inserting ‘‘and’’; and 

(C) by adding at the end the following: 

‘‘(iii) if—

‘‘(I) property to be distributed pursuant to this subsection is in the form of periodic payments, such payments shall be in equal monthly amounts; and 

‘‘(II) the holder of the claim is secured by personal 

property, the amount of such payments shall not be less 

than an amount sufficient to provide to the holder of 

such claim adequate protection during the period of the 

plan; or’’. 

(2) PAYMENTS.—Section 1326(a) of title 11, United States 

Code, is amended to read as follows: 

‘‘(a)(1) Unless the court orders otherwise, the debtor shall commence making payments not later than 30 days after the date of the 

filing of the plan or the order for relief, whichever is earlier, in the 

amount—

‘‘(A) proposed by the plan to the trustee; 

‘‘(B) scheduled in a lease of personal property directly to the 

lessor for that portion of the obligation that becomes due after 

the order for relief, reducing the payments under subparagraph 

(A) by the amount so paid and providing the trustee with eviVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00060 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
61

dence of such payment, including the amount and date of payment; and 

‘‘(C) that provides adequate protection directly to a creditor 

holding an allowed claim secured by personal property to the 

extent the claim is attributable to the purchase of such property 

by the debtor for that portion of the obligation that becomes due 

after the order for relief, reducing the payments under subparagraph (A) by the amount so paid and providing the trustee with 

evidence of such payment, including the amount and date of 

payment. 

‘‘(2) A payment made under paragraph (1)(A) shall be retained 

by the trustee until confirmation or denial of confirmation. If a plan 

is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as is practicable. If a plan is not 

confirmed, the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to 

paragraph (3) to the debtor, after deducting any unpaid claim allowed under section 503(b). 

‘‘(3) Subject to section 363, the court may, upon notice and a 

hearing, modify, increase, or reduce the payments required under 

this subsection pending confirmation of a plan. 

‘‘(4) Not later than 60 days after the date of filing of a case 

under this chapter, a debtor retaining possession of personal property subject to a lease or securing a claim attributable in whole or 

in part to the purchase price of such property shall provide the lessor or secured creditor reasonable evidence of the maintenance of 

any required insurance coverage with respect to the use or ownership of such property and continue to do so for so long as the debtor 

retains possession of such property.’’.

SEC. 310. LIMITATION ON LUXURY GOODS. 

Section 523(a)(2)(C) of title 11, United States Code, is amended 

to read as follows: 

‘‘(C)(i) for purposes of subparagraph (A)—

‘‘(I) consumer debts owed to a single creditor and 

aggregating more than $500 for luxury goods or services incurred by an individual debtor on or within 90 

days before the order for relief under this title are presumed to be nondischargeable; and 

‘‘(II) cash advances aggregating more than $750 

that are extensions of consumer credit under an open 

end credit plan obtained by an individual debtor on or 

within 70 days before the order for relief under this 

title, are presumed to be nondischargeable; and 

‘‘(ii) for purposes of this subparagraph—

‘‘(I) the terms ‘consumer’, ‘credit’, and ‘open end 

credit plan’ have the same meanings as in section 103 

of the Truth in Lending Act; and 

‘‘(II) the term ‘luxury goods or services’ does not include goods or services reasonably necessary for the 

support or maintenance of the debtor or a dependent of 

the debtor.’’.

62

SEC. 311. AUTOMATIC STAY. 

(a) IN GENERAL.—Section 362(b) of title 11, United States Code, 

as amended by sections 224 and 303, is amended by inserting after 

paragraph (21), the following: 

‘‘(22) subject to subsection (n), under subsection (a)(3), of 

the continuation of any eviction, unlawful detainer action, or 

similar proceeding by a lessor against a debtor involving residential property in which the debtor resides as a tenant under 

a lease or rental agreement and with respect to which the lessor 

has obtained before the date of the filing of the bankruptcy petition, a judgment for possession of such property against the 

debtor; ‘‘(23) subject to subsection (o), under subsection (a)(3), of an 

eviction action that seeks possession of the residential property 

in which the debtor resides as a tenant under a lease or rental 

agreement based on endangerment of such property or the illegal use of controlled substances on such property, but only if the 

lessor files with the court, and serves upon the debtor, a certification under penalty of perjury that such an eviction action has 

been filed, or that the debtor, during the 30-day period preceding the date of the filing of the certification, has endangered 

property or illegally used or allowed to be used a controlled 

substance on the property;

‘‘(24) under subsection (a), of any transfer that is not avoidable under section 544 and that is not avoidable under section 

549;’’. 

(b) LIMITATIONS.—Section 362 of title 11, United States Code, 

as amended by sections 106 and 305, is amended by adding at the 

end the following: 

‘‘(n)(1) Except as otherwise provided in this subsection, subsection (b)(22) shall apply on the date that is 30 days after the date 

on which the bankruptcy petition is filed, if the debtor files with the 

petition and serves upon the lessor a certification under penalty of 

perjury that—

‘‘(A) under nonbankruptcy law applicable in the jurisdiction, there are circumstances under which the debtor would be 

permitted to cure the entire monetary default that gave rise to 

the judgment for possession, after that judgment for possession 

was entered; and 

‘‘(B) the debtor (or an adult dependent of the debtor) has 

deposited with the clerk of the court, any rent that would become due during the 30-day period after the filing of the bankruptcy petition. 

‘‘(2) If, within the 30-day period after the filing of the bankruptcy petition, the debtor (or an adult dependent of the debtor) 

complies with paragraph (1) and files with the court and serves 

upon the lessor a further certification under penalty of perjury that 

the debtor (or an adult dependent of the debtor) has cured, under 

nonbankrupcty law applicable in the jurisdiction, the entire monetary default that gave rise to the judgment under which possession 

is sought by the lessor, subsection (b)(22) shall not apply, unless ordered to apply by the court under paragraph (3). 

‘‘(3)(A) If the lessor files an objection to any certification filed 

by the debtor under paragraph (1) or (2), and serves such objection 

upon the debtor, the court shall hold a hearing within 10 days after 

63

the filing and service of such objection to determine if the certification filed by the debtor under paragraph (1) or (2) is true. ‘‘(B) If the court upholds the objection of the lessor filed under 

subparagraph (A)— ‘‘(i) subsection (b)(22) shall apply immediately and relief 

from the stay provided under subsection (a)(3) shall not be required to enable the lessor to complete the process to recover full 

possession of the property; and ‘‘(ii) the clerk of the court shall immediately serve upon the 

lessor and the debtor a certified copy of the court’s order upholding the lessor’s objection. ‘‘(4) If a debtor, in accordance with paragraph (5), indicates on 

the petition that there was a judgment for possession of the residential rental property in which the debtor resides and does not file a 

certification under paragraph (1) or (2)— ‘‘(A) subsection (b)(22) shall apply immediately upon failure 

to file such certification, and relief from the stay provided 

under subsection (a)(3) shall not be required to enable the lessor 

to complete the process to recover full possession of the property; 

and ‘‘(B) the clerk of the court shall immediately serve upon the 

lessor and the debtor a certified copy of the docket indicating 

the absence of a filed certification and the applicability of the 

exception to the stay under subsection (b)(22). 

‘‘(5)(A) Where a judgment for possession of residential property 

in which the debtor resides as a tenant under a lease or rental 

agreement has been obtained by the lessor, the debtor shall so indicate on the bankruptcy petition and shall provide the name and address of the lessor that obtained that pre-petition judgment on the 

petition and on any certification filed under this subsection. ‘‘(B) The form of certification filed with the petition, as specified 

in this subsection, shall provide for the debtor to certify, and the 

debtor shall certify— ‘‘(i) whether a judgment for possession of residential rental 

housing in which the debtor resides has been obtained against 

the debtor before the filing of the petition; and 

‘‘(ii) whether the debtor is claiming under paragraph (1) 

that under nonbankruptcy law applicable in the jurisdiction, 

there are circumstances under which the debtor would be permitted to cure the entire monetary default that gave rise to the 

judgment for possession, after that judgment of possession was 

entered, and has made the appropriate deposit with the court. 

‘‘(C) The standard forms (electronic and otherwise) used in a 

bankruptcy proceeding shall be amended to reflect the requirements 

of this subsection. 

‘‘(D) The clerk of the court shall arrange for the prompt transmittal of the rent deposited in accordance with paragraph (1)(B) to 

the lessor. 

‘‘(o)(1) Except as otherwise provided in this subsection, subsection (b)(23) shall apply on the date that is 15 days after the date 

on which the lessor files and serves a certification described in subsection (b)(23). 

‘‘(2)(A) If the debtor files with the court an objection to the truth 

or legal sufficiency of the certification described in subsection (b)(23) 

and serves such objection upon the lessor, subsection (b)(23) shall 

64

not apply, unless ordered to apply by the court under this subsection. 

‘‘(B) If the debtor files and serves the objection under subparagraph (A), the court shall hold a hearing within 10 days after the 

filing and service of such objection to determine if the situation giving rise to the lessor’s certification under paragraph (1) existed or 

has been remedied. 

‘‘(C) If the debtor can demonstrate to the satisfaction of the 

court that the situation giving rise to the lessor’s certification under 

paragraph (1) did not exist or has been remedied, the stay provided 

under subsection (a)(3) shall remain in effect until the termination 

of the stay under this section. 

‘‘(D) If the debtor cannot demonstrate to the satisfaction of the 

court that the situation giving rise to the lessor’s certification under 

paragraph (1) did not exist or has been remedied—

‘‘(i) relief from the stay provided under subsection (a)(3) 

shall not be required to enable the lessor to proceed with the 

eviction; and 

‘‘(ii) the clerk of the court shall immediately serve upon the 

lessor and the debtor a certified copy of the court’s order upholding the lessor’s certification. 

‘‘(3) If the debtor fails to file, within 15 days, an objection under 

paragraph (2)(A)—

‘‘(A) subsection (b)(23) shall apply immediately upon such 

failure and relief from the stay provided under subsection (a)(3) 

shall not be required to enable the lessor to complete the process 

to recover full possession of the property; and 

‘‘(B) the clerk of the court shall immediately serve upon the 

lessor and the debtor a certified copy of the docket indicating 

such failure.’’. 

SEC. 312. EXTENSION OF PERIOD BETWEEN BANKRUPTCY DISCHARGES. 

Title 11, United States Code, is amended—

(1) in section 727(a)(8), by striking ‘‘six’’ and inserting ‘‘8’’; 

and 

(2) in section 1328, by inserting after subsection (e) the following: 

‘‘(f) Notwithstanding subsections (a) and (b), the court shall not 

grant a discharge of all debts provided for in the plan or disallowed 

under section 502, if the debtor has received a discharge—

‘‘(1) in a case filed under chapter 7, 11, or 12 of this title 

during the 4-year period preceding the date of the order for relief under this chapter, or 

‘‘(2) in a case filed under chapter 13 of this title during the 

2-year period preceding the date of such order.’’. 

SEC. 313. DEFINITION OF HOUSEHOLD GOODS AND ANTIQUES. 

(a) DEFINITION.—Section 522(f) of title 11, United States Code, 

is amended by adding at the end the following: ‘‘(4)(A) Subject to subparagraph (B), for purposes of paragraph 

(1)(B), the term ‘household goods’ means— ‘‘(i) clothing; 

‘‘(ii) furniture; 

‘‘(iii) appliances; 

‘‘(iv) 1 radio; 

65

‘‘(v) 1 television; 

‘‘(vi) 1 VCR; 

‘‘(vii) linens; 

‘‘(viii) china; 

‘‘(ix) crockery; 

‘‘(x) kitchenware; 

‘‘(xi) educational materials and educational equipment primarily for the use of minor dependent children of the debtor; ‘‘(xii) medical equipment and supplies; 

‘‘(xiii) furniture exclusively for the use of minor children, or 

elderly or disabled dependents of the debtor; ‘‘(xiv) personal effects (including the toys and hobby equipment of minor dependent children and wedding rings) of the 

debtor and the dependents of the debtor; and ‘‘(xv) 1 personal computer and related equipment. ‘‘(B) The term ‘household goods’ does not include— ‘‘(i) works of art (unless by or of the debtor, or any relative 

of the debtor); ‘‘(ii) electronic entertainment equipment with a fair market value of more than $500 in the aggregate (except 1 television, 

1 radio, and 1 VCR); ‘‘(iii) items acquired as antiques with a fair market value of more than $500 in the aggregate; ‘‘(iv) jewelry with a fair market value of more than $500 in 

the aggregate (except wedding rings); and ‘‘(v) a computer (except as otherwise provided for in this 

section), motor vehicle (including a tractor or lawn tractor), 

boat, or a motorized recreational device, conveyance, vehicle, 

watercraft, or aircraft.’’. (b) STUDY.—Not later than 2 years after the date of enactment 

of this Act, the Director of the Executive Office for United States 

Trustees shall submit a report to the Committee on the Judiciary of 

the Senate and the Committee on the Judiciary of the House of Representatives containing its findings regarding utilization of the definition of household goods, as defined in section 522(f)(4) of title 11, 

United States Code, as added by this section, with respect to the 

avoidance of nonpossessory, nonpurchase money security interests in 

household goods under section 522(f)(1)(B) of title 11, United States 

Code, and the impact that section 522(f)(4) of that title, as added 

by this section, has had on debtors and on the bankruptcy courts. 

Such report may include recommendations for amendments to section 522(f)(4) of title 11, United States Code, consistent with the Director’s findings. 

SEC. 314. DEBT INCURRED TO PAY NONDISCHARGEABLE DEBTS. 

(a) IN GENERAL.—Section 523(a) of title 11, United States Code, 

is amended by inserting after paragraph (14) the following: 

‘‘(14A) incurred to pay a tax to a governmental unit, other 

than the United States, that would be nondischargeable under 

paragraph (1);’’. 

(b) DISCHARGE UNDER CHAPTER 13.—Section 1328(a) of title 

11, United States Code, is amended by striking paragraphs (1) 

through (3) and inserting the following: 

‘‘(1) provided for under section 1322(b)(5); 

‘‘(2) of the kind specified in paragraph (2), (3), (4), (5), (8), 

or (9) of section 523(a); 

66

‘‘(3) for restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime; or ‘‘(4) for restitution, or damages, awarded in a civil action 

against the debtor as a result of willful or malicious injury by 

the debtor that caused personal injury to an individual or the 

death of an individual.’’.

SEC. 315. GIVING CREDITORS FAIR NOTICE IN CHAPTERS 7 AND 13 

CASES. 

(a) NOTICE.—Section 342 of title 11, United States Code, as 

amended by section 102, is amended— (1) in subsection (c)— (A) by inserting ‘‘(1)’’ after ‘‘(c)’’; 

(B) by striking ‘‘, but the failure of such notice to contain such information shall not invalidate the legal effect 

of such notice’’; and 

(C) by adding at the end the following: ‘‘(2)(A) If, within the 90 days before the commencement of a voluntary case, a creditor supplies the debtor in at least 2 communications sent to the debtor with the current account number of the debtor and the address at which such creditor requests to receive correspondence, then any notice required by this title to be sent by the 

debtor to such creditor shall be sent to such address and shall include such account number. 

(B) If a creditor would be in violation of applicable nonbankruptcy law by sending any such communication within such 90-day 

period and if such creditor supplies the debtor in the last 2 communications with the current account number of the debtor and the address at which such creditor requests to receive correspondence, then 

any notice required by this title to be sent by the debtor to such creditor shall be sent to such address and shall include such account 

number; and 

(2) by adding at the end the following: ‘‘(e)(1) In a case under chapter 7 or 13 of this title of a debtor 

who is an individual, a creditor at any time may both file with the 

court and serve on the debtor a notice of address to be used to provide notice in such case to such creditor. 

‘‘(2) Any notice in such case required to be provided to such 

creditor by the debtor or the court later than 5 days after the court 

and the debtor receive such creditor’s notice of address, shall be provided to such address.

‘‘(f)(1) An entity may file with any bankruptcy court a notice of 

address to be used by all the bankruptcy courts or by particular 

bankruptcy courts, as so specified by such entity at the time such 

notice is filed, to provide notice to such entity in all cases under 

chapters 7 and 13 pending in the courts with respect to which such 

notice is filed, in which such entity is a creditor. 

‘‘(2) In any case filed under chapter 7 or 13, any notice required 

to be provided by a court with respect to which a notice is filed 

under paragraph (1), to such entity later than 30 days after the filing of such notice under paragraph (1) shall be provided to such address unless with respect to a particular case a different address is 

specified in a notice filed and served in accordance with subsection 

(e). 

‘‘(3) A notice filed under paragraph (1) may be withdrawn by 

such entity. 

67

‘‘(g)(1) Notice provided to a creditor by the debtor or the court 

other than in accordance with this section (excluding this subsection) shall not be effective notice until such notice is brought to 

the attention of such creditor. If such creditor designates a person 

or an organizational subdivision of such creditor to be responsible 

for receiving notices under this title and establishes reasonable procedures so that such notices receivable by such creditor are to be delivered to such person or such subdivision, then a notice provided 

to such creditor other than in accordance with this section (excluding this subsection) shall not be considered to have been brought to 

the attention of such creditor until such notice is received by such 

person or such subdivision. 

‘‘(2) A monetary penalty may not be imposed on a creditor for 

a violation of a stay in effect under section 362(a) of this title (including a monetary penalty imposed under section 362(k) of this 

title) or for failure to comply with section 542 or 543 unless the conduct that is the basis of such violation or of such failure occurs after 

such creditor receives notice effective under this section of the order 

for relief.’’. 

(b) DEBTOR’S DUTIES.—Section 521 of title 11, United States 

Code, as amended by sections 106, 225, and 305, is amended—

(1) in subsection (a), as so designated by section 106, by 

amending paragraph (1) to read as follows: 

‘‘(1) file—

‘‘(A) a list of creditors; and 

‘‘(B) unless the court orders otherwise—

‘‘(i) a schedule of assets and liabilities; 

‘‘(ii) a schedule of current income and current expenditures; 

‘‘(iii) a statement of the debtor’s financial affairs 

and, if section 342(b) applies, a certificate—

‘‘(I) of an attorney whose name is indicated on 

the petition as the attorney for the debtor, or any 

bankruptcy petition preparer signing the petition 

under section 110(b)(1), indicating that such attorney or such bankruptcy petition preparer delivered 

to the debtor the notice required by section 342(b); 

or 

‘‘(II) if no attorney is so indicated, and no 

bankruptcy petition preparer signed the petition, of 

the debtor that such notice was received and read 

by the debtor; 

‘‘(iv) copies of all payment advices or other evidence of payment received within 60 days before the filing of the petition, by the debtor from any employer of 

the debtor; 

‘‘(v) a statement of the amount of monthly net income, itemized to show how the amount is calculated; 

and 

‘‘(vi) a statement disclosing any reasonably anticipated increase in income or expenditures over the 12-

month period following the date of the filing of the petition;’’; and 

(2) by adding at the end the following: 

68

‘‘(e)(1) If the debtor in a case under chapter 7 or 13 is an individual and if a creditor files with the court at any time a request 

to receive a copy of the petition, schedules, and statement of financial affairs filed by the debtor, then the court shall make such petition, such schedules, and such statement available to such creditor.

‘‘(2)(A) The debtor shall provide—

‘‘(i) not later than 7 days before the date first set for the 

first meeting of creditors, to the trustee a copy of the Federal income tax return required under applicable law (or at the election of the debtor, a transcript of such return) for the most recent tax year ending immediately before the commencement of 

the case and for which a Federal income tax return was filed; 

and 

‘‘(ii) at the same time the debtor complies with clause (i), 

a copy of such return (or if elected under clause (i), such transcript) to any creditor that timely requests such copy. 

‘‘(B) If the debtor fails to comply with clause (i) or (ii) of subparagraph (A), the court shall dismiss the case unless the debtor 

demonstrates that the failure to so comply is due to circumstances 

beyond the control of the debtor. 

‘‘(C) If a creditor requests a copy of such tax return or such 

transcript and if the debtor fails to provide a copy of such tax return 

or such transcript to such creditor at the time the debtor provides 

such tax return or such transcript to the trustee, then the court shall 

dismiss the case unless the debtor demonstrates that the failure to 

provide a copy of such tax return or such transcript is due to circumstances beyond the control of the debtor. 

‘‘(3) If a creditor in a case under chapter 13 files with the court 

at any time a request to receive a copy of the plan filed by the debtor, then the court shall make available to such creditor a copy of 

such plan—

‘‘(A) at a reasonable cost; and 

‘‘(B) not later than 5 days after such request is filed. 

‘‘(f) At the request of the court, the United States trustee, or any 

party in interest in a case under chapter 7, 11, or 13, a debtor who 

is an individual shall file with the court—

‘‘(1) at the same time filed with the taxing authority, a copy 

of each Federal income tax return required under applicable 

law (or at the election of the debtor, a transcript of such tax return) with respect to each tax year of the debtor ending while 

the case is pending under such chapter; 

‘‘(2) at the same time filed with the taxing authority, each 

Federal income tax return required under applicable law (or at 

the election of the debtor, a transcript of such tax return) that 

had not been filed with such authority as of the date of the commencement of the case and that was subsequently filed for any 

tax year of the debtor ending in the 3-year period ending on the 

date of the commencement of the case; 

‘‘(3) a copy of each amendment to any Federal income tax 

return or transcript filed with the court under paragraph (1) or 

(2); and 

‘‘(4) in a case under chapter 13—

‘‘(A) on the date that is either 90 days after the end of 

such tax year or 1 year after the date of the commencement 

69

of the case, whichever is later, if a plan is not confirmed 

before such later date; and 

‘‘(B) annually after the plan is confirmed and until the 

case is closed, not later than the date that is 45 days before 

the anniversary of the confirmation of such plan; 

a statement, under penalty of perjury, of the income and expenditures of the debtor during the tax year of the debtor most 

recently concluded before such statement is filed under this 

paragraph, and of the monthly income of the debtor, that shows 

how income, expenditures, and monthly income are calculated. 

‘‘(g)(1) A statement referred to in subsection (f)(4) shall disclose—

‘‘(A) the amount and sources of the income of the debtor; 

‘‘(B) the identity of any person responsible with the debtor 

for the support of any dependent of the debtor; and

‘‘(C) the identity of any person who contributed, and the 

amount contributed, to the household in which the debtor resides. 

‘‘(2) The tax returns, amendments, and statement of income and 

expenditures described in subsections (e)(2)(A) and (f) shall be available to the United States trustee (or the bankruptcy administrator, 

if any), the trustee, and any party in interest for inspection and 

copying, subject to the requirements of subsection (h). 

‘‘(h)(1) Not later than 180 days after the date of the enactment 

of the Bankruptcy Abuse Prevention and Consumer Protection Act 

of 2002, the Director of the Administrative Office of the United 

States Courts shall establish procedures for safeguarding the confidentiality of any tax information required to be provided under 

this section. 

‘‘(2) The procedures under paragraph (1) shall include restrictions on creditor access to tax information that is required to be provided under this section. 

‘‘(3) Not later than 540 days after the date of enactment of the 

Bankruptcy Abuse Prevention and Consumer Protection Act of 2002, 

the Director of the Administrative Office of the United States Courts 

shall prepare and submit to the President pro tempore of the Senate 

and the Speaker of the House of Representatives a report that—

‘‘(A) assesses the effectiveness of the procedures established 

under paragraph (1); and 

‘‘(B) if appropriate, includes proposed legislation to—

‘‘(i) further protect the confidentiality of tax information; and 

‘‘(ii) provide penalties for the improper use by any person of the tax information required to be provided under 

this section. 

‘‘(i) If requested by the United States trustee or by the trustee, 

the debtor shall provide—

‘‘(1) a document that establishes the identity of the debtor, 

including a driver’s license, passport, or other document that 

contains a photograph of the debtor; or 

‘‘(2) such other personal identifying information relating to 

the debtor that establishes the identity of the debtor.’’.

70

SEC. 316. DISMISSAL FOR FAILURE TO TIMELY FILE SCHEDULES OR 

PROVIDE REQUIRED INFORMATION. 

Section 521 of title 11, United States Code, as amended by sections 106, 225, 305, and 315, is amended by adding at the end the 

following: ‘‘(j)(1) Subject to paragraphs (2) and (4) and notwithstanding 

section 707(a), if an individual debtor in a voluntary case under 

chapter 7 or 13 fails to file all of the information required under 

subsection (a)(1) within 45 days after the filing of the petition commencing the case, the case shall be automatically dismissed effective 

on the 46th day after the filing of the petition. 

‘‘(2) Subject to paragraph (4) and with respect to a case described in paragraph (1), any party in interest may request the court 

to enter an order dismissing the case. If requested, the court shall 

enter an order of dismissal not later than 5 days after such request. 

‘‘(3) Subject to paragraph (4) and upon request of the debtor 

made within 45 days after the filing of the petition commencing a 

case described in paragraph (1), the court may allow the debtor an 

additional period of not to exceed 45 days to file the information required under subsection (a)(1) if the court finds justification for extending the period for the filing. 

‘‘(4) Notwithstanding any other provision of this subsection, on 

the motion of the trustee filed before the expiration of the applicable 

period of time specified in paragraph (1), (2), or (3), and after notice 

and a hearing, the court may decline to dismiss the case if the court 

finds that the debtor attempted in good faith to file all the information required by subsection (a)(1)(B)(iv) and that the best interests 

of creditors would be served by administration of the case.’’.

SEC. 317. ADEQUATE TIME TO PREPARE FOR HEARING ON CONFIRMATION OF THE PLAN. 

Section 1324 of title 11, United States Code, is amended—

(1) by striking ‘‘After’’ and inserting the following: 

‘‘(a) Except as provided in subsection (b) and after’’; and 

(2) by adding at the end the following: 

‘‘(b) The hearing on confirmation of the plan may be held not 

earlier than 20 days and not later than 45 days after the date of 

the meeting of creditors under section 341(a), unless the court determines that it would be in the best interests of the creditors and the 

estate to hold such hearing at an earlier date and there is no objection to such earlier date.’’. 

SEC. 318. CHAPTER 13 PLANS TO HAVE A 5-YEAR DURATION IN CERTAIN CASES. 

Title 11, United States Code, is amended—

(1) by amending section 1322(d) to read as follows: 

‘‘(d)(1) If the current monthly income of the debtor and the debtor’s spouse combined, when multiplied by 12, is not less than—

‘‘(A) in the case of a debtor in a household of 1 person, the 

median family income of the applicable State for 1 earner; 

‘‘(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable 

State for a family of the same number or fewer individuals; or 

‘‘(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable 

State for a family of 4 or fewer individuals, plus $525 per 

month for each individual in excess of 4, 

71

the plan may not provide for payments over a period that is longer 

than 5 years. 

‘‘(2) If the current monthly income of the debtor and the debtor’s 

spouse combined, when multiplied by 12, is less than—

‘‘(A) in the case of a debtor in a household of 1 person, the 

median family income of the applicable State for 1 earner last; 

‘‘(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable 

State for a family of the same number or fewer individuals; or 

‘‘(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable 

State for a family of 4 or fewer individuals, plus $525 per 

month for each individual in excess of 4, 

the plan may not provide for payments over a period that is longer 

than 3 years, unless the court, for cause, approves a longer period, 

but the court may not approve a period that is longer than 5 years.’’; 

(2) in section 1325(b)(1)(B), by striking ‘‘three-year period’’

and inserting ‘‘applicable commitment period’’; and 

(3) in section 1325(b), as amended by section 102, by adding at the end the following: 

‘‘(4) For purposes of this subsection, the ‘applicable commitment 

period’—

‘‘(A) subject to subparagraph (B), shall be—

‘‘(i) 3 years; or 

‘‘(ii) not less than 5 years, if the current monthly income of the debtor and the debtor’s spouse combined, when 

multiplied by 12, is not less than—

‘‘(I) in the case of a debtor in a household of 1 person, the median family income of the applicable State 

for 1 earner; 

‘‘(II) in the case of a debtor in a household of 2, 3, 

or 4 individuals, the highest median family income of 

the applicable State for a family of the same number 

or fewer individuals; or 

‘‘(III) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of 

the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess 

of 4; and 

‘‘(B) may be less than 3 or 5 years, whichever is applicable 

under subparagraph (A), but only if the plan provides for payment in full of all allowed unsecured claims over a shorter period.’’; and 

(4) in section 1329(c), by striking ‘‘three years’’ and inserting ‘‘the applicable commitment period under section 

1325(b)(1)(B)’’. 

SEC. 319. SENSE OF CONGRESS REGARDING EXPANSION OF RULE 9011 

OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE. 

It is the sense of Congress that rule 9011 of the Federal Rules 

of Bankruptcy Procedure (11 U.S.C. App.) should be modified to include a requirement that all documents (including schedules), 

signed and unsigned, submitted to the court or to a trustee by debtors who represent themselves and debtors who are represented by attorneys be submitted only after the debtors or the debtors’ attorneys 

72

have made reasonable inquiry to verify that the information contained in such documents is— (1) well grounded in fact; and 

(2) warranted by existing law or a good faith argument for 

the extension, modification, or reversal of existing law. 

SEC. 320. PROMPT RELIEF FROM STAY IN INDIVIDUAL CASES. 

Section 362(e) of title 11, United States Code, is amended— (1) by inserting ‘‘(1)’’ after ‘‘(e)’’; and 

(2) by adding at the end the following: ‘‘(2) Notwithstanding paragraph (1), in a case under chapter 7, 

11, or 13 in which the debtor is an individual, the stay under subsection (a) shall terminate on the date that is 60 days after a request is made by a party in interest under subsection (d), unless— ‘‘(A) a final decision is rendered by the court during the 60-

day period beginning on the date of the request; or ‘‘(B) that 60-day period is extended— ‘‘(i) by agreement of all parties in interest; or 

‘‘(ii) by the court for such specific period of time as the 

court finds is required for good cause, as described in findings made by the court.’’.

SEC. 321. CHAPTER 11 CASES FILED BY INDIVIDUALS. 

(a) PROPERTY OF THE ESTATE.— (1) IN GENERAL.—Subchapter I of chapter 11 of title 11, 

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

‘‘§ 1115. Property of the estate 

‘‘(a) In a case concerning a debtor who is an individual, property of the estate includes, in addition to the property specified in 

section 541—‘‘(1) all property of the kind specified in section 541 that the 

debtor acquires after the commencement of the case but before 

the case is closed, dismissed, or converted to a case under chapter 7, 12, or 13, whichever occurs first; and ‘‘(2) earnings from services performed by the debtor after 

the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 12, or 13, 

whichever occurs first.’’. ‘‘(b) Except as provided in section 1104 or a confirmed plan or 

order confirming a plan, the debtor shall remain in possession of all 

property of the estate.’’. (2) CLERICAL AMENDMENT.—The table of sections for subchapter I of chapter 11 of title 11, United States Code, is 

amended by adding at the end the following:

‘‘1115. Property of the estate.’’.

(b) CONTENTS OF PLAN.—Section 1123(a) of title 11, United 

States Code, is amended—

(1) in paragraph (6), by striking ‘‘and’’ at the end; 

(2) in paragraph (7), by striking the period and inserting 

‘‘; and’’; and 

(3) by adding at the end the following: 

‘‘(8) in a case in which the debtor is an individual, provide 

for the payment to creditors under the plan of all or such portion of earnings from personal services performed by the debtor 

73

after the commencement of the case or other future income of 

the debtor as is necessary for the execution of the plan.’’. (c) CONFIRMATION OF PLAN.— (1) REQUIREMENTS RELATING TO VALUE OF PROPERTY.—Section 1129(a) of title 11, United States Code, as amended by section 213, is amended by adding at the end the following: ‘‘(15) In a case in which the debtor is an individual and in 

which the holder of an allowed unsecured claim objects to the 

confirmation of the plan— ‘‘(A) the value, as of the effective date of the plan, of the 

property to be distributed under the plan on account of 

such claim is not less than the amount of such claim; or ‘‘(B) the value of the property to be distributed under 

the plan is not less than the projected disposable income of 

the debtor (as defined in section 1325(b)(2)) to be received 

during the 5-year period beginning on the date that the 

first payment is due under the plan, or during the period 

for which the plan provides payments, whichever is 

longer.’’. (2) REQUIREMENT RELATING TO INTERESTS IN PROPERTY.— Section 1129(b)(2)(B)(ii) of title 11, United States Code, is 

amended by inserting before the period at the end the following: 

‘‘, except that in a case in which the debtor is an individual, 

the debtor may retain property included in the estate under section 1115, subject to the requirements of subsection (a)(14) of 

this section.’’. (d) EFFECT OF CONFIRMATION.—Section 1141(d) of title 11, 

United States Code, is amended— (1) in paragraph (2), by striking ‘‘The confirmation of a 

plan does not discharge an individual debtor’’ and inserting ‘‘A 

discharge under this chapter does not discharge a debtor who 

is an individual’’; and 

(2) by adding at the end the following: ‘‘(5) In a case in which the debtor is an individual—

‘‘(A) unless after notice and a hearing the court orders otherwise for cause, confirmation of the plan does not discharge 

any debt provided for in the plan until the court grants a discharge on completion of all payments under the plan; 

‘‘(B) at any time after the confirmation of the plan, and 

after notice and a hearing, the court may not grant a discharge 

to the debtor who has not completed payments under the plan 

unless—

‘‘(i) for each allowed unsecured claim, the value, as of 

the effective date of the plan, of property actually distributed under the plan on account of that claim is not less 

than the amount that would have been paid on such claim 

if the estate of the debtor had been liquidated under chapter 7 of this title on such date; and 

‘‘(ii) modification of the plan under section 1127 of this 

title is not practicable; and’’. 

(e) MODIFICATION OF PLAN.—Section 1127 of title 11, United 

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

‘‘(e) If the debtor is an individual, the plan may be modified at 

any time after confirmation of the plan but before the completion of 

payments under the plan, whether or not the plan has been substanVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00073 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
74

tially consummated, upon request of the debtor, the trustee, the 

United States trustee, or the holder of an allowed unsecured claim, 

to—

‘‘(1) increase or reduce the amount of payments on claims 

of a particular class provided for by the plan; 

‘‘(2) extend or reduce the time period for such payments; or 

‘‘(3) alter the amount of the distribution to a creditor whose 

claim is provided for by the plan to the extent necessary to take 

account of any payment of such claim made other than under 

the plan. 

‘‘(f)(1) Sections 1121 through 1128 of this title and the requirements of section 1129 of this title apply to any modification under 

subsection (a). 

‘‘(2) The plan, as modified, shall become the plan only after 

there has been disclosure under section 1125 as the court may direct, notice and a hearing, and such modification is approved.’’.

SEC. 322. LIMITATIONS ON HOMESTEAD EXEMPTION. 

(a) EXEMPTIONS.—Section 522 of title 11, United States Code, 

as amended by sections 224 and 308, is amended by adding at the 

end the following: 

‘‘(p)(1)Except as provided in paragraph (2) of this subsection 

and sections 544 and 548 of this title, as a result of electing under 

subsection (b)(3)(A) to exempt property under State or local law, a 

debtor may not exempt any amount of interest that was acquired by 

the debtor during the 1215-day period preceding the filing of the petition which exceeds in the aggregate $125,000 in value in—

‘‘(A) real or personal property that the debtor or a dependent of the debtor uses as a residence; 

‘‘(B) a cooperative that owns property that the debtor or a 

dependent of the debtor uses as a residence; 

‘‘(C) a burial plot for the debtor or a dependent of the debtor; or 

‘‘(D) real or personal property that the debtor or dependent 

of the debtor claims as a homestead. 

‘‘(2)(A) The limitation under paragraph (1) shall not apply to 

an exemption claimed under subsection (b)(3)(A) by a family farmer 

for the principal residence of that farmer. 

‘‘(B) For purposes of paragraph (1), any amount of such interest 

does not include any interest transferred from a debtor’s previous 

principal residence (which was acquired prior to the beginning of 

such 1215-day period) into the debtor’s current principal residence, 

if the debtor’s previous and current residences are located in the 

same State. 

‘‘(q)(1) As a result of electing under subsection (b)(3)(A) to exempt property under State or local law, a debtor may not exempt 

any amount of an interest in property described in subparagraphs 

(A), (B), and (C) of subsection (p) which exceeds in the aggregate 

$125,000 if—

‘‘(A) the court determines, after notice and a hearing, that 

the debtor has been convicted of a felony (as defined in section 

3156 of title 18), which under the circumstances, demonstrates 

that the filing of the case was an abuse of the provisions of this 

title; or 

‘‘(B) the debtor owes a debt arising from—

75

‘‘(i) any violation of the Federal securities laws (as defined in section 3(a)(47) of the Securities Exchange Act of 

1934), any State securities laws, or any regulation or order 

issued under Federal securities laws or State securities 

laws; 

‘‘(ii) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities 

Exchange Act of 1934 or under section 6 of the Securities 

Act of 1933; 

‘‘(iii) any civil remedy under section 1964 of title 18, 

United States Code; or 

‘‘(iv) any criminal act, intentional tort, or willful or 

reckless misconduct that caused serious physical injury or 

death to another individual in the preceding 5 years. 

‘‘(2) Paragraph (1) shall not apply to the extent the amount of 

an interest in property described in subparagraphs (A), (B), and (C) 

of subsection (p) is reasonably necessary for the support of the debtor and any dependent of the debtor.’’. 

(b) ADJUSTMENT OF DOLLAR AMOUNTS.—Paragraphs (1) and 

(2) of section 104(b) of title 11, United States Code, as amended by 

section 224, are amended by inserting ‘‘522(p), 522(q),’’ after 

‘‘522(n),’’.

SEC. 323. EXCLUDING EMPLOYEE BENEFIT PLAN PARTICIPANT CONTRIBUTIONS AND OTHER PROPERTY FROM THE ESTATE. 

Section 541(b) of title 11, United States Code, as amended by 

section 225, is amended by adding at the end the following: 

‘‘(7) any amount—

‘‘(A) withheld by an employer from the wages of employees for payment as contributions to—

‘‘(i) an employee benefit plan subject to title I of the 

Employee Retirement Income Security Act of 1974 or 

under an employee benefit plan which is a governmental plan under section 414(d) of the Internal Revenue Code of 1986, a deferred compensation plan under 

section 457 of the Internal Revenue Code of 1986, or a 

tax-deferred annuity under section 403(b) of the Internal Revenue Code of 1986, except that such amount 

under this clause shall not constitute disposable income, as defined in section 1325(b)(2) of this title; or 

‘‘(ii) a health insurance plan regulated by State 

law whether or not subject to such title; or 

‘‘(B) received by the employer from employees for payment as contributions to—

‘‘(i) an employee benefit plan subject to title I of the 

Employee Retirement Income Security Act of 1974 or 

under an employee benefit plan which is a governmental plan under section 414(d) of the Internal Revenue Code of 1986, a deferred compensation plan under 

section 457 of the Internal Revenue Code of 1986, or a 

tax-deferred annuity under section 403(b) of the Internal Revenue Code of 1986, except that such amount 

under this clause shall not constitute disposable income, as defined in section 1325(b)(2) of this title; or

76

‘‘(ii) a health insurance plan regulated by State 

law whether or not subject to such title;’’. 

SEC. 324. EXCLUSIVE JURISDICTION IN MATTERS INVOLVING BANKRUPTCY PROFESSIONALS. 

(a) IN GENERAL.—Section 1334 of title 28, United States Code, 

is amended—

(1) in subsection (b), by striking ‘‘Notwithstanding’’ and inserting ‘‘Except as provided in subsection (e)(2), and notwithstanding’’; and 

(2) by striking subsection (e) and inserting the following: 

‘‘(e) The district court in which a case under title 11 is commenced or is pending shall have exclusive jurisdiction—

‘‘(1) of all the property, wherever located, of the debtor as 

of the date of commencement of such case, and of property of 

the estate; and 

‘‘(2) over all claims or causes of action that involve construction of section 327 of title 11, United States Code, or rules 

relating to disclosure requirements under section 327.’’. 

(b) APPLICABILITY.—This section shall only apply to cases filed 

after the date of enactment of this Act. 

SEC. 325. UNITED STATES TRUSTEE PROGRAM FILING FEE INCREASE. 

(a) ACTIONS UNDER CHAPTER 7 OR 13 OF TITLE 11, UNITED

STATES CODE.—Section 1930(a) of title 28, United States Code, is 

amended by striking paragraph (1) and inserting the following: 

‘‘(1) For a case commenced—

‘‘(A) under chapter 7 of title 11, $160; or 

‘‘(B) under chapter 13 of title 11, $150.’’. 

(b) UNITED STATES TRUSTEE SYSTEM FUND.—Section 589a(b) 

of title 28, United States Code, is amended—

(1) by striking paragraph (1) and inserting the following: 

‘‘(1)(A) 40.63 percent of the fees collected under section 

1930(a)(1)(A) of this title in cases commenced under chapter 7 

of title 11; and 

‘‘(B) 70.00 percent of the fees collected under section 

1930(a)(1)(B) of this title in cases commenced under chapter 13 

of title 11;’’; 

(2) in paragraph (2), by striking ‘‘one-half’’ and inserting 

‘‘three-fourths’’; and 

(3) in paragraph (4), by striking ‘‘one-half’’ and inserting 

‘‘100 percent’’. 

(c) COLLECTION AND DEPOSIT OF MISCELLANEOUS BANKRUPTCY

FEES.—Section 406(b) of the Judiciary Appropriations Act, 1990 (28 

U.S.C. 1931 note) is amended by striking ‘‘pursuant to 28 U.S.C. 

section 1930(b) and 33.87 per centum of the fees hereafter collected 

under 28 U.S.C. section 1930(a)(1) and 25 percent of the fees hereafter collected under 28 U.S.C. section 1930(a)(3) shall be deposited 

as offsetting receipts to the fund established under 28 U.S.C. section 

1931’’ and inserting ‘‘under section 1930(b) of title 28, United States 

Code, and 31.25 percent of the fees collected under section 

1930(a)(1)(A) of that title, 30.00 percent of the fees collected under 

section 1930(a)(1)(B) of that title, and 25 percent of the fees collected 

under section 1930(a)(3) of that title shall be deposited as offsetting 

receipts to the fund established under section 1931 of that title’’. 

77

SEC. 326. SHARING OF COMPENSATION. 

Section 504 of title 11, United States Code, is amended by adding at the end the following: 

‘‘(c) This section shall not apply with respect to sharing, or 

agreeing to share, compensation with a bona fide public service attorney referral program that operates in accordance with non-Federal law regulating attorney referral services and with rules of professional responsibility applicable to attorney acceptance of referrals.’’. 

SEC. 327. FAIR VALUATION OF COLLATERAL. 

Section 506(a) of title 11, United States Code, is amended by—

(1) inserting ‘‘(1)’’ after ‘‘(a)’’; and 

(2) by adding at the end the following: 

‘‘(2) If the debtor is an individual in a case under chapter 7 or 

13, such value with respect to personal property securing an allowed 

claim shall be determined based on the replacement value of such 

property as of the date of filing the petition without deduction for 

costs of sale or marketing. With respect to property acquired for personal, family, or household purposes, replacement value shall mean 

the price a retail merchant would charge for property of that kind 

considering the age and condition of the property at the time value 

is determined.’’. 

SEC. 328. DEFAULTS BASED ON NONMONETARY OBLIGATIONS. 

(a) EXECUTORY CONTRACTS AND UNEXPIRED LEASES.—Section 

365 of title 11, United States Code, is amended—

(1) in subsection (b)—

(A) in paragraph (1)(A), by striking the semicolon at 

the end and inserting the following: ‘‘other than a default 

that is a breach of a provision relating to the satisfaction 

of any provision (other than a penalty rate or penalty provision) relating to a default arising from any failure to perform nonmonetary obligations under an unexpired lease of 

real property, if it is impossible for the trustee to cure such 

default by performing nonmonetary acts at and after the 

time of assumption, except that if such default arises from 

a failure to operate in accordance with a nonresidential 

real property lease, then such default shall be cured by performance at and after the time of assumption in accordance 

with such lease, and pecuniary losses resulting from such 

default shall be compensated in accordance with the provisions of this paragraph;’’; and 

(B) in paragraph (2)(D), by striking ‘‘penalty rate or 

provision’’ and inserting ‘‘penalty rate or penalty provision’’; 

(2) in subsection (c)—

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

(B) in paragraph (3), by striking ‘‘; or’’ at the end and 

inserting a period; and 

(C) by striking paragraph (4); 

(3) in subsection (d)—

(A) by striking paragraphs (5) through (9); and

(B) by redesignating paragraph (10) as paragraph (5); 

and 

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(4) in subsection (f)(1) by striking ‘‘; except that’’ and all 

that follows through the end of the paragraph and inserting a 

period. 

(b) IMPAIRMENT OF CLAIMS OR INTERESTS.—Section 1124(2) of 

title 11, United States Code, is amended—

(1) in subparagraph (A), by inserting ‘‘or of a kind that section 365(b)(2) of this title expressly does not require to be cured’’

before the semicolon at the end; 

(2) in subparagraph (C), by striking ‘‘and’’ at the end; 

(3) by redesignating subparagraph (D) as subparagraph 

(E); and 

(4) by inserting after subparagraph (C) the following: 

‘‘(D) if such claim or such interest arises from any failure to perform a nonmonetary obligation, other than a default arising from failure to operate a nonresidential real 

property lease subject to section 365(b)(1)(A), compensates 

the holder of such claim or such interest (other than the 

debtor or an insider) for any actual pecuniary loss incurred 

by such holder as a result of such failure; and’’.

SEC. 329. CLARIFICATION OF POSTPETITION WAGES AND BENEFITS. 

Section 503(b)(1)(A) of title 11, United States Code, is amended 

to read as follows: 

‘‘(A) the actual, necessary costs and expenses of preserving the 

estate including—

‘‘(i) wages, salaries, or commissions for services rendered 

after the commencement of the case; and 

‘‘(ii) wages and benefits awarded pursuant to a judicial 

proceeding or a proceeding of the National Labor Relations 

Board as back pay attributable to any period of time occurring 

after commencement of the case under this title, as a result of 

a violation of Federal or State law by the debtor, without regard to the time of the occurrence of unlawful conduct on which 

such award is based or to whether any services were rendered, 

if the court determines that payment of wages and benefits by 

reason of the operation of this clause will not substantially increase the probability of layoff or termination of current employees, or of nonpayment of domestic support obligations, during 

the case under this title;’’.

SEC. 330. NONDISCHARGEABILITY OF DEBTS INCURRED THROUGH 

VIOLATIONS OF LAWS RELATING TO THE PROVISION OF 

LAWFUL GOODS AND SERVICES. 

(a) DEBTS INCURRED THROUGH VIOLATIONS OF LAW RELATING

TO THE PROVISION OF LAWFUL GOODS AND SERVICES.—Section 

523(a) of title 11, United States Code, as amended by section 224, 

is amended—

(1) in paragraph (18) by striking ‘‘or’’ at the end; 

(2) in paragraph (19) by striking the period at the end and 

inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(20) that results from any judgment, order, consent order, 

or decree entered in any Federal or State court, or contained in 

any settlement agreement entered into by the debtor (including 

any court-ordered damages, fine, penalty, or attorney fee or cost 

owed by the debtor), that arises from—

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‘‘(A) the violation by the debtor of any Federal or State 

statutory law, including but not limited to violations of title 

18, that results from intentional actions of the debtor 

that—

‘‘(i) by force or threat of force or by physical obstruction, intentionally injure, intimidate, or interfere 

with or attempt to injure, intimidate or interfere with 

any person because that person is or has been, or in 

order to intimidate such person or any other person or 

any class of persons from, obtaining or providing lawful goods or services; 

‘‘(ii) by force or threat of force or by physical obstruction, intentionally injure, intimidate, or interfere 

with or attempt to injure, intimidate or interfere with 

any person lawfully exercising or seeking to exercise the 

First Amendment right of religious freedom at a place 

of religious worship; or 

‘‘(iii) intentionally damage or destroy the property 

of a facility, or attempt to do so, because such facility 

provides lawful goods or services, or intentionally damage or destroy the property of a place of religious worship; or 

‘‘(B) a violation of a court order or injunction that protects access to a facility that or a person who provides lawful goods or services or the provision of lawful goods or 

services if—

‘‘(i) such violation is intentional or knowing; or 

‘‘(ii) such violation occurs after a court has found 

that the debtor previously violated—

‘‘(I) such court order or such injunction; or 

‘‘(II) any other court order or injunction that 

protects access to the same facility or the same person; 

except that nothing in this paragraph shall be construed to affect any expressive conduct (including peaceful picketing, peaceful prayer, or other peaceful demonstration) protected from legal 

prohibition by the first amendment to the Constitution of the 

United States.’’. 

(b) RESTITUTION.—Section 523(a)(13) of title 11, United States 

Code, is amended by inserting ‘‘or under the criminal law of a 

State’’ after ‘‘title 18’’.

SEC. 331. DELAY OF DISCHARGE DURING PENDENCY OF CERTAIN PROCEEDINGS. 

(a) CHAPTER 7.—Section 727(a) of title 11, United States Code, 

as amended by section 106, is amended—

(1) in paragraph (10), by striking ‘‘or’’ at the end;

(2) in paragraph (11) by striking the period at the end and 

inserting ‘‘; or’’; and 

(3) by inserting after paragraph (11) the following: 

‘‘(12) the court after notice and a hearing held not more 

than 10 days before the date of entry of the order granting the 

discharge finds that there is reasonable cause to believe that—

‘‘(A) section 522(q)(1) may be applicable to the debtor; 

and 

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‘‘(B) there is pending any proceeding in which the debtor may be found guilty of a felony of the kind described in 

section 522(q)(1)(A) or liable for a debt of the kind described in section 522(q)(1)(B); or’’. 

(b) CHAPTER 11.—Section 1141(d) of title 11, United States 

Code, as amended by section 321, is amended by adding at the end 

the following: 

‘‘(C) unless after notice and a hearing held not more 

than 10 days before the date of entry of the order granting 

the discharge, the court finds that there is no reasonable 

cause to believe that—

‘‘(i) section 522(q)(1) may be applicable to the debtor; and 

‘‘(ii) there is pending any proceeding in which the 

debtor may be found guilty of a felony of the kind described in section 522(q)(1)(A) or liable for a debt of the 

kind described in section 522(q)(1)(B).’’. 

(c) CHAPTER 12.—Section 1228 of title 11, United States Code, 

is amended—

(1) in subsection (a) by striking ‘‘As’’ and inserting ‘‘Subject 

to subsection (d), as’’, 

(2) in subsection (b) by striking ‘‘At’’ and inserting ‘‘Subject 

to subsection (d), at’’, and 

(3) by adding at the end the following: 

‘‘(f) The court may not grant a discharge under this chapter unless the court after notice and a hearing held not more than 10 days 

before the date of entry of the order granting the discharge finds 

that there is no reasonable cause to believe that—

‘‘(1) section 522(q)(1) may be applicable to the debtor; and 

‘‘(2) there is pending any proceeding in which the debtor 

may be found guilty of a felony of the kind described in section 

522(q)(1)(A) or liable for a debt of the kind described in section 

522(q)(1)(B).’’. 

(d) CHAPTER 13.—Section 1328 of title 11, United States Code, 

as amended by section 106, is amended—

(1) in subsection (a) by striking ‘‘As’’ and inserting ‘‘Subject 

to subsection (d), as’’, 

(2) in subsection (b) by striking ‘‘At’’ and inserting ‘‘Subject 

to subsection (d), at’’, and 

(3) by adding at the end the following: 

‘‘(h) The court may not grant a discharge under this chapter 

unless the court after notice and a hearing held not more than 10 

days before the date of entry of the order granting the discharge 

finds that there is no reasonable cause to believe that—

‘‘(1) section 522(q)(1) may be applicable to the debtor; and 

‘‘(2) there is pending any proceeding in which the debtor 

may be found guilty of a felony of the kind described in section 

522(q)(1)(A) or liable for a debt of the kind described in section 

522(q)(1)(B).’’.

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TITLE IV—GENERAL AND SMALL 

BUSINESS BANKRUPTCY PROVISIONS 

Subtitle A—General Business Bankruptcy 

Provisions 

SEC. 401. ADEQUATE PROTECTION FOR INVESTORS. 

(a) DEFINITION.—Section 101 of title 11, United States Code, is 

amended by inserting after paragraph (48) the following: 

‘‘(48A) ‘securities self regulatory organization’ means either 

a securities association registered with the Securities and Exchange Commission under section 15A of the Securities Exchange Act of 1934 or a national securities exchange registered 

with the Securities and Exchange Commission under section 6 

of the Securities Exchange Act of 1934;’’. 

(b) AUTOMATIC STAY.—Section 362(b) of title 11, United States 

Code, as amended by sections 224, 303, and 311, is amended by inserting after paragraph (24) the following: 

‘‘(25) under subsection (a), of—

‘‘(A) the commencement or continuation of an investigation or action by a securities self regulatory organization to 

enforce such organization’s regulatory power; 

‘‘(B) the enforcement of an order or decision, other than 

for monetary sanctions, obtained in an action by the securities self regulatory organization to enforce such organization’s regulatory power; or 

‘‘(C) any act taken by the securities self regulatory organization to delist, delete, or refuse to permit quotation of 

any stock that does not meet applicable regulatory requirements;’’. 

SEC. 402. MEETINGS OF CREDITORS AND EQUITY SECURITY HOLDERS. 

Section 341 of title 11, United States Code, is amended by adding at the end the following: 

‘‘(e) Notwithstanding subsections (a) and (b), the court, on the 

request of a party in interest and after notice and a hearing, for 

cause may order that the United States trustee not convene a meeting of creditors or equity security holders if the debtor has filed a 

plan as to which the debtor solicited acceptances prior to the commencement of the case.’’.

SEC. 403. PROTECTION OF REFINANCE OF SECURITY INTEREST. 

Subparagraphs (A), (B), and (C) of section 547(e)(2) of title 11, 

United States Code, are each amended by striking ‘‘10’’ each place 

it appears and inserting ‘‘30’’. 

SEC. 404. EXECUTORY CONTRACTS AND UNEXPIRED LEASES. 

(a) IN GENERAL.—Section 365(d)(4) of title 11, United States 

Code, is amended to read as follows: 

‘‘(4)(A) Subject to subparagraph (B), an unexpired lease of nonresidential real property under which the debtor is the lessee shall 

be deemed rejected, and the trustee shall immediately surrender 

that nonresidential real property to the lessor, if the trustee does not 

assume or reject the unexpired lease by the earlier of—

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‘‘(i) the date that is 120 days after the date of the order for 

relief; or 

‘‘(ii) the date of the entry of an order confirming a plan. 

‘‘(B)(i) The court may extend the period determined under subparagraph (A), prior to the expiration of the 120-day period, for 90 

days on the motion of the trustee or lessor for cause. 

‘‘(ii) If the court grants an extension under clause (i), the court 

may grant a subsequent extension only upon prior written consent 

of the lessor in each instance.’’. 

(b) EXCEPTION.—Section 365(f)(1) of title 11, United States 

Code, is amended by striking ‘‘subsection’’ the first place it appears 

and inserting ‘‘subsections (b) and’’. 

SEC. 405. CREDITORS AND EQUITY SECURITY HOLDERS COMMITTEES. 

(a) APPOINTMENT.—Section 1102(a) of title 11, United States 

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

‘‘(4) On request of a party in interest and after notice and a 

hearing, the court may order the United States trustee to change the 

membership of a committee appointed under this subsection, if the 

court determines that the change is necessary to ensure adequate 

representation of creditors or equity security holders. The court may 

order the United States trustee to increase the number of members 

of a committee to include a creditor that is a small business concern 

(as described in section 3(a)(1) of the Small Business Act, if the 

court determines that the creditor holds claims (of the kind represented by the committee) the aggregate amount of which, in comparison to the annual gross revenue of that creditor, is disproportionately large.’’. 

(b) INFORMATION.—Section 1102(b) of title 11, United States 

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

‘‘(3) A committee appointed under subsection (a) shall—

‘‘(A) provide access to information for creditors who—

‘‘(i) hold claims of the kind represented by that committee; and 

‘‘(ii) are not appointed to the committee; 

‘‘(B) solicit and receive comments from the creditors described in subparagraph (A); and 

‘‘(C) be subject to a court order that compels any additional 

report or disclosure to be made to the creditors described in subparagraph (A).’’.

SEC. 406. AMENDMENT TO SECTION 546 OF TITLE 11, UNITED STATES 

CODE. 

Section 546 of title 11, United States Code, is amended—

(1) by redesignating the second subsection (g) (as added by 

section 222(a) of Public Law 103–394) as subsection (i); 

(2) in subsection (i), as so redesignated, by inserting ‘‘and 

subject to the prior rights of holders of security interests in such 

goods or the proceeds of such goods’’ after ‘‘consent of a creditor’’; and 

(3) by adding at the end the following: 

‘‘(j)(1) Notwithstanding paragraphs (2) and (3) of section 545, 

the trustee may not avoid a warehouseman’s lien for storage, transportation, or other costs incidental to the storage and handling of 

goods. 

83

‘‘(2) The prohibition under paragraph (1) shall be applied in a 

manner consistent with any State statute applicable to such lien 

that is similar to section 7–209 of the Uniform Commercial Code, 

as in effect on the date of enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2002, or any successor to 

such section 7–209.’’. 

SEC. 407. AMENDMENTS TO SECTION 330(a) OF TITLE 11, UNITED 

STATES CODE. 

Section 330(a) of title 11, United States Code, is amended—

(1) in paragraph (3)—

(A) by striking ‘‘(A) In’’ and inserting ‘‘In’’; and 

(B) by inserting ‘‘to an examiner, trustee under chapter 

11, or professional person’’ after ‘‘awarded’’; and 

(2) by adding at the end the following: 

‘‘(7) In determining the amount of reasonable compensation to 

be awarded to a trustee, the court shall treat such compensation as 

a commission, based on section 326 of this title.’’. 

SEC. 408. POSTPETITION DISCLOSURE AND SOLICITATION. 

Section 1125 of title 11, United States Code, is amended by 

adding at the end the following: 

‘‘(g) Notwithstanding subsection (b), an acceptance or rejection 

of the plan may be solicited from a holder of a claim or interest if 

such solicitation complies with applicable nonbankruptcy law and 

if such holder was solicited before the commencement of the case in 

a manner complying with applicable nonbankruptcy law.’’. 

SEC. 409. PREFERENCES. 

Section 547(c) of title 11, United States Code, is amended—

(1) by striking paragraph (2) and inserting the following: 

‘‘(2) to the extent that such transfer was in payment of a 

debt incurred by the debtor in the ordinary course of business 

or financial affairs of the debtor and the transferee, and such 

transfer was—

‘‘(A) made in the ordinary course of business or financial affairs of the debtor and the transferee; or

‘‘(B) made according to ordinary business terms;’’; 

(2) in paragraph (8), by striking the period at the end and 

inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(9) if, in a case filed by a debtor whose debts are not primarily consumer debts, the aggregate value of all property that 

constitutes or is affected by such transfer is less than $5,000.’’. 

SEC. 410. VENUE OF CERTAIN PROCEEDINGS. 

Section 1409(b) of title 28, United States Code, is amended by 

inserting ‘‘, or a nonconsumer debt against a noninsider of less than 

$10,000,’’ after ‘‘$5,000’’. 

SEC. 411. PERIOD FOR FILING PLAN UNDER CHAPTER 11. 

Section 1121(d) of title 11, United States Code, is amended—

(1) by striking ‘‘On’’ and inserting ‘‘(1) Subject to paragraph 

(2), on’’; and 

(2) by adding at the end the following: 

‘‘(2)(A) The 120-day period specified in paragraph (1) may not 

be extended beyond a date that is 18 months after the date of the 

order for relief under this chapter. 

84

‘‘(B) The 180-day period specified in paragraph (1) may not be 

extended beyond a date that is 20 months after the date of the order 

for relief under this chapter.’’. 

SEC. 412. FEES ARISING FROM CERTAIN OWNERSHIP INTERESTS. 

Section 523(a)(16) of title 11, United States Code, is amended—

(1) by striking ‘‘dwelling’’ the first place it appears; 

(2) by striking ‘‘ownership or’’ and inserting ‘‘ownership,’’; 

(3) by striking ‘‘housing’’ the first place it appears; and 

(4) by striking ‘‘but only’’ and all that follows through ‘‘such 

period,’’ and inserting ‘‘or a lot in a homeowners association, for 

as long as the debtor or the trustee has a legal, equitable, or 

possessory ownership interest in such unit, such corporation, or 

such lot,’’. 

SEC. 413. CREDITOR REPRESENTATION AT FIRST MEETING OF CREDITORS. 

Section 341(c) of title 11, United States Code, is amended by inserting at the end the following: ‘‘Notwithstanding any local court 

rule, provision of a State constitution, any other Federal or State 

law that is not a bankruptcy law, or other requirement that representation at the meeting of creditors under subsection (a) be by an 

attorney, a creditor holding a consumer debt or any representative 

of the creditor (which may include an entity or an employee of an 

entity and may be a representative for more than 1 creditor) shall 

be permitted to appear at and participate in the meeting of creditors 

in a case under chapter 7 or 13, either alone or in conjunction with 

an attorney for the creditor. Nothing in this subsection shall be construed to require any creditor to be represented by an attorney at 

any meeting of creditors.’’. 

SEC. 414. DEFINITION OF DISINTERESTED PERSON. 

Section 101(14) of title 11, United States Code, is amended to 

read as follows: 

‘‘(14) ‘disinterested person’ means a person that—

‘‘(A) is not a creditor, an equity security holder, or an 

insider; 

‘‘(B) is not and was not, within 2 years before the date 

of the filing of the petition, a director, officer, or employee 

of the debtor; and 

‘‘(C) does not have an interest materially adverse to the 

interest of the estate or of any class of creditors or equity 

security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtor, or for 

any other reason;’’. 

SEC. 415. FACTORS FOR COMPENSATION OF PROFESSIONAL PERSONS. 

Section 330(a)(3) of title 11, United States Code, is amended—

(1) in subparagraph (D), by striking ‘‘and’’ at the end; 

(2) by redesignating subparagraph (E) as subparagraph 

(F); and 

(3) by inserting after subparagraph (D) the following: 

‘‘(E) with respect to a professional person, whether the person is board certified or otherwise has demonstrated skill and 

experience in the bankruptcy field; and’’. 

SEC. 416. APPOINTMENT OF ELECTED TRUSTEE. 

Section 1104(b) of title 11, United States Code, is amended—

85

(1) by inserting ‘‘(1)’’ after ‘‘(b)’’; and 

(2) by adding at the end the following: 

‘‘(2)(A) If an eligible, disinterested trustee is elected at a meeting 

of creditors under paragraph (1), the United States trustee shall file 

a report certifying that election. 

‘‘(B) Upon the filing of a report under subparagraph (A)—

‘‘(i) the trustee elected under paragraph (1) shall be considered to have been selected and appointed for purposes of this 

section; and 

‘‘(ii) the service of any trustee appointed under subsection 

(d) shall terminate. 

‘‘(C) The court shall resolve any dispute arising out of an election described in subparagraph (A).’’. 

SEC. 417. UTILITY SERVICE. 

Section 366 of title 11, United States Code, is amended—

(1) in subsection (a), by striking ‘‘subsection (b)’’ and inserting ‘‘subsections (b) and (c)’’; and 

(2) by adding at the end the following: 

‘‘(c)(1)(A) For purposes of this subsection, the term ‘assurance of 

payment’ means—

‘‘(i) a cash deposit; 

‘‘(ii) a letter of credit; 

‘‘(iii) a certificate of deposit; 

‘‘(iv) a surety bond; 

‘‘(v) a prepayment of utility consumption; or 

‘‘(vi) another form of security that is mutually agreed on between the utility and the debtor or the trustee. 

‘‘(B) For purposes of this subsection an administrative expense priority shall not constitute an assurance of payment. 

‘‘(2) Subject to paragraphs (3) and (4), with respect to a case 

filed under chapter 11, a utility referred to in subsection (a) may 

alter, refuse, or discontinue utility service, if during the 30-day period beginning on the date of filing of the petition, the utility does 

not receive from the debtor or the trustee adequate assurance of payment for utility service that is satisfactory to the utility. 

‘‘(3)(A) On request of a party in interest and after notice and a 

hearing, the court may order modification of the amount of an assurance of payment under paragraph (2). 

‘‘(B) In making a determination under this paragraph whether 

an assurance of payment is adequate, the court may not consider—

‘‘(i) the absence of security before the date of filing of the 

petition; 

‘‘(ii) the payment by the debtor of charges for utility service 

in a timely manner before the date of filing of the petition; or 

‘‘(iii) the availability of an administrative expense priority.

‘‘(4) Notwithstanding any other provision of law, with respect to 

a case subject to this subsection, a utility may recover or set off 

against a security deposit provided to the utility by the debtor before 

the date of filing of the petition without notice or order of the 

court.’’. 

SEC. 418. BANKRUPTCY FEES. 

Section 1930 of title 28, United States Code, is amended— (1) in subsection (a), by striking ‘‘Notwithstanding section 

1915 of this title, the’’ and inserting ‘‘The’’; and 

86

(2) by adding at the end the following: ‘‘(f)(1) Under the procedures prescribed by the Judicial Conference of the United States, the district court or the bankruptcy 

court may waive the filing fee in a case under chapter 7 of title 11 

for an individual if the court determines that such individual has 

income less than 150 percent of the income official poverty line (as 

defined by the Office of Management and Budget, and revised annually in accordance with section 673(2) of the Omnibus Budget Reconciliation Act of 1981) applicable to a family of the size involved 

and is unable to pay that fee in installments. For purposes of this 

paragraph, the term ‘filing fee’ means the filing required by subsection (a), or any other fee prescribed by the Judicial Conference 

under subsections (b) and (c) that is payable to the clerk upon the 

commencement of a case under chapter 7. ‘‘(2) The district court or the bankruptcy court may waive for 

such debtors other fees prescribed under subsections (b) and (c). ‘‘(3) This subsection does not restrict the district court or the 

bankruptcy court from waiving, in accordance with Judicial Conference policy, fees prescribed under this section for other debtors 

and creditors.’’. 

SEC. 419. MORE COMPLETE INFORMATION REGARDING ASSETS OF THE 

ESTATE. 

(a) IN GENERAL.— (1) DISCLOSURE.—The Advisory Committee on Bankruptcy 

Rules of the Judicial Conference of the United States, after consideration of the views of the Director of the Executive Office for 

United States Trustees, shall propose for adoption amended 

Federal Rules of Bankruptcy Procedure and Official Bankruptcy Forms directing debtors under chapter 11 of title 11, 

United States Code, to disclose the information described in 

paragraph (2) by filing and serving periodic financial and other 

reports designed to provide such information. 

(2) INFORMATION.—The information referred to in paragraph (1) is the value, operations, and profitability of any closely held corporation, partnership, or of any other entity in which 

the debtor holds a substantial or controlling interest. 

(b) PURPOSE.—The purpose of the rules and reports under subsection (a) shall be to assist parties in interest taking steps to ensure 

that the debtor’s interest in any entity referred to in subsection (a)(2) 

is used for the payment of allowed claims against debtor. 

Subtitle B—Small Business Bankruptcy 

Provisions 

SEC. 431. FLEXIBLE RULES FOR DISCLOSURE STATEMENT AND PLAN. 

Section 1125 of title 11, United States Code, is amended—

(1) in subsection (a)(1), by inserting before the semicolon 

‘‘and in determining whether a disclosure statement provides 

adequate information, the court shall consider the complexity of 

the case, the benefit of additional information to creditors and 

other parties in interest, and the cost of providing additional 

information’’; and 

(2) by striking subsection (f), and inserting the following: ‘‘(f) Notwithstanding subsection (b), in a small business case—

87

‘‘(1) the court may determine that the plan itself provides 

adequate information and that a separate disclosure statement 

is not necessary; 

‘‘(2) the court may approve a disclosure statement submitted on standard forms approved by the court or adopted 

under section 2075 of title 28; and 

‘‘(3)(A) the court may conditionally approve a disclosure 

statement subject to final approval after notice and a hearing; 

‘‘(B) acceptances and rejections of a plan may be solicited 

based on a conditionally approved disclosure statement if the 

debtor provides adequate information to each holder of a claim 

or interest that is solicited, but a conditionally approved disclosure statement shall be mailed not later than 20 days before the 

date of the hearing on confirmation of the plan; and 

‘‘(C) the hearing on the disclosure statement may be combined with the hearing on confirmation of a plan.’’.

SEC. 432. DEFINITIONS. 

(a) DEFINITIONS.—Section 101 of title 11, United States Code, 

is amended by striking paragraph (51C) and inserting the following:

‘‘(51C) ‘small business case’ means a case filed under chapter 11 of this title in which the debtor is a small business debtor; 

‘‘(51D) ‘small business debtor’—

‘‘(A) subject to subparagraph (B), means a person engaged in commercial or business activities (including any 

affiliate of such person that is also a debtor under this title 

and excluding a person whose primary activity is the business of owning or operating real property or activities incidental thereto) that has aggregate noncontingent, liquidated secured and unsecured debts as of the date of the 

petition or the order for relief in an amount not more than 

$2,000,000 (excluding debts owed to 1 or more affiliates or 

insiders) for a case in which the United States trustee has 

not appointed under section 1102(a)(1) a committee of unsecured creditors or where the court has determined that the 

committee of unsecured creditors is not sufficiently active 

and representative to provide effective oversight of the debtor; and 

‘‘(B) does not include any member of a group of affiliated debtors that has aggregate noncontingent liquidated 

secured and unsecured debts in an amount greater than 

$2,000,000 (excluding debt owed to 1 or more affiliates or 

insiders);’’. 

(b) CONFORMING AMENDMENT.—Section 1102(a)(3) of title 11, 

United States Code, is amended by inserting ‘‘debtor’’ after ‘‘small 

business’’. (c) ADJUSTMENT OF DOLLAR AMOUNTS.—Section 104(b) of title 

11, United States Code, as amended by section 226, is amended by 

inserting ‘‘101(51D),’’ after ‘‘101(3),’’ each place it appears. 

SEC. 433. STANDARD FORM DISCLOSURE STATEMENT AND PLAN. 

Within a reasonable period of time after the date of enactment 

of this Act, the Advisory Committee on Bankruptcy Rules of the Judicial Conference of the United States shall propose for adoption 

88

standard form disclosure statements and plans of reorganization for 

small business debtors (as defined in section 101 of title 11, United 

States Code, as amended by this Act), designed to achieve a practical balance between—

(1) the reasonable needs of the courts, the United States 

trustee, creditors, and other parties in interest for reasonably 

complete information; and 

(2) economy and simplicity for debtors. 

SEC. 434. UNIFORM NATIONAL REPORTING REQUIREMENTS. 

(a) REPORTING REQUIRED.—

(1) IN GENERAL.—Chapter 3 of title 11, United States Code, 

is amended by inserting after section 307 the following: 

‘‘§ 308. Debtor reporting requirements 

‘‘(a) For purposes of this section, the term ‘profitability’ means, 

with respect to a debtor, the amount of money that the debtor has 

earned or lost during current and recent fiscal periods. 

‘‘(b) A small business debtor shall file periodic financial and 

other reports containing information including—

‘‘(1) the debtor’s profitability; 

‘‘(2) reasonable approximations of the debtor’s projected 

cash receipts and cash disbursements over a reasonable period; 

‘‘(3) comparisons of actual cash receipts and disbursements 

with projections in prior reports; 

‘‘(4)(A) whether the debtor is—

‘‘(i) in compliance in all material respects with 

postpetition requirements imposed by this title and the Federal Rules of Bankruptcy Procedure; and 

‘‘(ii) timely filing tax returns and other required government filings and paying taxes and other administrative 

expenses when due; 

‘‘(B) if the debtor is not in compliance with the requirements referred to in subparagraph (A)(i) or filing tax returns 

and other required government filings and making the payments referred to in subparagraph (A)(ii), what the failures are 

and how, at what cost, and when the debtor intends to remedy 

such failures; and 

‘‘(C) such other matters as are in the best interests of the 

debtor and creditors, and in the public interest in fair and efficient procedures under chapter 11 of this title.’’. 

(2) CLERICAL AMENDMENT.—The table of sections for chapter 3 of title 11, United States Code, is amended by inserting 

after the item relating to section 307 the following:

‘‘308. Debtor reporting requirements.’’.

(b) EFFECTIVE DATE.—The amendments made by subsection (a) 

shall take effect 60 days after the date on which rules are prescribed 

under section 2075 of title 28, United States Code, to establish 

forms to be used to comply with section 308 of title 11, United 

States Code, as added by subsection (a). 

SEC. 435. UNIFORM REPORTING RULES AND FORMS FOR SMALL BUSINESS CASES. 

(a) PROPOSAL OF RULES AND FORMS.—The Advisory Committee 

on Bankruptcy Rules of the Judicial Conference of the United States 

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shall propose for adoption amended Federal Rules of Bankruptcy 

Procedure and Official Bankruptcy Forms to be used by small business debtors to file periodic financial and other reports containing 

information, including information relating to— (1) the debtor’s profitability; 

(2) the debtor’s cash receipts and disbursements; and 

(3) whether the debtor is timely filing tax returns and paying taxes and other administrative expenses when due. 

(b) PURPOSE.—The rules and forms proposed under subsection 

(a) shall be designed to achieve a practical balance among— (1) the reasonable needs of the bankruptcy court, the United 

States trustee, creditors, and other parties in interest for reasonably complete information; 

(2) the small business debtor’s interest that required reports 

be easy and inexpensive to complete; and

(3) the interest of all parties that the required reports help 

the small business debtor to understand the small business 

debtor’s financial condition and plan the small business debtor’s future. 

SEC. 436. DUTIES IN SMALL BUSINESS CASES. 

(a) DUTIES IN CHAPTER 11 CASES.—Subchapter I of chapter 11 

of title 11, United States Code, as amended by section 321, is 

amended by adding at the end the following: 

‘‘§ 1116. Duties of trustee or debtor in possession in small 

business cases 

‘‘In a small business case, a trustee or the debtor in possession, 

in addition to the duties provided in this title and as otherwise required by law, shall— ‘‘(1) append to the voluntary petition or, in an involuntary 

case, file not later than 7 days after the date of the order for 

relief— ‘‘(A) its most recent balance sheet, statement of operations, cash-flow statement, Federal income tax return; or ‘‘(B) a statement made under penalty of perjury that no 

balance sheet, statement of operations, or cash-flow statement has been prepared and no Federal tax return has 

been filed; 

‘‘(2) attend, through its senior management personnel and 

counsel, meetings scheduled by the court or the United States 

trustee, including initial debtor interviews, scheduling conferences, and meetings of creditors convened under section 341 

unless the court waives that requirement after notice and a 

hearing, upon a finding of extraordinary and compelling circumstances; ‘‘(3) timely file all schedules and statements of financial affairs, unless the court, after notice and a hearing, grants an extension, which shall not extend such time period to a date later 

than 30 days after the date of the order for relief, absent extraordinary and compelling circumstances; ‘‘(4) file all postpetition financial and other reports required 

by the Federal Rules of Bankruptcy Procedure or by local rule 

of the district court; ‘‘(5) subject to section 363(c)(2), maintain insurance customary and appropriate to the industry; 

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‘‘(6)(A) timely file tax returns and other required government filings; and ‘‘(B) subject to section 363(c)(2), timely pay all taxes entitled 

to administrative expense priority except those being contested 

by appropriate proceedings being diligently prosecuted; and ‘‘(7) allow the United States trustee, or a designated representative of the United States trustee, to inspect the debtor’s 

business premises, books, and records at reasonable times, after 

reasonable prior written notice, unless notice is waived by the 

debtor.’’. (b) CLERICAL AMENDMENT.—The table of sections for chapter 11 

of title 11, United States Code, as amended by section 321, is 

amended by inserting after the item relating to section 1115 the following:

‘‘1116. Duties of trustee or debtor in possession in small business cases.’’.

SEC. 437. PLAN FILING AND CONFIRMATION DEADLINES. 

Section 1121 of title 11, United States Code, is amended by 

striking subsection (e) and inserting the following: ‘‘(e) In a small business case— ‘‘(1) only the debtor may file a plan until after 180 days 

after the date of the order for relief, unless that period is— ‘‘(A) extended as provided by this subsection, after notice and a hearing; or ‘‘(B) the court, for cause, orders otherwise; ‘‘(2) the plan, and any necessary disclosure statement, shall 

be filed not later than 300 days after the date of the order for 

relief; and ‘‘(3) the time periods specified in paragraphs (1) and (2), 

and the time fixed in section 1129(e) within which the plan 

shall be confirmed, may be extended only if— ‘‘(A) the debtor, after providing notice to parties in interest (including the United States trustee), demonstrates 

by a preponderance of the evidence that it is more likely 

than not that the court will confirm a plan within a reasonable period of time; ‘‘(B) a new deadline is imposed at the time the extension is granted; and ‘‘(C) the order extending time is signed before the existing deadline has expired.’’.

SEC. 438. PLAN CONFIRMATION DEADLINE. 

Section 1129 of title 11, United States Code, is amended by 

adding at the end the following: 

‘‘(e) In a small business case, the court shall confirm a plan 

that complies with the applicable provisions of this title and that is 

filed in accordance with section 1121(e) not later than 45 days after 

such plan is filed unless the time for confirmation is extended in accordance with section 1121(e)(3).’’. 

SEC. 439. DUTIES OF THE UNITED STATES TRUSTEE. 

Section 586(a) of title 28, United States Code, is amended—

(1) in paragraph (3)—

(A) in subparagraph (G), by striking ‘‘and’’ at the end; 

(B) by redesignating subparagraph (H) as subparagraph (I); and 

(C) by inserting after subparagraph (G) the following: 

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‘‘(H) in small business cases (as defined in section 101 

of title 11), performing the additional duties specified in 

title 11 pertaining to such cases; and’’; 

(2) in paragraph (5), by striking ‘‘and’’ at the end; 

(3) in paragraph (6), by striking the period at the end and 

inserting a semicolon; and 

(4) by adding at the end the following: 

‘‘(7) in each of such small business cases—

‘‘(A) conduct an initial debtor interview as soon as 

practicable after the entry of order for relief but before the 

first meeting scheduled under section 341(a) of title 11, at 

which time the United States trustee shall—

‘‘(i) begin to investigate the debtor’s viability; 

‘‘(ii) inquire about the debtor’s business plan; 

‘‘(iii) explain the debtor’s obligations to file monthly operating reports and other required reports; 

‘‘(iv) attempt to develop an agreed scheduling 

order; and 

‘‘(v) inform the debtor of other obligations; 

‘‘(B) if determined to be appropriate and advisable, 

visit the appropriate business premises of the debtor and 

ascertain the state of the debtor’s books and records and 

verify that the debtor has filed its tax returns; and ‘‘(C) review and monitor diligently the debtor’s activities, to identify as promptly as possible whether the debtor 

will be unable to confirm a plan; and 

‘‘(8) in any case in which the United States trustee finds 

material grounds for any relief under section 1112 of title 11, 

the United States trustee shall apply promptly after making 

that finding to the court for relief.’’. 

SEC. 440. SCHEDULING CONFERENCES. 

Section 105(d) of title 11, United States Code, is amended—

(1) in the matter preceding paragraph (1), by striking ‘‘, 

may’’; and 

(2) by striking paragraph (1) and inserting the following: 

‘‘(1) shall hold such status conferences as are necessary to 

further the expeditious and economical resolution of the case; 

and’’.

SEC. 441. SERIAL FILER PROVISIONS. 

Section 362 of title 11, United States Code, as amended by sections 106, 305, and 311, is amended— (1) in subsection (k), as so redesignated by section 305— (A) by striking ‘‘An’’ and inserting ‘‘(1) Except as provided in paragraph (2), an’’; and 

(B) by adding at the end the following: 

‘‘(2) If such violation is based on an action taken by an entity 

in the good faith belief that subsection (h) applies to the debtor, the 

recovery under paragraph (1) of this subsection against such entity 

shall be limited to actual damages.’’; and 

(2) by adding at the end the following: 

‘‘(n)(1) Except as provided in paragraph (2), subsection (a) does 

not apply in a case in which the debtor—

‘‘(A) is a debtor in a small business case pending at the 

time the petition is filed; 

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‘‘(B) was a debtor in a small business case that was dismissed for any reason by an order that became final in the 2-

year period ending on the date of the order for relief entered 

with respect to the petition; 

‘‘(C) was a debtor in a small business case in which a plan 

was confirmed in the 2-year period ending on the date of the 

order for relief entered with respect to the petition; or 

‘‘(D) is an entity that has acquired substantially all of the 

assets or business of a small business debtor described in subparagraph (A), (B), or (C), unless such entity establishes by a 

preponderance of the evidence that such entity acquired substantially all of the assets or business of such small business 

debtor in good faith and not for the purpose of evading this 

paragraph. 

‘‘(2) Paragraph (1) does not apply—

‘‘(A) to an involuntary case involving no collusion by the 

debtor with creditors; or 

‘‘(B) to the filing of a petition if—

‘‘(i) the debtor proves by a preponderance of the evidence that the filing of that petition resulted from circumstances beyond the control of the debtor not foreseeable 

at the time the case then pending was filed; and 

‘‘(ii) it is more likely than not that the court will confirm a feasible plan, but not a liquidating plan, within a 

reasonable period of time.’’.

SEC. 442. EXPANDED GROUNDS FOR DISMISSAL OR CONVERSION AND 

APPOINTMENT OF TRUSTEE. 

(a) EXPANDED GROUNDS FOR DISMISSAL OR CONVERSION.—Section 1112 of title 11, United States Code, is amended by striking 

subsection (b) and inserting the following: 

‘‘(b)(1) Except as provided in paragraph (2) of this subsection, 

subsection (c) of this section, and section 1104(a)(3), on request of 

a party in interest, and after notice and a hearing, absent unusual 

circumstances specifically identified by the court that establish that 

the requested conversion or dismissal is not in the best interests of 

creditors and the estate, the court shall convert a case under this 

chapter to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, if 

the movant establishes cause.

‘‘(2) The relief provided in paragraph (1) shall not be granted 

absent unusual circumstances specifically identified by the court 

that establish that such relief is not in the best interests of creditors 

and the estate, if the debtor or another party in interest objects and 

establishes that—

‘‘(A) there is a reasonable likelihood that a plan will be confirmed within the timeframes established in sections 1121(e) 

and 1129(e) of this title, or if such sections do not apply, within 

a reasonable period of time; and 

‘‘(B) the grounds for granting such relief include an act or 

omission of the debtor other than under paragraph (4)(A)—

‘‘(i) for which there exists a reasonable justification for 

the act or omission; and 

‘‘(ii) that will be cured within a reasonable period of 

time fixed by the court. 

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‘‘(3) The court shall commence the hearing on a motion under 

this subsection not later than 30 days after filing of the motion, and 

shall decide the motion not later than 15 days after commencement 

of such hearing, unless the movant expressly consents to a continuance for a specific period of time or compelling circumstances prevent the court from meeting the time limits established by this paragraph. ‘‘(4) For purposes of this subsection, the term ‘cause’ includes— ‘‘(A) substantial or continuing loss to or diminution of the 

estate and the absence of a reasonable likelihood of rehabilitation; ‘‘(B) gross mismanagement of the estate; 

‘‘(C) failure to maintain appropriate insurance that poses a 

risk to the estate or to the public; ‘‘(D) unauthorized use of cash collateral substantially 

harmful to 1 or more creditors; ‘‘(E) failure to comply with an order of the court; 

‘‘(F) unexcused failure to satisfy timely any filing or reporting requirement established by this title or by any rule applicable to a case under this chapter; ‘‘(G) failure to attend the meeting of creditors convened 

under section 341(a) or an examination ordered under rule 

2004 of the Federal Rules of Bankruptcy Procedure without 

good cause shown by the debtor; ‘‘(H) failure timely to provide information or attend meetings reasonably requested by the United States trustee or the 

bankruptcy administrator; ‘‘(I) failure timely to pay taxes owed after the date of the 

order for relief or to file tax returns due after the order for relief; ‘‘(J) failure to file a disclosure statement, or to file or confirm a plan, within the time fixed by this title or by order of 

the court; ‘‘(K) failure to pay any fees or charges required under chapter 123 of title 28; 

‘‘(L) revocation of an order of confirmation under section 

1144; 

‘‘(M) inability to effectuate substantial consummation of a 

confirmed plan; 

‘‘(N) material default by the debtor with respect to a confirmed plan; 

‘‘(O) termination of a confirmed plan by reason of the occurrence of a condition specified in the plan; and 

‘‘(P) failure of the debtor to pay any domestic support obligation that first becomes payable after the date on which the petition is filed. 

‘‘(5) The court shall commence the hearing on a motion under 

this subsection not later than 30 days after filing of the motion, and 

shall decide the motion not later than 15 days after commencement 

of such hearing, unless the movant expressly consents to a continuance for a specific period of time or compelling circumstances prevent the court from meeting the time limits established by this paragraph.’’. 

(b) ADDITIONAL GROUNDS FOR APPOINTMENT OF TRUSTEE.—

Section 1104(a) of title 11, United States Code, is amended—

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(1) in paragraph (1), by striking ‘‘or’’ at the end; 

(2) in paragraph (2), by striking the period at the end and 

inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(3) if grounds exist to convert or dismiss the case under 

section 1112, but the court determines that the appointment of 

a trustee or an examiner is in the best interests of creditors and 

the estate.’’. 

SEC. 443. STUDY OF OPERATION OF TITLE 11, UNITED STATES CODE, 

WITH RESPECT TO SMALL BUSINESSES. 

Not later than 2 years after the date of enactment of this Act, 

the Administrator of the Small Business Administration, in consultation with the Attorney General, the Director of the Executive 

Office for United States Trustees, and the Director of the Administrative Office of the United States Courts, shall—

(1) conduct a study to determine—

(A) the internal and external factors that cause small 

businesses, especially sole proprietorships, to become debtors in cases under title 11, United States Code, and that 

cause certain small businesses to successfully complete 

cases under chapter 11 of such title; and 

(B) how Federal laws relating to bankruptcy may be 

made more effective and efficient in assisting small businesses to remain viable; and 

(2) submit to the President pro tempore of the Senate and 

the Speaker of the House of Representatives a report summarizing that study. 

SEC. 444. PAYMENT OF INTEREST. 

Section 362(d)(3) of title 11, United States Code, is amended—

(1) by inserting ‘‘or 30 days after the court determines that 

the debtor is subject to this paragraph, whichever is later’’ after 

‘‘90-day period)’’; and 

(2) by striking subparagraph (B) and inserting the following:

‘‘(B) the debtor has commenced monthly payments 

that—

‘‘(i) may, in the debtor’s sole discretion, notwithstanding section 363(c)(2), be made from rents or other 

income generated before or after the commencement of 

the case by or from the property to each creditor whose 

claim is secured by such real estate (other than a claim 

secured by a judgment lien or by an unmatured statutory lien); and 

‘‘(ii) are in an amount equal to interest at the then 

applicable nondefault contract rate of interest on the 

value of the creditor’s interest in the real estate; or’’. 

SEC. 445. PRIORITY FOR ADMINISTRATIVE EXPENSES. 

Section 503(b) of title 11, United States Code, is amended—

(1) in paragraph (5), by striking ‘‘and’’ at the end; 

(2) in paragraph (6), by striking the period at the end and 

inserting a semicolon; and 

(3) by adding at the end the following: 

‘‘(7) with respect to a nonresidential real property lease previously assumed under section 365, and subsequently rejected, 

95

a sum equal to all monetary obligations due, excluding those 

arising from or relating to a failure to operate or a penalty provision, for the period of 2 years following the later of the rejection date or the date of actual turnover of the premises, without 

reduction or setoff for any reason whatsoever except for sums 

actually received or to be received from a nondebtor, and the 

claim for remaining sums due for the balance of the term of the 

lease shall be a claim under section 502(b)(6);’’.

SEC. 446. DUTIES WITH RESPECT TO A DEBTOR WHO IS A PLAN ADMINISTRATOR OF AN EMPLOYEE BENEFIT PLAN. 

(a) IN GENERAL.—Section 521(a) of title 11, United States Code, 

as amended by section 106, is amended—

(1) in paragraph (4), by striking ‘‘and’’ at the end; 

(2) in paragraph (5), by striking the period at the end and 

inserting ‘‘; and’’; and 

(3) by adding at the end the following: 

‘‘(6) unless a trustee is serving in the case, if at the time of 

filing the debtor served as the administrator (as defined in section 3 of the Employee Retirement Income Security Act of 1974 

of an employee benefit plan, continue to perform the obligations 

required of the administrator.’’. 

(b) DUTIES OF TRUSTEES.—Section 704(a) of title 11, United 

States Code, as amended by sections 102 and 219, is amended—

(1) in paragraph (9), by striking ‘‘and’’ at the end; 

(2) in paragraph (10), by striking the period at the end; 

and 

(3) by adding at the end the following: 

‘‘(11) if, at the time of the commencement of the case, the 

debtor served as the administrator (as defined in section 3 of 

the Employee Retirement Income Security Act of 1974) of an 

employee benefit plan, continue to perform the obligations required of the administrator; and’’. 

(c) CONFORMING AMENDMENT.—Section 1106(a)(1) of title 11, 

United States Code, is amended to read as follows: 

‘‘(1) perform the duties of the trustee, as specified in paragraphs (2), (5), (7), (8), (9), (10), and (11) of section 704;’’.

SEC. 447. APPOINTMENT OF COMMITTEE OF RETIRED EMPLOYEES. 

Section 1114(d) of title 11, United States Code, is amended—

(1) by striking ‘‘appoint’’ and inserting ‘‘order the appointment of’’, and 

(2) by adding at the end the following: ‘‘The United States 

trustee shall appoint any such committee.’’. 

TITLE V—MUNICIPAL BANKRUPTCY 

PROVISIONS 

SEC. 501. PETITION AND PROCEEDINGS RELATED TO PETITION. 

(a) TECHNICAL AMENDMENT RELATING TO MUNICIPALITIES.— Section 921(d) of title 11, United States Code, is amended by inserting ‘‘notwithstanding section 301(b)’’ before the period at the end. 

(b) CONFORMING AMENDMENT.—Section 301 of title 11, United 

States Code, is amended— (1) by inserting ‘‘(a)’’ before ‘‘A voluntary’’; and 

96

(2) by striking the last sentence and inserting the following: ‘‘(b) The commencement of a voluntary case under a chapter of 

this title constitutes an order for relief under such chapter.’’. 

SEC. 502. APPLICABILITY OF OTHER SECTIONS TO CHAPTER 9. 

Section 901(a) of title 11, United States Code, is amended— (1) by inserting ‘‘555, 556,’’ after ‘‘553,’’; and 

(2) by inserting ‘‘559, 560, 561, 562’’ after ‘‘557,’’. 

TITLE VI—BANKRUPTCY DATA 

SEC. 601. IMPROVED BANKRUPTCY STATISTICS. 

(a) IN GENERAL.—Chapter 6 of title 28, United States Code, is 

amended by adding at the end the following: 

‘‘§ 159. Bankruptcy statistics 

‘‘(a) The clerk of the district court, or the clerk of the bankruptcy 

court if one is certified pursuant to section 156(b) of this title, shall 

collect statistics regarding debtors who are individuals with primarily consumer debts seeking relief under chapters 7, 11, and 13 

of title 11. Those statistics shall be in a standardized format prescribed by the Director of the Administrative Office of the United 

States Courts (referred to in this section as the ‘Director’). 

‘‘(b) The Director shall—

‘‘(1) compile the statistics referred to in subsection (a);

‘‘(2) make the statistics available to the public; and 

‘‘(3) not later than June 1, 2005, and annually thereafter, 

prepare, and submit to Congress a report concerning the information collected under subsection (a) that contains an analysis 

of the information. 

‘‘(c) The compilation required under subsection (b) shall—

‘‘(1) be itemized, by chapter, with respect to title 11; 

‘‘(2) be presented in the aggregate and for each district; and 

‘‘(3) include information concerning— ‘‘(A) the total assets and total liabilities of the debtors 

described in subsection (a), and in each category of assets 

and liabilities, as reported in the schedules prescribed pursuant to section 2075 of this title and filed by those debtors; ‘‘(B) the current monthly income, average income, and 

average expenses of those debtors as reported on the schedules and statements that each such debtor files under sections 521 and 1322 of title 11; ‘‘(C) the aggregate amount of debt discharged in cases 

filed during the reporting period, determined as the difference between the total amount of debt and obligations of 

a debtor reported on the schedules and the amount of such 

debt reported in categories which are predominantly nondischargeable; 

‘‘(D) the average period of time between the filing of the 

petition and the closing of the case for cases closed during 

the reporting period; 

‘‘(E) for cases closed during the reporting period—

‘‘(i) the number of cases in which a reaffirmation 

was filed; and 

‘‘(ii)(I) the total number of reaffirmations filed; 

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‘‘(II) of those cases in which a reaffirmation was 

filed, the number of cases in which the debtor was not 

represented by an attorney; and 

‘‘(III) of those cases in which a reaffirmation was 

filed, the number of cases in which the reaffirmation 

was approved by the court; 

‘‘(F) with respect to cases filed under chapter 13 of title 

11, for the reporting period—

‘‘(i)(I) the number of cases in which a final order 

was entered determining the value of property securing 

a claim in an amount less than the amount of the 

claim; and 

‘‘(II) the number of final orders entered determining the value of property securing a claim; 

‘‘(ii) the number of cases dismissed, the number of 

cases dismissed for failure to make payments under the 

plan, the number of cases refiled after dismissal, and 

the number of cases in which the plan was completed, 

separately itemized with respect to the number of modifications made before completion of the plan, if any; 

and ‘‘(iii) the number of cases in which the debtor filed 

another case during the 6-year period preceding the filing; 

‘‘(G) the number of cases in which creditors were fined 

for misconduct and any amount of punitive damages 

awarded by the court for creditor misconduct; and 

‘‘(H) the number of cases in which sanctions under rule 

9011 of the Federal Rules of Bankruptcy Procedure were 

imposed against debtor’s attorney or damages awarded 

under such Rule.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 6 

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

the following:

‘‘159. Bankruptcy statistics.’’.

(c) EFFECTIVE DATE.—The amendments made by this section 

shall take effect 18 months after the date of enactment of this Act. 

SEC. 602. UNIFORM RULES FOR THE COLLECTION OF BANKRUPTCY 

DATA. 

(a) AMENDMENT.—Chapter 39 of title 28, United States Code, is 

amended by adding at the end the following: 

‘‘§ 589b. Bankruptcy data 

‘‘(a) RULES.—The Attorney General shall, within a reasonable 

time after the effective date of this section, issue rules requiring uniform forms for (and from time to time thereafter to appropriately 

modify and approve)—

‘‘(1) final reports by trustees in cases under chapters 7, 12, 

and 13 of title 11; and 

‘‘(2) periodic reports by debtors in possession or trustees in 

cases under chapter 11 of title 11. 

‘‘(b) REPORTS.—Each report referred to in subsection (a) shall 

be designed (and the requirements as to place and manner of filing 

shall be established) so as to facilitate compilation of data and maxVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00097 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
98

imum possible access of the public, both by physical inspection at 

one or more central filing locations, and by electronic access through 

the Internet or other appropriate media. ‘‘(c) REQUIRED INFORMATION.—The information required to be 

filed in the reports referred to in subsection (b) shall be that which 

is in the best interests of debtors and creditors, and in the public 

interest in reasonable and adequate information to evaluate the efficiency and practicality of the Federal bankruptcy system. In issuing 

rules proposing the forms referred to in subsection (a), the Attorney 

General shall strike the best achievable practical balance between— ‘‘(1) the reasonable needs of the public for information 

about the operational results of the Federal bankruptcy system; ‘‘(2) economy, simplicity, and lack of undue burden on persons with a duty to file reports; and ‘‘(3) appropriate privacy concerns and safeguards. ‘‘(d) FINAL REPORTS.—The uniform forms for final reports required under subsection (a) for use by trustees under chapters 7, 12, 

and 13 of title 11 shall, in addition to such other matters as are 

required by law or as the Attorney General in the discretion of the 

Attorney General shall propose, include with respect to a case under 

such title—

‘‘(1) information about the length of time the case was 

pending; ‘‘(2) assets abandoned; 

‘‘(3) assets exempted; 

‘‘(4) receipts and disbursements of the estate; 

‘‘(5) expenses of administration, including for use under 

section 707(b), actual costs of administering cases under chapter 13 of title 11; ‘‘(6) claims asserted; 

‘‘(7) claims allowed; and 

‘‘(8) distributions to claimants and claims discharged without payment, 

in each case by appropriate category and, in cases under chapters 

12 and 13 of title 11, date of confirmation of the plan, each modification thereto, and defaults by the debtor in performance under 

the plan. 

‘‘(e) PERIODIC REPORTS.—The uniform forms for periodic reports 

required under subsection (a) for use by trustees or debtors in possession under chapter 11 of title 11 shall, in addition to such other 

matters as are required by law or as the Attorney General in the 

discretion of the Attorney General shall propose, include— ‘‘(1) information about the standard industry classification, 

published by the Department of Commerce, for the businesses 

conducted by the debtor; ‘‘(2) length of time the case has been pending; 

‘‘(3) number of full-time employees as of the date of the 

order for relief and at the end of each reporting period since the 

case was filed; ‘‘(4) cash receipts, cash disbursements and profitability of 

the debtor for the most recent period and cumulatively since the 

date of the order for relief; 

‘‘(5) compliance with title 11, whether or not tax returns 

and tax payments since the date of the order for relief have been 

timely filed and made; 

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‘‘(6) all professional fees approved by the court in the case 

for the most recent period and cumulatively since the date of the 

order for relief (separately reported, for the professional fees incurred by or on behalf of the debtor, between those that would 

have been incurred absent a bankruptcy case and those not); 

and 

‘‘(7) plans of reorganization filed and confirmed and, with 

respect thereto, by class, the recoveries of the holders, expressed 

in aggregate dollar values and, in the case of claims, as a percentage of total claims of the class allowed.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for chapter 39 

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

the following:

‘‘589b. Bankruptcy data.’’.

SEC. 603. AUDIT PROCEDURES. 

(a) IN GENERAL.—

(1) ESTABLISHMENT OF PROCEDURES.—The Attorney General (in judicial districts served by United States trustees) and 

the Judicial Conference of the United States (in judicial districts served by bankruptcy administrators) shall establish procedures to determine the accuracy, veracity, and completeness of 

petitions, schedules, and other information which the debtor is 

required to provide under sections 521 and 1322 of title 11, 

United States Code, and, if applicable, section 111 of such title, 

in cases filed under chapter 7 or 13 of such title in which the 

debtor is an individual. Such audits shall be in accordance 

with generally accepted auditing standards and performed by 

independent certified public accountants or independent licensed public accountants, provided that the Attorney General 

and the Judicial Conference, as appropriate, may develop alternative auditing standards not later than 2 years after the date 

of enactment of this Act. 

(2) PROCEDURES.—Those procedures required by paragraph 

(1) shall—

(A) establish a method of selecting appropriate qualified persons to contract to perform those audits; 

(B) establish a method of randomly selecting cases to 

be audited, except that not less than 1 out of every 250 

cases in each Federal judicial district shall be selected for 

audit; 

(C) require audits for schedules of income and expenses 

which reflect greater than average variances from the statistical norm of the district in which the schedules were 

filed if those variances occur by reason of higher income or 

higher expenses than the statistical norm of the district in 

which the schedules were filed; and 

(D) establish procedures for providing, not less frequently than annually, public information concerning the 

aggregate results of such audits including the percentage of 

cases, by district, in which a material misstatement of income or expenditures is reported. 

(b) AMENDMENTS.—Section 586 of title 28, United States Code, 

is amended—

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(1) in subsection (a), by striking paragraph (6) and inserting the following: ‘‘(6) make such reports as the Attorney General directs, including the results of audits performed under section 603(a) of 

the Bankruptcy Abuse Prevention and Consumer Protection Act 

of 2002;’’; and 

(2) by adding at the end the following: ‘‘(f)(1) The United States trustee for each district is authorized 

to contract with auditors to perform audits in cases designated by 

the United States trustee, in accordance with the procedures established under section 603(a) of the Bankruptcy Abuse Prevention and 

Consumer Protection Act of 2002. ‘‘(2)(A) The report of each audit referred to in paragraph (1) 

shall be filed with the court and transmitted to the United States 

trustee. Each report shall clearly and conspicuously specify any material misstatement of income or expenditures or of assets identified 

by the person performing the audit. In any case in which a material 

misstatement of income or expenditures or of assets has been reported, the clerk of the district court (or the clerk of the bankruptcy 

court if one is certified under section 156(b) of this title) shall give 

notice of the misstatement to the creditors in the case. 

‘‘(B) If a material misstatement of income or expenditures or of 

assets is reported, the United States trustee shall—

‘‘(i) report the material misstatement, if appropriate, to the 

United States Attorney pursuant to section 3057 of title 18; and 

‘‘(ii) if advisable, take appropriate action, including but not 

limited to commencing an adversary proceeding to revoke the 

debtor’s discharge pursuant to section 727(d) of title 11.’’. 

(c) AMENDMENTS TO SECTION 521 OF TITLE 11, U.S.C.—Section 

521(a) of title 11, United States Code, as so designated by section 

106, is amended in each of paragraphs (3) and (4) by inserting ‘‘or 

an auditor appointed under section 586(f) of title 28’’ after ‘‘serving 

in the case’’. (d) AMENDMENTS TO SECTION 727 OF TITLE 11, U.S.C.—Section 

727(d) of title 11, United States Code, is amended— (1) in paragraph (2), by striking ‘‘or’’ at the end;

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

inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(4) the debtor has failed to explain satisfactorily— ‘‘(A) a material misstatement in an audit referred to in 

section 586(f) of title 28; or ‘‘(B) a failure to make available for inspection all necessary accounts, papers, documents, financial records, files, 

and all other papers, things, or property belonging to the 

debtor that are requested for an audit referred to in section 

586(f) of title 28.’’. (e) EFFECTIVE DATE.—The amendments made by this section 

shall take effect 18 months after the date of enactment of this Act. 

SEC. 604. SENSE OF CONGRESS REGARDING AVAILABILITY OF BANKRUPTCY DATA. 

It is the sense of Congress that—

(1) the national policy of the United States should be that 

all data held by bankruptcy clerks in electronic form, to the extent such data reflects only public records (as defined in section 

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107 of title 11, United States Code), should be released in a usable electronic form in bulk to the public, subject to such appropriate privacy concerns and safeguards as Congress and the Judicial Conference of the United States may determine; and 

(2) there should be established a bankruptcy data system in 

which—

(A) a single set of data definitions and forms are used 

to collect data nationwide; and 

(B) data for any particular bankruptcy case are aggregated in the same electronic record. 

TITLE VII—BANKRUPTCY TAX 

PROVISIONS 

SEC. 701. TREATMENT OF CERTAIN LIENS. 

(a) TREATMENT OF CERTAIN LIENS.—Section 724 of title 11, 

United States Code, is amended—

(1) in subsection (b), in the matter preceding paragraph (1), 

by inserting ‘‘(other than to the extent that there is a properly 

perfected unavoidable tax lien arising in connection with an ad 

valorem tax on real or personal property of the estate)’’ after 

‘‘under this title’’; 

(2) in subsection (b)(2), by inserting ‘‘(except that such expenses, other than claims for wages, salaries, or commissions 

which arise after the filing of a petition, shall be limited to expenses incurred under chapter 7 of this title and shall not include expenses incurred under chapter 11 of this title)’’ after 

‘‘507(a)(1)’’; and 

(3) by adding at the end the following: 

‘‘(e) Before subordinating a tax lien on real or personal property 

of the estate, the trustee shall—

‘‘(1) exhaust the unencumbered assets of the estate; and 

‘‘(2) in a manner consistent with section 506(c), recover 

from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving or disposing of 

that property. 

‘‘(f) Notwithstanding the exclusion of ad valorem tax liens 

under this section and subject to the requirements of subsection (e), 

the following may be paid from property of the estate which secures 

a tax lien, or the proceeds of such property: 

‘‘(1) Claims for wages, salaries, and commissions that are 

entitled to priority under section 507(a)(4). 

‘‘(2) Claims for contributions to an employee benefit plan 

entitled to priority under section 507(a)(5).’’. 

(b) DETERMINATION OF TAX LIABILITY.—Section 505(a)(2) of 

title 11, United States Code, is amended—

(1) in subparagraph (A), by striking ‘‘or’’ at the end; 

(2) in subparagraph (B), by striking the period at the end 

and inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(C) the amount or legality of any amount arising in connection with an ad valorem tax on real or personal property of 

the estate, if the applicable period for contesting or redeterVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00101 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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mining that amount under any law (other than a bankruptcy 

law) has expired.’’. 

SEC. 702. TREATMENT OF FUEL TAX CLAIMS. 

Section 501 of title 11, United States Code, is amended by adding at the end the following: ‘‘(e) A claim arising from the liability of a debtor for fuel use 

tax assessed consistent with the requirements of section 31705 of 

title 49 may be filed by the base jurisdiction designated pursuant 

to the International Fuel Tax Agreement (as defined in section 

31701 of title 49) and, if so filed, shall be allowed as a single 

claim.’’. 

SEC. 703. NOTICE OF REQUEST FOR A DETERMINATION OF TAXES. 

Section 505(b) of title 11, United States Code, is amended— (1) in the first sentence, by inserting ‘‘at the address and in 

the manner designated in paragraph (1)’’ after ‘‘determination 

of such tax’’; 

(2) by striking ‘‘(1) upon payment’’ and inserting ‘‘(A) upon 

payment’’; 

(3) by striking ‘‘(A) such governmental unit’’ and inserting ‘‘(i) such governmental unit’’; 

(4) by striking ‘‘(B) such governmental unit’’ and inserting 

‘‘(ii) such governmental unit’’; 

(5) by striking ‘‘(2) upon payment’’ and inserting ‘‘(B) upon 

payment’’; 

(6) by striking ‘‘(3) upon payment’’ and inserting ‘‘(C) upon 

payment’’; 

(7) by striking ‘‘(b)’’ and inserting ‘‘(2)’’; and 

(8) by inserting before paragraph (2), as so designated, the 

following: 

‘‘(b)(1)(A) The clerk shall maintain a listing under which a Federal, State, or local governmental unit responsible for the collection 

of taxes within the district may—

‘‘(i) designate an address for service of requests under this 

subsection; and ‘‘(ii) describe where further information concerning additional requirements for filing such requests may be found.

‘‘(B) If a governmental unit referred to in subparagraph (A) 

does not designate an address and provide that address to the clerk 

under that subparagraph, any request made under this subsection 

may be served at the address for the filing of a tax return or protest 

with the appropriate taxing authority of that governmental unit.’’. 

SEC. 704. RATE OF INTEREST ON TAX CLAIMS. 

(a) IN GENERAL.—Subchapter I of chapter 5 of title 11, United 

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

‘‘§ 511. Rate of interest on tax claims 

‘‘(a) If any provision of this title requires the payment of interest 

on a tax claim or on an administrative expense tax, or the payment 

of interest to enable a creditor to receive the present value of the allowed amount of a tax claim, the rate of interest shall be the rate 

determined under applicable nonbankruptcy law. 

‘‘(b) In the case of taxes paid under a confirmed plan under this 

title, the rate of interest shall be determined as of the calendar 

month in which the plan is confirmed.’’. 

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(b) CLERICAL AMENDMENT.—The table of sections for subchapter 1 of chapter 5 of title 11, United States Code, is amended 

by adding at the end the following:

‘‘511. Rate of interest on tax claims.’’.

SEC. 705. PRIORITY OF TAX CLAIMS. 

Section 507(a)(8) of title 11, United States Code, is amended—

(1) in subparagraph (A)—

(A) in the matter preceding clause (i), by inserting ‘‘for 

a taxable year ending on or before the date of the filing of 

the petition’’ after ‘‘gross receipts’’; 

(B) in clause (i), by striking ‘‘for a taxable year ending 

on or before the date of the filing of the petition’’; and 

(C) by striking clause (ii) and inserting the following: 

‘‘(ii) assessed within 240 days before the date of the 

filing of the petition, exclusive of—

‘‘(I) any time during which an offer in compromise with respect to that tax was pending or in 

effect during that 240-day period, plus 30 days; 

and 

‘‘(II) any time during which a stay of proceedings against collections was in effect in a prior 

case under this title during that 240-day period, 

plus 90 days.’’; and 

(2) by adding at the end the following: 

‘‘An otherwise applicable time period specified in this paragraph shall be suspended for any period during which a governmental unit is prohibited under applicable nonbankruptcy 

law from collecting a tax as a result of a request by the debtor 

for a hearing and an appeal of any collection action taken or 

proposed against the debtor, plus 90 days; plus any time during 

which the stay of proceedings was in effect in a prior case under 

this title or during which collection was precluded by the existence of 1 or more confirmed plans under this title, plus 90 

days.’’. 

SEC. 706. PRIORITY PROPERTY TAXES INCURRED. 

Section 507(a)(8)(B) of title 11, United States Code, is amended 

by striking ‘‘assessed’’ and inserting ‘‘incurred’’. 

SEC. 707. NO DISCHARGE OF FRAUDULENT TAXES IN CHAPTER 13. 

Section 1328(a)(2) of title 11, United States Code, as amended 

by section 314, is amended by striking ‘‘paragraph’’ and inserting ‘‘section 507(a)(8)(C) or in paragraph (1)(B), (1)(C),’’.

SEC. 708. NO DISCHARGE OF FRAUDULENT TAXES IN CHAPTER 11. 

Section 1141(d) of title 11, United States Code, as amended by 

section 321, is amended by adding at the end the following: 

‘‘(6) Notwithstanding paragraph (1), the confirmation of a plan 

does not discharge a debtor that is a corporation from any debt—

‘‘(A) of a kind specified in paragraph (2)(A) or (2)(B) of section 523(a) that is owed to a domestic governmental unit, or 

owed to a person as the result of an action filed under subchapter III of chapter 37 of title 31 or any similar State statute; 

or 

‘‘(B) for a tax or customs duty with respect to which the 

debtor—

104

‘‘(i) made a fraudulent return; or 

‘‘(ii) willfully attempted in any manner to evade or to 

defeat such tax or such customs duty.’’. 

SEC. 709. STAY OF TAX PROCEEDINGS LIMITED TO PREPETITION 

TAXES. 

Section 362(a)(8) of title 11, United States Code, is amended by 

striking ‘‘the debtor’’ and inserting ‘‘a corporate debtor’s tax liability 

for a taxable period the bankruptcy court may determine or concerning the tax liability of a debtor who is an individual for a taxable period ending before the order for relief under this title’’. 

SEC. 710. PERIODIC PAYMENT OF TAXES IN CHAPTER 11 CASES. 

Section 1129(a)(9) of title 11, United States Code, is amended—

(1) in subparagraph (B), by striking ‘‘and’’ at the end; 

(2) in subparagraph (C), by striking ‘‘deferred cash payments,’’ and all that follows through the end of the subparagraph, and inserting ‘‘regular installment payments in cash—

‘‘(i) of a total value, as of the effective date of the 

plan, equal to the allowed amount of such claim; 

‘‘(ii) over a period ending not later than 5 years 

after the date of the entry of the order for relief under 

section 301, 302, or 303; and 

‘‘(iii) in a manner not less favorable than the most 

favored nonpriority unsecured claim provided for by 

the plan (other than cash payments made to a class of 

creditors under section 1122(b)); and’’; and 

(3) by adding at the end the following: 

‘‘(D) with respect to a secured claim which would otherwise meet the description of an unsecured claim of a governmental unit under section 507(a)(8), but for the secured 

status of that claim, the holder of that claim will receive on 

account of that claim, cash payments, in the same manner 

and over the same period, as prescribed in subparagraph 

(C).’’. 

SEC. 711. AVOIDANCE OF STATUTORY TAX LIENS PROHIBITED. 

Section 545(2) of title 11, United States Code, is amended by inserting before the semicolon at the end the following: ‘‘, except in any 

case in which a purchaser is a purchaser described in section 6323 

of the Internal Revenue Code of 1986, or in any other similar provision of State or local law’’. 

SEC. 712. PAYMENT OF TAXES IN THE CONDUCT OF BUSINESS. 

(a) PAYMENT OF TAXES REQUIRED.—Section 960 of title 28, 

United States Code, is amended—

(1) by inserting ‘‘(a)’’ before ‘‘Any’’; and 

(2) by adding at the end the following: ]

‘‘(b) A tax under subsection (a) shall be paid on or before the 

due date of the tax under applicable nonbankruptcy law, unless—

‘‘(1) the tax is a property tax secured by a lien against property that is abandoned within a reasonable period of time after 

the lien attaches by the trustee of a bankruptcy estate under section 554 of title 11; or 

‘‘(2) payment of the tax is excused under a specific provision 

of title 11. 

105

‘‘(c) In a case pending under chapter 7 of title 11, payment of 

a tax may be deferred until final distribution is made under section 

726 of title 11, if—

‘‘(1) the tax was not incurred by a trustee duly appointed 

under chapter 7 of title 11; or 

‘‘(2) before the due date of the tax, an order of the court 

makes a finding of probable insufficiency of funds of the estate 

to pay in full the administrative expenses allowed under section 

503(b) of title 11 that have the same priority in distribution 

under section 726(b) of title 11 as the priority of that tax.’’. 

(b) PAYMENT OF AD VALOREM TAXES REQUIRED.—Section 

503(b)(1)(B)(i) of title 11, United States Code, is amended by inserting ‘‘whether secured or unsecured, including property taxes for 

which liability is in rem, in personam, or both,’’ before ‘‘except’’. 

(c) REQUEST FOR PAYMENT OF ADMINISTRATIVE EXPENSE TAXES

ELIMINATED.—Section 503(b)(1) of title 11, United States Code, is 

amended—

(1) in subparagraph (B), by striking ‘‘and’’ at the end; 

(2) in subparagraph (C), by adding ‘‘and’’ at the end; and 

(3) by adding at the end the following: 

‘‘(D) notwithstanding the requirements of subsection (a), a 

governmental unit shall not be required to file a request for the 

payment of an expense described in subparagraph (B) or (C), as 

a condition of its being an allowed administrative expense;’’. 

(d) PAYMENT OF TAXES AND FEES AS SECURED CLAIMS.—Section 506 of title 11, United States Code, is amended—

(1) in subsection (b), by inserting ‘‘or State statute’’ after 

‘‘agreement’’; and 

(2) in subsection (c), by inserting ‘‘, including the payment 

of all ad valorem property taxes with respect to the property’’ before the period at the end. 

SEC. 713. TARDILY FILED PRIORITY TAX CLAIMS. 

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

striking ‘‘before the date on which the trustee commences distribution under this section;’’ and inserting the following: ‘‘on or before 

the earlier of—

‘‘(A) the date that is 10 days after the mailing to creditors of the summary of the trustee’s final report; or 

‘‘(B) the date on which the trustee commences final distribution under this section;’’. 

SEC. 714. INCOME TAX RETURNS PREPARED BY TAX AUTHORITIES. 

Section 523(a) of title 11, United States Code, as amended by 

sections 215 and 224, is amended—

(1) in paragraph (1)(B)—

(A) in the matter preceding clause (i), by inserting ‘‘or 

equivalent report or notice,’’ after ‘‘a return,’’; 

(B) in clause (i), by inserting ‘‘or given’’ after ‘‘filed’’; 

and 

(C) in clause (ii)—

(i) by inserting ‘‘or given’’ after ‘‘filed’’; and 

(ii) by inserting ‘‘, report, or notice’’ after ‘‘return’’; 

and 

(2) by adding at the end the following: 

106

‘‘For purposes of this subsection, the term ‘return’ means a return 

that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements). Such term includes a return 

prepared pursuant to section 6020(a) of the Internal Revenue Code 

of 1986, or similar State or local law, or a written stipulation to a 

judgment or a final order entered by a nonbankruptcy tribunal, but 

does not include a return made pursuant to section 6020(b) of the 

Internal Revenue Code of 1986, or a similar State or local law.’’. 

SEC. 715. DISCHARGE OF THE ESTATE’S LIABILITY FOR UNPAID TAXES. 

Section 505(b)(2) of title 11, United States Code, as amended by 

section 703, is amended by inserting ‘‘the estate,’’ after ‘‘misrepresentation,’’. 

SEC. 716. REQUIREMENT TO FILE TAX RETURNS TO CONFIRM CHAPTER 13 PLANS. 

(a) FILING OF PREPETITION TAX RETURNS REQUIRED FOR PLAN

CONFIRMATION.—Section 1325(a) of title 11, United States Code, as 

amended by sections 102, 213, and 306, is amended by inserting 

after paragraph (8) the following: 

‘‘(9) the debtor has filed all applicable Federal, State, and 

local tax returns as required by section 1308.’’. 

(b) ADDITIONAL TIME PERMITTED FOR FILING TAX RETURNS.—

(1) IN GENERAL.—Subchapter I of chapter 13 of title 11, 

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

‘‘§ 1308. Filing of prepetition tax returns 

‘‘(a) Not later than the day before the date on which the meeting 

of the creditors is first scheduled to be held under section 341(a), 

if the debtor was required to file a tax return under applicable nonbankruptcy law, the debtor shall file with appropriate tax authorities all tax returns for all taxable periods ending during the 4-year 

period ending on the date of the filing of the petition. 

‘‘(b)(1) Subject to paragraph (2), if the tax returns required by 

subsection (a) have not been filed by the date on which the meeting 

of creditors is first scheduled to be held under section 341(a), the 

trustee may hold open that meeting for a reasonable period of time 

to allow the debtor an additional period of time to file any unfiled 

returns, but such additional period of time shall not extend beyond—

‘‘(A) for any return that is past due as of the date of the 

filing of the petition, the date that is 120 days after the date 

of that meeting; or ‘‘(B) for any return that is not past due as of the date of 

the filing of the petition, the later of—

‘‘(i) the date that is 120 days after the date of that 

meeting; or 

‘‘(ii) the date on which the return is due under the last 

automatic extension of time for filing that return to which 

the debtor is entitled, and for which request is timely made, 

in accordance with applicable nonbankruptcy law. 

‘‘(2) After notice and a hearing, and order entered before the 

tolling of any applicable filing period determined under this subsection, if the debtor demonstrates by a preponderance of the evidence that the failure to file a return as required under this subVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00106 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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section is attributable to circumstances beyond the control of the 

debtor, the court may extend the filing period established by the 

trustee under this subsection for—

‘‘(A) a period of not more than 30 days for returns described in paragraph (1); and 

‘‘(B) a period not to extend after the applicable extended 

due date for a return described in paragraph (2). 

‘‘(c) For purposes of this section, the term ‘return’ includes a return prepared pursuant to subsection (a) or (b) of section 6020 of the 

Internal Revenue Code of 1986, or a similar State or local law, or 

a written stipulation to a judgment or a final order entered by a 

nonbankruptcy tribunal.’’. 

(2) CONFORMING AMENDMENT.—The table of sections for 

subchapter I of chapter 13 of title 11, United States Code, is 

amended by adding at the end the following:

‘‘1308. Filing of prepetition tax returns.’’.

(c) DISMISSAL OR CONVERSION ON FAILURE TO COMPLY.—Section 1307 of title 11, United States Code, is amended—

(1) by redesignating subsections (e) and (f) as subsections 

(f) and (g), respectively; and 

(2) by inserting after subsection (d) the following: 

‘‘(e) Upon the failure of the debtor to file a tax return under section 1308, on request of a party in interest or the United States 

trustee and after notice and a hearing, the court shall dismiss a 

case or convert a case under this chapter to a case under chapter 

7 of this title, whichever is in the best interest of the creditors and 

the estate.’’. 

(d) TIMELY FILED CLAIMS.—Section 502(b)(9) of title 11, United 

States Code, is amended by inserting before the period at the end 

the following: ‘‘, and except that in a case under chapter 13, a claim 

of a governmental unit for a tax with respect to a return filed under 

section 1308 shall be timely if the claim is filed on or before the date 

that is 60 days after the date on which such return was filed as required’’. 

(e) RULES FOR OBJECTIONS TO CLAIMS AND TO CONFIRMATION.—It is the sense of Congress that the Advisory Committee on 

Bankruptcy Rules of the Judicial Conference of the United States 

should, as soon as practicable after the date of enactment of this 

Act, propose for adoption amended Federal Rules of Bankruptcy 

Procedure which provide that—

(1) notwithstanding the provisions of Rule 3015(f), in cases 

under chapter 13 of title 11, United States Code, an objection 

to the confirmation of a plan filed by a governmental unit on 

or before the date that is 60 days after the date on which the 

debtor files all tax returns required under sections 1308 and 

1325(a)(7) of title 11, United States Code, shall be treated for 

all purposes as if such objection had been timely filed before 

such confirmation; and 

(2) in addition to the provisions of Rule 3007, in a case 

under chapter 13 of title 11, United States Code, no objection 

to a claim for a tax with respect to which a return is required 

to be filed under section 1308 of title 11, United States Code, 

shall be filed until such return has been filed as required. 

108

SEC. 717. STANDARDS FOR TAX DISCLOSURE. 

Section 1125(a)(1) of title 11, United States Code, is amended— (1) by inserting ‘‘including a discussion of the potential material Federal tax consequences of the plan to the debtor, any 

successor to the debtor, and a hypothetical investor typical of 

the holders of claims or interests in the case,’’ after ‘‘records’’; 

and 

(2) by striking ‘‘a hypothetical reasonable investor typical of 

holders of claims or interests’’ and inserting ‘‘such a hypothetical investor’’. 

SEC. 718. SETOFF OF TAX REFUNDS. 

Section 362(b) of title 11, United States Code, as amended by 

sections 224, 303, 311, and 401, is amended by inserting after paragraph (25) the following: ‘‘(26) under subsection (a), of the setoff under applicable 

nonbankruptcy law of an income tax refund, by a governmental 

unit, with respect to a taxable period that ended before the 

order for relief against an income tax liability for a taxable period that also ended before the order for relief, except that in 

any case in which the setoff of an income tax refund is not permitted under applicable nonbankruptcy law because of a pending action to determine the amount or legality of a tax liability, 

the governmental unit may hold the refund pending the resolution of the action, unless the court, on the motion of the trustee 

and after notice and a hearing, grants the taxing authority adequate protection (within the meaning of section 361) for the secured claim of that authority in the setoff under section 

506(a);’’. 

SEC. 719. SPECIAL PROVISIONS RELATED TO THE TREATMENT OF 

STATE AND LOCAL TAXES. 

(a) IN GENERAL.— (1) SPECIAL PROVISIONS.—Section 346 of title 11, United 

States Code, is amended to read as follows: 

‘‘§ 346. Special provisions related to the treatment of State 

and local taxes 

‘‘(a) Whenever the Internal Revenue Code of 1986 provides that 

a separate taxable estate or entity is created in a case concerning 

a debtor under this title, and the income, gain, loss, deductions, and 

credits of such estate shall be taxed to or claimed by the estate, a 

separate taxable estate is also created for purposes of any State and 

local law imposing a tax on or measured by income and such income, gain, loss, deductions, and credits shall be taxed to or 

claimed by the estate and may not be taxed to or claimed by the 

debtor. The preceding sentence shall not apply if the case is dismissed. The trustee shall make tax returns of income required under 

any such State or local law. ‘‘(b) Whenever the Internal Revenue Code of 1986 provides that 

no separate taxable estate shall be created in a case concerning a 

debtor under this title, and the income, gain, loss, deductions, and 

credits of an estate shall be taxed to or claimed by the debtor, such 

income, gain, loss, deductions, and credits shall be taxed to or 

claimed by the debtor under a State or local law imposing a tax on 

or measured by income and may not be taxed to or claimed by the 

estate. The trustee shall make such tax returns of income of corporaVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00108 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
109

tions and of partnerships as are required under any State or local 

law, but with respect to partnerships, shall make said returns only 

to the extent such returns are also required to be made under such 

Code. The estate shall be liable for any tax imposed on such corporation or partnership, but not for any tax imposed on partners or 

members. 

‘‘(c) With respect to a partnership or any entity treated as a 

partnership under a State or local law imposing a tax on or measured by income that is a debtor in a case under this title, any gain 

or loss resulting from a distribution of property from such partnership, or any distributive share of any income, gain, loss, deduction, 

or credit of a partner or member that is distributed, or considered 

distributed, from such partnership, after the commencement of the 

case, is gain, loss, income, deduction, or credit, as the case may be, 

of the partner or member, and if such partner or member is a debtor 

in a case under this title, shall be subject to tax in accordance with 

subsection (a) or (b). 

‘‘(d) For purposes of any State or local law imposing a tax on 

or measured by income, the taxable period of a debtor in a case 

under this title shall terminate only if and to the extent that the taxable period of such debtor terminates under the Internal Revenue 

Code of 1986. 

‘‘(e) The estate in any case described in subsection (a) shall use 

the same accounting method as the debtor used immediately before 

the commencement of the case, if such method of accounting complies with applicable nonbankruptcy tax law. 

‘‘(f) For purposes of any State or local law imposing a tax on 

or measured by income, a transfer of property from the debtor to the 

estate or from the estate to the debtor shall not be treated as a disposition for purposes of any provision assigning tax consequences to 

a disposition, except to the extent that such transfer is treated as a 

disposition under the Internal Revenue Code of 1986. 

‘‘(g) Whenever a tax is imposed pursuant to a State or local law 

imposing a tax on or measured by income pursuant to subsection (a) 

or (b), such tax shall be imposed at rates generally applicable to the 

same types of entities under such State or local law. 

‘‘(h) The trustee shall withhold from any payment of claims for 

wages, salaries, commissions, dividends, interest, or other payments, 

or collect, any amount required to be withheld or collected under applicable State or local tax law, and shall pay such withheld or collected amount to the appropriate governmental unit at the time and 

in the manner required by such tax law, and with the same priority 

as the claim from which such amount was withheld or collected was 

paid. 

‘‘(i)(1) To the extent that any State or local law imposing a tax 

on or measured by income provides for the carryover of any tax attribute from one taxable period to a subsequent taxable period, the 

estate shall succeed to such tax attribute in any case in which such 

estate is subject to tax under subsection (a). 

‘‘(2) After such a case is closed or dismissed, the debtor shall 

succeed to any tax attribute to which the estate succeeded under 

paragraph (1) to the extent consistent with the Internal Revenue 

Code of 1986. 

110

‘‘(3) The estate may carry back any loss or tax attribute to a taxable period of the debtor that ended before the order for relief under 

this title to the extent that— ‘‘(A) applicable State or local tax law provides for a 

carryback in the case of the debtor; and ‘‘(B) the same or a similar tax attribute may be carried 

back by the estate to such a taxable period of the debtor under 

the Internal Revenue Code of 1986. 

‘‘(j)(1) For purposes of any State or local law imposing a tax on 

or measured by income, income is not realized by the estate, the 

debtor, or a successor to the debtor by reason of discharge of indebtedness in a case under this title, except to the extent, if any, that 

such income is subject to tax under the Internal Revenue Code of 

1986. ‘‘(2) Whenever the Internal Revenue Code of 1986 provides that 

the amount excluded from gross income in respect of the discharge 

of indebtedness in a case under this title shall be applied to reduce 

the tax attributes of the debtor or the estate, a similar reduction 

shall be made under any State or local law imposing a tax on or 

measured by income to the extent such State or local law recognizes 

such attributes. Such State or local law may also provide for the reduction of other attributes to the extent that the full amount of income from the discharge of indebtedness has not been applied. ‘‘(k)(1) Except as provided in this section and section 505, the 

time and manner of filing tax returns and the items of income, gain, 

loss, deduction, and credit of any taxpayer shall be determined 

under applicable nonbankruptcy law. ‘‘(2) For Federal tax purposes, the provisions of this section are 

subject to the Internal Revenue Code of 1986 and other applicable 

Federal nonbankruptcy law.’’. (2) CLERICAL AMENDMENT.—The table of sections for chapter 3 of title 11, United States Code, is amended by striking the 

item relating to section 346 and inserting the following:

‘‘346. Special provisions related to the treatment of State and local taxes.’’.

(b) CONFORMING AMENDMENTS.—Title 11 of the United States 

Code is amended—

(1) by striking section 728; 

(2) in the table of sections for chapter 7 by striking the item 

relating to section 728; 

(3) in section 1146—

(A) by striking subsections (a) and (b); and 

(B) by redesignating subsections (c) and (d) as subsections (a) and (b), respectively; and 

(4) in section 1231—

(A) by striking subsections (a) and (b); and 

(B) by redesignating subsections (c) and (d) as subsections (a) and (b), respectively. 

SEC. 720. DISMISSAL FOR FAILURE TO TIMELY FILE TAX RETURNS. 

Section 521 of title 11, United States Code, as amended by sections 106, 225, 305, 315, and 316, is amended by adding at the end 

the following: ‘‘(k)(1) Notwithstanding any other provision of this title, if the 

debtor fails to file a tax return that becomes due after the commencement of the case or to properly obtain an extension of the due 

111

date for filing such return, the taxing authority may request that the 

court enter an order converting or dismissing the case. 

‘‘(2) If the debtor does not file the required return or obtain the 

extension referred to in paragraph (1) within 90 days after a request 

is filed by the taxing authority under that paragraph, the court 

shall convert or dismiss the case, whichever is in the best interests 

of creditors and the estate.’’. 

TITLE VIII—ANCILLARY AND OTHER 

CROSS-BORDER CASES 

SEC. 801. AMENDMENT TO ADD CHAPTER 15 TO TITLE 11, UNITED 

STATES CODE. 

(a) IN GENERAL.—Title 11, United States Code, is amended by 

inserting after chapter 13 the following: 

‘‘CHAPTER 15—ANCILLARY AND OTHER CROSS-BORDER 

CASES

‘‘Sec. 

‘‘1501. Purpose and scope of application. 

‘‘SUBCHAPTER I—GENERAL PROVISIONS 

‘‘1502. Definitions. 

‘‘1503. International obligations of the United States. 

‘‘1504. Commencement of ancillary case. 

‘‘1505. Authorization to act in a foreign country. 

‘‘1506. Public policy exception. 

‘‘1507. Additional assistance. 

‘‘1508. Interpretation. 

‘‘SUBCHAPTER II—ACCESS OF FOREIGN REPRESENTATIVES AND 

CREDITORS TO THE COURT 

‘‘1509. Right of direct access. 

‘‘1510. Limited jurisdiction. 

‘‘1511. Commencement of case under section 301 or 303. 

‘‘1512. Participation of a foreign representative in a case under this title. 

‘‘1513. Access of foreign creditors to a case under this title. 

‘‘1514. Notification to foreign creditors concerning a case under this title. 

‘‘SUBCHAPTER III—RECOGNITION OF A FOREIGN PROCEEDING AND 

RELIEF 

‘‘1515. Application for recognition. 

‘‘1516. Presumptions concerning recognition. 

‘‘1517. Order granting recognition. 

‘‘1518. Subsequent information. 

‘‘1519. Relief that may be granted upon filing petition for recognition. 

‘‘1520. Effects of recognition of a foreign main proceeding. 

‘‘1521. Relief that may be granted upon recognition. 

‘‘1522. Protection of creditors and other interested persons. 

‘‘1523. Actions to avoid acts detrimental to creditors. 

‘‘1524. Intervention by a foreign representative. 

‘‘SUBCHAPTER IV—COOPERATION WITH FOREIGN COURTS AND FOREIGN 

REPRESENTATIVES 

‘‘1525. Cooperation and direct communication between the court and foreign courts 

or foreign representatives. 

‘‘1526. Cooperation and direct communication between the trustee and foreign courts 

or foreign representatives. 

‘‘1527. Forms of cooperation. 

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‘‘SUBCHAPTER V—CONCURRENT PROCEEDINGS 

‘‘1528. Commencement of a case under this title after recognition of a foreign main 

proceeding. 

‘‘1529. Coordination of a case under this title and a foreign proceeding. 

‘‘1530. Coordination of more than 1 foreign proceeding. 

‘‘1531. Presumption of insolvency based on recognition of a foreign main proceeding. 

‘‘1532. Rule of payment in concurrent proceedings.

‘‘§ 1501. Purpose and scope of application 

‘‘(a) The purpose of this chapter is to incorporate the Model Law 

on Cross-Border Insolvency so as to provide effective mechanisms for 

dealing with cases of cross-border insolvency with the objectives of—

‘‘(1) cooperation between—

‘‘(A) courts of the United States, United States trustees, 

trustees, examiners, debtors, and debtors in possession; and 

‘‘(B) the courts and other competent authorities of foreign countries involved in cross-border insolvency cases; 

‘‘(2) greater legal certainty for trade and investment; 

‘‘(3) fair and efficient administration of cross-border insolvencies that protects the interests of all creditors, and other interested entities, including the debtor; 

‘‘(4) protection and maximization of the value of the debtor’s assets; and 

‘‘(5) facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment. 

‘‘(b) This chapter applies where—

‘‘(1) assistance is sought in the United States by a foreign 

court or a foreign representative in connection with a foreign 

proceeding; 

‘‘(2) assistance is sought in a foreign country in connection 

with a case under this title; 

‘‘(3) a foreign proceeding and a case under this title with 

respect to the same debtor are taking place concurrently; or 

‘‘(4) creditors or other interested persons in a foreign country have an interest in requesting the commencement of, or participating in, a case or proceeding under this title. 

‘‘(c) This chapter does not apply to—

‘‘(1) a proceeding concerning an entity, other than a foreign 

insurance company, identified by exclusion in section 109(b); 

‘‘(2) an individual, or to an individual and such individual’s spouse, who have debts within the limits specified in section 109(e) and who are citizens of the United States or aliens 

lawfully admitted for permanent residence in the United States; 

or 

‘‘(3) an entity subject to a proceeding under the Securities 

Investor Protection Act of 1970, a stockbroker subject to subchapter III of chapter 7 of this title, or a commodity broker subject to subchapter IV of chapter 7 of this title. 

‘‘(d) The court may not grant relief under this chapter with respect to any deposit, escrow, trust fund, or other security required 

or permitted under any applicable State insurance law or regulation 

for the benefit of claim holders in the United States. 

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‘‘SUBCHAPTER I—GENERAL PROVISIONS 

‘‘§ 1502. Definitions 

‘‘For the purposes of this chapter, the term—

‘‘(1) ‘debtor’ means an entity that is the subject of a foreign 

proceeding; 

‘‘(2) ‘establishment’ means any place of operations where 

the debtor carries out a nontransitory economic activity; 

‘‘(3) ‘foreign court’ means a judicial or other authority competent to control or supervise a foreign proceeding;

‘‘(4) ‘foreign main proceeding’ means a foreign proceeding 

taking place in the country where the debtor has the center of 

its main interests; 

‘‘(5) ‘foreign nonmain proceeding’ means a foreign proceeding, other than a foreign main proceeding, taking place in 

a country where the debtor has an establishment; 

‘‘(6) ‘trustee’ includes a trustee, a debtor in possession in a 

case under any chapter of this title, or a debtor under chapter 

9 of this title; 

‘‘(7) ‘recognition’ means the entry of an order granting recognition of a foreign main proceeding or foreign nonmain proceeding under this chapter; and 

‘‘(8) ‘within the territorial jurisdiction of the United States’, 

when used with reference to property of a debtor, refers to tangible property located within the territory of the United States 

and intangible property deemed under applicable nonbankruptcy law to be located within that territory, including any 

property subject to attachment or garnishment that may properly be seized or garnished by an action in a Federal or State 

court in the United States. 

‘‘§ 1503. International obligations of the United States 

‘‘To the extent that this chapter conflicts with an obligation of 

the United States arising out of any treaty or other form of agreement to which it is a party with one or more other countries, the 

requirements of the treaty or agreement prevail. 

‘‘§ 1504. Commencement of ancillary case 

‘‘A case under this chapter is commenced by the filing of a petition for recognition of a foreign proceeding under section 1515. 

‘‘§ 1505. Authorization to act in a foreign country 

‘‘A trustee or another entity (including an examiner) may be authorized by the court to act in a foreign country on behalf of an estate created under section 541. An entity authorized to act under 

this section may act in any way permitted by the applicable foreign 

law. 

‘‘§ 1506. Public policy exception 

‘‘Nothing in this chapter prevents the court from refusing to 

take an action governed by this chapter if the action would be manifestly contrary to the public policy of the United States. 

114

‘‘§ 1507. Additional assistance 

‘‘(a) Subject to the specific limitations stated elsewhere in this 

chapter the court, if recognition is granted, may provide additional 

assistance to a foreign representative under this title or under other 

laws of the United States. 

‘‘(b) In determining whether to provide additional assistance 

under this title or under other laws of the United States, the court 

shall consider whether such additional assistance, consistent with 

the principles of comity, will reasonably assure—

‘‘(1) just treatment of all holders of claims against or interests in the debtor’s property; 

‘‘(2) protection of claim holders in the United States against 

prejudice and inconvenience in the processing of claims in such 

foreign proceeding; 

‘‘(3) prevention of preferential or fraudulent dispositions of 

property of the debtor; 

‘‘(4) distribution of proceeds of the debtor’s property substantially in accordance with the order prescribed by this title; 

and 

‘‘(5) if appropriate, the provision of an opportunity for a 

fresh start for the individual that such foreign proceeding concerns. 

‘‘§ 1508. Interpretation 

‘‘In interpreting this chapter, the court shall consider its international origin, and the need to promote an application of this 

chapter that is consistent with the application of similar statutes 

adopted by foreign jurisdictions. 

‘‘SUBCHAPTER II—ACCESS OF FOREIGN REPRESENTATIVES 

AND CREDITORS TO THE COURT 

‘‘§ 1509. Right of direct access 

‘‘(a) A foreign representative may commence a case under section 1504 by filing directly with the court a petition for recognition 

of a foreign proceeding under section 1515. 

‘‘(b) If the court grants recognition under section 1515, and subject to any limitations that the court may impose consistent with the 

policy of this chapter—

‘‘(1) the foreign representative has the capacity to sue and 

be sued in a court in the United States; 

‘‘(2) the foreign representative may apply directly to a court 

in the United States for appropriate relief in that court; and 

‘‘(3) a court in the United States shall grant comity or cooperation to the foreign representative. 

‘‘(c) A request for comity or cooperation by a foreign representative in a court in the United States other than the court which 

granted recognition shall be accompanied by a certified copy of an 

order granting recognition under section 1517. 

‘‘(d) If the court denies recognition under this chapter, the court 

may issue any appropriate order necessary to prevent the foreign 

representative from obtaining comity or cooperation from courts in 

the United States. 

115

‘‘(e) Whether or not the court grants recognition, and subject to 

sections 306 and 1510, a foreign representative is subject to applicable nonbankruptcy law. ‘‘(f) Notwithstanding any other provision of this section, the failure of a foreign representative to commence a case or to obtain recognition under this chapter does not affect any right the foreign representative may have to sue in a court in the United States to collect 

or recover a claim which is the property of the debtor. 

‘‘§ 1510. Limited jurisdiction 

‘‘The sole fact that a foreign representative files a petition under 

section 1515 does not subject the foreign representative to the jurisdiction of any court in the United States for any other purpose. 

‘‘§ 1511. Commencement of case under section 301 or 303

‘‘(a) Upon recognition, a foreign representative may commence— ‘‘(1) an involuntary case under section 303; or 

‘‘(2) a voluntary case under section 301 or 302, if the foreign proceeding is a foreign main proceeding.

‘‘(b) The petition commencing a case under subsection (a) must 

be accompanied by a certified copy of an order granting recognition. 

The court where the petition for recognition has been filed must be 

advised of the foreign representative’s intent to commence a case 

under subsection (a) prior to such commencement. 

‘‘§ 1512. Participation of a foreign representative in a case 

under this title 

‘‘Upon recognition of a foreign proceeding, the foreign representative in the recognized proceeding is entitled to participate as a 

party in interest in a case regarding the debtor under this title. 

‘‘§ 1513. Access of foreign creditors to a case under this title 

‘‘(a) Foreign creditors have the same rights regarding the commencement of, and participation in, a case under this title as domestic creditors. 

‘‘(b)(1) Subsection (a) does not change or codify present law as 

to the priority of claims under section 507 or 726 of this title, except 

that the claim of a foreign creditor under those sections shall not 

be given a lower priority than that of general unsecured claims 

without priority solely because the holder of such claim is a foreign 

creditor. 

‘‘(2)(A) Subsection (a) and paragraph (1) do not change or codify present law as to the allowability of foreign revenue claims or 

other foreign public law claims in a proceeding under this title. 

‘‘(B) Allowance and priority as to a foreign tax claim or other 

foreign public law claim shall be governed by any applicable tax 

treaty of the United States, under the conditions and circumstances 

specified therein. 

‘‘§ 1514. Notification to foreign creditors concerning a case 

under this title 

‘‘(a) Whenever in a case under this title notice is to be given to 

creditors generally or to any class or category of creditors, such notice shall also be given to the known creditors generally, or to creditors in the notified class or category, that do not have addresses in 

116

the United States. The court may order that appropriate steps be 

taken with a view to notifying any creditor whose address is not yet 

known. 

‘‘(b) Such notification to creditors with foreign addresses described in subsection (a) shall be given individually, unless the 

court considers that, under the circumstances, some other form of 

notification would be more appropriate. No letter or other formality 

is required. 

‘‘(c) When a notification of commencement of a case is to be 

given to foreign creditors, the notification shall—

‘‘(1) indicate the time period for filing proofs of claim and 

specify the place for their filing; 

‘‘(2) indicate whether secured creditors need to file their 

proofs of claim; and 

‘‘(3) contain any other information required to be included 

in such a notification to creditors under this title and the orders 

of the court. 

‘‘(d) Any rule of procedure or order of the court as to notice or 

the filing of a claim shall provide such additional time to creditors 

with foreign addresses as is reasonable under the circumstances. 

‘‘SUBCHAPTER III—RECOGNITION OF A FOREIGN 

PROCEEDING AND RELIEF 

‘‘§ 1515. Application for recognition 

‘‘(a) A foreign representative applies to the court for recognition 

of the foreign proceeding in which the foreign representative has 

been appointed by filing a petition for recognition. 

‘‘(b) A petition for recognition shall be accompanied by—

‘‘(1) a certified copy of the decision commencing the foreign 

proceeding and appointing the foreign representative; 

‘‘(2) a certificate from the foreign court affirming the existence of the foreign proceeding and of the appointment of the foreign representative; or 

‘‘(3) in the absence of evidence referred to in paragraphs (1) 

and (2), any other evidence acceptable to the court of the existence of the foreign proceeding and of the appointment of the foreign representative. 

‘‘(c) A petition for recognition shall also be accompanied by a 

statement identifying all foreign proceedings with respect to the 

debtor that are known to the foreign representative. 

‘‘(d) The documents referred to in paragraphs (1) and (2) of subsection (b) shall be translated into English. The court may require 

a translation into English of additional documents. 

‘‘§ 1516. Presumptions concerning recognition 

‘‘(a) If the decision or certificate referred to in section 1515(b) 

indicates that the foreign proceeding is a foreign proceeding and 

that the person or body is a foreign representative, the court is entitled to so presume. 

‘‘(b) The court is entitled to presume that documents submitted 

in support of the petition for recognition are authentic, whether or 

not they have been legalized. 

117

‘‘(c) In the absence of evidence to the contrary, the debtor’s registered office, or habitual residence in the case of an individual, is 

presumed to be the center of the debtor’s main interests. 

‘‘§ 1517. Order granting recognition 

‘‘(a) Subject to section 1506, after notice and a hearing, an 

order recognizing a foreign proceeding shall be entered if—

‘‘(1) the foreign proceeding for which recognition is sought 

is a foreign main proceeding or foreign nonmain proceeding 

within the meaning of section 1502; 

‘‘(2) the foreign representative applying for recognition is a 

person or body; and 

‘‘(3) the petition meets the requirements of section 1515. 

‘‘(b) The foreign proceeding shall be recognized—

‘‘(1) as a foreign main proceeding if it is taking place in the 

country where the debtor has the center of its main interests; or 

‘‘(2) as a foreign nonmain proceeding if the debtor has an 

establishment within the meaning of section 1502 in the foreign 

country where the proceeding is pending.

‘‘(c) A petition for recognition of a foreign proceeding shall be 

decided upon at the earliest possible time. Entry of an order recognizing a foreign proceeding constitutes recognition under this chapter. 

‘‘(d) The provisions of this subchapter do not prevent modification or termination of recognition if it is shown that the grounds for 

granting it were fully or partially lacking or have ceased to exist, 

but in considering such action the court shall give due weight to 

possible prejudice to parties that have relied upon the order granting recognition. The case under this chapter may be closed in the 

manner prescribed under section 350. 

‘‘§ 1518. Subsequent information 

‘‘From the time of filing the petition for recognition of the foreign proceeding, the foreign representative shall file with the court 

promptly a notice of change of status concerning—

‘‘(1) any substantial change in the status of the foreign proceeding or the status of the foreign representative’s appointment; 

and 

‘‘(2) any other foreign proceeding regarding the debtor that 

becomes known to the foreign representative. 

‘‘§ 1519. Relief that may be granted upon filing petition for 

recognition 

‘‘(a) From the time of filing a petition for recognition until the 

court rules on the petition, the court may, at the request of the foreign representative, where relief is urgently needed to protect the assets of the debtor or the interests of the creditors, grant relief of a 

provisional nature, including—

‘‘(1) staying execution against the debtor’s assets; 

‘‘(2) entrusting the administration or realization of all or 

part of the debtor’s assets located in the United States to the 

foreign representative or another person authorized by the court, 

including an examiner, in order to protect and preserve the 

value of assets that, by their nature or because of other cirVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00117 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
118

cumstances, are perishable, susceptible to devaluation or otherwise in jeopardy; and ‘‘(3) any relief referred to in paragraph (3), (4), or (7) of section 1521(a). 

‘‘(b) Unless extended under section 1521(a)(6), the relief granted 

under this section terminates when the petition for recognition is 

granted. ‘‘(c) It is a ground for denial of relief under this section that 

such relief would interfere with the administration of a foreign 

main proceeding. ‘‘(d) The court may not enjoin a police or regulatory act of a 

governmental unit, including a criminal action or proceeding, under 

this section. ‘‘(e) The standards, procedures, and limitations applicable to an 

injunction shall apply to relief under this section. ‘‘(f) The exercise of rights not subject to the stay arising under 

section 362(a) pursuant to paragraph (6), (7), (17), or (27) of section 

362(b) or pursuant to section 362(n) shall not be stayed by any order 

of a court or administrative agency in any proceeding under this 

chapter. 

‘‘§ 1520. Effects of recognition of a foreign main proceeding 

‘‘(a) Upon recognition of a foreign proceeding that is a foreign 

main proceeding— ‘‘(1) sections 361 and 362 apply with respect to the debtor 

and that property of the debtor that is within the territorial jurisdiction of the United States; ‘‘(2) sections 363, 549, and 552 of this title apply to a transfer of an interest of the debtor in property that is within the territorial jurisdiction of the United States to the same extent that 

the sections would apply to property of an estate; ‘‘(3) unless the court orders otherwise, the foreign representative may operate the debtor’s business and may exercise the 

rights and powers of a trustee under and to the extent provided 

by sections 363 and 552; and 

‘‘(4) section 552 applies to property of the debtor that is 

within the territorial jurisdiction of the United States. 

‘‘(b) Subsection (a) does not affect the right to commence an individual action or proceeding in a foreign country to the extent necessary to preserve a claim against the debtor. 

‘‘(c) Subsection (a) does not affect the right of a foreign representative or an entity to file a petition commencing a case under 

this title or the right of any party to file claims or take other proper 

actions in such a case. 

‘‘§ 1521. Relief that may be granted upon recognition 

‘‘(a) Upon recognition of a foreign proceeding, whether main or 

nonmain, where necessary to effectuate the purpose of this chapter 

and to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, 

grant any appropriate relief, including—

‘‘(1) staying the commencement or continuation of an individual action or proceeding concerning the debtor’s assets, 

rights, obligations or liabilities to the extent they have not been 

stayed under section 1520(a); 

119

‘‘(2) staying execution against the debtor’s assets to the extent it has not been stayed under section 1520(a); ‘‘(3) suspending the right to transfer, encumber or otherwise 

dispose of any assets of the debtor to the extent this right has 

not been suspended under section 1520(a); ‘‘(4) providing for the examination of witnesses, the taking 

of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities; 

‘‘(5) entrusting the administration or realization of all or 

part of the debtor’s assets within the territorial jurisdiction of 

the United States to the foreign representative or another person, including an examiner, authorized by the court; ‘‘(6) extending relief granted under section 1519(a); and 

‘‘(7) granting any additional relief that may be available to 

a trustee, except for relief available under sections 522, 544, 

545, 547, 548, 550, and 724(a).

‘‘(b) Upon recognition of a foreign proceeding, whether main or 

nonmain, the court may, at the request of the foreign representative, 

entrust the distribution of all or part of the debtor’s assets located 

in the United States to the foreign representative or another person, 

including an examiner, authorized by the court, provided that the 

court is satisfied that the interests of creditors in the United States 

are sufficiently protected. ‘‘(c) In granting relief under this section to a representative of 

a foreign nonmain proceeding, the court must be satisfied that the 

relief relates to assets that, under the law of the United States, 

should be administered in the foreign nonmain proceeding or concerns information required in that proceeding. ‘‘(d) The court may not enjoin a police or regulatory act of a 

governmental unit, including a criminal action or proceeding, under 

this section. ‘‘(e) The standards, procedures, and limitations applicable to an 

injunction shall apply to relief under paragraphs (1), (2), (3), and 

(6) of subsection (a). 

‘‘(f) The exercise of rights not subject to the stay arising under 

section 362(a) pursuant to paragraph (6), (7), (17), or (27) of section 

362(b) or pursuant to section 362(n) shall not be stayed by any order 

of a court or administrative agency in any proceeding under this 

chapter. 

‘‘§ 1522. Protection of creditors and other interested persons 

‘‘(a) The court may grant relief under section 1519 or 1521, or 

may modify or terminate relief under subsection (c), only if the interests of the creditors and other interested entities, including the 

debtor, are sufficiently protected. 

‘‘(b) The court may subject relief granted under section 1519 or 

1521, or the operation of the debtor’s business under section 

1520(a)(3) of this title, to conditions it considers appropriate, including the giving of security or the filing of a bond. 

‘‘(c) The court may, at the request of the foreign representative 

or an entity affected by relief granted under section 1519 or 1521, 

or at its own motion, modify or terminate such relief. 

‘‘(d) Section 1104(d) shall apply to the appointment of an examiner under this chapter. Any examiner shall comply with the qualification requirements imposed on a trustee by section 322. 

120

‘‘§ 1523. Actions to avoid acts detrimental to creditors 

‘‘(a) Upon recognition of a foreign proceeding, the foreign representative has standing in a case concerning the debtor pending 

under another chapter of this title to initiate actions under sections 

522, 544, 545, 547, 548, 550, 553, and 724(a). 

‘‘(b) When the foreign proceeding is a foreign nonmain proceeding, the court must be satisfied that an action under subsection 

(a) relates to assets that, under United States law, should be administered in the foreign nonmain proceeding. 

‘‘§ 1524. Intervention by a foreign representative 

‘‘Upon recognition of a foreign proceeding, the foreign representative may intervene in any proceedings in a State or Federal court 

in the United States in which the debtor is a party. 

‘‘SUBCHAPTER IV—COOPERATION WITH FOREIGN COURTS 

AND FOREIGN REPRESENTATIVES 

‘‘§ 1525. Cooperation and direct communication between the 

court and foreign courts or foreign representatives 

‘‘(a) Consistent with section 1501, the court shall cooperate to 

the maximum extent possible with foreign courts or foreign representatives, either directly or through the trustee. 

‘‘(b) The court is entitled to communicate directly with, or to request information or assistance directly from, foreign courts or foreign representatives, subject to the rights of parties in interest to notice and participation. 

‘‘§ 1526. Cooperation and direct communication between the 

trustee and foreign courts or foreign representatives 

‘‘(a) Consistent with section 1501, the trustee or other person, 

including an examiner, authorized by the court, shall, subject to the 

supervision of the court, cooperate to the maximum extent possible 

with foreign courts or foreign representatives. 

‘‘(b) The trustee or other person, including an examiner, authorized by the court is entitled, subject to the supervision of the court, 

to communicate directly with foreign courts or foreign representatives. 

‘‘§ 1527. Forms of cooperation 

‘‘Cooperation referred to in sections 1525 and 1526 may be implemented by any appropriate means, including—

‘‘(1) appointment of a person or body, including an examiner, to act at the direction of the court; 

‘‘(2) communication of information by any means considered appropriate by the court; 

‘‘(3) coordination of the administration and supervision of 

the debtor’s assets and affairs; 

‘‘(4) approval or implementation of agreements concerning 

the coordination of proceedings; and 

‘‘(5) coordination of concurrent proceedings regarding the 

same debtor. 

121

‘‘SUBCHAPTER V—CONCURRENT PROCEEDINGS 

‘‘§ 1528. Commencement of a case under this title after recognition of a foreign main proceeding 

‘‘After recognition of a foreign main proceeding, a case under 

another chapter of this title may be commenced only if the debtor 

has assets in the United States. The effects of such case shall be restricted to the assets of the debtor that are within the territorial jurisdiction of the United States and, to the extent necessary to implement cooperation and coordination under sections 1525, 1526, and 

1527, to other assets of the debtor that are within the jurisdiction 

of the court under sections 541(a) of this title, and 1334(e) of title 

28, to the extent that such other assets are not subject to the jurisdiction and control of a foreign proceeding that has been recognized 

under this chapter. 

‘‘§ 1529. Coordination of a case under this title and a foreign 

proceeding 

‘‘If a foreign proceeding and a case under another chapter of 

this title are taking place concurrently regarding the same debtor, 

the court shall seek cooperation and coordination under sections 

1525, 1526, and 1527, and the following shall apply:

‘‘(1) If the case in the United States is taking place at the 

time the petition for recognition of the foreign proceeding is 

filed—

‘‘(A) any relief granted under section 1519 or 1521 

must be consistent with the relief granted in the case in the 

United States; and 

‘‘(B) even if the foreign proceeding is recognized as a 

foreign main proceeding, section 1520 does not apply. 

‘‘(2) If a case in the United States under this title commences after recognition, or after the filing of the petition for 

recognition, of the foreign proceeding—

‘‘(A) any relief in effect under section 1519 or 1521 

shall be reviewed by the court and shall be modified or terminated if inconsistent with the case in the United States; 

and 

‘‘(B) if the foreign proceeding is a foreign main proceeding, the stay and suspension referred to in section 

1520(a) shall be modified or terminated if inconsistent with 

the relief granted in the case in the United States. 

‘‘(3) In granting, extending, or modifying relief granted to 

a representative of a foreign nonmain proceeding, the court 

must be satisfied that the relief relates to assets that, under the 

laws of the United States, should be administered in the foreign 

nonmain proceeding or concerns information required in that 

proceeding. 

‘‘(4) In achieving cooperation and coordination under sections 1528 and 1529, the court may grant any of the relief authorized under section 305. 

‘‘§ 1530. Coordination of more than 1 foreign proceeding 

‘‘In matters referred to in section 1501, with respect to more 

than 1 foreign proceeding regarding the debtor, the court shall seek 

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cooperation and coordination under sections 1525, 1526, and 1527, 

and the following shall apply: ‘‘(1) Any relief granted under section 1519 or 1521 to a representative of a foreign nonmain proceeding after recognition of 

a foreign main proceeding must be consistent with the foreign 

main proceeding. ‘‘(2) If a foreign main proceeding is recognized after recognition, or after the filing of a petition for recognition, of a foreign nonmain proceeding, any relief in effect under section 1519 

or 1521 shall be reviewed by the court and shall be modified 

or terminated if inconsistent with the foreign main proceeding. ‘‘(3) If, after recognition of a foreign nonmain proceeding, 

another foreign nonmain proceeding is recognized, the court 

shall grant, modify, or terminate relief for the purpose of facilitating coordination of the proceedings. 

‘‘§ 1531. Presumption of insolvency based on recognition of a 

foreign main proceeding 

‘‘In the absence of evidence to the contrary, recognition of a foreign main proceeding is, for the purpose of commencing a proceeding under section 303, proof that the debtor is generally not 

paying its debts as such debts become due. 

‘‘§ 1532. Rule of payment in concurrent proceedings 

‘‘Without prejudice to secured claims or rights in rem, a creditor 

who has received payment with respect to its claim in a foreign proceeding pursuant to a law relating to insolvency may not receive a 

payment for the same claim in a case under any other chapter of 

this title regarding the debtor, so long as the payment to other creditors of the same class is proportionately less than the payment the 

creditor has already received.’’. (b) CLERICAL AMENDMENT.—The table of chapters for title 11, 

United States Code, is amended by inserting after the item relating 

to chapter 13 the following:

‘‘15. Ancillary and Other Cross-Border Cases .............................................. 1501’’.

SEC. 802. OTHER AMENDMENTS TO TITLES 11 AND 28, UNITED STATES 

CODE. 

(a) APPLICABILITY OF CHAPTERS.—Section 103 of title 11, 

United States Code, is amended— (1) in subsection (a), by inserting before the period the following: ‘‘, and this chapter, sections 307, 362(n), 555 through 

557, and 559 through 562 apply in a case under chapter 15’’; 

and 

(2) by adding at the end the following: 

‘‘(k) Chapter 15 applies only in a case under such chapter, except that—

‘‘(1) sections 1505, 1513, and 1514 apply in all cases under 

this title; and 

‘‘(2) section 1509 applies whether or not a case under this 

title is pending.’’. 

(b) DEFINITIONS.—Section 101 of title 11, United States Code, 

is amended by striking paragraphs (23) and (24) and inserting the 

following: 

‘‘(23) ‘foreign proceeding’ means a collective judicial or administrative proceeding in a foreign country, including an inVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00122 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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terim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the assets and affairs of the 

debtor are subject to control or supervision by a foreign court, 

for the purpose of reorganization or liquidation; 

‘‘(24) ‘foreign representative’ means a person or body, including a person or body appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor’s assets or affairs or to act 

as a representative of the foreign proceeding;’’. 

(c) AMENDMENTS TO TITLE 28, UNITED STATES CODE.—

(1) PROCEDURES.—Section 157(b)(2) of title 28, United 

States Code, is amended—

(A) in subparagraph (N), by striking ‘‘and’’ at the end; 

(B) in subparagraph (O), by striking the period at the 

end and inserting ‘‘; and’’; and 

(C) by adding at the end the following: 

‘‘(P) recognition of foreign proceedings and other matters 

under chapter 15 of title 11.’’. 

(2) BANKRUPTCY CASES AND PROCEEDINGS.—Section 1334(c) 

of title 28, United States Code, is amended by striking ‘‘Nothing 

in’’ and inserting ‘‘Except with respect to a case under chapter 

15 of title 11, nothing in’’.

(3) DUTIES OF TRUSTEES.—Section 586(a)(3) of title 28, 

United States Code, is amended by striking ‘‘or 13’’ and inserting ‘‘13, or 15’’. 

(4) VENUE OF CASES ANCILLARY TO FOREIGN PROCEEDINGS.—Section 1410 of title 28, United States Code, is 

amended to read as follows: 

‘‘§ 1410. Venue of cases ancillary to foreign proceedings 

‘‘A case under chapter 15 of title 11 may be commenced in the 

district court of the United States for the district—

‘‘(1) in which the debtor has its principal place of business 

or principal assets in the United States; 

‘‘(2) if the debtor does not have a place of business or assets 

in the United States, in which there is pending against the 

debtor an action or proceeding in a Federal or State court; or 

‘‘(3) in a case other than those specified in paragraph (1) 

or (2), in which venue will be consistent with the interests of 

justice and the convenience of the parties, having regard to the 

relief sought by the foreign representative.’’. 

(d) OTHER SECTIONS OF TITLE 11.—Title 11 of the United 

States Code is amended—

(1) in section 109(b), by striking paragraph (3) and inserting the following: 

‘‘(3)(A) a foreign insurance company, engaged in such business in the United States; or 

‘‘(B) a foreign bank, savings bank, cooperative bank, savings and loan association, building and loan association, or 

credit union, that has a branch or agency (as defined in section 

1(b) of the International Banking Act of 1978 in the United 

States.’’; 

(2) in section 303, by striking subsection (k); 

(3) by striking section 304; 

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(4) in the table of sections for chapter 3 by striking the item 

relating to section 304; 

(5) in section 306 by striking ‘‘, 304,’’ each place it appears; 

(6) in section 305(a) by striking paragraph (2) and inserting the following: 

‘‘(2)(A) a petition under section 1515 of this title for recognition of a foreign proceeding has been granted; and 

‘‘(B) the purposes of chapter 15 of this title would be best 

served by such dismissal or suspension.’’; and 

(7) in section 508—

(A) by striking subsection (a); and 

(B) in subsection (b), by striking ‘‘(b)’’.

TITLE IX—FINANCIAL CONTRACT 

PROVISIONS 

SEC. 901. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS 

OR RECEIVERS OF INSURED DEPOSITORY INSTITUTIONS. 

(a) DEFINITION OF QUALIFIED FINANCIAL CONTRACT.—Section 

11(e)(8)(D) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(e)(8)(D)) is amended—

(1) by striking ‘‘subsection—’’ and inserting ‘‘subsection, the 

following definitions shall apply:’’; and 

(2) in clause (i), by inserting ‘‘, resolution, or order’’ after 

‘‘any similar agreement that the Corporation determines by regulation’’. 

(b) DEFINITION OF SECURITIES CONTRACT.—Section 

11(e)(8)(D)(ii) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(e)(8)(D)(ii)) is amended to read as follows: 

‘‘(ii) SECURITIES CONTRACT.—The term ‘securities 

contract’—

‘‘(I) means a contract for the purchase, sale, or 

loan of a security, a certificate of deposit, a mortgage loan, or any interest in a mortgage loan, a 

group or index of securities, certificates of deposit, 

or mortgage loans or interests therein (including 

any interest therein or based on the value thereof) 

or any option on any of the foregoing, including 

any option to purchase or sell any such security, 

certificate of deposit, mortgage loan, interest, group 

or index, or option, and including any repurchase 

or reverse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or index, or option; 

‘‘(II) does not include any purchase, sale, or repurchase obligation under a participation in a 

commercial mortgage loan unless the Corporation 

determines by regulation, resolution, or order to include any such agreement within the meaning of 

such term; 

‘‘(III) means any option entered into on a national securities exchange relating to foreign currencies; 

125

‘‘(IV) means the guarantee by or to any securities clearing agency of any settlement of cash, securities, certificates of deposit, mortgage loans or interests therein, group or index of securities, certificates of deposit, or mortgage loans or interests 

therein (including any interest therein or based on 

the value thereof) or option on any of the foregoing, 

including any option to purchase or sell any such 

security, certificate of deposit, mortgage loan, interest, group or index, or option; ‘‘(V) means any margin loan; 

‘‘(VI) means any other agreement or transaction that is similar to any agreement or transaction referred to in this clause; ‘‘(VII) means any combination of the agreements or transactions referred to in this clause; ‘‘(VIII) means any option to enter into any 

agreement or transaction referred to in this clause; ‘‘(IX) means a master agreement that provides 

for an agreement or transaction referred to in subclause (I), (III), (IV), (V), (VI), (VII), or (VIII), together with all supplements to any such master 

agreement, without regard to whether the master 

agreement provides for an agreement or transaction that is not a securities contract under this 

clause, except that the master agreement shall be 

considered to be a securities contract under this 

clause only with respect to each agreement or 

transaction under the master agreement that is referred to in subclause (I), (III), (IV), (V), (VI), (VII), 

or (VIII); and ‘‘(X) means any security agreement or arrangement or other credit enhancement related to any 

agreement or transaction referred to in this clause, 

including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in this clause.’’. 

(c) DEFINITION OF COMMODITY CONTRACT.—Section 

11(e)(8)(D)(iii) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(e)(8)(D)(iii)) is amended to read as follows: ‘‘(iii) COMMODITY CONTRACT.—The term ‘commodity contract’ means—

‘‘(I) with respect to a futures commission merchant, a contract for the purchase or sale of a commodity for future delivery on, or subject to the 

rules of, a contract market or board of trade; 

‘‘(II) with respect to a foreign futures commission merchant, a foreign future; 

‘‘(III) with respect to a leverage transaction 

merchant, a leverage transaction; ‘‘(IV) with respect to a clearing organization, a 

contract for the purchase or sale of a commodity 

for future delivery on, or subject to the rules of, a 

contract market or board of trade that is cleared 

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tion traded on, or subject to the rules of, a contract 

market or board of trade that is cleared by such 

clearing organization; ‘‘(V) with respect to a commodity options dealer, a commodity option; ‘‘(VI) any other agreement or transaction that 

is similar to any agreement or transaction referred 

to in this clause; ‘‘(VII) any combination of the agreements or 

transactions referred to in this clause; ‘‘(VIII) any option to enter into any agreement 

or transaction referred to in this clause; ‘‘(IX) a master agreement that provides for an 

agreement or transaction referred to in subclause 

(I), (II), (III), (IV), (V), (VI), (VII), or (VIII), together with all supplements to any such master 

agreement, without regard to whether the master 

agreement provides for an agreement or transaction that is not a commodity contract under this 

clause, except that the master agreement shall be 

considered to be a commodity contract under this 

clause only with respect to each agreement or 

transaction under the master agreement that is referred to in subclause (I), (II), (III), (IV), (V), (VI), 

(VII), or (VIII); or ‘‘(X) any security agreement or arrangement or 

other credit enhancement related to any agreement 

or transaction referred to in this clause, including 

any guarantee or reimbursement obligation in connection with any agreement or transaction referred 

to in this clause.’’. (d) DEFINITION OF FORWARD CONTRACT.—Section 11(e)(8)(D)(iv) 

of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iv)) is 

amended to read as follows: ‘‘(iv) FORWARD CONTRACT.—The term ‘forward contract’ means— ‘‘(I) a contract (other than a commodity contract) for the purchase, sale, or transfer of a commodity or any similar good, article, service, right, 

or interest which is presently or in the future becomes the subject of dealing in the forward contract trade, or product or byproduct thereof, with 

a maturity date more than 2 days after the date 

the contract is entered into, including, a repurchase transaction, reverse repurchase transaction, 

consignment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, 

unallocated transaction, or any other similar 

agreement; ‘‘(II) any combination of agreements or transactions referred to in subclauses (I) and (III); 

‘‘(III) any option to enter into any agreement or 

transaction referred to in subclause (I) or (II); 

‘‘(IV) a master agreement that provides for an 

agreement or transaction referred to in subclauses 

127

(I), (II), or (III), together with all supplements to 

any such master agreement, without regard to 

whether the master agreement provides for an 

agreement or transaction that is not a forward 

contract under this clause, except that the master 

agreement shall be considered to be a forward contract under this clause only with respect to each 

agreement or transaction under the master agreement that is referred to in subclause (I), (II), or 

(III); or ‘‘(V) any security agreement or arrangement or 

other credit enhancement related to any agreement 

or transaction referred to in subclause (I), (II), 

(III), or (IV), including any guarantee or reimbursement obligation in connection with any agreement or transaction referred to in any such subclause.’’. (e) DEFINITION OF REPURCHASE AGREEMENT.—Section 

11(e)(8)(D)(v) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(e)(8)(D)(v)) is amended to read as follows: ‘‘(v) REPURCHASE AGREEMENT.—The term ‘repurchase agreement’ (which definition also applies to a reverse repurchase agreement)— ‘‘(I) means an agreement, including related 

terms, which provides for the transfer of one or 

more certificates of deposit, mortgage-related securities (as such term is defined in the Securities Exchange Act of 1934), mortgage loans, interests in 

mortgage-related securities or mortgage loans, eligible bankers’ acceptances, qualified foreign government securities or securities that are direct obligations of, or that are fully guaranteed by, the 

United States or any agency of the United States 

against the transfer of funds by the transferee of 

such certificates of deposit, eligible bankers’ acceptances, securities, mortgage loans, or interests with 

a simultaneous agreement by such transferee to 

transfer to the transferor thereof certificates of deposit, eligible bankers’ acceptances, securities, 

mortgage loans, or interests as described above, at 

a date certain not later than 1 year after such 

transfers or on demand, against the transfer of 

funds, or any other similar agreement; 

‘‘(II) does not include any repurchase obligation under a participation in a commercial mortgage loan unless the Corporation determines by 

regulation, resolution, or order to include any such 

participation within the meaning of such term;

‘‘(III) means any combination of agreements or 

transactions referred to in subclauses (I) and (IV); 

‘‘(IV) means any option to enter into any agreement or transaction referred to in subclause (I) or 

(III); 

‘‘(V) means a master agreement that provides 

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clause (I), (III), or (IV), together with all supplements to any such master agreement, without regard to whether the master agreement provides for 

an agreement or transaction that is not a repurchase agreement under this clause, except that the 

master agreement shall be considered to be a repurchase agreement under this subclause only 

with respect to each agreement or transaction 

under the master agreement that is referred to in 

subclause (I), (III), or (IV); and ‘‘(VI) means any security agreement or arrangement or other credit enhancement related to 

any agreement or transaction referred to in subclause (I), (III), (IV), or (V), including any guarantee or reimbursement obligation in connection 

with any agreement or transaction referred to in 

any such subclause. 

For purposes of this clause, the term ‘qualified foreign 

government security’ means a security that is a direct 

obligation of, or that is fully guaranteed by, the central 

government of a member of the Organization for Economic Cooperation and Development (as determined by 

regulation or order adopted by the appropriate Federal 

banking authority).’’. (f) DEFINITION OF SWAP AGREEMENT.—Section 11(e)(8)(D)(vi) of 

the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(vi)) is 

amended to read as follows: ‘‘(vi) SWAP AGREEMENT.—The term ‘swap agreement’ means— ‘‘(I) any agreement, including the terms and 

conditions incorporated by reference in any such 

agreement, which is an interest rate swap, option, 

future, or forward agreement, including a rate 

floor, rate cap, rate collar, cross-currency rate 

swap, and basis swap; a spot, same day-tomorrow, 

tomorrow-next, forward, or other foreign exchange 

or precious metals agreement; a currency swap, option, future, or forward agreement; an equity index 

or equity swap, option, future, or forward agreement; a debt index or debt swap, option, future, or 

forward agreement; a total return, credit spread or 

credit swap, option, future, or forward agreement; 

a commodity index or commodity swap, option, future, or forward agreement; or a weather swap, 

weather derivative, or weather option; 

‘‘(II) any agreement or transaction that is similar to any other agreement or transaction referred 

to in this clause and that is of a type that has 

been, is presently, or in the future becomes, the 

subject of recurrent dealings in the swap markets 

(including terms and conditions incorporated by 

reference in such agreement) and that is a forward, swap, future, or option on one or more rates, 

currencies, commodities, equity securities or other 

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struments, quantitative measures associated with 

an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or 

economic consequence, or economic or financial indices or measures of economic or financial risk or 

value; 

‘‘(III) any combination of agreements or transactions referred to in this clause; 

‘‘(IV) any option to enter into any agreement or 

transaction referred to in this clause; 

‘‘(V) a master agreement that provides for an 

agreement or transaction referred to in subclause 

(I), (II), (III), or (IV), together with all supplements 

to any such master agreement, without regard to 

whether the master agreement contains an agreement or transaction that is not a swap agreement 

under this clause, except that the master agreement shall be considered to be a swap agreement 

under this clause only with respect to each agreement or transaction under the master agreement 

that is referred to in subclause (I), (II), (III), or 

(IV); and 

‘‘(VI) any security agreement or arrangement 

or other credit enhancement related to any agreements or transactions referred to in subclause (I), 

(II), (III), (IV), or (V), including any guarantee or 

reimbursement obligation in connection with any 

agreement or transaction referred to in any such 

subclause. 

Such term is applicable for purposes of this subsection 

only and shall not be construed or applied so as to 

challenge or affect the characterization, definition, or 

treatment of any swap agreement under any other statute, regulation, or rule, including the Securities Act of 

1933, the Securities Exchange Act of 1934, the Public 

Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, 

the Investment Advisers Act of 1940, the Securities Investor Protection Act of 1970, the Commodity Exchange 

Act, the Gramm-Leach-Bliley Act, and the Legal Certainty for Bank Products Act of 2000.’’.

(g) DEFINITION OF TRANSFER.—Section 11(e)(8)(D)(viii) of the 

Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(viii)) is 

amended to read as follows: 

‘‘(viii) TRANSFER.—The term ‘transfer’ means every 

mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with 

property or with an interest in property, including retention of title as a security interest and foreclosure of 

the depository institution’s equity of redemption.’’. 

(h) TREATMENT OF QUALIFIED FINANCIAL CONTRACTS.—Section 

11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) 

is amended—

(1) in subparagraph (A)—

130

(A) by striking ‘‘paragraph (10)’’ and inserting ‘‘paragraphs (9) and (10)’’; 

(B) in clause (i), by striking ‘‘to cause the termination 

or liquidation’’ and inserting ‘‘such person has to cause the 

termination, liquidation, or acceleration’’; and 

(C) by striking clause (ii) and inserting the following: ‘‘(ii) any right under any security agreement or arrangement or other credit enhancement related to one 

or more qualified financial contracts described in 

clause (i);’’; and 

(2) in subparagraph (E), by striking clause (ii) and inserting the following: ‘‘(ii) any right under any security agreement or arrangement or other credit enhancement related to one 

or more qualified financial contracts described in 

clause (i);’’. (i) AVOIDANCE OF TRANSFERS.—Section 11(e)(8)(C)(i) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(C)(i)) is amended 

by inserting ‘‘section 5242 of the Revised Statutes of the United 

States or any other Federal or State law relating to the avoidance 

of preferential or fraudulent transfers,’’ before ‘‘the Corporation’’. 

SEC. 902. AUTHORITY OF THE CORPORATION WITH RESPECT TO 

FAILED AND FAILING INSTITUTIONS. 

(a) IN GENERAL.—Section 11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is amended—

(1) in subparagraph (E), by striking ‘‘other than paragraph 

(12) of this subsection, subsection (d)(9)’’ and inserting ‘‘other 

than subsections (d)(9) and (e)(10)’’; and 

(2) by adding at the end the following new subparagraphs: 

‘‘(F) CLARIFICATION.—No provision of law shall be construed as limiting the right or power of the Corporation, or 

authorizing any court or agency to limit or delay, in any 

manner, the right or power of the Corporation to transfer 

any qualified financial contract in accordance with paragraphs (9) and (10) of this subsection or to disaffirm or repudiate any such contract in accordance with subsection 

(e)(1) of this section. 

‘‘(G) WALKAWAY CLAUSES NOT EFFECTIVE.—

‘‘(i) IN GENERAL.—Notwithstanding the provisions 

of subparagraphs (A) and (E), and sections 403 and 

404 of the Federal Deposit Insurance Corporation Improvement Act of 1991, no walkaway clause shall be 

enforceable in a qualified financial contract of an insured depository institution in default. 

‘‘(ii) WALKAWAY CLAUSE DEFINED.—For purposes of 

this subparagraph, the term ‘walkaway clause’ means 

a provision in a qualified financial contract that, after 

calculation of a value of a party’s position or an 

amount due to or from 1 of the parties in accordance 

with its terms upon termination, liquidation, or acceleration of the qualified financial contract, either does 

not create a payment obligation of a party or extinguishes a payment obligation of a party in whole or in 

part solely because of such party’s status as a nondefaulting party.’’. 

131

(b) TECHNICAL AND CONFORMING AMENDMENT.—Section 

11(e)(12)(A) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(e)(12)(A)) is amended by inserting ‘‘or the exercise of rights or 

powers by’’ after ‘‘the appointment of’’. 

SEC. 903. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED FINANCIAL CONTRACTS. 

(a) TRANSFERS OF QUALIFIED FINANCIAL CONTRACTS TO FINAN- CIAL INSTITUTIONS.—Section 11(e)(9) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(9)) is amended to read as follows: ‘‘(9) TRANSFER OF QUALIFIED FINANCIAL CONTRACTS.— ‘‘(A) IN GENERAL.—In making any transfer of assets or 

liabilities of a depository institution in default which includes any qualified financial contract, the conservator or 

receiver for such depository institution shall either— ‘‘(i) transfer to one financial institution, other than 

a financial institution for which a conservator, receiver, trustee in bankruptcy, or other legal custodian 

has been appointed or which is otherwise the subject of 

a bankruptcy or insolvency proceeding— ‘‘(I) all qualified financial contracts between 

any person or any affiliate of such person and the 

depository institution in default; ‘‘(II) all claims of such person or any affiliate 

of such person against such depository institution 

under any such contract (other than any claim 

which, under the terms of any such contract, is 

subordinated to the claims of general unsecured 

creditors of such institution); 

‘‘(III) all claims of such depository institution 

against such person or any affiliate of such person 

under any such contract; and 

‘‘(IV) all property securing or any other credit 

enhancement for any contract described in subclause (I) or any claim described in subclause (II) 

or (III) under any such contract; or 

‘‘(ii) transfer none of the qualified financial contracts, claims, property or other credit enhancement referred to in clause (i) (with respect to such person and 

any affiliate of such person).

‘‘(B) TRANSFER TO FOREIGN BANK, FOREIGN FINANCIAL

INSTITUTION, OR BRANCH OR AGENCY OF A FOREIGN BANK

OR FINANCIAL INSTITUTION.—In transferring any qualified 

financial contracts and related claims and property under 

subparagraph (A)(i), the conservator or receiver for the depository institution shall not make such transfer to a foreign bank, financial institution organized under the laws of 

a foreign country, or a branch or agency of a foreign bank 

or financial institution unless, under the law applicable to 

such bank, financial institution, branch or agency, to the 

qualified financial contracts, and to any netting contract, 

any security agreement or arrangement or other credit enhancement related to one or more qualified financial contracts, the contractual rights of the parties to such qualified 

financial contracts, netting contracts, security agreements 

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able substantially to the same extent as permitted under 

this section. ‘‘(C) TRANSFER OF CONTRACTS SUBJECT TO THE RULES

OF A CLEARING ORGANIZATION.—In the event that a conservator or receiver transfers any qualified financial contract 

and related claims, property, and credit enhancements pursuant to subparagraph (A)(i) and such contract is cleared 

by or subject to the rules of a clearing organization, the 

clearing organization shall not be required to accept the 

transferee as a member by virtue of the transfer. ‘‘(D) DEFINITIONS.—For purposes of this paragraph, the 

term ‘financial institution’ means a broker or dealer, a depository institution, a futures commission merchant, or any 

other institution, as determined by the Corporation by regulation to be a financial institution, and the term ‘clearing 

organization’ has the same meaning as in section 402 of the 

Federal Deposit Insurance Corporation Improvement Act of 

1991.’’. (b) NOTICE TO QUALIFIED FINANCIAL CONTRACT

COUNTERPARTIES.—Section 11(e)(10)(A) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(10)(A)) is amended in the material 

immediately following clause (ii) by striking ‘‘the conservator’’ and 

all that follows through the period and inserting the following: ‘‘the 

conservator or receiver shall notify any person who is a party to any 

such contract of such transfer by 5:00 p.m. (eastern time) on the 

business day following the date of the appointment of the receiver 

in the case of a receivership, or the business day following such 

transfer in the case of a conservatorship.’’. (c) RIGHTS AGAINST RECEIVER AND TREATMENT OF BRIDGE

BANKS.—Section 11(e)(10) of the Federal Deposit Insurance Act (12 

U.S.C. 1821(e)(10)) is amended— (1) by redesignating subparagraph (B) as subparagraph 

(D); and 

(2) by inserting after subparagraph (A) the following new 

subparagraphs: 

‘‘(B) CERTAIN RIGHTS NOT ENFORCEABLE.— ‘‘(i) RECEIVERSHIP.—A person who is a party to a 

qualified financial contract with an insured depository 

institution may not exercise any right that such person 

has to terminate, liquidate, or net such contract under 

paragraph (8)(A) of this subsection or section 403 or 

404 of the Federal Deposit Insurance Corporation Improvement Act of 1991, solely by reason of or incidental 

to the appointment of a receiver for the depository institution (or the insolvency or financial condition of the 

depository institution for which the receiver has been 

appointed)—

‘‘(I) until 5:00 p.m. (eastern time) on the business day following the date of the appointment of 

the receiver; or 

‘‘(II) after the person has received notice that 

the contract has been transferred pursuant to 

paragraph (9)(A). 

‘‘(ii) CONSERVATORSHIP.—A person who is a party 

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itory institution may not exercise any right that such 

person has to terminate, liquidate, or net such contract 

under paragraph (8)(E) of this subsection or section 

403 or 404 of the Federal Deposit Insurance Corporation Improvement Act of 1991, solely by reason of or incidental to the appointment of a conservator for the depository institution (or the insolvency or financial condition of the depository institution for which the conservator has been appointed). 

‘‘(iii) NOTICE.—For purposes of this paragraph, the 

Corporation as receiver or conservator of an insured 

depository institution shall be deemed to have notified 

a person who is a party to a qualified financial contract with such depository institution if the Corporation has taken steps reasonably calculated to provide 

notice to such person by the time specified in subparagraph (A). 

‘‘(C) TREATMENT OF BRIDGE BANKS.—The following institutions shall not be considered to be a financial institution for which a conservator, receiver, trustee in bankruptcy, or other legal custodian has been appointed or 

which is otherwise the subject of a bankruptcy or insolvency 

proceeding for purposes of paragraph (9): 

‘‘(i) A bridge bank. 

‘‘(ii) A depository institution organized by the Corporation, for which a conservator is appointed either—

‘‘(I) immediately upon the organization of the 

institution; or 

‘‘(II) at the time of a purchase and assumption 

transaction between the depository institution and 

the Corporation as receiver for a depository institution in default.’’. 

SEC. 904. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION OF QUALIFIED FINANCIAL CONTRACTS. 

Section 11(e) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(e)) is amended—

(1) by redesignating paragraphs (11) through (15) as paragraphs (12) through (16), respectively; 

(2) by inserting after paragraph (10) the following new 

paragraph: 

‘‘(11) DISAFFIRMANCE OR REPUDIATION OF QUALIFIED FINANCIAL CONTRACTS.—In exercising the rights of disaffirmance or 

repudiation of a conservator or receiver with respect to any 

qualified financial contract to which an insured depository institution is a party, the conservator or receiver for such institution shall either—

‘‘(A) disaffirm or repudiate all qualified financial contracts between—

‘‘(i) any person or any affiliate of such person; and 

‘‘(ii) the depository institution in default; or 

‘‘(B) disaffirm or repudiate none of the qualified financial contracts referred to in subparagraph (A) (with respect 

to such person or any affiliate of such person).’’; and 

(3) by adding at the end the following new paragraph: 

134

‘‘(17) SAVINGS CLAUSE.—The meanings of terms used in 

this subsection are applicable for purposes of this subsection 

only, and shall not be construed or applied so as to challenge 

or affect the characterization, definition, or treatment of any 

similar terms under any other statute, regulation, or rule, including the Gramm-Leach-Bliley Act, the Legal Certainty for 

Bank Products Act of 2000, the securities laws (as that term is 

defined in section 3(a)(47) of the Securities Exchange Act of 

1934), and the Commodity Exchange Act.’’. 

SEC. 905. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS. 

Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance Act (12 

U.S.C. 1821(e)(8)(D)(vii)) is amended to read as follows: ‘‘(vii) TREATMENT OF MASTER AGREEMENT AS ONE

AGREEMENT.—Any master agreement for any contract 

or agreement described in any preceding clause of this 

subparagraph (or any master agreement for such master agreement or agreements), together with all supplements to such master agreement, shall be treated as a 

single agreement and a single qualified financial contract. If a master agreement contains provisions relating to agreements or transactions that are not themselves qualified financial contracts, the master agreement shall be deemed to be a qualified financial contract only with respect to those transactions that are 

themselves qualified financial contracts.’’.

SEC. 906. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991. 

(a) DEFINITIONS.—Section 402 of the Federal Deposit Insurance 

Corporation Improvement Act of 1991 (12 U.S.C. 4402) is amended— (1) in paragraph (2)— (A) in subparagraph (A)(ii), by inserting before the 

semicolon ‘‘, or is exempt from such registration by order of 

the Securities and Exchange Commission’’; and 

(B) in subparagraph (B), by inserting before the period ‘‘, that has been granted an exemption under section 4(c)(1) 

of the Commodity Exchange Act, or that is a multilateral 

clearing organization (as defined in section 408 of this 

Act)’’; 

(2) in paragraph (6)—

(A) by redesignating subparagraphs (B) through (D) as 

subparagraphs (C) through (E), respectively; 

(B) by inserting after subparagraph (A) the following 

new subparagraph: ‘‘(B) an uninsured national bank or an uninsured State 

bank that is a member of the Federal Reserve System, if the 

national bank or State member bank is not eligible to make 

application to become an insured bank under section 5 of 

the Federal Deposit Insurance Act;’’; and 

(C) by amending subparagraph (C), so redesignated, to 

read as follows: 

‘‘(C) a branch or agency of a foreign bank, a foreign 

bank and any branch or agency of the foreign bank, or the 

foreign bank that established the branch or agency, as 

135

those terms are defined in section 1(b) of the International 

Banking Act of 1978;’’; 

(3) in paragraph (11), by inserting before the period ‘‘and 

any other clearing organization with which such clearing organization has a netting contract’’; 

(4) by amending paragraph (14)(A)(i) to read as follows: ‘‘(i) means a contract or agreement between 2 or 

more financial institutions, clearing organizations, or 

members that provides for netting present or future 

payment obligations or payment entitlements (including liquidation or close out values relating to such obligations or entitlements) among the parties to the agreement; and’’; and 

(5) by adding at the end the following new paragraph: 

‘‘(15) PAYMENT.—The term ‘payment’ means a payment of 

United States dollars, another currency, or a composite currency, and a noncash delivery, including a payment or delivery 

to liquidate an unmatured obligation.’’. (b) ENFORCEABILITY OF BILATERAL NETTING CONTRACTS.—Section 403 of the Federal Deposit Insurance Corporation Improvement 

Act of 1991 (12 U.S.C. 4403) is amended— (1) by striking subsection (a) and inserting the following: ‘‘(a) GENERAL RULE.—Notwithstanding any other provision of 

State or Federal law (other than paragraphs (8)(E), (8)(F), and 

(10)(B) of section 11(e) of the Federal Deposit Insurance Act or any 

order authorized under section 5(b)(2) of the Securities Investor Protection Act of 1970), the covered contractual payment obligations 

and the covered contractual payment entitlements between any 2 financial institutions shall be netted in accordance with, and subject 

to the conditions of, the terms of any applicable netting contract (except as provided in section 561(b)(2) of title 11, United States 

Code).’’; and 

(2) by adding at the end the following new subsection: ‘‘(f) ENFORCEABILITY OF SECURITY AGREEMENTS.—The provisions of any security agreement or arrangement or other credit enhancement related to one or more netting contracts between any 2 

financial institutions shall be enforceable in accordance with their 

terms (except as provided in section 561(b)(2) of title 11, United 

States Code), and shall not be stayed, avoided, or otherwise limited 

by any State or Federal law (other than paragraphs (8)(E), (8)(F), 

and (10)(B) of section 11(e) of the Federal Deposit Insurance Act 

and section 5(b)(2) of the Securities Investor Protection Act of 

1970).’’. 

(c) ENFORCEABILITY OF CLEARING ORGANIZATION NETTING CONTRACTS.—Section 404 of the Federal Deposit Insurance Corporation 

Improvement Act of 1991 (12 U.S.C. 4404) is amended—

(1) by striking subsection (a) and inserting the following: 

‘‘(a) GENERAL RULE.—Notwithstanding any other provision of 

State or Federal law (other than paragraphs (8)(E), (8)(F), and 

(10)(B) of section 11(e) of the Federal Deposit Insurance Act and any 

order authorized under section 5(b)(2) of the Securities Investor Protection Act of 1970), the covered contractual payment obligations 

and the covered contractual payment entitlements of a member of a 

clearing organization to and from all other members of a clearing 

organization shall be netted in accordance with and subject to the 

136

conditions of any applicable netting contract (except as provided in 

section 561(b)(2) of title 11, United States Code).’’; and 

(2) by adding at the end the following new subsection: 

‘‘(h) ENFORCEABILITY OF SECURITY AGREEMENTS.—The provisions of any security agreement or arrangement or other credit enhancement related to one or more netting contracts between any 2 

members of a clearing organization shall be enforceable in accordance with their terms (except as provided in section 561(b)(2) of title 

11, United States Code), and shall not be stayed, avoided, or otherwise limited by any State or Federal law (other than paragraphs 

(8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal Deposit Insurance Act and section 5(b)(2) of the Securities Investor Protection 

Act of 1970).’’. 

(d) ENFORCEABILITY OF CONTRACTS WITH UNINSURED NATIONAL BANKS, UNINSURED FEDERAL BRANCHES AND AGENCIES, 

CERTAIN UNINSURED STATE MEMBER BANKS, AND EDGE ACT CORPORATIONS.—The Federal Deposit Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4401 et seq.) is amended—

(1) by redesignating section 407 as section 407A; and 

(2) by inserting after section 406 the following new section:

‘‘SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL 

BANKS, UNINSURED FEDERAL BRANCHES AND AGENCIES, 

CERTAIN UNINSURED STATE MEMBER BANKS, AND EDGE 

ACT CORPORATIONS. 

‘‘(a) IN GENERAL.—Notwithstanding any other provision of law, 

paragraphs (8), (9), (10), and (11) of section 11(e) of the Federal Deposit Insurance Act shall apply to an uninsured national bank or 

uninsured Federal branch or Federal agency, a corporation chartered under section 25A of the Federal Reserve Act, or an uninsured 

State member bank which operates, or operates as, a multilateral 

clearing organization pursuant to section 409 of this Act, except that 

for such purpose—

‘‘(1) any reference to the ‘Corporation as receiver’ or ‘the receiver or the Corporation’ shall refer to the receiver appointed 

by the Comptroller of the Currency in the case of an uninsured 

national bank or uninsured Federal branch or agency, or to the 

receiver appointed by the Board of Governors of the Federal Reserve System in the case of a corporation chartered under section 25A of the Federal Reserve Act or an uninsured State member bank; 

‘‘(2) any reference to the ‘Corporation’ (other than in section 

11(e)(8)(D) of such Act), the ‘Corporation, whether acting as 

such or as conservator or receiver’, a ‘receiver’, or a ‘conservator’

shall refer to the receiver or conservator appointed by the Comptroller of the Currency in the case of an uninsured national 

bank or uninsured Federal branch or agency, or to the receiver 

or conservator appointed by the Board of Governors of the Federal Reserve System in the case of a corporation chartered 

under section 25A of the Federal Reserve Act or an uninsured 

State member bank; and 

‘‘(3) any reference to an ‘insured depository institution’ or 

‘depository institution’ shall refer to an uninsured national 

bank, an uninsured Federal branch or Federal agency, a corporation chartered under section 25A of the Federal Reserve 

Act, or an uninsured State member bank which operates, or opVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00136 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
137

erates as, a multilateral clearing organization pursuant to section 409 of this Act. 

‘‘(b) LIABILITY.—The liability of a receiver or conservator of an 

uninsured national bank, uninsured Federal branch or agency, a 

corporation chartered under section 25A of the Federal Reserve Act, 

or an uninsured State member bank which operates, or operates as, 

a multilateral clearing organization pursuant to section 409 of this 

Act, shall be determined in the same manner and subject to the 

same limitations that apply to receivers and conservators of insured 

depository institutions under section 11(e) of the Federal Deposit Insurance Act. ‘‘(c) REGULATORY AUTHORITY.— ‘‘(1) IN GENERAL.—The Comptroller of the Currency in the 

case of an uninsured national bank or uninsured Federal 

branch or agency and the Board of Governors of the Federal Reserve System in the case of a corporation chartered under section 25A of the Federal Reserve Act, or an uninsured State 

member bank that operates, or operates as, a multilateral clearing organization pursuant to section 409 of this Act, in consultation with the Federal Deposit Insurance Corporation, may 

each promulgate regulations solely to implement this section. ‘‘(2) SPECIFIC REQUIREMENT.—In promulgating regulations, 

limited solely to implementing paragraphs (8), (9), (10), and 

(11) of section 11(e) of the Federal Deposit Insurance Act, the 

Comptroller of the Currency and the Board of Governors of the 

Federal Reserve System each shall ensure that the regulations 

generally are consistent with the regulations and policies of the 

Federal Deposit Insurance Corporation adopted pursuant to the 

Federal Deposit Insurance Act. 

‘‘(d) DEFINITIONS.—For purposes of this section, the terms ‘Federal branch’, ‘Federal agency’, and ‘foreign bank’ have the same 

meanings as in section 1(b) of the International Banking Act of 

1978.’’. 

SEC. 907. BANKRUPTCY LAW AMENDMENTS. 

(a) DEFINITIONS OF FORWARD CONTRACT, REPURCHASE AGREE- MENT, SECURITIES CLEARING AGENCY, SWAP AGREEMENT, COM- MODITY CONTRACT, AND SECURITIES CONTRACT.—Title 11, United 

States Code, is amended— (1) in section 101— (A) in paragraph (25)— (i) by striking ‘‘means a contract’’ and inserting 

‘‘means—

‘‘(A) a contract’’; 

(ii) by striking ‘‘, or any combination thereof or option thereon;’’ and inserting ‘‘, or any other similar 

agreement;’’; and 

(iii) by adding at the end the following: 

‘‘(B) any combination of agreements or transactions referred to in subparagraphs (A) and (C);

‘‘(C) any option to enter into an agreement or transaction referred to in subparagraph (A) or (B); 

‘‘(D) a master agreement that provides for an agreement or transaction referred to in subparagraph (A), (B), or 

(C), together with all supplements to any such master 

agreement, without regard to whether such master agreeVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00137 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
138

ment provides for an agreement or transaction that is not 

a forward contract under this paragraph, except that such 

master agreement shall be considered to be a forward contract under this paragraph only with respect to each agreement or transaction under such master agreement that is 

referred to in subparagraph (A), (B), or (C); or ‘‘(E) any security agreement or arrangement, or other 

credit enhancement related to any agreement or transaction 

referred to in subparagraph (A), (B), (C), or (D), including 

any guarantee or reimbursement obligation by or to a forward contract merchant or financial participant in connection with any agreement or transaction referred to in any 

such subparagraph, but not to exceed the damages in connection with any such agreement or transaction, measured 

in accordance with section 562 of this title;’’; 

(B) in paragraph (46), by striking ‘‘on any day during 

the period beginning 90 days before the date of’’ and inserting ‘‘at any time before’’; 

(C) by amending paragraph (47) to read as follows: ‘‘(47) ‘repurchase agreement’ (which definition also applies 

to a reverse repurchase agreement)— ‘‘(A) means— ‘‘(i) an agreement, including related terms, which 

provides for the transfer of one or more certificates of 

deposit, mortgage related securities (as defined in section 3 of the Securities Exchange Act of 1934), mortgage loans, interests in mortgage related securities or 

mortgage loans, eligible bankers’ acceptances, qualified 

foreign government securities (defined as a security 

that is a direct obligation of, or that is fully guaranteed by, the central government of a member of the Organization for Economic Cooperation and Development), or securities that are direct obligations of, or 

that are fully guaranteed by, the United States or any 

agency of the United States against the transfer of 

funds by the transferee of such certificates of deposit, 

eligible bankers’ acceptances, securities, mortgage 

loans, or interests, with a simultaneous agreement by 

such transferee to transfer to the transferor thereof certificates of deposit, eligible bankers’ acceptance, securities, mortgage loans, or interests of the kind described 

in this clause, at a date certain not later than 1 year 

after such transfer or on demand, against the transfer 

of funds; 

‘‘(ii) any combination of agreements or transactions 

referred to in clauses (i) and (iii); 

‘‘(iii) an option to enter into an agreement or transaction referred to in clause (i) or (ii); 

‘‘(iv) a master agreement that provides for an 

agreement or transaction referred to in clause (i), (ii), 

or (iii), together with all supplements to any such master agreement, without regard to whether such master 

agreement provides for an agreement or transaction 

that is not a repurchase agreement under this paragraph, except that such master agreement shall be conVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00138 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
139

sidered to be a repurchase agreement under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to 

in clause (i), (ii), or (iii); or ‘‘(v) any security agreement or arrangement or 

other credit enhancement related to any agreement or 

transaction referred to in clause (i), (ii), (iii), or (iv), including any guarantee or reimbursement obligation by 

or to a repo participant or financial participant in connection with any agreement or transaction referred to 

in any such clause, but not to exceed the damages in 

connection with any such agreement or transaction, 

measured in accordance with section 562 of this title; 

and 

‘‘(B) does not include a repurchase obligation under a 

participation in a commercial mortgage loan;’’; 

(D) in paragraph (48), by inserting ‘‘, or exempt from 

such registration under such section pursuant to an order 

of the Securities and Exchange Commission,’’ after ‘‘1934’’; 

and 

(E) by amending paragraph (53B) to read as follows: ‘‘(53B) ‘swap agreement’— ‘‘(A) means— ‘‘(i) any agreement, including the terms and conditions incorporated by reference in such agreement, 

which is—

‘‘(I) an interest rate swap, option, future, or 

forward agreement, including a rate floor, rate 

cap, rate collar, cross-currency rate swap, and 

basis swap; ‘‘(II) a spot, same day-tomorrow, tomorrownext, forward, or other foreign exchange or precious metals agreement; ‘‘(III) a currency swap, option, future, or forward agreement; 

‘‘(IV) an equity index or equity swap, option, 

future, or forward agreement;

‘‘(V) a debt index or debt swap, option, future, 

or forward agreement; 

‘‘(VI) a total return, credit spread or credit 

swap, option, future, or forward agreement; 

‘‘(VII) a commodity index or a commodity 

swap, option, future, or forward agreement; or 

‘‘(VIII) a weather swap, weather derivative, or 

weather option; 

‘‘(ii) any agreement or transaction that is similar 

to any other agreement or transaction referred to in 

this paragraph and that—

‘‘(I) is of a type that has been, is presently, or 

in the future becomes, the subject of recurrent dealings in the swap markets (including terms and 

conditions incorporated by reference therein); and 

‘‘(II) is a forward, swap, future, or option on 

one or more rates, currencies, commodities, equity 

securities, or other equity instruments, debt securiVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00139 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
140

ties or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or economic or financial indices or measures of economic 

or financial risk or value; 

‘‘(iii) any combination of agreements or transactions referred to in this subparagraph; ‘‘(iv) any option to enter into an agreement or 

transaction referred to in this subparagraph; ‘‘(v) a master agreement that provides for an agreement or transaction referred to in clause (i), (ii), (iii), 

or (iv), together with all supplements to any such master agreement, and without regard to whether the master agreement contains an agreement or transaction 

that is not a swap agreement under this paragraph, except that the master agreement shall be considered to 

be a swap agreement under this paragraph only with 

respect to each agreement or transaction under the 

master agreement that is referred to in clause (i), (ii), 

(iii), or (iv); or ‘‘(vi) any security agreement or arrangement or 

other credit enhancement related to any agreements or 

transactions referred to in clause (i) through (v), including any guarantee or reimbursement obligation by 

or to a swap participant or financial participant in 

connection with any agreement or transaction referred 

to in any such clause, but not to exceed the damages 

in connection with any such agreement or transaction, 

measured in accordance with section 562 of this title; 

and 

‘‘(B) is applicable for purposes of this title only, and 

shall not be construed or applied so as to challenge or affect 

the characterization, definition, or treatment of any swap 

agreement under any other statute, regulation, or rule, including the Securities Act of 1933, the Securities Exchange 

Act of 1934, the Public Utility Holding Company Act of 

1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the 

Securities Investor Protection Act of 1970, the Commodity 

Exchange Act, the Gramm-Leach-Bliley Act, and the Legal 

Certainty for Bank Products Act of 2000;’’; 

(2) in section 741(7), by striking paragraph (7) and inserting the following: 

‘‘(7) ‘securities contract’—

‘‘(A) means—

‘‘(i) a contract for the purchase, sale, or loan of a 

security, a certificate of deposit, a mortgage loan or any 

interest in a mortgage loan, a group or index of securities, certificates of deposit, or mortgage loans or interests therein (including an interest therein or based on 

the value thereof), or option on any of the foregoing, including an option to purchase or sell any such security, 

certificate of deposit, mortgage loan, interest, group or 

index, or option, and including any repurchase or reVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00140 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
141

verse repurchase transaction on any such security, certificate of deposit, mortgage loan, interest, group or 

index, or option; 

‘‘(ii) any option entered into on a national securities exchange relating to foreign currencies; 

‘‘(iii) the guarantee by or to any securities clearing 

agency of a settlement of cash, securities, certificates of 

deposit, mortgage loans or interests therein, group or 

index of securities, or mortgage loans or interests therein (including any interest therein or based on the value 

thereof), or option on any of the foregoing, including an 

option to purchase or sell any such security, certificate 

of deposit, mortgage loan, interest, group or index, or 

option; 

‘‘(iv) any margin loan; 

‘‘(v) any other agreement or transaction that is 

similar to an agreement or transaction referred to in 

this subparagraph; 

‘‘(vi) any combination of the agreements or transactions referred to in this subparagraph; 

‘‘(vii) any option to enter into any agreement or 

transaction referred to in this subparagraph; 

‘‘(viii) a master agreement that provides for an 

agreement or transaction referred to in clause (i), (ii), 

(iii), (iv), (v), (vi), or (vii), together with all supplements 

to any such master agreement, without regard to 

whether the master agreement provides for an agreement or transaction that is not a securities contract 

under this subparagraph, except that such master 

agreement shall be considered to be a securities contract under this subparagraph only with respect to 

each agreement or transaction under such master 

agreement that is referred to in clause (i), (ii), (iii), (iv), 

(v), (vi), or (vii); or 

‘‘(ix) any security agreement or arrangement or 

other credit enhancement related to any agreement or 

transaction referred to in this subparagraph, including 

any guarantee or reimbursement obligation by or to a 

stockbroker, securities clearing agency, financial institution, or financial participant in connection with any 

agreement or transaction referred to in this subparagraph, but not to exceed the damages in connection 

with any such agreement or transaction, measured in 

accordance with section 562 of this title; and

‘‘(B) does not include any purchase, sale, or repurchase 

obligation under a participation in a commercial mortgage 

loan;’’; and 

(3) in section 761(4)—

(A) by striking ‘‘or’’ at the end of subparagraph (D); 

and 

(B) by adding at the end the following: 

‘‘(F) any other agreement or transaction that is similar 

to an agreement or transaction referred to in this paragraph; 

142

‘‘(G) any combination of the agreements or transactions 

referred to in this paragraph; 

‘‘(H) any option to enter into an agreement or transaction referred to in this paragraph; 

‘‘(I) a master agreement that provides for an agreement 

or transaction referred to in subparagraph (A), (B), (C), (D), 

(E), (F), (G), or (H), together with all supplements to such 

master agreement, without regard to whether the master 

agreement provides for an agreement or transaction that is 

not a commodity contract under this paragraph, except that 

the master agreement shall be considered to be a commodity contract under this paragraph only with respect to 

each agreement or transaction under the master agreement 

that is referred to in subparagraph (A), (B), (C), (D), (E), 

(F), (G), or (H); or 

‘‘(J) any security agreement or arrangement or other 

credit enhancement related to any agreement or transaction 

referred to in this paragraph, including any guarantee or 

reimbursement obligation by or to a commodity broker or 

financial participant in connection with any agreement or 

transaction referred to in this paragraph, but not to exceed 

the damages in connection with any such agreement or 

transaction, measured in accordance with section 562 of 

this title;’’. 

(b) DEFINITIONS OF FINANCIAL INSTITUTION, FINANCIAL PARTICIPANT, AND FORWARD CONTRACT MERCHANT.—Section 101 of title 

11, United States Code, is amended—

(1) by striking paragraph (22) and inserting the following: 

‘‘(22) ‘financial institution’ means—

‘‘(A) a Federal reserve bank, or an entity (domestic or 

foreign) that is a commercial or savings bank, industrial 

savings bank, savings and loan association, trust company, 

or receiver or conservator for such entity and, when any 

such Federal reserve bank, receiver, conservator or entity is 

acting as agent or custodian for a customer in connection 

with a securities contract (as defined in section 741) such 

customer; or 

‘‘(B) in connection with a securities contract (as defined 

in section 741) an investment company registered under the 

Investment Company Act of 1940;’’; 

(2) by inserting after paragraph (22) the following: 

‘‘(22A) ‘financial participant’ means—

‘‘(A) an entity that, at the time it enters into a securities 

contract, commodity contract, swap agreement, repurchase 

agreement, or forward contract, or at the time of the filing 

of the petition, has one or more agreements or transactions 

described in paragraph (1), (2), (3), (4), (5), or (6) of section 

561(a) with the debtor or any other entity (other than an 

affiliate) of a total gross dollar value of not less than 

$1,000,000,000 in notional or actual principal amount outstanding on any day during the previous 15-month period, 

or has gross mark-to-market positions of not less than 

$100,000,000 (aggregated across counterparties) in one or 

more such agreements or transactions with the debtor or 

143

any other entity (other than an affiliate) on any day during 

the previous 15-month period; or ‘‘(B) a clearing organization (as defined in section 402 

of the Federal Deposit Insurance Corporation Improvement 

Act of 1991);’’; and 

(3) by striking paragraph (26) and inserting the following: 

‘‘(26) ‘forward contract merchant’ means a Federal reserve 

bank, or an entity the business of which consists in whole or in 

part of entering into forward contracts as or with merchants in 

a commodity (as defined in section 761) or any similar good, article, service, right, or interest which is presently or in the future becomes the subject of dealing in the forward contract 

trade;’’. (c) DEFINITION OF MASTER NETTING AGREEMENT AND MASTER

NETTING AGREEMENT PARTICIPANT.—Section 101 of title 11, United 

States Code, is amended by inserting after paragraph (38) the following new paragraphs: ‘‘(38A) ‘master netting agreement’— ‘‘(A) means an agreement providing for the exercise of 

rights, including rights of netting, setoff, liquidation, termination, acceleration, or close out, under or in connection 

with one or more contracts that are described in any one 

or more of paragraphs (1) through (5) of section 561(a), or 

any security agreement or arrangement or other credit enhancement related to one or more of the foregoing, including any guarantee or reimbursement obligation related to 1 

or more of the foregoing; and ‘‘(B) if the agreement contains provisions relating to 

agreements or transactions that are not contracts described 

in paragraphs (1) through (5) of section 561(a), shall be 

deemed to be a master netting agreement only with respect 

to those agreements or transactions that are described in 

any one or more of paragraphs (1) through (5) of section 

561(a); 

‘‘(38B) ‘master netting agreement participant’ means an entity that, at any time before the filing of the petition, is a party 

to an outstanding master netting agreement with the debtor;’’.

(d) SWAP AGREEMENTS, SECURITIES CONTRACTS, COMMODITY

CONTRACTS, FORWARD CONTRACTS, REPURCHASE AGREEMENTS, AND

MASTER NETTING AGREEMENTS UNDER THE AUTOMATIC-STAY.—

(1) IN GENERAL.—Section 362(b) of title 11, United States 

Code, as amended by sections 224, 303, 311, 401, and 718, is 

amended—

(A) in paragraph (6), by inserting

‘‘, pledged to, under the control of,’’ after ‘‘held by’’; 

(B) in paragraph (7), by inserting

‘‘, pledged to, under the control of,’’ after ‘‘held by’’; 

(C) by striking paragraph (17) and inserting the following: 

‘‘(17) under subsection (a), of the setoff by a swap participant or financial participant of a mutual debt and claim under 

or in connection with one or more swap agreements that constitutes the setoff of a claim against the debtor for any payment 

or other transfer of property due from the debtor under or in 

connection with any swap agreement against any payment due 

144

to the debtor from the swap participant or financial participant 

under or in connection with any swap agreement or against 

cash, securities, or other property held by, pledged to, under the 

control of, or due from such swap participant or financial participant to margin, guarantee, secure, or settle any swap agreement;’’; and 

(D) by inserting after paragraph (26) the following: ‘‘(27) under subsection (a), of the setoff by a master netting 

agreement participant of a mutual debt and claim under or in 

connection with one or more master netting agreements or any 

contract or agreement subject to such agreements that constitutes the setoff of a claim against the debtor for any payment 

or other transfer of property due from the debtor under or in 

connection with such agreements or any contract or agreement 

subject to such agreements against any payment due to the 

debtor from such master netting agreement participant under or 

in connection with such agreements or any contract or agreement subject to such agreements or against cash, securities, or 

other property held by, pledged to, under the control of, or due 

from such master netting agreement participant to margin, 

guarantee, secure, or settle such agreements or any contract or 

agreement subject to such agreements, to the extent that such 

participant is eligible to exercise such offset rights under paragraph (6), (7), or (17) for each individual contract covered by 

the master netting agreement in issue.’’. (2) LIMITATION.—Section 362 of title 11, United States 

Code, as amended by sections 106, 305, 311, and 441, is 

amended by adding at the end the following: 

‘‘(o) The exercise of rights not subject to the stay arising under 

subsection (a) pursuant to paragraph (6), (7), (17), or (27) of subsection (b) shall not be stayed by any order of a court or administrative agency in any proceeding under this title.’’. (e) LIMITATION OF AVOIDANCE POWERS UNDER MASTER NET- TING AGREEMENT.—Section 546 of title 11, United States Code, is 

amended—

(1) in subsection (g) (as added by section 103 of Public Law 

101–311)—

(A) by striking ‘‘under a swap agreement’’; 

(B) by striking ‘‘in connection with a swap agreement’’

and inserting ‘‘under or in connection with any swap agreement’’; and 

(C) by inserting ‘‘or financial participant’’ after ‘‘swap 

participant’’ each place such term appears; and 

(2) by adding at the end the following: 

‘‘(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and 

548(b) the trustee may not avoid a transfer made by or to a master 

netting agreement participant under or in connection with any master netting agreement or any individual contract covered thereby 

that is made before the commencement of the case, except under section 548(a)(1)(A) and except to the extent that the trustee could otherwise avoid such a transfer made under an individual contract 

covered by such master netting agreement.’’. 

(f) FRAUDULENT TRANSFERS OF MASTER NETTING AGREE- MENTS.—Section 548(d)(2) of title 11, United States Code, is amended—

145

(1) in subparagraph (C), by striking ‘‘and’’ at the end; 

(2) in subparagraph (D), by striking the period and inserting ‘‘; and’’; and 

(3) by adding at the end the following new subparagraph: 

‘‘(E) a master netting agreement participant that receives a 

transfer in connection with a master netting agreement or any 

individual contract covered thereby takes for value to the extent 

of such transfer, except that, with respect to a transfer under 

any individual contract covered thereby, to the extent that such 

master netting agreement participant otherwise did not take (or 

is otherwise not deemed to have taken) such transfer for value.’’. (g) TERMINATION OR ACCELERATION OF SECURITIES CON- TRACTS.—Section 555 of title 11, United States Code, is amended— (1) by amending the section heading to read as follows: 

‘‘§ 555. Contractual right to liquidate, terminate, or accelerate a securities contract’’; 

and 

(2) in the first sentence, by striking ‘‘liquidation’’ and inserting ‘‘liquidation, termination, or acceleration’’. (h) TERMINATION OR ACCELERATION OF COMMODITIES OR FOR- WARD CONTRACTS.—Section 556 of title 11, United States Code, is 

amended—

(1) by amending the section heading to read as follows: 

‘‘§ 556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract’’; 

(2) in the first sentence, by striking ‘‘liquidation’’ and inserting ‘‘liquidation, termination, or acceleration’’; and

(3) in the second sentence, by striking ‘‘As used’’ and all 

that follows through ‘‘right,’’ and inserting ‘‘As used in this section, the term ‘contractual right’ includes a right set forth in a 

rule or bylaw of a derivatives clearing organization (as defined 

in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, 

a national securities association, a securities clearing agency, a 

contract market designated under the Commodity Exchange 

Act, a derivatives transaction execution facility registered under 

the Commodity Exchange Act, or a board of trade (as defined 

in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,’’. 

(i) TERMINATION OR ACCELERATION OF REPURCHASE AGREEMENTS.—Section 559 of title 11, United States Code, is amended—

(1) by amending the section heading to read as follows: 

‘‘§ 559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement’’; 

(2) in the first sentence, by striking ‘‘liquidation’’ and inserting ‘‘liquidation, termination, or acceleration’’; and 

(3) in the third sentence, by striking ‘‘As used’’ and all that 

follows through ‘‘right,’’ and inserting ‘‘As used in this section, 

the term ‘contractual right’ includes a right set forth in a rule 

or bylaw of a derivatives clearing organization (as defined in 

the Commodity Exchange Act), a multilateral clearing organizaVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00145 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
146

tion (as defined in the Federal Deposit Insurance Corporation 

Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a 

derivatives transaction execution facility registered under the 

Commodity Exchange Act, or a board of trade (as defined in the 

Commodity Exchange Act) or in a resolution of the governing 

board thereof and a right,’’. 

(j) LIQUIDATION, TERMINATION, OR ACCELERATION OF SWAP

AGREEMENTS.—Section 560 of title 11, United States Code, is 

amended—

(1) by amending the section heading to read as follows: 

‘‘§ 560. Contractual right to liquidate, terminate, or accelerate a swap agreement’’; 

(2) in the first sentence, by striking ‘‘termination of a swap 

agreement’’ and inserting ‘‘liquidation, termination, or acceleration of one or more swap agreements’’; 

(3) by striking ‘‘in connection with any swap agreement’’

and inserting ‘‘in connection with the termination, liquidation, 

or acceleration of one or more swap agreements’’; and 

(4) in the second sentence, by striking ‘‘As used’’ and all 

that follows through ‘‘right,’’ and inserting ‘‘As used in this section, the term ‘contractual right’ includes a right set forth in a 

rule or bylaw of a derivatives clearing organization (as defined 

in the Commodity Exchange Act), a multilateral clearing organization (as defined in the Federal Deposit Insurance Corporation Improvement Act of 1991), a national securities exchange, 

a national securities association, a securities clearing agency, a 

contract market designated under the Commodity Exchange 

Act, a derivatives transaction execution facility registered under 

the Commodity Exchange Act, or a board of trade (as defined 

in the Commodity Exchange Act) or in a resolution of the governing board thereof and a right,’’. 

(k) LIQUIDATION, TERMINATION, ACCELERATION, OR OFFSET

UNDER A MASTER NETTING AGREEMENT AND ACROSS CONTRACTS.—

(1) IN GENERAL.—Title 11, United States Code, is amended 

by inserting after section 560 the following: 

‘‘§ 561. Contractual right to terminate, liquidate, accelerate, 

or offset under a master netting agreement and 

across contracts; proceedings under chapter 15

‘‘(a) Subject to subsection (b), the exercise of any contractual 

right, because of a condition of the kind specified in section 

365(e)(1), to cause the termination, liquidation, or acceleration of or 

to offset or net termination values, payment amounts, or other 

transfer obligations arising under or in connection with one or more 

(or the termination, liquidation, or acceleration of one or more)—

‘‘(1) securities contracts, as defined in section 741(7); 

‘‘(2) commodity contracts, as defined in section 761(4); 

‘‘(3) forward contracts; 

‘‘(4) repurchase agreements; 

‘‘(5) swap agreements; or 

‘‘(6) master netting agreements, 

147

shall not be stayed, avoided, or otherwise limited by operation of 

any provision of this title or by any order of a court or administrative agency in any proceeding under this title. 

‘‘(b)(1) A party may exercise a contractual right described in 

subsection (a) to terminate, liquidate, or accelerate only to the extent 

that such party could exercise such a right under section 555, 556, 

559, or 560 for each individual contract covered by the master netting agreement in issue. 

‘‘(2) If a debtor is a commodity broker subject to subchapter IV 

of chapter 7—

‘‘(A) a party may not net or offset an obligation to the debtor arising under, or in connection with, a commodity contract 

traded on or subject to the rules of a contract market designated 

under the Commodity Exchange Act or a derivatives transaction 

execution facility registered under the Commodity Exchange Act 

against any claim arising under, or in connection with, other 

instruments, contracts, or agreements listed in subsection (a) except to the extent that the party has positive net equity in the 

commodity accounts at the debtor, as calculated under such 

subchapter; and

‘‘(B) another commodity broker may not net or offset an obligation to the debtor arising under, or in connection with, a 

commodity contract entered into or held on behalf of a customer 

of the debtor and traded on or subject to the rules of a contract 

market designated under the Commodity Exchange Act or a derivatives transaction execution facility registered under the 

Commodity Exchange Act against any claim arising under, or 

in connection with, other instruments, contracts, or agreements 

listed in subsection (a). 

‘‘(3) No provision of subparagraph (A) or (B) of paragraph (2) 

shall prohibit the offset of claims and obligations that arise under—

‘‘(A) a cross-margining agreement or similar arrangement 

that has been approved by the Commodity Futures Trading 

Commission or submitted to the Commodity Futures Trading 

Commission under paragraph (1) or (2) of section 5c(c) of the 

Commodity Exchange Act and has not been abrogated or rendered ineffective by the Commodity Futures Trading Commission; or 

‘‘(B) any other netting agreement between a clearing organization (as defined in section 761) and another entity that has 

been approved by the Commodity Futures Trading Commission. 

‘‘(c) As used in this section, the term ‘contractual right’ includes 

a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral 

clearing organization (as defined in the Federal Deposit Insurance 

Corporation Improvement Act of 1991), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange 

Act, a derivatives transaction execution facility registered under the 

Commodity Exchange Act, or a board of trade (as defined in the 

Commodity Exchange Act) or in a resolution of the governing board 

thereof, and a right, whether or not evidenced in writing, arising 

under common law, under law merchant, or by reason of normal 

business practice. 

148

‘‘(d) Any provisions of this title relating to securities contracts, 

commodity contracts, forward contracts, repurchase agreements, 

swap agreements, or master netting agreements shall apply in a 

case under chapter 15, so that enforcement of contractual provisions 

of such contracts and agreements in accordance with their terms 

will not be stayed or otherwise limited by operation of any provision 

of this title or by order of a court in any case under this title, and 

to limit avoidance powers to the same extent as in a proceeding 

under chapter 7 or 11 of this title (such enforcement not to be limited based on the presence or absence of assets of the debtor in the 

United States).’’. 

(2) CONFORMING AMENDMENT.—The table of sections for 

chapter 5 of title 11, United States Code, is amended by inserting after the item relating to section 560 the following:

‘‘561. Contractual right to terminate, liquidate, accelerate, or offset under a master 

netting agreement and across contracts; proceedings under chapter 15.’’.

(l) COMMODITY BROKER LIQUIDATIONS.—Title 11, United States 

Code, is amended by inserting after section 766 the following:

‘‘§ 767. Commodity broker liquidation and forward contract 

merchants, commodity brokers, stockbrokers, financial institutions, financial participants, securities 

clearing agencies, swap participants, repo participants, and master netting agreement participants 

‘‘Notwithstanding any other provision of this title, the exercise 

of rights by a forward contract merchant, commodity broker, stockbroker, financial institution, financial participant, securities clearing agency, swap participant, repo participant, or master netting 

agreement participant under this title shall not affect the priority of 

any unsecured claim it may have after the exercise of such rights.’’. 

(m) STOCKBROKER LIQUIDATIONS.—Title 11, United States 

Code, is amended by inserting after section 752 the following: 

‘‘§ 753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial 

institutions, financial participants, securities 

clearing agencies, swap participants, repo participants, and master netting agreement participants 

‘‘Notwithstanding any other provision of this title, the exercise 

of rights by a forward contract merchant, commodity broker, stockbroker, financial institution, securities clearing agency, swap participant, repo participant, financial participant, or master netting 

agreement participant under this title shall not affect the priority of 

any unsecured claim it may have after the exercise of such rights.’’. 

(n) SETOFF.—Section 553 of title 11, United States Code, is 

amended—

(1) in subsection (a)(2)(B)(ii), by inserting before the semicolon the following: ‘‘(except for a setoff of a kind described in 

section 362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 

559, 560, or 561)’’; 

(2) in subsection (a)(3)(C), by inserting before the period the 

following: ‘‘(except for a setoff of a kind described in section 

362(b)(6), 362(b)(7), 362(b)(17), 362(b)(27), 555, 556, 559, 560, 

or 561 of this title)’’; and 

149

(3) in subsection (b)(1), by striking ‘‘362(b)(14),’’ and inserting ‘‘362(b)(17), 362(b)(27), 555, 556, 559, 560, 561,’’. 

(o) SECURITIES CONTRACTS, COMMODITY CONTRACTS, AND FORWARD CONTRACTS.—Title 11, United States Code, is amended—

(1) in section 362(b)(6), by striking ‘‘financial institutions,’’

each place such term appears and inserting ‘‘financial institution, financial participant,’’; 

(2) in sections 362(b)(7) and 546(f), by inserting ‘‘or financial participant’’ after ‘‘repo participant’’ each place such term 

appears; 

(3) in section 546(e), by inserting ‘‘financial participant,’’

after ‘‘financial institution,’’; 

(4) in section 548(d)(2)(B), by inserting ‘‘financial participant,’’ after ‘‘financial institution,’’; 

(5) in section 548(d)(2)(C), by inserting ‘‘or financial participant’’ after ‘‘repo participant’’;

(6) in section 548(d)(2)(D), by inserting ‘‘or financial participant’’ after ‘‘swap participant’’; 

(7) in section 555—

(A) by inserting ‘‘financial participant,’’ after ‘‘financial 

institution,’’; and 

(B) by striking the second sentence and inserting the 

following: ‘‘As used in this section, the term ‘contractual 

right’ includes a right set forth in a rule or bylaw of a derivatives clearing organization (as defined in the Commodity Exchange Act), a multilateral clearing organization 

(as defined in the Federal Deposit Insurance Corporation 

Improvement Act of 1991), a national securities exchange, 

a national securities association, a securities clearing agency, a contract market designated under the Commodity Exchange Act, a derivatives transaction execution facility registered under the Commodity Exchange Act, or a board of 

trade (as defined in the Commodity Exchange Act), or in a 

resolution of the governing board thereof, and a right, 

whether or not in writing, arising under common law, 

under law merchant, or by reason of normal business practice’’; 

(8) in section 556, by inserting ‘‘, financial participant,’’

after ‘‘commodity broker’’; 

(9) in section 559, by inserting ‘‘or financial participant’’

after ‘‘repo participant’’ each place such term appears; and 

(10) in section 560, by inserting ‘‘or financial participant’’

after ‘‘swap participant’’. 

(p) CONFORMING AMENDMENTS.—Title 11, United States Code, 

is amended—

(1) in the table of sections for chapter 5—

(A) by amending the items relating to sections 555 and 

556 to read as follows:

‘‘555. Contractual right to liquidate, terminate, or accelerate a securities contract. 

‘‘556. Contractual right to liquidate, terminate, or accelerate a commodities contract 

or forward contract.’’;

and 

(B) by amending the items relating to sections 559 and 

560 to read as follows:

150

‘‘559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement. 

‘‘560. Contractual right to liquidate, terminate, or accelerate a swap agreement.’’;

and 

(2) in the table of sections for chapter 7—

(A) by inserting after the item relating to section 766 

the following:

‘‘767. Commodity broker liquidation and forward contract merchants, commodity 

brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants.’’;

and 

(B) by inserting after the item relating to section 752 

the following:

‘‘753. Stockbroker liquidation and forward contract merchants, commodity brokers, 

stockbrokers, financial institutions, financial participants, securities 

clearing agencies, swap participants, repo participants, and master netting agreement participants.’’.

SEC. 908. RECORDKEEPING REQUIREMENTS. 

Section 11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C. 

1821(e)(8)) is amended by adding at the end the following new subparagraph: 

‘‘(H) RECORDKEEPING REQUIREMENTS.—The Corporation, in consultation with the appropriate Federal banking 

agencies, may prescribe regulations requiring more detailed 

recordkeeping by any insured depository institution with respect to qualified financial contracts (including market 

valuations) only if such insured depository institution is in 

a troubled condition (as such term is defined by the Corporation pursuant to section 32).’’. 

SEC. 909. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION REQUIREMENT. 

Section 13(e)(2) of the Federal Deposit Insurance Act (12 U.S.C. 

1823(e)(2)) is amended to read as follows: 

‘‘(2) EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION REQUIREMENT.—An agreement to provide for the lawful 

collateralization of—

‘‘(A) deposits of, or other credit extension by, a Federal, 

State, or local governmental entity, or of any depositor referred to in section 11(a)(2), including an agreement to provide collateral in lieu of a surety bond; 

‘‘(B) bankruptcy estate funds pursuant to section 

345(b)(2) of title 11, United States Code; 

‘‘(C) extensions of credit, including any overdraft, from 

a Federal reserve bank or Federal home loan bank; or 

‘‘(D) one or more qualified financial contracts, as defined in section 11(e)(8)(D),

shall not be deemed invalid pursuant to paragraph (1)(B) solely 

because such agreement was not executed contemporaneously 

with the acquisition of the collateral or because of pledges, delivery, or substitution of the collateral made in accordance with 

such agreement.’’. 

SEC. 910. DAMAGE MEASURE. 

(a) IN GENERAL.—Title 11, United States Code, is amended—

151

(1) by inserting after section 561, as added by section 907, 

the following: 

‘‘§ 562. Timing of damage measurement in connection with 

swap agreements, securities contracts, forward contracts, commodity contracts, repurchase agreements, and master netting agreements 

‘‘(a) If the trustee rejects a swap agreement, securities contract 

(as defined in section 741), forward contract, commodity contract 

(as defined in section 761), repurchase agreement, or master netting 

agreement pursuant to section 365(a), or if a forward contract merchant, stockbroker, financial institution, securities clearing agency, 

repo participant, financial participant, master netting agreement 

participant, or swap participant liquidates, terminates, or accelerates such contract or agreement, damages shall be measured as of 

the earlier of— ‘‘(1) the date of such rejection; or 

‘‘(2) the date or dates of such liquidation, termination, or 

acceleration. 

‘‘(b) If there are not any commercially reasonable determinants 

of value as of any date referred to in paragraph (1) or (2) of subsection (a), damages shall be measured as of the earliest subsequent 

date or dates on which there are commercially reasonable determinants of value.

‘‘(c) For the purposes of subsection (b), if damages are not measured as of the date or dates of rejection, liquidation, termination, or 

acceleration, and the forward contract merchant, stockbroker, financial institution, securities clearing agency, repo participant, financial participant, master netting agreement participant, or swap participant or the trustee objects to the timing of the measurement of 

damages—

‘‘(1) the trustee, in the case of an objection by a forward 

contract merchant, stockbroker, financial institution, securities 

clearing agency, repo participant, financial participant, master 

netting agreement participant, or swap participant; or ‘‘(2) the forward contract merchant, stockbroker, financial 

institution, securities clearing agency, repo participant, financial participant, master netting agreement participant, or swap 

participant, in the case of an objection by the trustee, 

has the burden of proving that there were no commercially reasonable determinants of value as of such date or dates.’’; and 

(2) in the table of sections for chapter 5, by inserting after 

the item relating to section 561 (as added by section 907) the 

following new item:

‘‘562. Timing of damage measure in connection with swap agreements, securities contracts, forward contracts, commodity contracts, repurchase agreements, 

or master netting agreements.’’.

(b) CLAIMS ARISING FROM REJECTION.—Section 502(g) of title 

11, United States Code, is amended—

(1) by inserting ‘‘(1)’’ after ‘‘(g)’’; and 

(2) by adding at the end the following: 

‘‘(2) A claim for damages calculated in accordance with section 

562 of this title shall be allowed under subsection (a), (b), or (c), or 

disallowed under subsection (d) or (e), as if such claim had arisen 

before the date of the filing of the petition.’’. 

152

SEC. 911. SIPC STAY. 

Section 5(b)(2) of the Securities Investor Protection Act of 1970 

(15 U.S.C. 78eee(b)(2)) is amended by adding at the end the following new subparagraph: 

‘‘(C) EXCEPTION FROM STAY.—

‘‘(i) Notwithstanding section 362 of title 11, United 

States Code, neither the filing of an application under 

subsection (a)(3) nor any order or decree obtained by 

SIPC from the court shall operate as a stay of any contractual rights of a creditor to liquidate, terminate, or 

accelerate a securities contract, commodity contract, 

forward contract, repurchase agreement, swap agreement, or master netting agreement, as those terms are 

defined in sections 101, 741, and 761 of title 11, United 

States Code, to offset or net termination values, payment amounts, or other transfer obligations arising 

under or in connection with one or more of such contracts or agreements, or to foreclose on any cash collateral pledged by the debtor, whether or not with respect 

to one or more of such contracts or agreements. 

‘‘(ii) Notwithstanding clause (i), such application, 

order, or decree may operate as a stay of the foreclosure 

on, or disposition of, securities collateral pledged by the 

debtor, whether or not with respect to one or more of 

such contracts or agreements, securities sold by the 

debtor under a repurchase agreement, or securities lent 

under a securities lending agreement. 

‘‘(iii) As used in this subparagraph, the term ‘contractual right’ includes a right set forth in a rule or 

bylaw of a national securities exchange, a national securities association, or a securities clearing agency, a 

right set forth in a bylaw of a clearing organization or 

contract market or in a resolution of the governing 

board thereof, and a right, whether or not in writing, 

arising under common law, under law merchant, or by 

reason of normal business practice.’’.

TITLE X—PROTECTION OF FAMILY 

FARMERS AND FAMILY FISHERMEN 

SEC. 1001. PERMANENT REENACTMENT OF CHAPTER 12. 

(a) REENACTMENT.—

(1) IN GENERAL.—Chapter 12 of title 11, United States 

Code, as reenacted by section 149 of division C of the Omnibus 

Consolidated and Emergency Supplemental Appropriations Act, 

1999 (Public Law 105–277), is hereby reenacted, and as here reenacted is amended by this Act. 

(2) EFFECTIVE DATE.—Subsection (a) shall take effect on the 

date of the enactment of this Act. 

(b) CONFORMING AMENDMENT.—Section 302 of the Bankruptcy 

Judges, United States Trustees, and Family Farmer Bankruptcy Act 

of 1986 (28 U.S.C. 581 note) is amended by striking subsection (f).

153

SEC. 1002. DEBT LIMIT INCREASE. 

Section 104(b) of title 11, United States Code, as amended by 

section 226, is amended by inserting ‘‘101(18),’’ after ‘‘101(3),’’ each 

place it appears. 

SEC. 1003. CERTAIN CLAIMS OWED TO GOVERNMENTAL UNITS. 

(a) CONTENTS OF PLAN.—Section 1222(a)(2) of title 11, United 

States Code, is amended to read as follows: 

‘‘(2) provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507, unless—

‘‘(A) the claim is a claim owed to a governmental unit 

that arises as a result of the sale, transfer, exchange, or 

other disposition of any farm asset used in the debtor’s 

farming operation, in which case the claim shall be treated 

as an unsecured claim that is not entitled to priority under 

section 507, but the debt shall be treated in such manner 

only if the debtor receives a discharge; or 

‘‘(B) the holder of a particular claim agrees to a different treatment of that claim;’’. 

(b) SPECIAL NOTICE PROVISIONS.—Section 1231(b) of title 11, 

United States Code, as so designated by section 719, is amended by 

striking ‘‘a State or local governmental unit’’ and inserting ‘‘any 

governmental unit’’.

(c) EFFECTIVE DATE; APPLICATION OF AMENDMENTS.—This section and the amendments made by this section shall take effect on 

the date of the enactment of this Act and shall not apply with respect to cases commenced under title 11 of the United States Code 

before such date.

SEC. 1004. DEFINITION OF FAMILY FARMER. 

Section 101(18) of title 11, United States Code, is amended—

(1) in subparagraph (A)—

(A) by striking ‘‘$1,500,000’’ and inserting 

‘‘$3,237,000’’; and 

(B) by striking ‘‘80’’ and inserting ‘‘50’’; and 

(2) in subparagraph (B)(ii)—

(A) by striking ‘‘$1,500,000’’ and inserting 

‘‘$3,237,000’’; and 

(B) by striking ‘‘80’’ and inserting ‘‘50’’.

SEC. 1005. ELIMINATION OF REQUIREMENT THAT FAMILY FARMER 

AND SPOUSE RECEIVE OVER 50 PERCENT OF INCOME 

FROM FARMING OPERATION IN YEAR PRIOR TO BANKRUPTCY. 

Section 101(18)(A) of title 11, United States Code, is amended 

by striking ‘‘for the taxable year preceding the taxable year’’ and inserting the following: ‘‘for— ‘‘(i) the taxable year preceding; or 

‘‘(ii) each of the 2d and 3d taxable years preceding; 

the taxable year’’.

SEC. 1006. PROHIBITION OF RETROACTIVE ASSESSMENT OF DISPOSABLE INCOME. 

(a) CONFIRMATION OF PLAN.—Section 1225(b)(1) of title 11, 

United States Code, is amended—

(1) in subparagraph (A) by striking ‘‘or’’ at the end; 

154

(2) in subparagraph (B) by striking the period at the end 

and inserting ‘‘; or’’; and 

(3) by adding at the end the following: 

‘‘(C) the value of the property to be distributed under the 

plan in the 3-year period, or such longer period as the court 

may approve under section 1222(c), beginning on the date that 

the first distribution is due under the plan is not less than the 

debtor’s projected disposable income for such period.’’. (b) MODIFICATION OF PLAN.—Section 1229 of title 11, United 

States Code, is amended by adding at the end the following: ‘‘(d) A plan may not be modified under this section— ‘‘(1) to increase the amount of any payment due before the 

plan as modified becomes the plan; ‘‘(2) by anyone except the debtor, based on an increase in 

the debtor’s disposable income, to increase the amount of payments to unsecured creditors required for a particular month so 

that the aggregate of such payments exceeds the debtor’s disposable income for such month; or ‘‘(3) in the last year of the plan by anyone except the debtor, 

to require payments that would leave the debtor with insufficient funds to carry on the farming operation after the plan is 

completed.’’.

SEC. 1007. FAMILY FISHERMEN. 

(a) DEFINITIONS.—Section 101 of title 11, United States Code, 

is amended— (1) by inserting after paragraph (7) the following: 

‘‘(7A) ‘commercial fishing operation’ means— ‘‘(A) the catching or harvesting of fish, shrimp, lobsters, 

urchins, seaweed, shellfish, or other aquatic species or 

products of such species; or ‘‘(B) for purposes of section 109 and chapter 12, aquaculture activities consisting of raising for market any species or product described in subparagraph (A); 

‘‘(7B) ‘commercial fishing vessel’ means a vessel used by a 

family fisherman to carry out a commercial fishing operation;’’; 

and 

(2) by inserting after paragraph (19) the following: 

‘‘(19A) ‘family fisherman’ means— ‘‘(A) an individual or individual and spouse engaged in 

a commercial fishing operation— ‘‘(i) whose aggregate debts do not exceed 

$1,500,000 and not less than 80 percent of whose aggregate noncontingent, liquidated debts (excluding a 

debt for the principal residence of such individual or 

such individual and spouse, unless such debt arises 

out of a commercial fishing operation), on the date the 

case is filed, arise out of a commercial fishing operation owned or operated by such individual or such individual and spouse; and 

‘‘(ii) who receive from such commercial fishing operation more than 50 percent of such individual’s or 

such individual’s and spouse’s gross income for the taxable year preceding the taxable year in which the case 

concerning such individual or such individual and 

spouse was filed; or 

155

‘‘(B) a corporation or partnership— ‘‘(i) in which more than 50 percent of the outstanding stock or equity is held by— ‘‘(I) 1 family that conducts the commercial 

fishing operation; or ‘‘(II) 1 family and the relatives of the members 

of such family, and such family or such relatives 

conduct the commercial fishing operation; and 

‘‘(ii)(I) more than 80 percent of the value of its assets consists of assets related to the commercial fishing 

operation; ‘‘(II) its aggregate debts do not exceed $1,500,000 

and not less than 80 percent of its aggregate noncontingent, liquidated debts (excluding a debt for 1 dwelling 

which is owned by such corporation or partnership and 

which a shareholder or partner maintains as a principal residence, unless such debt arises out of a commercial fishing operation), on the date the case is filed, 

arise out of a commercial fishing operation owned or 

operated by such corporation or such partnership; and ‘‘(III) if such corporation issues stock, such stock is 

not publicly traded; ‘‘(19B) ‘family fisherman with regular annual income’ means a family fisherman whose annual income is sufficiently 

stable and regular to enable such family fisherman to make 

payments under a plan under chapter 12 of this title;’’. (b) WHO MAY BE A DEBTOR.—Section 109(f) of title 11, United 

States Code, is amended by inserting ‘‘or family fisherman’’ after ‘‘family farmer’’. (c) CHAPTER 12.—Chapter 12 of title 11, United States Code, is 

amended—

(1) in the chapter heading, by inserting ‘‘OR FISHERMAN’’ after ‘‘FAMILY FARMER’’; 

(2) in section 1203, by inserting ‘‘or commercial fishing operation’’ after ‘‘farm’’; and 

(3) in section 1206, by striking ‘‘if the property is farmland 

or farm equipment’’ and inserting ‘‘if the property is farmland, 

farm equipment, or property used to carry out a commercial 

fishing operation (including a commercial fishing vessel)’’. (d) CLERICAL AMENDMENT.—In the table of chapters for title 11, 

United States Code, the item relating to chapter 12, is amended to 

read as follows:

‘‘12. Adjustments of Debts of a Family Farmer or Family Fisherman 

with Regular Annual Income .......................................... 1201’’.

(e) APPLICABILITY.—Nothing in this section shall change, affect, 

or amend the Fishery Conservation and Management Act of 1976 

(16 U.S.C. 1801, et seq.). 

TITLE XI—HEALTH CARE AND 

EMPLOYEE BENEFITS 

SEC. 1101. DEFINITIONS. 

(a) HEALTH CARE BUSINESS DEFINED.—Section 101 of title 11, 

United States Code, as amended by section 306, is amended—

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(1) by redesignating paragraph (27A) as paragraph (27B); 

and 

(2) by inserting after paragraph (27) the following: 

‘‘(27A) ‘health care business’— ‘‘(A) means any public or private entity (without regard 

to whether that entity is organized for profit or not for profit) that is primarily engaged in offering to the general public facilities and services for— ‘‘(i) the diagnosis or treatment of injury, deformity, 

or disease; and ‘‘(ii) surgical, drug treatment, psychiatric, or obstetric care; and 

‘‘(B) includes— ‘‘(i) any— ‘‘(I) general or specialized hospital; 

‘‘(II) ancillary ambulatory, emergency, or surgical treatment facility; ‘‘(III) hospice; 

‘‘(IV) home health agency; and 

‘‘(V) other health care institution that is similar to an entity referred to in subclause (I), (II), 

(III), or (IV); and 

‘‘(ii) any long-term care facility, including any— ‘‘(I) skilled nursing facility; 

‘‘(II) intermediate care facility; 

‘‘(III) assisted living facility; 

‘‘(IV) home for the aged; 

‘‘(V) domiciliary care facility; and 

‘‘(VI) health care institution that is related to 

a facility referred to in subclause (I), (II), (III), 

(IV), or (V), if that institution is primarily engaged 

in offering room, board, laundry, or personal assistance with activities of daily living and 

incidentals to activities of daily living;’’. (b) PATIENT AND PATIENT RECORDS DEFINED.—Section 101 of 

title 11, United States Code, is amended by inserting after paragraph (40) the following: ‘‘(40A) ‘patient’ means any person who obtains or receives 

services from a health care business; ‘‘(40B) ‘patient records’ means any written document relating to a patient or a record recorded in a magnetic, optical, or 

other form of electronic medium;’’. 

(c) RULE OF CONSTRUCTION.—The amendments made by subsection (a) of this section shall not affect the interpretation of section 

109(b) of title 11, United States Code. 

SEC. 1102. DISPOSAL OF PATIENT RECORDS. 

(a) IN GENERAL.—Subchapter III of chapter 3 of title 11, United 

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

‘‘§ 351. Disposal of patient records 

‘‘If a health care business commences a case under chapter 7, 

9, or 11, and the trustee does not have a sufficient amount of funds 

to pay for the storage of patient records in the manner required 

under applicable Federal or State law, the following requirements 

shall apply: 

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‘‘(1) The trustee shall—

‘‘(A) promptly publish notice, in 1 or more appropriate 

newspapers, that if patient records are not claimed by the 

patient or an insurance provider (if applicable law permits 

the insurance provider to make that claim) by the date that 

is 365 days after the date of that notification, the trustee 

will destroy the patient records; and 

‘‘(B) during the first 180 days of the 365-day period described in subparagraph (A), promptly attempt to notify directly each patient that is the subject of the patient records 

and appropriate insurance carrier concerning the patient 

records by mailing to the most recent known address of 

that patient, or a family member or contact person for that 

patient, and to the appropriate insurance carrier an appropriate notice regarding the claiming or disposing of patient 

records. 

‘‘(2) If, after providing the notification under paragraph (1), 

patient records are not claimed during the 365-day period described under that paragraph, the trustee shall mail, by certified mail, at the end of such 365-day period a written request 

to each appropriate Federal agency to request permission from 

that agency to deposit the patient records with that agency, except that no Federal agency is required to accept patient records 

under this paragraph. 

‘‘(3) If, following the 365-day period described in paragraph 

(2) and after providing the notification under paragraph (1), 

patient records are not claimed by a patient or insurance provider, or request is not granted by a Federal agency to deposit 

such records with that agency, the trustee shall destroy those 

records by—

‘‘(A) if the records are written, shredding or burning 

the records; or 

‘‘(B) if the records are magnetic, optical, or other electronic records, by otherwise destroying those records so that 

those records cannot be retrieved.’’. 

(b) CLERICAL AMENDMENT.—The table of sections for subchapter III of chapter 3 of title 11, United States Code, is amended 

by adding at the end the following:

‘‘351. Disposal of patient records.’’.

SEC. 1103. ADMINISTRATIVE EXPENSE CLAIM FOR COSTS OF CLOSING 

A HEALTH CARE BUSINESS AND OTHER ADMINISTRATIVE 

EXPENSES. 

Section 503(b) of title 11, United States Code, as amended by 

section 445, is amended by adding at the end the following: 

‘‘(8) the actual, necessary costs and expenses of closing a 

health care business incurred by a trustee or by a Federal agency (as defined in section 551(1) of title 5) or a department or 

agency of a State or political subdivision thereof, including any 

cost or expense incurred— ‘‘(A) in disposing of patient records in accordance with 

section 351; or ‘‘(B) in connection with transferring patients from the 

health care business that is in the process of being closed 

to another health care business; and’’.

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SEC. 1104. APPOINTMENT OF OMBUDSMAN TO ACT AS PATIENT ADVOCATE. 

(a) OMBUDSMAN TO ACT AS PATIENT ADVOCATE.—

(1) APPOINTMENT OF OMBUDSMAN.—Title 11, United States 

Code, as amended by section 232, is amended by inserting after 

section 332 the following: 

‘‘§ 333. Appointment of patient care ombudsman 

‘‘(a)(1) If the debtor in a case under chapter 7, 9, or 11 is a 

health care business, the court shall order, not later than 30 days 

after the commencement of the case, the appointment of an ombudsman to monitor the quality of patient care and to represent the interests of the patients of the health care business unless the court 

finds that the appointment of such ombudsman is not necessary for 

the protection of patients under the specific facts of the case. 

‘‘(2)(A) If the court orders the appointment of an ombudsman 

under paragraph (1), the United States trustee shall appoint 1 disinterested person (other than the United States trustee) to serve as 

such ombudsman. 

‘‘(B) If the debtor is a health care business that provides longterm care, then the United States trustee may appoint the State 

Long-Term Care Ombudsman appointed under the Older Americans 

Act of 1965 for the State in which the case is pending to serve as 

the ombudsman required by paragraph (1). 

‘‘(C) If the United States trustee does not appoint a State LongTerm Care Ombudsman under subparagraph (B), the court shall 

notify the State Long-Term Care Ombudsman appointed under the 

Older Americans Act of 1965 for the State in which the case is pending, of the name and address of the person who is appointed under 

subparagraph (A). 

‘‘(b) An ombudsman appointed under subsection (a) shall—

‘‘(1) monitor the quality of patient care provided to patients 

of the debtor, to the extent necessary under the circumstances, 

including interviewing patients and physicians; 

‘‘(2) not later than 60 days after the date of appointment, 

and not less frequently than at 60-day intervals thereafter, report to the court, at a hearing or in writing, regarding the quality of patient care provided to patients of the debtor; and 

‘‘(3) if such ombudsman determines that the quality of patient care provided to patients of the debtor is declining significantly or is otherwise being materially compromised, file with 

the court a motion or a written report, with notice to the parties 

in interest immediately upon making such determination. 

‘‘(c)(1) An ombudsman appointed under subsection (a) shall 

maintain any information obtained by such ombudsman under this 

section that relates to patients (including information relating to patient records) as confidential information. Such ombudsman may 

not review confidential patient records unless the court approves 

such review in advance and imposes restrictions on such ombudsman to protect the confidentiality of such records. 

‘‘(2) An ombudsman appointed under subsection (a)(2)(B) shall 

have access to patient records consistent with authority of such ombudsman under the Older Americans Act of 1965 and under nonFederal laws governing the State Long-Term Care Ombudsman program.’’. 

159

(2) CLERICAL AMENDMENT.—The table of sections for subchapter II of chapter 3 of title 11, United States Code, as 

amended by section 232, is amended by adding at the end the 

following:

‘‘333. Appointment of ombudsman.’’.

(b) COMPENSATION OF OMBUDSMAN.—Section 330(a)(1) of title 

11, United States Code, is amended—

(1) in the matter preceding subparagraph (A), by inserting 

‘‘an ombudsman appointed under section 333, or’’ before ‘‘a professional person’’; and 

(2) in subparagraph (A), by inserting ‘‘ombudsman,’’ before 

‘‘professional person’’. 

SEC. 1105. DEBTOR IN POSSESSION; DUTY OF TRUSTEE TO TRANSFER 

PATIENTS. 

(a) IN GENERAL.—Section 704(a) of title 11, United States Code, 

as amended by sections 102, 219, and 446, is amended by adding 

at the end the following: 

‘‘(12) use all reasonable and best efforts to transfer patients 

from a health care business that is in the process of being 

closed to an appropriate health care business that—

‘‘(A) is in the vicinity of the health care business that 

is closing; 

‘‘(B) provides the patient with services that are substantially similar to those provided by the health care business that is in the process of being closed; and 

‘‘(C) maintains a reasonable quality of care.’’. 

(b) CONFORMING AMENDMENT.—Section 1106(a)(1) of title 11, 

United States Code, as amended by section 446, is amended by 

striking ‘‘and (11)’’ and inserting ‘‘(11), and (12)’’. 

SEC. 1106. EXCLUSION FROM PROGRAM PARTICIPATION NOT SUBJECT 

TO AUTOMATIC STAY. 

Section 362(b) of title 11, United States Code, is amended by inserting after paragraph (27), as amended by sections 224, 303, 311, 

401, 718, and 907, the following: 

‘‘(28) under subsection (a), of the exclusion by the Secretary 

of Health and Human Services of the debtor from participation 

in the medicare program or any other Federal health care program (as defined in section 1128B(f) of the Social Security Act 

pursuant to title XI of such Act or title XVIII of such Act.’’. 

TITLE XII—TECHNICAL AMENDMENTS 

SEC. 1201. DEFINITIONS. 

Section 101 of title 11, United States Code, as hereinbefore 

amended by this Act, is amended—

(1) by striking ‘‘In this title—’’ and inserting ‘‘In this title 

the following definitions shall apply:’’; 

(2) in each paragraph, by inserting ‘‘The term’’ after the 

paragraph designation; 

(3) in paragraph (35)(B), by striking ‘‘paragraphs (21B) 

and (33)(A)’’ and inserting ‘‘paragraphs (23) and (35)’’; 

(4) in each of paragraphs (35A), (38), and (54A), by striking 

‘‘; and’’ at the end and inserting a period; 

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(5) in paragraph (51B)—

(A) by inserting ‘‘who is not a family farmer’’ after 

‘‘debtor’’ the first place it appears; and

(B) by striking ‘‘thereto having aggregate’’ and all that 

follows through the end of the paragraph and inserting a 

semicolon; 

(6) by striking paragraph (54) and inserting the following: 

‘‘(54) The term ‘transfer’ means—

‘‘(A) the creation of a lien; 

‘‘(B) the retention of title as a security interest; 

‘‘(C) the foreclosure of a debtor’s equity of redemption; 

or 

‘‘(D) each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting 

with—

‘‘(i) property; or 

‘‘(ii) an interest in property;’’; 

(7) by indenting the left margin of paragraph (54A) 2 ems 

to the right; and 

(8) in each of paragraphs (1) through (35), in each of paragraphs (36), (37), (38A), (38B) and (39A), and in each of paragraphs (40) through (55), by striking the semicolon at the end 

and inserting a period. 

SEC. 1202. ADJUSTMENT OF DOLLAR AMOUNTS. 

Section 104 of title 11, United States Code, is amended by inserting ‘‘522(f)(3),’’ after ‘‘522(d),’’ each place it appears. 

SEC. 1203. EXTENSION OF TIME. 

Section 108(c)(2) of title 11, United States Code, is amended by 

striking ‘‘922’’ and all that follows through ‘‘or’’, and inserting ‘‘922, 

1201, or’’. 

SEC. 1204. TECHNICAL AMENDMENTS. 

Title 11, United States Code, is amended—

(1) in section 109(b)(2), by striking ‘‘subsection (c) or (d) of’’; 

and 

(2) in section 552(b)(1), by striking ‘‘product’’ each place it 

appears and inserting ‘‘products’’. 

SEC. 1205. PENALTY FOR PERSONS WHO NEGLIGENTLY OR FRAUDULENTLY PREPARE BANKRUPTCY PETITIONS. 

Section 110(j)(4) of title 11, United States Code, as so redesignated by section 221, is amended by striking ‘‘attorney’s’’ and inserting ‘‘attorneys’ ’’. 

SEC. 1206. LIMITATION ON COMPENSATION OF PROFESSIONAL PERSONS. 

Section 328(a) of title 11, United States Code, is amended by 

inserting ‘‘on a fixed or percentage fee basis,’’ after ‘‘hourly basis,’’. 

SEC. 1207. EFFECT OF CONVERSION. 

Section 348(f)(2) of title 11, United States Code, is amended by 

inserting ‘‘of the estate’’ after ‘‘property’’ the first place it appears. 

SEC. 1208. ALLOWANCE OF ADMINISTRATIVE EXPENSES. 

Section 503(b)(4) of title 11, United States Code, is amended by 

inserting ‘‘subparagraph (A), (B), (C), (D), or (E) of’’ before ‘‘paragraph (3)’’. 

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SEC. 1209. EXCEPTIONS TO DISCHARGE. 

Section 523, and of title 11, United States Code, as amended 

by sections 215 and 314, is amended—

(1) by transferring paragraph (15), as added by section 

304(e) of Public Law 103–394 (108 Stat. 4133), so as to insert 

such paragraph after subsection (a)(14A); 

(2) in subsection (a)(9), by striking ‘‘motor vehicle’’ and inserting ‘‘motor vehicle, vessel, or aircraft’’; and 

(3) in subsection (e), by striking ‘‘a insured’’ and inserting 

‘‘an insured’’. 

SEC. 1210. EFFECT OF DISCHARGE. 

Section 524(a)(3) of title 11, United States Code, is amended by 

striking ‘‘section 523’’ and all that follows through ‘‘or that’’ and inserting ‘‘section 523, 1228(a)(1), or 1328(a)(1), or that’’. 

SEC. 1211. PROTECTION AGAINST DISCRIMINATORY TREATMENT. 

Section 525(c) of title 11, United States Code, is amended—

(1) in paragraph (1), by inserting ‘‘student’’ before ‘‘grant’’

the second place it appears; and 

(2) in paragraph (2), by striking ‘‘the program operated 

under part B, D, or E of’’ and inserting ‘‘any program operated 

under’’. 

SEC. 1212. PROPERTY OF THE ESTATE. 

Section 541(b)(4)(B)(ii) of title 11, United States Code, is 

amended by inserting ‘‘365 or’’ before ‘‘542’’. 

SEC. 1213. PREFERENCES. 

(a) IN GENERAL.—Section 547 of title 11, United States Code, 

as amended by section 201, is amended—

(1) in subsection (b), by striking ‘‘subsection (c)’’ and inserting ‘‘subsections (c) and (i)’’; and 

(2) by adding at the end the following: 

‘‘(i) If the trustee avoids under subsection (b) a transfer made 

between 90 days and 1 year before the date of the filing of the petition, by the debtor to an entity that is not an insider for the benefit 

of a creditor that is an insider, such transfer shall be considered to 

be avoided under this section only with respect to the creditor that 

is an insider.’’. 

(b) APPLICABILITY.—The amendments made by this section shall 

apply to any case that is pending or commenced on or after the date 

of enactment of this Act. 

SEC. 1214. POSTPETITION TRANSACTIONS. 

Section 549(c) of title 11, United States Code, is amended— (1) by inserting ‘‘an interest in’’ after ‘‘transfer of’’ each 

place it appears; 

(2) by striking ‘‘such property’’ and inserting ‘‘such real 

property’’; and 

(3) by striking ‘‘the interest’’ and inserting ‘‘such interest’’. 

SEC. 1215. DISPOSITION OF PROPERTY OF THE ESTATE. 

Section 726(b) of title 11, United States Code, is amended by 

striking ‘‘1009,’’. 

SEC. 1216. GENERAL PROVISIONS. 

Section 901(a) of title 11, United States Code, is amended by 

inserting ‘‘1123(d),’’ after ‘‘1123(b),’’. 

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SEC. 1217. ABANDONMENT OF RAILROAD LINE. 

Section 1170(e)(1) of title 11, United States Code, is amended 

by striking ‘‘section 11347’’ and inserting ‘‘section 11326(a)’’.

SEC. 1218. CONTENTS OF PLAN. 

Section 1172(c)(1) of title 11, United States Code, is amended 

by striking ‘‘section 11347’’ and inserting ‘‘section 11326(a)’’. 

SEC. 1219. BANKRUPTCY CASES AND PROCEEDINGS. 

Section 1334(d) of title 28, United States Code, is amended— (1) by striking ‘‘made under this subsection’’ and inserting ‘‘made under subsection (c)’’; and 

(2) by striking ‘‘This subsection’’ and inserting ‘‘Subsection 

(c) and this subsection’’. 

SEC. 1220. KNOWING DISREGARD OF BANKRUPTCY LAW OR RULE. 

Section 156(a) of title 18, United States Code, is amended— (1) in the first undesignated paragraph— (A) by inserting ‘‘(1) the term’’ before ‘‘ ‘bankruptcy’’; 

and 

(B) by striking the period at the end and inserting ‘‘; 

and’’; and 

(2) in the second undesignated paragraph— (A) by inserting ‘‘(2) the term’’ before ‘‘ ‘document’’; and 

(B) by striking ‘‘this title’’ and inserting ‘‘title 11’’. 

SEC. 1221. TRANSFERS MADE BY NONPROFIT CHARITABLE CORPORATIONS. 

(a) SALE OF PROPERTY OF ESTATE.—Section 363(d) of title 11, 

United States Code, is amended by striking ‘‘only’’ and all that follows through the end of the subsection and inserting ‘‘only— ‘‘(1) in accordance with applicable nonbankruptcy law that 

governs the transfer of property by a corporation or trust that 

is not a moneyed, business, or commercial corporation or trust; 

and ‘‘(2) to the extent not inconsistent with any relief granted 

under subsection (c), (d), (e), or (f) of section 362.’’. 

(b) CONFIRMATION OF PLAN FOR REORGANIZATION.—Section 

1129(a) of title 11, United States Code, as amended by sections 213, 

321, and 331, is amended by adding at the end the following: 

‘‘(17) All transfers of property of the plan shall be made in 

accordance with any applicable provisions of nonbankruptcy 

law that govern the transfer of property by a corporation or 

trust that is not a moneyed, business, or commercial corporation or trust.’’. 

(c) TRANSFER OF PROPERTY.—Section 541 of title 11, United 

States Code, as amended by section 225, is amended by adding at 

the end the following: 

‘‘(f) Notwithstanding any other provision of this title, property 

that is held by a debtor that is a corporation described in section 

501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax 

under section 501(a) of such Code may be transferred to an entity 

that is not such a corporation, but only under the same conditions 

as would apply if the debtor had not filed a case under this title.’’. 

(d) APPLICABILITY.—The amendments made by this section 

shall apply to a case pending under title 11, United States Code, 

on the date of enactment of this Act, or filed under that title on or 

after that date of enactment, except that the court shall not confirm 

163

a plan under chapter 11 of title 11, United States Code, without 

considering whether this section would substantially affect the 

rights of a party in interest who first acquired rights with respect 

to the debtor after the date of the petition. The parties who may appear and be heard in a proceeding under this section include the attorney general of the State in which the debtor is incorporated, was 

formed, or does business. 

(e) RULE OF CONSTRUCTION.—Nothing in this section shall be 

construed to require the court in which a case under chapter 11 of 

title 11, United States Code, is pending to remand or refer any proceeding, issue, or controversy to any other court or to require the approval of any other court for the transfer of property. 

SEC. 1222. PROTECTION OF VALID PURCHASE MONEY SECURITY INTERESTS. 

Section 547(c)(3)(B) of title 11, United States Code, is amended 

by striking ‘‘20’’ and inserting ‘‘30’’.

SEC. 1223. BANKRUPTCY JUDGESHIPS. 

(a) SHORT TITLE.—This section may be cited as the ‘‘Bankruptcy Judgeship Act of 2002’’. 

(b) TEMPORARY JUDGESHIPS.—

(1) APPOINTMENTS.—The following bankruptcy judges shall 

be appointed in the manner prescribed in section 152(a)(1) of 

title 28, United States Code, for the appointment of bankruptcy 

judges provided for in section 152(a)(2) of such title: 

(A) One additional bankruptcy judge for the eastern 

district of California. 

(B) Three additional bankruptcy judges for the central 

district of California. 

(C) Four additional bankruptcy judges for the district 

of Delaware. 

(D) Two additional bankruptcy judges for the southern 

district of Florida. 

(E) One additional bankruptcy judge for the southern 

district of Georgia. 

(F) Three additional bankruptcy judges for the district 

of Maryland. 

(G) One additional bankruptcy judge for the eastern 

district of Michigan. 

(H) One additional bankruptcy judge for the southern 

district of Mississippi. 

(I) One additional bankruptcy judge for the district of 

New Jersey. 

(J) One additional bankruptcy judge for the eastern 

district of New York. 

(K) One additional bankruptcy judge for the northern 

district of New York. 

(L) One additional bankruptcy judge for the southern 

district of New York. 

(M) One additional bankruptcy judge for the eastern 

district of North Carolina. 

(N) One additional bankruptcy judge for the eastern 

district of Pennsylvania. 

(O) One additional bankruptcy judge for the middle 

district of Pennsylvania. 

164

(P) One additional bankruptcy judge for the district of 

Puerto Rico. 

(Q) One additional bankruptcy judge for the western 

district of Tennessee. 

(R) One additional bankruptcy judge for the eastern 

district of Virginia.

(S) One additional bankruptcy judge for the district of 

South Carolina. 

(T) One additional bankruptcy judge for the district of 

Nevada. 

(2) VACANCIES.—

(A) DISTRICTS WITH SINGLE APPOINTMENTS.—Except as 

provided in subparagraphs (B), (C), (D), and (E), the first 

vacancy occurring in the office of bankruptcy judge in each 

of the judicial districts set forth in paragraph (1)—

(i) occurring 5 years or more after the appointment 

date of the bankruptcy judge appointed under paragraph (1) to such office; and 

(ii) resulting from the death, retirement, resignation, or removal of a bankruptcy judge; 

shall not be filled. 

(B) CENTRAL DISTRICT OF CALIFORNIA.—The 1st, 2d, 

and 3d vacancies in the office of bankruptcy judge in the 

central district of California—

(i) occurring 5 years or more after the respective 

1st, 2d, and 3d appointment dates of the bankruptcy 

judges appointed under paragraph (1)(B); and 

(ii) resulting from the death, retirement, resignation, or removal of a bankruptcy judge; 

shall not be filled. 

(C) DISTRICT OF DELAWARE.—The 1st, 2d, 3d, and 4th 

vacancies in the office of bankruptcy judge in the district 

of Delaware—

(i) occurring 5 years or more after the respective 

1st, 2d, 3d, and 4th appointment dates of the bankruptcy judges appointed under paragraph (1)(F); and 

(ii) resulting from the death, retirement, resignation, or removal of a bankruptcy judge; 

shall not be filled. 

(D) SOUTHERN DISTRICT OF FLORIDA.—The 1st and 2d 

vacancies in the office of bankruptcy judge in the southern 

district of Florida—

(i) occurring 5 years or more after the respective 

1st and 2d appointment dates of the bankruptcy judges 

appointed under paragraph (1)(D); and 

(ii) resulting from the death, retirement, resignation, or removal of a bankruptcy judge; 

shall not be filled. 

(E) DISTRICT OF MARYLAND.—The 1st, 2d, and 3d vacancies in the office of bankruptcy judge in the district of 

Maryland—

(i) occurring 5 years or more after the respective 

1st, 2d, and 3d appointment dates of the bankruptcy 

judges appointed under paragraph (1)(F); and 

165

(ii) resulting from the death, retirement, resignation, or removal of a bankruptcy judge; 

shall not be filled. 

(c) EXTENSIONS.— (1) IN GENERAL.—The temporary office of bankruptcy 

judges authorized for the northern district of Alabama, the district of Delaware, the district of Puerto Rico, and the eastern 

district of Tennessee under paragraphs (1), (3), (7), and (9) of 

section 3(a) of the Bankruptcy Judgeship Act of 1992 (28 U.S.C. 

152 note) are extended until the first vacancy occurring in the 

office of a bankruptcy judge in the applicable district resulting 

from the death, retirement, resignation, or removal of a bankruptcy judge and occurring 5 years after the date of the enactment of this Act. 

(2) APPLICABILITY OF OTHER PROVISIONS.—All other provisions of section 3 of the Bankruptcy Judgeship Act of 1992 (28 

U.S.C. 152 note) remain applicable to the temporary office of 

bankrupcy judges referred to in this subsection. 

(d) TECHNICAL AMENDMENTS.—Section 152(a) of title 28, 

United States Code, is amended— (1) in paragraph (1), by striking the first sentence and inserting the following: ‘‘Each bankruptcy judge to be appointed 

for a judicial district, as provided in paragraph (2), shall be 

appointed by the court of appeals of the United States for the 

circuit in which such district is located.’’; and 

(2) in paragraph (2)— (A) in the item relating to the middle district of Georgia, by striking ‘‘2’’ and inserting ‘‘3’’; and 

(B) in the collective item relating to the middle and 

southern districts of Georgia, by striking ‘‘Middle and 

Southern . . . . . . 1’’. (e) EFFECTIVE DATE.—The amendments made by this section 

shall take effect on the date of the enactment of this Act. 

SEC. 1224. COMPENSATING TRUSTEES. 

Section 1326 of title 11, United States Code, is amended— (1) in subsection (b)— (A) in paragraph (1), by striking ‘‘and’’; 

(B) in paragraph (2), by striking the period at the end 

and inserting ‘‘; and’’; and 

(C) by adding at the end the following: ‘‘(3) if a chapter 7 trustee has been allowed compensation 

due to the conversion or dismissal of the debtor’s prior case pursuant to section 707(b), and some portion of that compensation 

remains unpaid in a case converted to this chapter or in the 

case dismissed under section 707(b) and refiled under this 

chapter, the amount of any such unpaid compensation, which 

shall be paid monthly—

‘‘(A) by prorating such amount over the remaining duration of the plan; and 

‘‘(B) by monthly payments not to exceed the greater of—

‘‘(i) $25; or

‘‘(ii) the amount payable to unsecured nonpriority 

creditors, as provided by the plan, multiplied by 5 percent, and the result divided by the number of months 

in the plan.’’; and 

166

(2) by adding at the end the following: 

‘‘(d) Notwithstanding any other provision of this title—

‘‘(1) compensation referred to in subsection (b)(3) is payable 

and may be collected by the trustee under that paragraph, even 

if such amount has been discharged in a prior proceeding 

under this title; and 

‘‘(2) such compensation is payable in a case under this 

chapter only to the extent permitted by subsection (b)(3).’’. 

SEC. 1225. AMENDMENT TO SECTION 362 OF TITLE 11, UNITED STATES 

CODE. 

Section 362(b)(18) of title 11, United States Code, is amended 

to read as follows: 

‘‘(18) under subsection (a) of the creation or perfection of a 

statutory lien for an ad valorem property tax, or a special tax 

or special assessment on real property whether or not ad valorem, imposed by a governmental unit, if such tax or assessment 

comes due after the filing of the petition;’’. 

SEC. 1226. JUDICIAL EDUCATION. 

The Director of the Federal Judicial Center, in consultation 

with the Director of the Executive Office for United States Trustees, 

shall develop materials and conduct such training as may be useful 

to courts in implementing this Act and the amendments made by 

this Act, including the requirements relating to the means test and 

reaffirmations under section 707(b) of title 11, United States Code, 

as amended by this Act. 

SEC. 1227. RECLAMATION. 

(a) RIGHTS AND POWERS OF THE TRUSTEE.—Section 546(c) of 

title 11, United States Code, is amended to read as follows: 

‘‘(c)(1) Except as provided in subsection (d) of this section and 

subsection (c) of section 507, and subject to the prior rights of holders of security interests in such goods or the proceeds thereof, the 

rights and powers of the trustee under sections 544(a), 545, 547, 

and 549 are subject to the right of a seller of goods that has sold 

goods to the debtor, in the ordinary course of such seller’s business, 

to reclaim such goods if the debtor has received such goods while 

insolvent, within 45 days before the date of the commencement of a 

case under this title, but such seller may not reclaim such goods unless such seller demands in writing reclamation of such goods—

‘‘(A) not later than 45 days after the date of receipt of such 

goods by the debtor; or 

‘‘(B) not later than 20 days after the date of commencement 

of the case, if the 45-day period expires after the commencement 

of the case. 

‘‘(2) If a seller of goods fails to provide notice in the manner described in paragraph (1), the seller still may assert the rights contained in section 503(b)(9).’’. 

(b) ADMINISTRATIVE EXPENSES.—Section 503(b) of title 11, 

United States Code, as amended by sections 445 and 1103, is 

amended by adding at the end the following: 

‘‘(9) the value of any goods received by the debtor within 20 

days before the date of commencement of a case under this title 

in which the goods have been sold to the debtor in the ordinary 

course of such debtor’s business.’’. 

167

SEC. 1228. PROVIDING REQUESTED TAX DOCUMENTS TO THE COURT. 

(a) CHAPTER 7 CASES.—The court shall not grant a discharge 

in the case of an individual seeking bankruptcy under chapter 7 of 

title 11, United States Code, unless requested tax documents have 

been provided to the court. 

(b) CHAPTER 11 AND CHAPTER 13 CASES.—The court shall not 

confirm a plan of reorganization in the case of an individual under 

chapter 11 or 13 of title 11, United States Code, unless requested 

tax documents have been filed with the court. 

(c) DOCUMENT RETENTION.—The court shall destroy documents 

submitted in support of a bankruptcy claim not sooner than 3 years 

after the date of the conclusion of a bankruptcy case filed by an individual under chapter 7, 11, or 13 of title 11, United States Code. 

In the event of a pending audit or enforcement action, the court may 

extend the time for destruction of such requested tax documents. 

SEC. 1229. ENCOURAGING CREDITWORTHINESS. 

(a) SENSE OF THE CONGRESS.—It is the sense of the Congress 

that—

(1) certain lenders may sometimes offer credit to consumers 

indiscriminately, without taking steps to ensure that consumers 

are capable of repaying the resulting debt, and in a manner 

which may encourage certain consumers to accumulate additional debt; and 

(2) resulting consumer debt may increasingly be a major 

contributing factor to consumer insolvency. 

(b) STUDY REQUIRED.—The Board of Governors of the Federal 

Reserve System (hereafter in this section referred to as the ‘‘Board’’) 

shall conduct a study of—

(1) consumer credit industry practices of soliciting and extending credit—

(A) indiscriminately; 

(B) without taking steps to ensure that consumers are 

capable of repaying the resulting debt; and 

(C) in a manner that encourages consumers to accumulate additional debt; and 

(2) the effects of such practices on consumer debt and insolvency. 

(c) REPORT AND REGULATIONS.—Not later than 12 months after 

the date of enactment of this Act, the Board—

(1) shall make public a report on its findings with respect 

to the indiscriminate solicitation and extension of credit by the 

credit industry; 

(2) may issue regulations that would require additional 

disclosures to consumers; and 

(3) may take any other actions, consistent with its existing 

statutory authority, that the Board finds necessary to ensure responsible industrywide practices and to prevent resulting consumer debt and insolvency.

SEC. 1230. PROPERTY NO LONGER SUBJECT TO REDEMPTION. 

Section 541(b) of title 11, United States Code, as amended by 

sections 225 and 323, is amended by adding at the end the following: 

‘‘(8) subject to subchapter III of chapter 5, any interest of 

the debtor in property where the debtor pledged or sold tangible 

168

personal property (other than securities or written or printed 

evidences of indebtedness or title) as collateral for a loan or advance of money given by a person licensed under law to make 

such loans or advances, where—

‘‘(A) the tangible personal property is in the possession 

of the pledgee or transferee; 

‘‘(B) the debtor has no obligation to repay the money, 

redeem the collateral, or buy back the property at a stipulated price; and 

‘‘(C) neither the debtor nor the trustee have exercised 

any right to redeem provided under the contract or State 

law, in a timely manner as provided under State law and 

section 108(b) of this title; or’’. 

SEC. 1231. TRUSTEES. 

(a) SUSPENSION AND TERMINATION OF PANEL TRUSTEES AND

STANDING TRUSTEES.—Section 586(d) of title 28, United States 

Code, is amended—

(1) by inserting ‘‘(1)’’ after ‘‘(d)’’; and 

(2) by adding at the end the following: 

‘‘(2) A trustee whose appointment under subsection (a)(1) or 

under subsection (b) is terminated or who ceases to be assigned to 

cases filed under title 11, United States Code, may obtain judicial 

review of the final agency decision by commencing an action in the 

district court of the United States for the district for which the 

panel to which the trustee is appointed under subsection (a)(1), or 

in the district court of the United States for the district in which 

the trustee is appointed under subsection (b) resides, after first exhausting all available administrative remedies, which if the trustee 

so elects, shall also include an administrative hearing on the record. 

Unless the trustee elects to have an administrative hearing on the 

record, the trustee shall be deemed to have exhausted all administrative remedies for purposes of this paragraph if the agency fails 

to make a final agency decision within 90 days after the trustee requests administrative remedies. The Attorney General shall prescribe procedures to implement this paragraph. The decision of the 

agency shall be affirmed by the district court unless it is unreasonable and without cause based on the administrative record before 

the agency.’’. 

(b) EXPENSES OF STANDING TRUSTEES.—Section 586(e) of title 

28, United States Code, is amended by adding at the end the following: ‘‘(3) After first exhausting all available administrative remedies, 

an individual appointed under subsection (b) may obtain judicial 

review of final agency action to deny a claim of actual, necessary 

expenses under this subsection by commencing an action in the district court of the United States for the district where the individual 

resides. The decision of the agency shall be affirmed by the district 

court unless it is unreasonable and without cause based upon the 

administrative record before the agency. ‘‘(4) The Attorney General shall prescribe procedures to implement this subsection.’’. 

SEC. 1232. BANKRUPTCY FORMS. 

Section 2075 of title 28, United States Code, is amended by 

adding at the end the following: 

169

‘‘The bankruptcy rules promulgated under this section shall prescribe a form for the statement required under section 707(b)(2)(C) 

of title 11 and may provide general rules on the content of such 

statement.’’.

SEC. 1233. DIRECT APPEALS OF BANKRUPTCY MATTERS TO COURTS OF 

APPEALS. 

(a) APPEALS.—Section 158 of title 28, United States Code, is 

amended—

(1) in subsection (c)(1), by striking ‘‘Subject to subsection 

(b),’’ and inserting ‘‘Subject to subsections (b) and (d)(2),’’; and 

(2) in subsection (d)— (A) by inserting ‘‘(1)’’ after ‘‘(d)’’; and 

(B) by adding at the end the following: ‘‘(2)(A) The appropriate court of appeals shall have jurisdiction 

of appeals described in the first sentence of subsection (a) if the 

bankruptcy court, the district court, or the bankruptcy appellate 

panel involved, acting on its own motion or on the request of a party 

to the judgment, order, or decree described in such first sentence, or 

all the appellants and appellees (if any) acting jointly, certify that— ‘‘(i) the judgment, order, or decree involves a question of 

law as to which there is no controlling decision of the court of 

appeals for the circuit or of the Supreme Court of the United 

States, or involves a matter of public importance; ‘‘(ii) the judgment, order, or decree involves a question of 

law requiring resolution of conflicting decisions; or ‘‘(iii) an immediate appeal from the judgment, order, or decree may materially advance the progress of the case or proceeding in which the appeal is taken; 

and if the court of appeals authorizes the direct appeal of the judgment, order, or decree. ‘‘(B) If the bankruptcy court, the district court, or the bankruptcy appellate panel— ‘‘(i) on its own motion or on the request of a party, determines that a circumstance specified in clause (i), (ii), or (iii) of 

subparagraph (A) exists; or 

‘‘(ii) receives a request made by a majority of the appellants 

and a majority of appellees (if any) to make the certification described in subparagraph (A); 

then the bankruptcy court, the district court, or the bankruptcy appellate panel shall make the certification described in subparagraph 

(A). 

‘‘(C) The parties may supplement the certification with a short 

statement of the basis for the certification. 

‘‘(D) An appeal under this paragraph does not stay any proceeding of the bankruptcy court, the district court, or the bankruptcy 

appellate panel from which the appeal is taken, unless the respective 

bankruptcy court, district court, or bankruptcy appellate panel, or 

the court of appeals in which the appeal in pending, issues a stay 

of such proceeding pending the appeal.

‘‘(E) Any request under subparagraph (B) for certification shall 

be made not later than 60 days after the entry of the judgment, 

order, or decree.’’. 

(b) PROCEDURAL RULES.—

(1) TEMPORARY APPLICATION.—A provision of this subsection shall apply to appeals under section 158(d)(2) of title 28, 

170

United States Code, until a rule of practice and procedure relating to such provision and such appeals is promulgated or 

amended under chapter 131 of such title. 

(2) CERTIFICATION.—A district court, a bankruptcy court, or 

a bankruptcy appellate panel may make a certification under 

section 158(d)(2) of title 28, United States Code, only with respect to matters pending in the respective bankruptcy court, district court, or bankruptcy appellate panel. 

(3) PROCEDURE.—Subject to any other provision of this subsection, an appeal authorized by the court of appeals under section 158(d)(2)(A) of title 28, United States Code, shall be taken 

in the manner prescribed in subdivisions (a)(1), (b), (c), and (d) 

of rule 5 of the Federal Rules of Appellate Procedure. For purposes of subdivision (a)(1) of rule 5— (A) a reference in such subdivision to a district court 

shall be deemed to include a reference to a bankruptcy 

court and a bankruptcy appellate panel, as appropriate; 

(B) a reference in such subdivision to the parties requesting permission to appeal to be served with the petition 

shall be deemed to include a reference to the parties to the 

judgment, order, or decree from which the appeal is taken. 

(4) FILING OF PETITION WITH ATTACHMENT.—A petition requesting permission to appeal, that is based on a certification 

made under subparagraph (A) or (B) of section 158(d)(2) 

shall— (A) be filed with the circuit clerk not later than 10 days 

after the certification is entered on the docket of the bankruptcy court, the district court, or the bankruptcy appellate 

panel from which the appeal is taken; and 

(B) have attached a copy of such certification. 

(5) REFERENCES IN RULE 5.—For purposes of rule 5 of the 

Federal Rules of Appellate Procedure— (A) a reference in such rule to a district court shall be 

deemed to include a reference to a bankruptcy court and to 

a bankruptcy appellate panel; and 

(B) a reference in such rule to a district clerk shall be 

deemed to include a reference to a clerk of a bankruptcy 

court and to a clerk of a bankruptcy appellate panel. 

(6) APPLICATION OF RULES.—The Federal Rules of Appellate 

Procedure shall apply in the courts of appeals with respect to 

appeals authorized under section 158(d)(2)(A), to the extent relevant and as if such appeals were taken from final judgments, 

orders, or decrees of the district courts or bankruptcy appellate 

panels exercising appellate jurisdiction under subsection (a) or 

(b) of section 158 of title 28, United States Code.

SEC. 1234. INVOLUNTARY CASES. 

(a) AMENDMENTS.—Section 303 of title 11, United States Code, 

is amended—

(1) in subsection (b)(1), by—

(A) inserting ‘‘as to liability or amount’’ after ‘‘bona fide 

dispute’’; and 

(B) striking ‘‘if such claims’’ and inserting ‘‘if such noncontingent, undisputed claims’’; and 

(2) in subsection (h)(1), by inserting ‘‘as to liability or 

amount’’ before the semicolon at the end. 

171

(b) EFFECTIVE DATE; APPLICATION OF AMENDMENTS.—This section and the amendments made by this section shall take effect on 

the date of the enactment of this Act and shall not apply with respect to cases commenced under title 11 of the United States Code 

before such date. 

SEC. 1235. FEDERAL ELECTION LAW FINES AND PENALTIES AS NONDISCHARGEABLE DEBT. 

Section 523(a) of title 11, United States Code, as amended by 

section 314, is amended by inserting after paragraph (14A) the following: ‘‘(14B) incurred to pay fines or penalties imposed under 

Federal election law;’’. 

TITLE XIII—CONSUMER CREDIT 

DISCLOSURE 

SEC. 1301. ENHANCED DISCLOSURES UNDER AN OPEN END CREDIT 

PLAN. 

(a) MINIMUM PAYMENT DISCLOSURES.—Section 127(b) of the 

Truth in Lending Act (15 U.S.C. 1637(b)) is amended by adding at 

the end the following: ‘‘(11)(A) In the case of an open end credit plan that requires 

a minimum monthly payment of not more than 4 percent of the 

balance on which finance charges are accruing, the following 

statement, located on the front of the billing statement, disclosed clearly and conspicuously: ‘Minimum Payment Warning: 

Making only the minimum payment will increase the interest 

you pay and the time it takes to repay your balance. For example, making only the typical 2% minimum monthly payment on 

a balance of $1,000 at an interest rate of 17% would take 88 

months to repay the balance in full. For an estimate of the time 

it would take to repay your balance, making only minimum 

payments, call this toll-free number: llllll.’ (the blank 

space to be filled in by the creditor). 

‘‘(B) In the case of an open end credit plan that requires a 

minimum monthly payment of more than 4 percent of the balance on which finance charges are accruing, the following statement, in a prominent location on the front of the billing statement, disclosed clearly and conspicuously: ‘Minimum Payment 

Warning: Making only the required minimum payment will increase the interest you pay and the time it takes to repay your 

balance. Making a typical 5% minimum monthly payment on a 

balance of $300 at an interest rate of 17% would take 24 

months to repay the balance in full. For an estimate of the time 

it would take to repay your balance, making only minimum 

monthly payments, call this toll-free number: llllll.’ (the 

blank space to be filled in by the creditor). 

‘‘(C) Notwithstanding subparagraphs (A) and (B), in the 

case of a creditor with respect to which compliance with this 

title is enforced by the Federal Trade Commission, the following 

statement, in a prominent location on the front of the billing 

statement, disclosed clearly and conspicuously: ‘Minimum Payment Warning: Making only the required minimum payment 

will increase the interest you pay and the time it takes to repay 

172

your balance. For example, making only the typical 5% minimum monthly payment on a balance of $300 at an interest rate 

of 17% would take 24 months to repay the balance in full. For 

an estimate of the time it would take to repay your balance, 

making only minimum monthly payments, call the Federal 

Trade Commission at this toll-free number: llllll.’ (the 

blank space to be filled in by the creditor). A creditor who is 

subject to this subparagraph shall not be subject to subparagraph (A) or (B). ‘‘(D) Notwithstanding subparagraph (A), (B), or (C), in 

complying with any such subparagraph, a creditor may substitute an example based on an interest rate that is greater than 

17 percent. Any creditor that is subject to subparagraph (B) 

may elect to provide the disclosure required under subparagraph (A) in lieu of the disclosure required under subparagraph 

(B). ‘‘(E) The Board shall, by rule, periodically recalculate, as 

necessary, the interest rate and repayment period under subparagraphs (A), (B), and (C). ‘‘(F)(i) The toll-free telephone number disclosed by a creditor or the Federal Trade Commission under subparagraph (A), 

(B), or (G), as appropriate, may be a toll-free telephone number 

established and maintained by the creditor or the Federal 

Trade Commission, as appropriate, or may be a toll-free telephone number established and maintained by a third party for 

use by the creditor or multiple creditors or the Federal Trade 

Commission, as appropriate. The toll-free telephone number 

may connect consumers to an automated device through which 

consumers may obtain information described in subparagraph 

(A), (B), or (C), by inputting information using a touch-tone 

telephone or similar device, if consumers whose telephones are 

not equipped to use such automated device are provided the opportunity to be connected to an individual from whom the information described in subparagraph (A), (B), or (C), as applicable, may be obtained. A person that receives a request for information described in subparagraph (A), (B), or (C) from an obligor through the toll-free telephone number disclosed under subparagraph (A), (B), or (C), as applicable, shall disclose in response to such request only the information set forth in the 

table promulgated by the Board under subparagraph (H)(i). 

‘‘(ii)(I) The Board shall establish and maintain for a period 

not to exceed 24 months following the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2002, 

a toll-free telephone number, or provide a toll-free telephone 

number established and maintained by a third party, for use by 

creditors that are depository institutions (as defined in section 

3 of the Federal Deposit Insurance Act), including a Federal 

credit union or State credit union (as defined in section 101 of 

the Federal Credit Union Act, with total assets not exceeding 

$250,000,000. The toll-free telephone number may connect consumers to an automated device through which consumers may 

obtain information described in subparagraph (A) or (B), as applicable, by inputting information using a touch-tone telephone 

or similar device, if consumers whose telephones are not 

equipped to use such automated device are provided the opporVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00172 Fmt 6659 Sfmt 6603 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
173

tunity to be connected to an individual from whom the information described in subparagraph (A) or (B), as applicable, may 

be obtained. A person that receives a request for information described in subparagraph (A) or (B) from an obligor through the 

toll-free telephone number disclosed under subparagraph (A) or 

(B), as applicable, shall disclose in response to such request 

only the information set forth in the table promulgated by the 

Board under subparagraph (H)(i). The dollar amount contained 

in this subclause shall be adjusted according to an indexing 

mechanism established by the Board. 

‘‘(II) Not later than 6 months prior to the expiration of the 

24-month period referenced in subclause (I), the Board shall 

submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of 

the House of Representatives a report on the program described 

in subclause (I). 

‘‘(G) The Federal Trade Commission shall establish and 

maintain a toll-free number for the purpose of providing to consumers the information required to be disclosed under subparagraph (C). 

‘‘(H) The Board shall—

‘‘(i) establish a detailed table illustrating the approximate number of months that it would take to repay an outstanding balance if a consumer pays only the required minimum monthly payments and if no other advances are 

made, which table shall clearly present standardized information to be used to disclose the information required to be 

disclosed under subparagraph (A), (B), or (C), as applicable; 

‘‘(ii) establish the table required under clause (i) by assuming—

‘‘(I) a significant number of different annual percentage rates; 

‘‘(II) a significant number of different account balances; 

‘‘(III) a significant number of different minimum 

payment amounts; and

‘‘(IV) that only minimum monthly payments are 

made and no additional extensions of credit are obtained; and 

‘‘(iii) promulgate regulations that provide instructional 

guidance regarding the manner in which the information 

contained in the table established under clause (i) should 

be used in responding to the request of an obligor for any 

information required to be disclosed under subparagraph 

(A), (B), or (C). 

‘‘(I) The disclosure requirements of this paragraph do not 

apply to any charge card account, the primary purpose of which 

is to require payment of charges in full each month. 

‘‘(J) A creditor that maintains a toll-free telephone number 

for the purpose of providing customers with the actual number 

of months that it will take to repay the customer’s outstanding 

balance is not subject to the requirements of subparagraph (A) 

or (B). 

174

‘‘(K) A creditor that maintains a toll-free telephone number 

for the purpose of providing customers with the actual number 

of months that it will take to repay an outstanding balance 

shall include the following statement on each billing statement: 

‘Making only the minimum payment will increase the interest 

you pay and the time it takes to repay your balance. For more 

information, call this toll-free number: llll.’ (the blank 

space to be filled in by the creditor).’’. 

(b) REGULATORY IMPLEMENTATION.—

(1) IN GENERAL.—The Board of Governors of the Federal 

Reserve System (hereafter in this title referred to as the 

‘‘Board’’) shall promulgate regulations implementing the requirements of section 127(b)(11) of the Truth in Lending Act, as 

added by subsection (a) of this section. 

(2) EFFECTIVE DATE.—Section 127(b)(11) of the Truth in 

Lending Act, as added by subsection (a) of this section, and the 

regulations issued under paragraph (1) of this subsection shall 

not take effect until the later of—

(A) 18 months after the date of enactment of this Act; 

or 

(B) 12 months after the publication of such final regulations by the Board. 

(c) STUDY OF FINANCIAL DISCLOSURES.—

(1) IN GENERAL.—The Board may conduct a study to determine the types of information available to potential borrowers 

from consumer credit lending institutions regarding factors 

qualifying potential borrowers for credit, repayment requirements, and the consequences of default. 

(2) FACTORS FOR CONSIDERATION.—In conducting a study 

under paragraph (1), the Board should, in consultation with 

the other Federal banking agencies (as defined in section 3 of 

the Federal Deposit Insurance Act), the National Credit Union 

Administration, and the Federal Trade Commission, consider 

the extent to which—

(A) consumers, in establishing new credit arrangements, are aware of their existing payment obligations, the 

need to consider those obligations in deciding to take on 

new credit, and how taking on excessive credit can result 

in financial difficulty; 

(B) minimum periodic payment features offered in connection with open end credit plans impact consumer default 

rates; 

(C) consumers make only the required minimum payment under open end credit plans; 

(D) consumers are aware that making only required 

minimum payments will increase the cost and repayment 

period of an open end credit obligation; and 

(E) the availability of low minimum payment options 

is a cause of consumers experiencing financial difficulty. 

(3) REPORT TO CONGRESS.—Findings of the Board in connection with any study conducted under this subsection shall be 

submitted to Congress. Such report shall also include recommendations for legislative initiatives, if any, of the Board, 

based on its findings. 

175

SEC. 1302. ENHANCED DISCLOSURE FOR CREDIT EXTENSIONS SECURED BY A DWELLING. 

(a) OPEN END CREDIT EXTENSIONS.—

(1) CREDIT APPLICATIONS.—Section 127A(a)(13) of the 

Truth in Lending Act (15 U.S.C. 1637a(a)(13)) is amended—

(A) by striking ‘‘CONSULTATION OF TAX ADVISER.—A 

statement that the’’ and inserting the following: ‘‘TAX DEDUCTIBILITY.—A statement that—

‘‘(A) the’’; and 

(B) by striking the period at the end and inserting the 

following: ‘‘; and 

‘‘(B) in any case in which the extension of credit exceeds 

the fair market value (as defined under the Internal Revenue Code of 1986) of the dwelling, the interest on the portion of the credit extension that is greater than the fair 

market value of the dwelling is not tax deductible for Federal income tax purposes.’’. 

(2) CREDIT ADVERTISEMENTS.—Section 147(b) of the Truth 

in Lending Act (15 U.S.C. 1665b(b)) is amended—

(A) by striking ‘‘If any’’ and inserting the following: 

‘‘(1) IN GENERAL.—If any’’; and 

(B) by adding at the end the following: 

‘‘(2) CREDIT IN EXCESS OF FAIR MARKET VALUE.—Each advertisement described in subsection (a) that relates to an extension of credit that may exceed the fair market value of the 

dwelling, and which advertisement is disseminated in paper 

form to the public or through the Internet, as opposed to by 

radio or television, shall include a clear and conspicuous statement that—

‘‘(A) the interest on the portion of the credit extension 

that is greater than the fair market value of the dwelling 

is not tax deductible for Federal income tax purposes; and

‘‘(B) the consumer should consult a tax adviser for further information regarding the deductibility of interest and 

charges.’’. 

(b) NON-OPEN END CREDIT EXTENSIONS.—

(1) CREDIT APPLICATIONS.—Section 128 of the Truth in 

Lending Act (15 U.S.C. 1638) is amended—

(A) in subsection (a), by adding at the end the following: 

‘‘(15) In the case of a consumer credit transaction that is secured by the principal dwelling of the consumer, in which the 

extension of credit may exceed the fair market value of the 

dwelling, a clear and conspicuous statement that—

‘‘(A) the interest on the portion of the credit extension 

that is greater than the fair market value of the dwelling 

is not tax deductible for Federal income tax purposes; and 

‘‘(B) the consumer should consult a tax adviser for further information regarding the deductibility of interest and 

charges.’’; and 

(B) in subsection (b), by adding at the end the following: 

‘‘(3) In the case of a credit transaction described in paragraph 

(15) of subsection (a), disclosures required by that paragraph shall 

176

be made to the consumer at the time of application for such extension of credit.’’. (2) CREDIT ADVERTISEMENTS.—Section 144 of the Truth in 

Lending Act (15 U.S.C. 1664) is amended by adding at the end 

the following: 

‘‘(e) Each advertisement to which this section applies that relates to a consumer credit transaction that is secured by the principal dwelling of a consumer in which the extension of credit may 

exceed the fair market value of the dwelling, and which advertisement is disseminated in paper form to the public or through the 

Internet, as opposed to by radio or television, shall clearly and conspicuously state that— ‘‘(1) the interest on the portion of the credit extension that 

is greater than the fair market value of the dwelling is not tax 

deductible for Federal income tax purposes; and ‘‘(2) the consumer should consult a tax adviser for further 

information regarding the deductibility of interest and 

charges.’’. (c) REGULATORY IMPLEMENTATION.— (1) IN GENERAL.—The Board shall promulgate regulations 

implementing the amendments made by this section. 

(2) EFFECTIVE DATE.—Regulations issued under paragraph 

(1) shall not take effect until the later of— (A) 12 months after the date of enactment of this Act; 

or 

(B) 12 months after the date of publication of such 

final regulations by the Board. 

SEC. 1303. DISCLOSURES RELATED TO ‘‘INTRODUCTORY RATES’’. 

(a) INTRODUCTORY RATE DISCLOSURES.—Section 127(c) of the 

Truth in Lending Act (15 U.S.C. 1637(c)) is amended by adding at 

the end the following: ‘‘(6) ADDITIONAL NOTICE CONCERNING ‘INTRODUCTORY

RATES’.—

‘‘(A) IN GENERAL.—Except as provided in subparagraph 

(B), an application or solicitation to open a credit card account and all promotional materials accompanying such 

application or solicitation for which a disclosure is required 

under paragraph (1), and that offers a temporary annual 

percentage rate of interest, shall— ‘‘(i) use the term ‘introductory’ in immediate proximity to each listing of the temporary annual percentage rate applicable to such account, which term shall 

appear clearly and conspicuously; 

‘‘(ii) if the annual percentage rate of interest that 

will apply after the end of the temporary rate period 

will be a fixed rate, state in a clear and conspicuous 

manner in a prominent location closely proximate to 

the first listing of the temporary annual percentage 

rate (other than a listing of the temporary annual percentage rate in the tabular format described in section 

122(c)), the time period in which the introductory period will end and the annual percentage rate that will 

apply after the end of the introductory period; and 

‘‘(iii) if the annual percentage rate that will apply 

after the end of the temporary rate period will vary in 

177

accordance with an index, state in a clear and conspicuous manner in a prominent location closely proximate to the first listing of the temporary annual percentage rate (other than a listing in the tabular format 

prescribed by section 122(c)), the time period in which 

the introductory period will end and the rate that will 

apply after that, based on an annual percentage rate 

that was in effect within 60 days before the date of 

mailing the application or solicitation. 

‘‘(B) EXCEPTION.—Clauses (ii) and (iii) of subparagraph (A) do not apply with respect to any listing of a temporary annual percentage rate on an envelope or other enclosure in which an application or solicitation to open a 

credit card account is mailed. 

‘‘(C) CONDITIONS FOR INTRODUCTORY RATES.—An application or solicitation to open a credit card account for 

which a disclosure is required under paragraph (1), and 

that offers a temporary annual percentage rate of interest 

shall, if that rate of interest is revocable under any circumstance or upon any event, clearly and conspicuously 

disclose, in a prominent manner on or with such application or solicitation—

‘‘(i) a general description of the circumstances that 

may result in the revocation of the temporary annual 

percentage rate; and

‘‘(ii) if the annual percentage rate that will apply 

upon the revocation of the temporary annual percentage rate—

‘‘(I) will be a fixed rate, the annual percentage 

rate that will apply upon the revocation of the temporary annual percentage rate; or 

‘‘(II) will vary in accordance with an index, 

the rate that will apply after the temporary rate, 

based on an annual percentage rate that was in effect within 60 days before the date of mailing the 

application or solicitation. 

‘‘(D) DEFINITIONS.—In this paragraph—

‘‘(i) the terms ‘temporary annual percentage rate of 

interest’ and ‘temporary annual percentage rate’ mean 

any rate of interest applicable to a credit card account 

for an introductory period of less than 1 year, if that 

rate is less than an annual percentage rate that was in 

effect within 60 days before the date of mailing the application or solicitation; and 

‘‘(ii) the term ‘introductory period’ means the maximum time period for which the temporary annual percentage rate may be applicable. 

‘‘(E) RELATION TO OTHER DISCLOSURE REQUIREMENTS.—Nothing in this paragraph may be construed to 

supersede subsection (a) of section 122, or any disclosure required by paragraph (1) or any other provision of this subsection.’’. 

(b) REGULATORY IMPLEMENTATION.—

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(1) IN GENERAL.—The Board shall promulgate regulations 

implementing the requirements of section 127(c)(6) of the Truth 

in Lending Act, as added by this section. 

(2) EFFECTIVE DATE.—Section 127(c)(6) of the Truth in 

Lending Act, as added by this section, and regulations issued 

under paragraph (1) of this subsection shall not take effect until 

the later of—

(A) 12 months after the date of enactment of this Act; 

or 

(B) 12 months after the date of publication of such 

final regulations by the Board. 

SEC. 1304. INTERNET-BASED CREDIT CARD SOLICITATIONS. 

(a) INTERNET-BASED SOLICITATIONS.—Section 127(c) of the 

Truth in Lending Act (15 U.S.C. 1637(c)) is amended by adding at 

the end the following: 

‘‘(7) INTERNET-BASED SOLICITATIONS.—

‘‘(A) IN GENERAL.—In any solicitation to open a credit 

card account for any person under an open end consumer 

credit plan using the Internet or other interactive computer 

service, the person making the solicitation shall clearly and 

conspicuously disclose—

‘‘(i) the information described in subparagraphs 

(A) and (B) of paragraph (1); and 

‘‘(ii) the information described in paragraph (6). 

‘‘(B) FORM OF DISCLOSURE.—The disclosures required 

by subparagraph (A) shall be—

‘‘(i) readily accessible to consumers in close proximity to the solicitation to open a credit card account; 

and 

‘‘(ii) updated regularly to reflect the current policies, terms, and fee amounts applicable to the credit 

card account. 

‘‘(C) DEFINITIONS.—For purposes of this paragraph—

‘‘(i) the term ‘Internet’ means the international 

computer network of both Federal and non-Federal 

interoperable packet switched data networks; and 

‘‘(ii) the term ‘interactive computer service’ means 

any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically 

a service or system that provides access to the Internet 

and such systems operated or services offered by libraries or educational institutions.’’. 

(b) REGULATORY IMPLEMENTATION.—

(1) IN GENERAL.—The Board shall promulgate regulations 

implementing the requirements of section 127(c)(7) of the Truth 

in Lending Act, as added by this section. 

(2) EFFECTIVE DATE.—The amendment made by subsection 

(a) and the regulations issued under paragraph (1) of this subsection shall not take effect until the later of—

(A) 12 months after the date of enactment of this Act; 

or 

(B) 12 months after the date of publication of such 

final regulations by the Board.

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SEC. 1305. DISCLOSURES RELATED TO LATE PAYMENT DEADLINES 

AND PENALTIES. 

(a) DISCLOSURES RELATED TO LATE PAYMENT DEADLINES AND

PENALTIES.—Section 127(b) of the Truth in Lending Act (15 U.S.C. 

1637(b)) is amended by adding at the end the following: ‘‘(12) If a late payment fee is to be imposed due to the failure of the obligor to make payment on or before a required payment due date, the following shall be stated clearly and conspicuously on the billing statement: ‘‘(A) The date on which that payment is due or, if different, the earliest date on which a late payment fee may 

be charged. ‘‘(B) The amount of the late payment fee to be imposed 

if payment is made after such date.’’. (b) REGULATORY IMPLEMENTATION.— (1) IN GENERAL.—The Board shall promulgate regulations 

implementing the requirements of section 127(b)(12) of the 

Truth in Lending Act, as added by this section. 

(2) EFFECTIVE DATE.—The amendment made by subsection 

(a) and regulations issued under paragraph (1) of this subsection shall not take effect until the later of— (A) 12 months after the date of enactment of this Act; 

or 

(B) 12 months after the date of publication of such 

final regulations by the Board. 

SEC. 1306. PROHIBITION ON CERTAIN ACTIONS FOR FAILURE TO 

INCUR FINANCE CHARGES. 

(a) PROHIBITION ON CERTAIN ACTIONS FOR FAILURE TO INCUR

FINANCE CHARGES.—Section 127 of the Truth in Lending Act (15 

U.S.C. 1637) is amended by adding at the end the following: ‘‘(h) PROHIBITION ON CERTAIN ACTIONS FOR FAILURE TO INCUR

FINANCE CHARGES.—A creditor of an account under an open end 

consumer credit plan may not terminate an account prior to its expiration date solely because the consumer has not incurred finance 

charges on the account. Nothing in this subsection shall prohibit a 

creditor from terminating an account for inactivity in 3 or more 

consecutive months.’’. 

(b) REGULATORY IMPLEMENTATION.—

(1) IN GENERAL.—The Board shall promulgate regulations 

implementing the requirements of section 127(h) of the Truth in 

Lending Act, as added by this section. 

(2) EFFECTIVE DATE.—The amendment made by subsection 

(a) and regulations issued under paragraph (1) of this subsection shall not take effect until the later of—

(A) 12 months after the date of enactment of this Act; 

or 

(B) 12 months after the date of publication of such 

final regulations by the Board. 

SEC. 1307. DUAL USE DEBIT CARD. 

(a) REPORT.—The Board may conduct a study of, and present 

to Congress a report containing its analysis of, consumer protections 

under existing law to limit the liability of consumers for unauthorized use of a debit card or similar access device. Such report, if submitted, shall include recommendations for legislative initiatives, if 

any, of the Board, based on its findings. 

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(b) CONSIDERATIONS.—In preparing a report under subsection 

(a), the Board may include— (1) the extent to which section 909 of the Electronic Fund 

Transfer Act (15 U.S.C. 1693g), as in effect at the time of the 

report, and the implementing regulations promulgated by the 

Board to carry out that section provide adequate unauthorized 

use liability protection for consumers; 

(2) the extent to which any voluntary industry rules have 

enhanced or may enhance the level of protection afforded consumers in connection with such unauthorized use liability; and 

(3) whether amendments to the Electronic Fund Transfer 

Act (15 U.S.C. 1693 et seq.), or revisions to regulations promulgated by the Board to carry out that Act, are necessary to further address adequate protection for consumers concerning unauthorized use liability. 

SEC. 1308. STUDY OF BANKRUPTCY IMPACT OF CREDIT EXTENDED TO 

DEPENDENT STUDENTS. 

(a) STUDY.—

(1) IN GENERAL.—The Board shall conduct a study regarding the impact that the extension of credit described in paragraph (2) has on the rate of bankruptcy cases filed under title 

11, United States Code. 

(2) EXTENSION OF CREDIT.—The extension of credit described in this paragraph is the extension of credit to individuals who are—

(A) claimed as dependents for purposes of the Internal 

Revenue Code of 1986; and 

(B) enrolled within 1 year of successfully completing all 

required secondary education requirements and on a fulltime basis, in postsecondary educational institutions.

(b) REPORT.—Not later than 1 year after the date of enactment 

of this Act, the Board shall submit to the Senate and the House of 

Representatives a report summarizing the results of the study conducted under subsection (a). 

SEC. 1309. CLARIFICATION OF CLEAR AND CONSPICUOUS. 

(a) REGULATIONS.—Not later than 6 months after the date of 

enactment of this Act, the Board, in consultation with the other Federal banking agencies (as defined in section 3 of the Federal Deposit 

Insurance Act), the National Credit Union Administration Board, 

and the Federal Trade Commission, shall promulgate regulations to 

provide guidance regarding the meaning of the term ‘‘clear and conspicuous’’, as used in subparagraphs (A), (B), and (C) of section 

127(b)(11) and clauses (ii) and (iii) of section 127(c)(6)(A) of the 

Truth in Lending Act. 

(b) EXAMPLES.—Regulations promulgated under subsection (a) 

shall include examples of clear and conspicuous model disclosures 

for the purposes of disclosures required by the provisions of the 

Truth in Lending Act referred to in subsection (a).

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(c) STANDARDS.—In promulgating regulations under this section, the Board shall ensure that the clear and conspicuous standard required for disclosures made under the provisions of the Truth 

in Lending Act referred to in subsection (a) can be implemented in 

a manner which results in disclosures which are reasonably understandable and designed to call attention to the nature and significance of the information in the notice. 

TITLE XIV—GENERAL EFFECTIVE DATE; 

APPLICATION OF AMENDMENTS 

SEC. 1401. EFFECTIVE DATE; APPLICATION OF AMENDMENTS. 

(a) EFFECTIVE DATE.—Except as otherwise provided in this Act, 

this Act and the amendments made by this Act shall take effect 180 

days after the date of enactment of this Act. 

(b) APPLICATION OF AMENDMENTS.—

(1) IN GENERAL.—Except as otherwise provided in this Act 

and paragraph (2), the amendments made by this Act shall not 

apply with respect to cases commenced under title 11, United 

States Code, before the effective date of this Act. 

(2) LIMITATIONS ON HOMESTEAD EXEMPTION.—The amendments made by sections 308 and 322 shall apply with respect 

to cases commenced under title 11, United States Code, on or 

after the date of the enactment of this Act.

And the Senate agree to the same.

From the Committee on the Judiciary, for consideration of 

the House bill and the Senate amendment, and modifications committed to conference: 

F. JAMES SENSENBRENNER, 

HENRY J. HYDE, 

GEORGE W. GEKAS, LAMAR SMITH, 

STEVE CHABOT, 

BOB BARR, 

RICK BOUCHER, 

From the Committee on Financial Services, for consideration of secs. 901–906, 907A–909, 911, and 1301–1309 of 

the House bill, and secs. 901–906, 907A–909, 911, 913–4, 

and title XIII of the Senate amendment, and modifications 

committed to conference: 

MICHAEL G. OXLEY, 

SPENCER BACHUS, 

From the Committee on Energy and Commerce, for consideration of title XIV of the Senate amendment, and modifications committed to conference: 

BILLY TAUZIN, 

JOE BARTON,

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From the Committee on Education and the Workforce, for 

consideration of sec. 1403 of the Senate amendment, and 

modifications committed to conference: 

JOHN BOEHNER, MICHAEL N. CASTLE, Managers on the Part of the House.

PATRICK LEAHY, 

JOE BIDEN, 

CHARLES SCHUMER, 

ORRIN HATCH, 

CHUCK GRASSLEY, 

JON KYL, 

MIKE DEWINE, 

JEFF SESSIONS, 

MITCH MCCONNELL, 

Managers on the Part of the Senate.

(183)

JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF 

CONFERENCE 

The managers on the part of the House and the Senate at the 

conference on the disagreeing votes of the two Houses on the 

amendment of the Senate to the bill, H.R. 333, the Bankruptcy 

Abuse Prevention and Consumer Protection Act of 2002, submit the 

following joint statement to the House and the Senate in explanation of the effect of the action agreed upon by the managers and 

recommended in the accompanying conference report: 

The Senate amendment struck all of the House bill after the 

enacting clause and inserted a substitute text. 

The House recedes from its disagreement to the amendment of 

the Senate with an amendment that is a substitute for the House 

bill and the Senate amendment. The differences between the House 

bill, the Senate amendment, and the substitute agreed to in conference are noted below, except for clerical corrections, conforming 

changes made necessary by agreements reached by the conferees, 

and minor drafting and clerical changes. 

Sec. 1. Short title; references; table of contents 

The short title of this measure is the Bankruptcy Abuse Prevention and Consumer Protection Act of 2002. 

TITLE I—NEEDS-BASED BANKRUPTCY

Sec. 101. Conversion 

Section 101 is identical to section 101 of the House bill and the 

Senate amendment. Under current law, section 706(c) of the Bankruptcy Code provides that a court may not convert a chapter 7 case 

unless the debtor requests such conversion. Section 101 of the conference report amends this provision to allow a chapter 7 case to 

be converted to a case under chapter 12 or chapter 13 on request 

or consent of the debtor. 

Sec. 102. Dismissal or conversion 

Section 102 of the conference report reflects a compromise between section 102 of the House bill and the Senate amendment, although many of the components of this provision are derived from 

identical counterparts in the House bill and the Senate amendment. 

This provision implements the conference report’s principal 

consumer bankruptcy reforms: needs-based debt relief. Under section 707(b) of the Bankruptcy Code, a chapter 7 case filed by a 

debtor who is an individual may be dismissed for substantial abuse 

only on motion of the court or the United States Trustee. It specifically prohibits such dismissal at the suggestion of any party in interest. 

184

Section 102 of the conference report revises current law in several significant respects. First, it amends section 707(b) of the 

Bankruptcy Code to permit—in addition to the court and the 

United States trustee—a trustee, bankruptcy administrator, or a 

party in interest to seek dismissal or conversion of a chapter 7 case 

to one under chapter 11 or 13 on consent of the debtor, under certain circumstances. In addition, section 102 of the conference report 

changes the current standard for dismissal from ‘‘substantial 

abuse’’ to ‘‘abuse’’. Section 102 of the conference report further 

amends Bankruptcy Code section 707(b) to mandate a presumption 

of abuse if the debtor’s current monthly income (reduced by certain 

specified amounts) when multiplied by 60 is not less than the lesser of 25 percent of the debtor’s nonpriority unsecured claims or $6,000 (whichever is greater), or $10,000. 

To determine whether the presumption of abuse applies under 

section 707(b) of the Bankruptcy Code, section 102(a) of the conference report specifies certain monthly expense amounts that are 

to be deducted from the debtor’s ‘‘current monthly income’’ (a defined term). The House bill and the Senate amendment contain 

similar, but not identical provisions with respect to these expenses. 

Section 102(a) incorporates those provisions that are identical in 

both bills. These include the following expense items: 

the applicable monthly expenses for the debtor as well as 

for the debtor’s dependents and spouse in a joint case (if the 

spouse is not otherwise a dependent) specified under the Internal Revenue Service’s National Standards (with provision for 

an additional 5 percent for food and clothing if the debtor can 

demonstrate that such additional amount is reasonable and 

necessary) and the IRS Local Standards; 

the actual monthly expenses for the debtor, the debtor’s 

dependents, and the debtor’s spouse in a joint case (if the 

spouse is not otherwise a dependent) for the categories specified by the Internal Revenue Service as Other Necessary Expenses; 

reasonably necessary expenses incurred to maintain the 

safety of the debtor and the debtor’s family from family violence as specified in section 309 of the Family Violence Prevention and Services Act or other applicable federal law, with provision for the confidentiality of these expenses; 

the debtor’s average monthly payments on account of secured debts and priority claims as explained below; and 

if the debtor is eligible to be a debtor under chapter 13, 

the actual administrative expenses of administering a chapter 

13 plan for the district in which the debtor resides, up to 10 

percent of projected plan payments, as determined under 

schedules issued by the Executive Office for United States 

Trustees. 

With respect to secured debts, Section 102(a)(2)(C) of the conference report specifies that the debtor’s average monthly payments on account of secured debts is calculated as the sum of the 

following divided by 60: (1) all amounts scheduled as contractually 

due to secured creditors for each month of the 60-month period following filing of the case; and (2) any additional payments necessary, in filing a plan under chapter 13, to maintain possession of 

185

the debtor’s primary residence, motor vehicle or other property necessary for the support of the debtor and the debtor’s dependents, 

that serves as collateral for secured debts. This provision is identical to section 102(a)(2)(C) of the House bill and the Senate 

amendment. 

With respect to priority claims, section 102(a)(2)(C) of the conference report specifies that the debtor’s expenses for payment of 

such claims (including child support and alimony claims) is calculated as the total of such debts divided by 60. This provision is 

identical to section 102(a)(2)(C) of the House bill and the Senate 

amendment.

Although the House bill and the Senate amendment contain 

identical provisions permitting a debtor, if applicable, to deduct 

from current monthly income the continuation of actual expenses 

paid by the debtor that are reasonable and necessary for the care 

and support of an elderly, chronically ill, or disabled household 

member or member of the debtor’s immediate family (providing 

such individual is unable to pay for these expenses), the bills differ 

with respect to their respective definitions of ‘‘immediate family’’. The conference report adopts the Senate amendment’s position that 

the term includes, in addition to other specified entities, the debtor’s children and grandchildren. 

Likewise, both the House bill and the Senate amendment permit the debtor to deduct the actual expenses for each dependent 

child of a debtor to attend a private or public elementary or secondary school of up to $1,500 per child if the debtor: (1) documents 

such expenses, and (2) provides a detailed explanation of why such 

expenses are reasonable and necessary. The conference report 

adopts the Senate amendment’s additional requirement that the 

debtor explain why such expenses are not already accounted for 

under any of the Internal Revenue Service National and Local 

Standards, and Other Expenses categories as identified in section 

707(b)(2)(I), as amended. 

In addition, the conference report adopts the Senate amendment provision permitting a debtor to claim additional housing and 

utilities allowances based on the debtor’s actual home energy expenses if the debtor documents such expenses and demonstrates 

that they are reasonable and necessary. The House bill has no comparable provision. 

While the conference report replaces the current law’s presumption in favor of granting relief requested by a chapter 7 debtor 

with a presumption of abuse (if applicable under the income and 

expense analysis previously described), this presumption may be 

rebutted only under certain circumstances. Section 102(a)(2)(C) of 

the conference report amends Bankruptcy Code section 707(b) to 

provide that the presumption of abuse may be rebutted only if: (1) 

the debtor demonstrates special circumstances that justify additional expenses or adjustments of current monthly income for 

which there is no reasonable alternative; and (2) the additional expenses or adjustments cause the product of the debtor’s current 

monthly income (reduced by the specified expenses) when multiplied by 60 to be less than the lesser of 25 percent of the debtor’s 

nonpriority unsecured claims, or $6,000 (whichever is greater); or 

$10,000. In addition, the debtor must itemize and document each 

186

additional expense or income adjustment as well as provide a detailed explanation of the special circumstances that make such expense or adjustment necessary and reasonable. In addition, the 

debtor must attest under oath to the accuracy of any information 

provided to demonstrate that such additional expense or adjustment is required. This provision is identical to section 102(a)(2)(C) 

of the House bill and the Senate amendment. 

To implement these needs-based reforms, the conference report, in section 102(a)(2)(C), requires the debtor to file, as part of 

the schedules of current income and current expenditures, a statement of current monthly income. This statement must show: (1) the 

calculations that determine whether a presumption of abuse arises 

under section 707(b) (as amended), and (2) how each amount is calculated. This provision is identical to section 102(a)(2)(C) of the 

House bill and the Senate amendment. 

In a case where the presumption of abuse does not apply or 

has been rebutted, section 102(a)(2)(C) of the conference report 

amends Bankruptcy Code section 707(b) to require a court to consider whether: (1) the debtor filed the chapter 7 case in bad faith; 

or (2) the totality of the circumstances of the debtor’s financial situation demonstrates abuse, including whether the debtor wants to 

reject a personal services contract and the debtor’s financial need 

for such rejection. This provision is identical to section 102(a)(2)(C) 

of the House bill and the Senate amendment. 

Under section 102(a)(2)(C) of the conference report, a court 

may on its own initiative or on motion of a party in interest in accordance with rule 9011 of the Federal Rules of Bankruptcy Procedure, order a debtor’s attorney to reimburse the trustee for all reasonable costs incurred in prosecuting a section 707(b) motion if: (1) 

a trustee files such motion; (2) the motion is granted; and (3) the 

court finds that the action of the debtor’s attorney in filing the case 

under chapter 7 violated rule 9011. If the court determines that the 

debtor’s attorney violated rule 9011, it may on its own initiative or 

on motion of a party in interest in accordance with such rule, order 

the assessment of an appropriate civil penalty against debtor’s 

counsel and the payment of such penalty to the trustee, United 

States trustee, or bankruptcy administrator. This provision represents a compromise among House and Senate conferees. It differs 

from its antecedents in section 102(a)(2)(C) of the House bill and 

the Senate amendment in that it changes the mandatory standard 

to a discretionary standard and clarifies that a motion for costs or 

the imposition of a civil penalty must be made by a party in interest or by the court itself in accordance with rule 9011. 

Section 102(a)(2)(C) of the conference report provides that the 

signature of an attorney on a petition, pleading or written motion 

shall constitute a certification that the attorney has: (1) performed 

a reasonable investigation into the circumstances that gave rise to 

such document; and (2) determined that such document is wellgrounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law 

and does not constitute an abuse under section 707(b)(1). In addition, such attorney’s signature on the petition shall constitute a 

certification that the attorney has no knowledge after an inquiry 

that the information in the schedules filed with the petition is inVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00186 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
187

correct. This provision is identical to section 102(a)(2)(C) of the 

House bill and the Senate amendment. 

Section 102(a)(2)(C) of the conference report amends section 

707(b) of the Bankruptcy Code to permit a court on its own initiative or a party in interest in accordance with rule 9011 of the Federal Rules of Bankruptcy Procedure to award reasonable costs (including reasonable attorneys’ fees) in contesting a motion filed by 

a party in interest (other than a trustee, United States trustee or 

bankruptcy administrator) if the court: (i) does not grant the section 707(b) motion; and (ii) finds that either the movant violated 

rule 9011, or the attorney (if any) who filed the motion did not 

comply with subparagraph (4)(C) and the section 707(b) motion was 

made solely for the purpose of coercing a debtor into waiving a 

right guaranteed under the Bankruptcy Code to such debtor. An 

exception applies with respect to a movant that is a ‘‘small business’’ with a claim in an aggregate amount of less than $1,000. A 

small business, for purposes of this provision, is defined as an unincorporated business, partnership, corporation, association or organization with less than 25 full-time employees that is engaged in 

commercial or business activity. The number of employees of a 

wholly owned subsidiary includes the employees of the parent and 

any other subsidiary corporation of the parent. Section 102(a)(2)(C) 

represents a compromise among House and Senate conferees. It differs from its antecedents in section 102(a)(2)(C) of the House bill 

and the Senate amendment in that it changes the mandatory 

standard to a discretionary standard and clarifies that the motion 

for costs must be made by a party in interest or by the court. The 

use of the phraseology in this provision, ‘‘in accordance with rule 

9011 of the Federal Rules of Bankruptcy Procedure’’, is intended to 

indicate that the procedures for the motion of a party in interest 

or a court acting on its own initiative are the procedures outlined 

in rule 9011(c). 

The conference report includes two ‘‘safe harbors’’ with respect 

to its needs-based reforms. Section 102(a)(2)(C) of the conference 

report amends Bankruptcy Code section 707(b) to allow only a 

judge, United States trustee, or bankruptcy administrator to file a 

section 707(b) motion (based on the debtor’s ability to repay, bad 

faith, or the totality of the circumstances) if the chapter 7 debtor’s 

current monthly income (or in a joint case, the income of the debtor 

and the debtor’s spouse) falls below the state median family income 

for a family of equal or lesser size (adjusted for larger sized families), or the state median family income for one earner in the case 

of a one-person household. This provision is substantively identical 

to section 102(a)(2)(C) of the House bill and the Senate amendment. 

The conference report’s second safe harbor only pertains to a 

motion under section 707(b)(2), that is, a motion to dismiss based 

on a debtor’s ability to repay. Section 102(a)(2)(C) represents a 

compromise between the House and the Senate positions. The 

House provision prohibits a judge, United States trustee, trustee, 

bankruptcy administrator or other party in interest from filing 

such motion if the debtor’s income falls below the state median 

family income for a family of equal or lesser size (adjusted for larger sized families), or the state median family income for one earner 

188

in the case of a one-person household. The Senate amendment 

takes into consideration the spouse’s income only in a joint case. 

Section 102(a)(2)(C) of the conference report does not consider 

the nonfiling spouse’s income if the debtor and the debtor’s spouse 

are separated under applicable nonbankruptcy law, or the debtor 

and the debtor’s spouse are living separate and apart, other than 

for the purpose of evading section 707(b)(2). The debtor must file 

a statement under penalty of perjury specifying that he or she 

meets one of these criteria. In addition, the statement must disclose the aggregate (or best estimate) of the amount of any cash or 

money payments received from the debtor’s spouse attributed to 

the debtor’s current monthly income. 

Section 102(b) of the conference report amends section 101 of 

the Bankruptcy Code to define ‘‘current monthly income’’ as the average monthly income that the debtor receives (or in a joint case, 

the debtor and debtor’s spouse receive) from all sources, without regard to whether it is taxable income, in a specified six-month period preceding the filing of the bankruptcy case. The conference report adopts the Senate amendment’s provision specifying that the 

six-month period is determined as ending on the last day of the calendar month immediately preceding the filing of the bankruptcy 

case, if the debtor files the statement of current income required 

by Bankruptcy Code section 521. If the debtor does not file such 

schedule, the court determines the date on which current income 

is calculated. 

The term, ‘‘current monthly income’’, pursuant to section 

102(b) of the conference report, includes any amount paid by any 

entity other than the debtor (or, in a joint case, the debtor and the 

debtor’s spouse if not otherwise a dependent) on a regular basis for 

the household expenses of the debtor or the debtor’s dependents 

(and, the debtor’s spouse in a joint case, if not otherwise a dependent). It excludes Social Security Act benefits and payments to victims of war crimes or crimes against humanity on account of their 

status as victims of such crimes. In addition, the conference report 

provides that current monthly income does not include payments to 

victims of international or domestic terrorism as defined in section 

2331 of title 18 of the United States Code on account of their status 

as victims of such terrorism. This provision with respect to victims 

of terrorism reflects a compromise among the conferees. It has no 

counterpart in either the House bill or the Senate amendment. 

Section 102(c) of the conference report is substantively similar 

in part to its House and the Senate counterparts. The provision 

amends section 704 of the Bankruptcy Code to require the United 

States trustee or bankruptcy administrator in a chapter 7 case 

where the debtor is an individual to: (1) review all materials filed 

by the debtor; and (2) file a statement with the court (within 10 

days following the meeting of creditors held pursuant to section 

341 of the Bankruptcy Code) as to whether or not the debtor’s case 

should be presumed to be an abuse under section 707(b). The court 

must provide a copy of such statement to all creditors within 5 

days after its filing. Within 30 days of the filing of such statement, 

the United States trustee or bankruptcy administrator must file either: (1) a motion under section 707(b); or (2) a statement setting 

forth the reasons why such motion is not appropriate in any case 

189

where the debtor’s filing should be presumed to be an abuse and 

the debtor’s current monthly income exceeds certain thresholds. 

Section 102(c) of the conference report does not include a provision 

contained in the House bill and Senate amendment that permits a 

United States trustee or bankruptcy administrator to decline to file 

a section 707(b)(2) motion (pertaining to the debtor’s ability to 

repay) under certain circumstances. 

In a chapter 7 case where the presumption of abuse applies 

under section 707(b), section 102(d) of the conference report 

amends Bankruptcy Code section 342 to require the clerk to provide written notice to all creditors within ten days after commencement of the case stating that the presumption of abuse applies in 

such case. This provision is substantively identical to section 102(d) 

of the House bill and the Senate amendment. 

Section 102(e) of the conference report provides that nothing in 

the Bankruptcy Code limits the ability of a creditor to give information to a judge (except for information communicated ex parte, 

unless otherwise permitted by applicable law), United States trustee, bankruptcy administrator, or trustee. This provision is substantively identical to section 102(e) of the House bill and the Senate amendment. 

Section 102(f) of the conference report adds a provision to 

Bankruptcy Code section 707 to permit the court to dismiss a chapter 7 case filed by a debtor who is an individual on motion by a 

victim of a crime of violence (as defined in section 16 of title 18 of 

the United States Code) or a drug trafficking crime (as defined in 

section 924(c)(2) of title 18 of the United States Code). The case 

may be dismissed if the debtor was convicted of such crime and dismissal is in the best interest of the victims, unless the debtor establishes by a preponderance of the evidence that the filing of the 

case is necessary to satisfy a claim for a domestic support obligation. This provision is substantively identical to section 102(f) of 

the House bill and the Senate amendment. 

Section 102(g) of the conference report amends section 1325(a) 

of the Bankruptcy Code to require the court, as a condition of confirming a chapter 13 plan, to find that the debtor’s action in filing 

the case was in good faith. This provision is substantively identical 

to section 102(g) of the House bill and the Senate amendment. 

Section 102(h) of the conference report amends section 

1325(b)(1) of the Bankruptcy Code to specify that the court must 

find, in confirming a chapter 13 plan to which there has been an 

objection, that the debtor’s disposable income will be paid to unsecured creditors. It also amends section 1325(b)(2)’s definition of disposable income. As defined under this provision, the term means 

income received by the debtor (other than child support payments, 

foster care payments, or certain disability payments for a dependent child) less amounts reasonably necessary to be expended for: (1) 

the maintenance or support of the debtor or the debtor’s dependent; 

(2) a domestic support obligation that first becomes due after the 

case is filed; (3) charitable contributions (as defined in section 

548(d)(3)) to a qualified religious or charitable entity or organization (as defined in section 548(d)(4)) in an amount that does not exceed 15 percent of the debtor’s gross income for the year in which 

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ness, the payment of expenditures necessary for the continuation, 

preservation, and operation of the business. As amended, section 

1325(b)(3) provides that the amounts reasonably necessary to be 

expended under section 1325(b)(2) are determined in accordance 

with section 707(b)(2)(A) and (B) if the debtor’s income exceeds certain monetary thresholds. This provision is substantively identical 

to section 102(h) of the House bill and the Senate amendment. 

Section 102(i) of the conference report adopts the Senate’s position in section 102(i) of the Senate amendment, which has no counterpart in the House bill. Section 102(i) amends Bankruptcy Code 

section 1329(a) to require the amounts paid under a confirmed 

chapter 13 plan to be reduced by the actual amount expended by 

the debtor to purchase health insurance for the debtor and the 

debtor’s dependents (if those dependents do not otherwise have 

such insurance) if the debtor documents the cost of such insurance 

and demonstrates such expense is reasonable and necessary, and 

the amount is not otherwise allowed for purposes of determining 

disposable income under section 1325(b). If the debtor previously 

paid for health insurance, the debtor must demonstrate that the 

amount is not materially greater than the amount the debtor previously paid. If the debtor did not previously have such insurance, 

the amount is not materially larger than the reasonable cost that 

would be incurred by a debtor having similar characteristics. Upon 

request of any party in interest, the debtor must file proof that a 

health insurance policy was purchased. 

Section 102(j) of the conference report represents a compromise 

between the House and Senate conferees and has no antecedent in 

either the House bill or Senate amendment. The provision amends 

section 104 of the Bankruptcy Code to provide for the periodic adjustment of monetary amounts specified in sections 707(b) and 

1325(b)(3) of the Bankruptcy Code, as amended by this Act. 

Section 102(k) adds to section 101 of the Bankruptcy Code a 

definition of ‘‘median family income.’’ This provision represents a 

compromise between the House and Senate conferees and has no 

antecedent in either the House bill or Senate amendment. 

Sec. 103. Sense of Congress and study 

Section 103(a) of the conference report expresses the sense of 

Congress that the Secretary of the Treasury has the authority to 

alter the Internal Revenue Service expense standards to set guidelines for repayment plans as needed to accommodate their use 

under section 707(b) of the Bankruptcy Code, as amended. Section 

103(b) requires the Executive Office for United States Trustees to 

submit a report within 2 years from the date of the Act’s enactment 

regarding the utilization of the Internal Revenue Service guidelines 

for determining the current monthly expenses of a debtor under 

section 707(b) and the impact that the application of these standards has had on debtors and the bankruptcy courts. The report 

may include recommendations for amendments to the Bankruptcy 

Code that are consistent with the report’s findings. This provision 

is substantially identical to section 103 of the House bill and the 

Senate amendment. 

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Sec. 104. Notice of alternatives 

Section 104 of the conference report amends section 342(b) of 

the Bankruptcy Code to require the clerk, before the commencement of a bankruptcy case by an individual whose debts are primarily consumer debts, to supply such individual with a written 

notice containing: (1) a brief description of chapters 7, 11, 12, and 

13 and the general purpose, benefits, and costs of proceeding under 

each of these chapters; (2) the types of services available from credit counseling agencies; (3) a statement advising that a person who 

knowingly and fraudulently conceals assets or makes a false oath 

or statement under penalty of perjury in connection with a bankruptcy case shall be subject to fine, imprisonment, or both; and (4) 

a statement warning that all information supplied by a debtor in 

connection with the case is subject to examination by the Attorney 

General. This provision is substantially identical to section 104 of 

the House bill and the Senate amendment. 

Sec. 105. Debtor financial management training test program 

Section 105 of the conference report requires the Director of 

the Executive Office for United States Trustees to: (1) consult with 

a wide range of debtor education experts who operate financial 

management education programs; and (2) develop a financial management training curriculum and materials that can be used to 

teach individual debtors how to manage their finances better. The 

Director must select six judicial districts to test the effectiveness of 

the financial management training curriculum and materials for an 

18-month period beginning not later than 270 days after the Act’s 

enactment date. For these six districts, the curricula and materials 

must be used as the instructional personal financial management 

course required under Bankruptcy Code section 111. Over the period of the study, the Director must evaluate the effectiveness of: 

(1) the curriculum and materials; and (2) a sample of existing consumer education programs (such as those described in the Report 

of the National Bankruptcy Review Commission) that are representative of consumer education programs sponsored by the credit industry, chapter 13 trustees, and consumer counseling groups. 

Not later than three months after concluding such evaluation, the 

Director must submit to Congress a report with findings regarding 

the effectiveness and cost of the curricula, materials, and programs. This provision is substantially identical to section 105 of the 

House bill and the Senate amendment. 

Sec. 106. Credit counseling 

Section 106(a) of the conference report amends section 109 of 

the Bankruptcy Code to require an individual—as a condition of 

eligibility for bankruptcy relief—to receive credit counseling within 

the 180-day period preceding the filing of a bankruptcy case by 

such individual. The credit counseling must be provided by an approved nonprofit budget and credit counseling agency consisting of 

either an individual or group briefing (which may be conducted 

telephonically or via the Internet) that outlined opportunities for 

available credit counseling and assisted the individual in performing a budget analysis. This requirement does not apply to a 

debtor who resides in a district where the United States trustee or 

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bankruptcy administrator has determined that approved nonprofit 

budget and credit counseling agencies in that district are not reasonably able to provide adequate services to such individuals. Although such determination must be reviewed annually, the United 

States trustee or bankruptcy administrator may disapprove a nonprofit budget and credit counseling agency at any time. 

A debtor may be temporarily exempted from this requirement 

if he or she submits to the court a certification that: (1) describes 

exigent circumstances meriting a waiver of this requirement; (2) 

states that the debtor requested credit counseling services from an 

approved nonprofit budget and credit counseling agency, but was 

unable to obtain such services within the five-day period beginning 

on the date the debtor made the request; and (3) is satisfactory to 

the court. This exemption terminates when the debtor meets the 

requirements for credit counseling participation, but not longer 

than 30 days after the case is filed, unless the court, for cause, extends this period up to an additional 15 days. This provision is substantively identical to section 106(a) of the House bill and the Senate amendment. 

Section 106(b) of the conference report amends section 727(a) 

of the Bankruptcy Code to deny a discharge to a chapter 7 debtor 

who fails to complete a personal financial management instructional course. This provision, however, does not apply if the debtor 

resides in a district where the United States trustee or bankruptcy 

administrator has determined that the approved instructional 

courses in that district are not adequate. Such determination must 

be reviewed annually by the United States trustee or bankruptcy 

administrator. This provision is substantively identical to section 

106(b) of the House bill and the Senate amendment. 

Section 106(c) of the conference report amends section 1328 of 

the Bankruptcy Code to deny a discharge to a chapter 13 debtor 

who fails to complete a personal financial management instructional course. This requirement does not apply if the debtor resides 

in a district where the United States trustee or bankruptcy administrator has determined that the approved instructional courses in 

that district are not adequate. Such determination must be reviewed annually by the United States trustee or bankruptcy administrator. This provision is substantively identical to section 

106(c) of the House bill and the Senate amendment. 

Section 106(d) of the conference report amends section 521 of 

the Bankruptcy Code to require a debtor who is an individual to 

file with the court: (1) a certificate from an approved nonprofit 

budget and credit counseling agency describing the services it provided the debtor pursuant to section 109(h); and (2) a copy of the 

repayment plan, if any, that was developed by the agency pursuant 

to section 109(h). This provision is substantively identical to section 

106(d) of the House bill and the Senate amendment. 

Section 106(e) of the conference report is substantively identical to section 106(e) of the House bill and the Senate amendment. 

It adds section 111 to the Bankruptcy Code requiring the clerk to 

maintain a publically available list of approved: (1) credit counseling agencies that provide the services described in section 109(h) 

of the Bankruptcy Code; and (2) personal financial management instructional courses. Section 106(e) further provides that the United 

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States trustee or bankruptcy administrator may only approve an 

agency or course provider under this provision pursuant to certain 

specified criteria. If such agency or provider course is approved, the 

approval may only be for a probationary period of up to six months. 

At the conclusion of the probationary period, the United States 

trustee or bankruptcy administrator may only approve such agency 

or instructional course for an additional one-year period and, thereafter for successive one-year periods, which has demonstrated during such period that it met the standards set forth in this provision 

and can satisfy such standards in the future. 

Within 30 days after any final decision occurring after the expiration of the initial probationary period or after any subsequent 

two-year period, an interested person may seek judicial review of 

such decision in the appropriate United States district court. In addition, the district court, at any time, may investigate the qualifications of a credit counseling agency and request the production of 

documents to ensure the agency’s integrity and effectiveness. The 

district court may remove a credit counseling agency that does not 

meet the specified qualifications from the approved list. The United 

States trustee or bankruptcy administrator must notify the clerk 

that a credit counseling agency or instructional course is no longer 

approved and the clerk must remove such entity from the approved 

list. 

Section 106(e) prohibits a credit counseling agency from providing information to a credit reporting agency as to whether an 

individual debtor has received or sought personal financial management instruction. A credit counseling agency that willfully or 

negligently fails to comply with any requirement under the Bankruptcy Code with respect to a debtor shall be liable to the debtor 

for damages in an amount equal to: (1) actual damages sustained 

by the debtor as a result of the violation; and (2) any court costs 

or reasonable attorneys’ fees incurred in an action to recover such 

damages. 

Section 106(f) of the conference report amends section 362 of 

the Bankruptcy Code to provide that if a chapter 7, 11, or 13 case 

is dismissed due to the creation of a debt repayment plan, the presumption that a case was not filed in good faith under section 

362(c)(3) shall not apply to any subsequent bankruptcy case commenced by the debtor. It also provides that the court, on request 

of a party in interest, must issue an order under section 362(c) confirming that the automatic stay has terminated. This provision is 

substantively identical to section 106(f) of the House bill and the 

Senate amendment. 

Sec. 107. Schedules of reasonable and necessary expenses 

For purposes of section 707(b) of the Bankruptcy Code, section 

107 of the conference report requires the Director of the Executive 

Office for United States Trustees to issue schedules of reasonable 

and necessary administrative expenses (including reasonable attorneys’ fees) relating to the administration of a chapter 13 plan for 

each judicial district not later than 180 days after the date of enactment of the Act. This provision is substantively identical to section 107 of the House bill and the Senate amendment. 

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TITLE II—ENHANCED CONSUMER PROTECTION

SUBTITLE A—PENALTIES FOR ABUSIVE CREDITOR PRACTICES

Sec. 201. Promotion of alternative dispute resolution 

Section 201 of the conference report is substantively identical 

to section 201 of the House bill and the Senate amendment. Subsection (a) amends section 502 of the Bankruptcy Code to permit 

the court, after a hearing on motion of the debtor, to reduce a claim 

based in whole on an unsecured consumer debt by up to 20 percent 

if: (1) the claim was filed by a creditor who unreasonably refused 

to negotiate a reasonable alternative repayment schedule proposed 

by an approved credit counseling agency on behalf of the debtor; (2) 

the debtor’s offer was made at least 60 days before the filing of the 

case; (3) the offer provided for payment of at least 60 percent of the 

debt over a period not exceeding the loan’s repayment period or a 

reasonable extension thereof; and (4) no part of the debt is nondischargeable. The debtor has the burden of proving by clear and 

convincing evidence that: (1) the creditor unreasonably refused to 

consider the debtor’s proposal; and (2) the proposed alternative repayment schedule was made prior to the expiration of the 60-day 

period. Section 201(b) amends section 547 of the Bankruptcy Code 

to prohibit the avoidance as a preferential transfer a payment by 

a debtor to a creditor pursuant to an alternative repayment plan 

created by an approved credit counseling agency. 

Sec. 202. Effect of discharge 

Section 202 of the conference report amends section 524 of the 

Bankruptcy Code in two respects. First, it provides that the willful 

failure of a creditor to credit payments received under a confirmed 

chapter 11, 12, or 13 plan constitutes a violation of the discharge 

injunction if the creditor’s action to collect and failure to credit payments in the manner required by the plan caused material injury 

to the debtor. This provision does not apply if the order confirming 

the plan is revoked, the plan is in default, or the creditor has not 

received payments required to be made under the plan in the manner prescribed by the plan. Second, section 202 amends section 524 

of the Bankruptcy Code to provide that the discharge injunction 

does not apply to a creditor having a claim secured by an interest 

in real property that is the debtor’s principal residence if the creditor communicates with the debtor in the ordinary course of business between the creditor and the debtor and such communication 

is limited to seeking or obtaining periodic payments associated 

with a valid security interest in lieu of the pursuit of in rem relief 

to enforce the lien. Section 202 is substantively identical to section 

202 of the House bill and the Senate amendment. 

Sec. 203. Discouraging abuse of reaffirmation practices 

Section 203 of the conference report effectuates a comprehensive overhaul of the law applicable to reaffirmation agreements. It 

is substantively identical to section 203 of the House bill and the 

Senate amendment. 

Section 203(a) amends section 524 of the Bankruptcy Code to 

mandate that certain specified disclosures be provided to a debtor 

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at or before the time he or she signs a reaffirmation agreement. 

These specified disclosures, which are the only disclosures required 

in connection with a reaffirmation agreement, must be in writing 

and be made clearly and conspicuously. In addition, the disclosure 

must include certain advisories and explanations. At the election of 

the creditor, the disclosure statement may include a repayment 

schedule. If the debtor is represented by counsel, section 203(a) 

mandates that the attorney file a certification stating that the 

agreement represents a fully informed and voluntary agreement by 

the debtor, that the agreement does not impose an undue hardship 

on the debtor or any dependent of the debtor, and that the attorney 

fully advised the debtor of the legal effect and consequences of such 

agreement as well as of any default thereunder. In those instances 

where the presumption of undue hardship applies, the attorney 

must also certify that the debtor is able to make the payments required under the reaffirmation agreement. Further, the debtor 

must submit a statement setting forth the debtor’s monthly income 

and actual current monthly expenditures. If the debtor is represented by counsel and the debt being reaffirmed is owed to a 

credit union, a modified version of this statement may be used. 

Notwithstanding any other provision of the Bankruptcy Code, 

section 203(a) permits a creditor to accept payments from a debtor: 

(1) before and after the filing of a reaffirmation agreement with the 

court; or (2) pursuant to a reaffirmation agreement that the creditor believes in good faith to be effective. It further provides that 

the requirements specified in subsections (c)(2) and (k) of section 

524 are satisfied if the disclosures required by these provisions are 

given in good faith. 

Where the amount of the scheduled payments due on the reaffirmed debt (as disclosed in the debtor’s statement) exceeds the 

debtor’s available income, it is presumed for 60 days from the date 

on which the reaffirmation agreement is filed with the court that 

the agreement presents an undue hardship. The court must review 

such presumption, which can be rebutted by the debtor by a written statement explaining the additional sources of funds that would 

enable the debtor to make the required payments on the reaffirmed 

debt. If the presumption is not rebutted to the satisfaction of the 

court, the court may disapprove the reaffirmation agreement. No 

reaffirmation agreement may be disapproved without notice and 

hearing to the debtor and creditor. The hearing must be concluded 

before the entry of the debtor’s discharge. The requirements set 

forth in this paragraph do not apply to reaffirmation agreements 

if the creditor is a credit union, as defined. 

Section 203(b) amends title 18 of the United States Code to require the Attorney General to designate a United States Attorney 

for each judicial district and to appoint a Federal Bureau of Investigation agent for each field office to have primary law enforcement 

responsibilities for violations of sections 152 and 157 of title 18 

with respect to abusive reaffirmation agreements and materially 

fraudulent statements in bankruptcy schedules that are intentionally false or misleading. In addition, section 203(b) provides 

that the designated United States Attorney has primary responsibility with respect to bankruptcy investigations under section 3057 

of title 18. Section 203(b) further provides that the bankruptcy 

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courts must establish procedures for referring any case in which a 

materially fraudulent bankruptcy schedule has been filed. 

Sec. 204. Preservation of claims and defenses upon sale of predatory 

loans 

Section 204 of the conference report adds a provision to section 

363 of the Bankruptcy Code with respect to sales of any interest 

in a consumer transaction that is subject to the Truth in Lending 

Act or any interest in a consumer credit contract (as defined in section 433.1 of title 16 of the Code of Federal Regulations). It provides that the purchaser of such interest through a bankruptcy sale 

under section 363 remains subject to all claims and defenses that 

are related to such assets to the same extent as that person would 

be subject to if the sale was not conducted under section 363. Section 204 of the conference report is derived from section 204 of the 

Senate amendment. There is no counterpart to this provision in the 

House bill. 

Sec. 205. GAO Study on reaffirmation process 

Section 205 of the conference report directs the Comptroller 

General of the United States to report to Congress on how consumers are treated in connection with the reaffirmation agreement 

process. This report must include: (1) the policies and activities of 

creditors with respect to reaffirmation agreements; and (2) whether 

such consumers are fully, fairly, and consistently informed of their 

rights under the Bankruptcy Code. The report, which must be completed not later than 18 months after the date of enactment of this 

Act, may include recommendations for legislation to address any 

abusive or coercive tactics found in connection with the reaffirmation process. Section 205 is derived from section 205 of the Senate

amendment. There is no counterpart to this provision in the House 

bill. 

SUBTITLE B—PRIORITY CHILD SUPPORT

Sec. 211. Definition of domestic support obligation 

Section 211 of the conference report amends section 101 of the 

Bankruptcy Code to define a domestic support obligation as a debt 

that accrues pre- or postpetition (including interest that accrues 

pursuant to applicable nonbankruptcy law) and is owed to or recoverable by: (1) a spouse, former spouse, or child of the debtor, or 

such child’s parent, legal guardian, or responsible relative; or (2) a 

governmental unit. To qualify as a domestic support obligation, the 

debt must be in the nature of alimony, maintenance, or support (including assistance provided by a governmental unit), without regard to whether such debt is expressly so designated. It must be 

established or subject to establishment either pre- or postpetition 

pursuant to: (1) a separation agreement, divorce decree, or property 

settlement agreement; (2) an order of a court of record; or (3) a determination made in accordance with applicable nonbankruptcy 

law by a governmental unit. It does not apply to a debt assigned 

to a nongovernmental entity, unless it was assigned voluntarily by 

the spouse, former spouse, child, or parent solely for the purpose 

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of collecting the debt. Section 211 is identical to section 211 of the 

House bill and the Senate amendment. 

Sec. 212. Priorities for claims for domestic support obligations 

Section 212 of the conference report amends section 507(a) of 

the Bankruptcy Code to accord first priority in payment to allowed 

unsecured claims for domestic support obligations that, as of the 

petition date, are owed to or recoverable by a spouse, former 

spouse, or child of the debtor, or the parent, legal guardian, or responsible relative of such child, without regard to whether such 

claim is filed by the claimant or by a governmental unit on behalf 

of such claimant, on the condition that funds received by such unit 

under this provision be applied and distributed in accordance with 

nonbankruptcy law. Subject to these claims, section 212 accords the 

same payment priority to allowed unsecured claims for domestic 

support obligations that, as of the petition date, were assigned by 

a spouse, former spouse, child of the debtor, or such child’s parent, 

legal guardian, or responsible relative to a governmental unit (unless the claimant assigned the claim voluntarily for the purpose of 

collecting the debt), or are owed directly to or recoverable by a governmental unit under applicable nonbankruptcy law, on the condition that funds received by such unit under this provision be applied and distributed in accordance with nonbankruptcy law. 

Where a trustee administers assets that may be available for payment of domestic support obligations under section 507(a)(1) (as 

amended), administrative expenses of the trustee allowed under 

section 503(b)(1)(A), (2) and (6) of the Bankruptcy Code must be 

paid before such claims to the extent the trustee administers assets 

that are otherwise available for the payment of these claims. Section 212 is similar to section 212 of the House bill and the Senate 

amendment. The principal difference is the conference report’s provision for the payment of trustee administrative expenses. 

Sec. 213. Requirements to obtain confirmation and discharge in 

cases involving domestic support obligations 

Section 213 is substantively identical to section 213 of the 

House bill and the Senate amendment. With respect to chapter 11 

cases, section 213(1) adds a condition for confirmation of a plan. It 

amends section 1129(a) of the Bankruptcy Code to provide that if 

a chapter 11 debtor is required by judicial or administrative order 

or statute to pay a domestic support obligation, then the debtor 

must pay all amounts payable under such order or statute that became payable postpetition as a prerequisite for confirmation. 

With respect to chapter 12 cases, section 213(2) of the conference report amends section 1208(c) of the Bankruptcy Code to 

provide that the failure of a debtor to pay any domestic support obligation that first becomes payable postpetition is cause for conversion or dismissal of the case. Section 213(3) amends Bankruptcy 

Code section 1222(a) to permit a chapter 12 debtor to propose a 

plan that provides for less than full payment of all amounts owed 

for a claim entitled to priority under Bankruptcy Code section 

507(a)(1)(B) if all of the debtor’s projected disposable income for a 

five-year period is applied to make payments under the plan. Section 213(4) of the conference report amends Bankruptcy Code secVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00197 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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tion 1222(b) to permit a chapter 12 debtor to propose a plan that 

pays postpetition interest on claims that are nondischargeable 

under Section 1228(a), but only to the extent that the debtor has 

disposable income available to pay such interest after payment of 

all allowed claims in full. Section 213(5) amends Bankruptcy Code 

section 1225(a) to provide that if a chapter 12 debtor is required 

by judicial or administrative order or statute to pay a domestic 

support obligation, then the debtor must pay such obligations pursuant to such order or statute that became payable postpetition as 

a condition of confirmation. Section 213(6) amends section Bankruptcy Code section 1228(a) to condition the granting of a chapter 

12 discharge upon the debtor’s payment of certain postpetition domestic support obligations. 

With respect to chapter 13 cases, section 213(7) of the conference report amends Bankruptcy Code section 1307(c) to provide 

that the failure of a debtor to pay any domestic support obligation 

that first becomes payable postpetition is cause for conversion or 

dismissal of the debtor’s case. Section 213(8) amends Bankruptcy 

Code section 1322(a) to permit a chapter 13 debtor to propose a 

plan that pays less than the full amount of a claim entitled to priority under Bankruptcy Code section 507(a)(1)(B) if the plan provides that all of the debtor’s projected disposable income over a 

five-year period will be applied to make payments under the plan. 

Section 213(9) amends Bankruptcy Code section 1322(b) to permit 

a chapter 13 debtor to propose a plan that pays postpetition interest on nondischargeable debts under section 1328(a), but only to 

the extent that the debtor has disposable income available to pay 

such interest after payment in full of all allowed claims. Section 

213(10) amends Bankruptcy Code section 1325(a) to provide that if 

a chapter 13 debtor is required by judicial or administrative order 

or statute to pay a domestic support obligation, then the debtor 

must pay all such obligations pursuant to such order or statute 

that became payable postpetition as a condition of confirmation. 

Section 213(11) amends Bankruptcy Code section 1328(a) to condition the granting of a chapter 13 discharge on the debtor’s payment 

of certain postpetition domestic support obligations. 

Sec. 214. Exceptions to automatic stay in domestic support proceedings 

Under current law, section 362(b)(2) of the Bankruptcy Code 

excepts from the automatic stay the commencement or continuation 

of an action or proceeding: (1) for the establishment of paternity; 

or (2) the establishment or modification of an order for alimony, 

maintenance or support. It also permits the collection of such obligations from property that is not property of the estate. Section 214 

makes several revisions to Bankruptcy Code section 362(b)(2). 

First, it replaces the reference to ‘‘alimony, maintenance or support’’ with ‘‘domestic support obligations’’. Second, it adds to section 

362(b)(2) actions or proceedings concerning: (1) child custody or visitation; (2) the dissolution of a marriage (except to the extent such 

proceeding seeks division of property that is property of the estate); 

and (3) domestic violence. Third, it permits the withholding of income that is property of the estate or property of the debtor for 

payment of a domestic support obligation under a judicial or adVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00198 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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ministrative order as well as the withholding, suspension, or restriction of a driver’s license, or a professional, occupational or recreational license under state law, pursuant to section 466(a)(16) of 

the Social Security Act. Fourth, it authorizes the reporting of overdue support owed by a parent to any consumer reporting agency 

pursuant to section 466(a)(7) of the Social Security Act. Fifth, it 

permits the interception of tax refunds as authorized by sections 

464 and 466(a)(3) of the Social Security Act or analogous state law. 

Sixth, it allows medical obligations, as specified under title IV of 

the Social Security Act, to be enforced notwithstanding the automatic stay. Section 214 is substantively identical to section 214 of 

the House bill and the Senate amendment. 

Sec. 215. Nondischargeability of certain debts for alimony, maintenance, and support 

Section 215 of the conference report amends Bankruptcy Code 

section 523(a)(5) to provide that a ‘‘domestic support obligation’’ (as 

defined in section 211 of the conference report) is nondischargeable 

and eliminates Bankruptcy Code section 523(a)(18). Section 215(2) 

amends Bankruptcy Code section 523(c) to delete the reference to 

section 523(a)(15) in that provision. Section 215(3) amends section 

523(a)(15) to provide that obligations to a spouse, former spouse, or 

a child of the debtor (not otherwise described in section 523(a)(5)) 

incurred in connection with a divorce or separation or related action are nondischargeable irrespective of the debtor’s inability to 

pay such debts. Section 215 is substantively identical to section 215 

of the House bill and the Senate amendment. 

Sec. 216. Continued liability of property 

Section 216(1) of the conference report amends section 522(c) 

of the Bankruptcy Code to make exempt property liable for nondischargeable domestic support obligations notwithstanding any 

contrary provision of applicable nonbankruptcy law. Section 216(2) 

and (3) make conforming amendments to sections 522(f)(1)(A) and 

522(g)(2) of the Bankruptcy Code. Section 216 is substantively 

identical to section 216 of the House bill and the Senate amendment. 

Sec. 217. Protection of domestic support claims against preferential 

transfer motions 

Section 217 of the conference report makes a conforming 

amendment to Bankruptcy Code section 547(c)(7) to provide that a 

bona fide payment of a debt for a domestic support obligation may 

not be avoided as a preferential transfer. This provision is substantively identical to section 217 of the House bill and the Senate 

amendment. 

Sec. 218. Disposable income defined 

Section 218 of the conference report amends section 

1225(b)(2)(A) of the Bankruptcy Code to provide that disposable income in a chapter 12 case does not include payments for 

postpetition domestic support obligations. This provision is substantively identical to section 218 of the House bill. Its Senate 

counterpart included a duplicative amendment to section 

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1325(b)(2)(A) of the Bankruptcy Code that therefore was deleted 

from section 218 of the conference report. 

Sec. 219. Collection of child support 

Section 219 amends sections 704, 1106, 1202, and 1302 of the 

Bankruptcy Code to require trustees in chapter 7, 11, 12, and 13 

cases to provide certain types of notices to child support claimants 

and governmental enforcement agencies. This provision is substantively derived from section 219 of the House bill and the Senate amendment. In addition to including a provision from the Senate amendment requiring chapter 12 trustees to give notice of the 

claim to the claimant, section 219 extends this requirement to 

chapter 7, 11 and 13 trustees as well. In addition, the conference 

report conforms internal statutory cross references to Bankruptcy 

Code section 523(a)(14A) and deletes the reference to Bankruptcy 

Code section 523(a)(14) with respect to chapter 13, as this provision 

is inapplicable to that chapter. 

Section 219(a) requires a chapter 7 trustee to provide written 

notice to a domestic support claimant of the right to use the services of a state child support enforcement agency established under 

sections 464 and 466 of the Social Security Act in the state where 

the claimant resides for assistance in collecting child support during and after the bankruptcy case. The notice must include the 

agency’s address and telephone number as well as explain the 

claimant’s right to payment under the applicable chapter of the 

Bankruptcy Code. In addition, the trustee must provide written notice to the claimant and the agency of such claim and include the 

name, address, and telephone number of the child support claimant. At the time the debtor is granted a discharge, the trustee must 

notify both the child support claimant and the agency that the 

debtor was granted a discharge as well as supply them with the 

debtor’s last known address, the last known name and address of 

the debtor’s employer, and the name of each creditor holding a debt 

that is not discharged under section 523(a)(2), (4) or (14A) or holding a debt that was reaffirmed pursuant to Bankruptcy Code section 524. A claimant or agency may request the debtor’s last known 

address from a creditor holding a debt that is not discharged under 

section 523(a)(2), (4) or (14A) or that is reaffirmed pursuant to section 524 of the Bankruptcy Code. A creditor who discloses such information, however, is not liable to the debtor or any other person 

by reason of such disclosure. Subsections (b), (c), and (d) of section 

219 of the conference report impose comparable requirements for 

chapter 11, 12, and 13 trustees. 

Sec. 220. Nondischargeability of certain educational benefits and 

loans 

Section 220 of the conference report amends section 523(a)(8) 

of the Bankruptcy Code to provide that a debt for a qualified education loan (as defined in section 221(e)(1) of the Internal Revenue 

Code) is nondischargeable, unless excepting such debt from discharge would impose an undue hardship on the debtor and the 

debtor’s dependents. This provision is substantively identical to 

section 220 of the House bill and the Senate amendment. 

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SUBTITLE C—OTHER CONSUMER PROTECTIONS

Sec. 221. Amendments to discourage abusive bankruptcy filings 

Section 221 of the conference report is substantively identical 

to section 221 of the House bill and the Senate amendment. It 

makes a series of amendments to section 110 of the Bankruptcy 

Code. First, section 221 clarifies that the definition of a bankruptcy 

petition preparer does not include an attorney for a debtor or an 

employee of an attorney under the direct supervision of such attorney. Second, it amends subsections (b) and (c) of section 110 to provide that if a bankruptcy petition preparer is not an individual, 

then an officer, principal, responsible person, or partner of the preparer must sign certain documents filed in connection with the 

bankruptcy case as well as state the person’s name and address on 

such documents. Third, it requires a bankruptcy petition preparer 

to give the debtor written notice (as prescribed by the Judicial Conference of the United States) explaining that the preparer is not an 

attorney and may not practice law or give legal advice. The notice 

may include examples of legal advice that a preparer may not provide. Such notice must be signed by the preparer under penalty of 

perjury and the debtor and be filed with any document for filing. 

Fourth, the petition preparer is prohibited from giving legal advice, 

including with respect to certain specified items. Fifth, it permits 

the Supreme Court to promulgate rules or the Judicial Conference 

of the United States to issue guidelines for setting the maximum 

fees that a bankruptcy petition preparer may charge for services. 

Sixth, section 221 requires the preparer to notify the debtor of such 

maximum fees. Seventh, it specifies that the bankruptcy petition 

preparer must certify that it complied with this notification requirement. Eighth, it requires the court to order the turnover of 

any fees in excess of the value of the services rendered by the preparer within the 12-month period preceding the bankruptcy filing. 

Ninth, section 221 provides that all fees charged by a preparer may 

be forfeited if the preparer fails to comply with certain requirements specified in Bankruptcy Code section 110, as amended by 

this provision. Tenth, it allows a debtor to exempt fees recovered 

under this provision pursuant to Bankruptcy Code section 522(b). 

Eleventh, it specifically authorizes the court to enjoin a bankruptcy 

petition preparer who has violated a court order issued under section 110. Twelfth, it generally revises section 110’s penalty provisions and specifies that such penalties are to be paid to a special 

fund of the United States trustee for the purpose of funding the enforcement of section 110 on a national basis. With respect to Bankruptcy Administrator districts, the funds are to be deposited as offsetting receipts pursuant to section 1931 of title 28 of the United 

States Code. 

Sec. 222. Sense of Congress 

Section 222 of the conference report expresses the sense of 

Congress that the states should develop personal finance curricula 

for use in elementary and secondary schools. This provision is substantively identical to section 222 of the House bill and the Senate 

amendment. 

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Sec. 223. Additional amendments to title 11, United States Code 

Section 223 of the conference report amends section 507(a) of 

the Bankruptcy Code to accord a tenth-level priority to claims for 

death or personal injuries resulting from the debtor’s operation of 

a motor vehicle or vessel while intoxicated. This provision is substantively identical to section 223 of the House bill and the Senate 

amendment. 

Sec. 224. Protection of retirement savings in bankruptcy 

Section 224 of the conference report is substantively identical 

to section 224 of the House bill and the Senate amendment. Subsection (a) amends section 522 of the Bankruptcy Code to permit 

a debtor to exempt certain retirement funds to the extent those 

monies are in a fund or account that is exempt from taxation under 

section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code and that have received a favorable determination pursuant to Internal Revenue Code section 7805 that is in effect as of 

the date of the commencement of the case. If the retirement monies 

are in a retirement fund that has not received a favorable determination, those monies are exempt if the debtor demonstrates that 

no prior unfavorable determination has been made by a court or 

the Internal Revenue Service, and the retirement fund is in substantial compliance with the applicable requirements of the Internal Revenue Code. If the retirement fund fails to be in substantial 

compliance with applicable requirements of the Internal Revenue 

Code, the debtor may claim the retirement funds as exempt if he 

or she is not materially responsible for such failure. This section 

also applies to certain direct transfers and rollover distributions. In 

addition, this provision ensures that the specified retirement funds 

are exempt under state as well as federal law. 

Section 224(b) amends section 362(b) of the Bankruptcy Code 

to except from the automatic stay the withholding of income from 

a debtor’s wages pursuant to an agreement authorizing such withholding for the benefit of a pension, profit-sharing, stock bonus, or 

other employer-sponsored plan established under Internal Revenue 

Code section 401, 403, 408, 408A, 414, 457, or 501(c) to the extent 

that the amounts withheld are used solely to repay a loan from a 

plan as authorized by section 408(b)(1) of the Employee Retirement 

Income Security Act of 1974 or subject to Internal Revenue Code 

section 72(p) or with respect to a loan from certain thrift savings 

plans. Section 224(b) further provides that this exception may not 

be used to cause any loan made under a governmental plan under 

section 414(d) or a contract or account under section 403(b) of the 

Internal Revenue Code to be construed to be a claim or debt within 

the meaning of the Bankruptcy Code. 

Section 224(c) amends Bankruptcy Code section 523(a) to except from discharge any amount owed by the debtor to a pension, 

profit-sharing, stock bonus, or other plan established under Internal Revenue Code section 401, 403, 408, 408A, 414, 457, or 501(c) 

under a loan authorized under section 408(b)(1) of the Employee 

Retirement Income Security Act of 1974 or subject to Internal Revenue Code section 72(p) or with respect to a loan from certain thrift 

savings plans. Section 224(c) further provides that this exception to 

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mental plan under section 414(d) or a contract or account under 

section 403(b) of the Internal Revenue Code to be construed to be 

a claim or debt within the meaning of the Bankruptcy Code. 

Section 224(d) amends Bankruptcy Code section 1322 to provide that a chapter 13 plan may not materially alter the terms of 

a loan described in section 362(b)(19) and that any amounts required to repay such loan shall not constitute ‘‘disposable income’’ under section 1325 of the Bankruptcy Code. 

Section 224(e) amends section 522 of the Bankruptcy Code to impose a $1 million cap (periodically adjusted pursuant to section 

104 of the Bankruptcy Code to reflect changes in the Consumer 

Price Index) on the value of the debtor’s interest in an individual 

retirement account established under either section 408 or 408A of 

the Internal Revenue Code (other than a simplified employee pension account under section 408(k) or a simple retirement account 

under section 408(p) of the Internal Revenue Code) that a debtor 

may claim as exempt property. This limit applies without regard 

to amounts attributable to rollover contributions made pursuant to 

section 402(c), 402(e)(6), 403(a)(4), 403(a)(5), or 403(b)(8) of the Internal Revenue Code and earnings thereon. The cap may be increased if required in the interest of justice. 

Sec. 225. Protection of education savings in bankruptcy 

Section 225 of the conference report is substantively identical 

to section 225 of the House bill and the Senate amendment. Subsection (a) amends section 541 of the Bankruptcy Code to provide 

that funds placed not later than 365 days before the filing of the 

bankruptcy case in a education individual retirement account are 

not property of the estate if certain criteria are met. First, the designated beneficiary of such account must be a child, stepchild, 

grandchild or step-grandchild of the debtor for the taxable year 

during which funds were placed in the account. A legally adopted 

child or a foster child, under certain circumstances, may also qualify as a designated beneficiary. Second, such funds may not be 

pledged or promised to an entity in connection with any extension 

of credit and they may not be excess contributions (as described in 

section 4973(e) of the Internal Revenue Code). Funds deposited between 720 days and 365 days before the filing date are protected 

to the extent they do not exceed $5,000. Similar criteria apply with 

respect to funds used to purchase a tuition credit or certificate or 

to funds contributed to a qualified state tuition plan under section 

529(b)(1)(A) of the Internal Revenue Code. Section 225(b) amends 

Bankruptcy Code section 521 to require a debtor to file with the 

court a record of any interest that the debtor has in an education 

individual retirement account or qualified state tuition program. 

Sec. 226. Definitions 

Section 226 of the conference report is substantively identical 

to section 226 of the House bill and the Senate amendment. Subsection (a) amends section 101 of the Bankruptcy Code to add certain definitions with respect to debt relief agencies. Section 

226(a)(1) defines an ‘‘assisted person’’ as a person whose debts consist primarily of consumer debts and whose nonexempt assets are 

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ance’’ as any goods or services sold or otherwise provided with the 

express or implied purpose of giving information, advice, or counsel; preparing documents for filing; or attending a meeting of creditors pursuant to section 341; appearing in a proceeding on behalf 

of a person; or providing legal representation in a case or proceeding under the Bankruptcy Code. Section 226(a)(3) defines a 

‘‘debt relief agency’’ as any person (including a bankruptcy petition 

preparer) who provides bankruptcy assistance to an assisted person 

in return for the payment of money or other valuable consideration. 

The definition specifically excludes certain entities. First, it does 

not apply to a nonprofit organization exemption from taxation 

under section 501(c)(3) of the Internal Revenue Code. Second, it is 

inapplicable to a creditor who assisted such person to the extent 

the assistance pertained to the restructuring of any debt owed by 

the person to the creditor. Third, the definition does not apply to 

a depository institution (as defined in section 3 of the Federal Deposit Insurance Act), or any federal or state credit union (as defined in section 101 of the Federal Credit Union Act), as well as 

any affiliate or subsidiary of such depository institution or credit 

union. Fourth, an author, publisher, distributor, or seller of works 

subject to copyright protection under title 17 of the United States 

Code when acting in such capacity are not within the ambit of this 

definition. Section 226(b) amends section 104(B)(1) of the Bankruptcy Code to permit the monetary amount set forth in the definition of an ‘‘assisted person’’ to be automatically adjusted to reflect 

the change in the Consumer Price Index. 

Sec. 227. Restrictions on debt relief agencies 

Section 227 of the conference report is substantively identical 

to section 227 of the House bill and the Senate amendment. This 

provision creates a new provision in the Bankruptcy Code intended 

to proscribe certain activities of a debt relief agency. It prohibits 

such agency from: (1) failing to perform any service that it informed an assisted person it would provide; (2) advising an assisted 

person to make an untrue and misleading statement (or that upon 

the exercise of reasonable case, should have been known to be untrue or misleading) in a document filed in a bankruptcy case; (3) 

misrepresenting the services it provides and the benefits that an 

assisted person may receive as a result of bankruptcy; and (4) advising an assisted person or prospective assisted person to incur 

additional debt in contemplation of filing for bankruptcy relief or 

for the purpose of paying fees for services rendered by an attorney 

or petition preparer in connection with the bankruptcy case. Any 

waiver by an assisted person of the protections under this provision 

are unenforceable, except against a debt relief agency. 

In addition, section 227 imposes penalties for the violation of 

section 526, 527 or 528 of the Bankruptcy Code. First, any contract 

between a debt relief agency and an assisted person that does not 

comply with these provisions is void and may not be enforced by 

any state or federal court or by any person, except an assisted person. Second, a debt relief agency is liable to an assisted person, 

under certain circumstances, for any fees or charges paid by such 

person to the agency, actual damages, and reasonable attorneys’

fees and costs. The chief law enforcement officer of a state who has 

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reason to believe that a person has violated or is violating section 

526 may seek to have such violation enjoined and recover actual 

damages. Third, section 227 provides that the United States district court has concurrent jurisdiction of certain actions under section 526. Fourth, section 227 provides that sections 526, 527 and 

528 preempt inconsistent state law. In addition, it provides that 

these provisions do not limit or curtail the authority of a federal 

court, a state, or a subdivision or instrumentality of a state, to determine and enforce qualifications for the practice of law before the 

federal court or under the laws of that state. 

Sec. 228. Disclosures 

Section 228 of the conference report requires a debt relief agency to provide certain specified written notices to an assisted person. 

These include the notice required under section 342(b)(1) (as 

amended by this Act) as well as a notice advising that: (1) all information the assisted person provides in connection with the case 

must be complete, accurate and truthful; (2) all assets and liabilities must be completely and accurately disclosed in the documents 

filed to commence the case, including the replacement value of each 

asset (if required) after reasonable inquiry to establish such value; 

(3) current monthly income, monthly expenses and, in a chapter 13 

case, disposable income, must be stated after reasonable inquiry; 

and (4) the information an assisted person provides may be audited 

and that the failure to provide such information may result in dismissal of the case or other sanction including, in some instances, 

criminal sanctions. In addition, the agency must supply certain 

specified advisories and explanations regarding the bankruptcy 

process. Further, this provision requires the agency to advise an 

assisted person (to the extent permitted under nonbankruptcy law) 

concerning asset valuation, the calculation of disposable income, 

and the determination of exempt property. Section 228 of the conference report is substantively identical to section 228 of the House 

bill and the Senate amendment. 

Sec. 229. Requirements for debt relief agencies 

Section 229 adds a new provision to the Bankruptcy Code requiring a debt relief agency—not later than five business days after 

the first date on which it provides any bankruptcy assistance services to an assisted person (but prior to such assisted person’s bankruptcy petition being filed)—to execute a written contract with the 

assisted person. The contract must specify clearly and conspicuously the services the agency will provide, the basis on which fees 

will be charged for such services, and the terms of payment. The 

assisted person must be given a copy of the fully executed and completed contract in a form the person can retain. The debt relief 

agency must include certain specified mandatory statements in any 

advertisement of bankruptcy assistance services or regarding the 

benefits of bankruptcy that is directed to the general public whether through the general media, seminars, specific mailings, telephonic or electronic messages, or otherwise. Section 229 of the conference report is substantively identical to section 229 of the House 

bill and the Senate amendment. 

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Sec. 230. GAO study 

Section 230 of the conference report directs the Comptroller 

General of the United States to study and prepare a report on the 

feasibility, efficacy and cost of requiring trustees to supply certain 

specified information about a debtor’s bankruptcy case to the Office 

of Child Support Enforcement for the purpose of determining 

whether a debtor has outstanding child support obligations. This 

provision is substantively identical to section 230 of the House bill 

and the Senate amendment. 

Sec. 231. Protection of personally identifiable information 

Section 231 of the conference report largely reflects section 231 

of the Senate amendment. It differs from its Senate antecedent in 

that it clarifies that it applies to personally identifiable information 

and does not preempt applicable nonbankruptcy law. In addition, 

the provision specifies that court approval must be preceded by the 

appointment of a privacy ombudsman to effectuate the intent of 

this provision. There is no counterpart to Section 231 in the House 

bill. 

Subsection (a) amends Bankruptcy Code section 363(b)(1) to 

provide that if a debtor, in connection with offering a product or 

service, discloses to an individual a policy prohibiting the transfer 

of personally identifiable information to persons unaffiliated with 

the debtor, and the policy is in effect at the time of the bankruptcy 

filing, then the trustee may not sell or lease such information unless either of the following conditions is satisfied: (1) the sale is 

consistent with such policy; or (2) the court, after appointment of 

a consumer privacy ombudsman (pursuant to section 332 of the 

Bankruptcy Code, as amended) and notice and hearing, the court 

approves the sale or lease upon due consideration of the facts, circumstances, and conditions of the sale or lease. 

Section 231(b) amends Bankruptcy Code section 101 to add a 

definition of ‘‘personally identifiable information.’’ The term applies 

to information provided by an individual to the debtor in connection with obtaining a product or service from the debtor primarily 

for personal, family, or household purposes. It includes the individual’s: (1) first name or initial and last name (whether given at 

birth or adoption or legally changed); (2) physical home address; (3) 

electronic address, including an e-mail address; (4) home telephone 

number; (5) Social Security number; or (vi) credit card account 

number. The term also includes information if it is identified in 

connection with the above items: (1) an individual’s birth date, 

birth or adoption certificate number, or place of birth; or (2) any 

other information concerning an identified individual that, if disclosed, will result in the physical or electronic contacting or identification of that person. 

Sec. 232. Consumer privacy ombudsman 

Section 232 implements the preceding provision of the conference report with respect to the appointment and responsibilities 

of a consumer privacy ombudsman. It provides that if a hearing is 

required under section 363(b)(1)(B) (as amended), the court must 

order the United States trustee to appoint a disinterested person 

to serve as the consumer privacy ombudsman and to provide timely 

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1Pub. L. No. 104–134, Section 804(b) (1996). 

notice of the hearing to such person. It permits the ombudsman to 

appear and be heard at such hearing. The ombudsman must provide the court with information to assist its consideration of the 

facts, circumstances and conditions of the proposed sale or lease of 

personally identifiable information. The information may include a 

presentation of the debtor’s privacy policy, potential losses or gains 

of privacy to consumers if the sale or lease is approved, potential 

costs or benefits to consumers if the sale or lease is approved, and 

possible alternatives that would mitigate potential privacy losses or 

costs to consumers. Section 232 prohibits the ombudsman from disclosing any personally identifiable information obtained in the case 

by such individual. In addition, the provision amends Bankruptcy 

Code section 330(a)(1) to permit an ombudsman to be compensated. 

This provision largely reflects section 232 of the Senate amendment. There is no counterpart to section 232 in the House bill. The 

conference report redrafts the Senate provision to be an amendment to the Bankruptcy Code rather than freestanding text, deletes 

the 30-day provision as being deemed to be unnecessary; restructures the provision to better integrate its components; and clarifies 

that the court must direct the United States trustee to appoint the 

ombudsman, rather than the court making such appointment itself. 

Sec. 233. Prohibition on disclosure of name of minor children 

Section 233 of the conference report adds a new provision to 

the Bankruptcy Code (section 112) specifying that a debtor may be 

required to provide information regarding his or her minor child in 

connection with the bankruptcy case, but such debtor may not be 

required to disclose in the public records the child’s name. It provides, however, that the debtor may be required to disclose this information in a nonpublic record maintained by the court, which 

must be available for inspection by the United States trustee, 

trustee or an auditor, if any. Section 233 prohibits the court, 

United States trustee, trustee, or auditor from disclosing such 

minor child’s name. Section 233 of the conference report generally 

reflects section 233 of the Senate amendment. The conference report clarifies that the prohibition against disclosure pertains to the 

minor child’s name. Section 231 of the House bill is similar, but 

does not include the provision giving the court, United States trustee, trustee or audit access to the proscribed information. 

TITLE III—DISCOURAGING BANKRUPTCY ABUSE

Sec. 301. Reinforcement of the fresh start 

Section 301 of the conference report makes a clarifying amendment to section 523(a)(17) of the Bankruptcy Code concerning the 

dischargeability of court fees incurred by prisoners. Section 

523(a)(17) was added to the Bankruptcy Code by the Omnibus Consolidated Rescissions and Appropriations Act of 1996 1 to except 

from discharge the filing fees and related costs and expenses assessed by a court in a civil case or appeal. As the result of a drafting error, however, this provision might be construed to apply to 

filing fees, costs or expenses incurred by any debtor, not solely by 

208

those who are prisoners. The amendment eliminates this ambiguity 

and makes other conforming changes to narrow its application in 

accordance with its original intent. This provision is substantively 

identical to section 301 of the House bill and the Senate amendment. 

Sec. 302. Discouraging bad faith repeat filings 

Section 302 of the conference report amends section 362(c) of 

the Bankruptcy Code to terminate the automatic stay within 30 

days in a chapter 7, 11, or 13 case filed by or against an individual 

if such individual was a debtor in a previously dismissed case 

pending within the preceding one-year period. The provision does 

not apply to a case refiled under a chapter other than chapter 7 

after dismissal of the prior chapter 7 case pursuant to section 

707(b) of the Bankruptcy Code. Upon motion of a party in interest, 

the court may continue the automatic stay after notice and a hearing completed prior to the expiration of the 30-day period if such 

party demonstrates that the latter case was filed in good faith as 

to the creditors who are stayed by the filing. For purposes of this 

provision, a case is presumptively not filed in good faith as to all 

creditors (but such presumption may be rebutted by clear and convincing evidence) if: (1) more than one bankruptcy case under chapter 7, 11 or 13 was previously filed by the debtor within the preceding one-year period; (2) the prior chapter 7, 11, or 13 case was 

dismissed within the preceding year for the debtor’s failure to (a) 

file or amend without substantial excuse a document required 

under the Bankruptcy Code or the court, (b) provide adequate protection ordered by the court, or (c) perform the terms of a confirmed plan; or (3) there has been no substantial change in the 

debtor’s financial or personal affairs since the dismissal of the prior 

case, or there is no reason to conclude that the pending case will 

conclude either with a discharge (if a chapter 7 case) or confirmation (if a chapter 11 or 13 case). In addition, section 302 provides 

that a case is presumptively deemed not to be filed in good faith 

as to any creditor who obtained relief from the automatic stay in 

the prior case or sought such relief in the prior case and such action was pending at the time of the prior case’s dismissal. The presumption may be rebutted by clear and convincing evidence. A 

similar presumption applies if two or more bankruptcy cases were 

pending in the one-year preceding the filing of the pending case. 

Section 302 is substantively identical to section 302 of the House 

bill and the Senate amendment. 

Sec. 303. Curbing abusive filings 

Section 303 of the conference report is intended to reduce abusive filings. This provision is substantively identical to section 303 

of the House bill and the Senate amendment. Subsection (a) 

amends Bankruptcy Code section 362(d) to add a new ground for 

relief from the automatic stay. Under this provision, cause for relief 

from the automatic stay may be established for a creditor whose 

claim is secured by an interest in real property, if the court finds 

that the filing of the bankruptcy case was part of a scheme to 

delay, hinder and defraud creditors that involved either: (i) a transfer of all or part of an ownership interest in real property without 

209

such creditor’s consent or without court approval; or (ii) multiple 

bankruptcy filings affecting the real property. If recorded in compliance with applicable state law governing notice of an interest in or 

a lien on real property, an order entered under this provision is 

binding in any other bankruptcy case for two years from the date 

of entry of such order. A debtor in a subsequent case may move for 

relief based upon changed circumstances or for good cause shown 

after notice and a hearing. Section 303(a) further provides that any 

federal, state or local governmental unit that accepts a notice of interest or a lien in real property, must accept a certified copy of an 

order entered under this provision. 

Section 303(b) amends Bankruptcy Code section 362(b) to except from the automatic stay an act to enforce any lien against or 

security interest in real property within two years following the 

entry of an order entered under section 362(d)(4). A debtor, in a 

subsequent case, may move for relief from such order based upon 

changed circumstances or for other good cause shown after notice 

and a hearing. Section 303(b) also provides that the automatic stay 

does not apply in a case where the debtor: (1) is ineligible to be a 

debtor in a bankruptcy case pursuant to section 109(g) of the Bankruptcy Code; or (2) filed the bankruptcy case in violation of an 

order issued in a prior bankruptcy case prohibiting the debtor from 

being a debtor in a subsequent bankruptcy case. 

Sec. 304. Debtor retention of personal property security 

Section 304 is substantively identical to section 304 of the 

House bill and Senate amendment. Section 304(1) of the conference 

report amends section 521(a) of the Bankruptcy Code to provide 

that an individual who is a chapter 7 debtor may not retain possession of personal property securing, in whole or in part, a purchase 

money security interest unless the debtor, within 45 days after the 

first meeting of creditors, enters into a reaffirmation agreement 

with the creditor, or redeems the property. If the debtor fails to so 

act within the prescribed period, the property is not subject to the 

automatic stay and is no longer property of the estate. An exception applies if the court: (1) determines on motion of the trustee 

filed before the expiration of the 45-day period that the property 

has consequential value or would benefit the bankruptcy estate; (2) 

orders adequate protection of the creditor’s interest; and (iii) directs 

the debtor to deliver any collateral in the debtor’s possession. Section 304(2) amends section 722 to clarify that a chapter 7 debtor 

must pay the redemption value in full at the time of redemption. 

Sec. 305. Relief from the automatic stay when the debtor does not 

complete intended surrender of consumer debt collateral 

Section 305 of the conference report is substantively identical 

to section 305 of the House bill and the Senate amendment. Subsection (1) amends Bankruptcy Code section 362 to terminate the 

automatic stay with respect to personal property of the estate or 

of the debtor in a chapter 7, 11, or 13 case (where the debtor is 

an individual) that secures a claim (in whole or in part) or is subject to an unexpired lease if the debtor fails to: (1) file timely a 

statement of intention as required by section 521(a)(2) of the Bankruptcy Code with respect to such property; or (2) indicate in such 

210

statement whether the property will be surrendered or retained, 

and if retained, whether the debtor will redeem the property or reaffirm the debt, or assume an unexpired lease, if the trustee does 

not. Likewise, the automatic stay is terminated if the debtor fails 

to take the action specified in the statement of intention in a timely manner, unless the statement specifies reaffirmation and the 

creditor refuses to enter into the reaffirmation agreement on the 

original contract terms. In addition to terminating the automatic 

stay, this provision renders such property no longer property of the 

estate. An exception pertains where the court determines, on the 

motion of the trustee made prior to the expiration of the applicable 

time period under section 521(a)(2), and after notice and a hearing, 

that such property is of consequential value or benefit to the estate, 

orders adequate protection of the creditor’s interest, and directs the 

debtor to deliver any collateral in the debtor’s possession. 

Section 305(2) amends section 521 of the Bankruptcy Code to 

make the requirement to file a statement of intention applicable to 

all secured debts, not just secured consumer debts. In addition, it 

requires the debtor to effectuate his or her stated intention within 

30 days from the first date set for the meeting of creditors. If the 

debtor fails to timely undertake certain specified actions with respect to property that a lessor or bailor owns and has leased, 

rented or bailed to the debtor or in which a creditor has a security 

interest (not otherwise avoidable under section 522(f), 544, 545, 

547, 548 or 549 of the Bankruptcy Code), then nothing in the 

Bankruptcy Code shall prevent or limit the operation of a provision 

in a lease or agreement that places the debtor in default by reason 

of the debtor’s bankruptcy or insolvency. 

Sec. 306. Giving secured creditors fair treatment in chapter 13 

Section 306 of the conference report is substantively identical 

to section 306 of the House bill and Senate amendment, except as 

noted below. Subsection (a) amends Bankruptcy Code section 

1325(a)(5)(B)(i) to require—as a condition of confirmation—that a 

chapter 13 plan provide that a secured creditor retain its lien until 

the earlier of when the underlying debt is paid or the debtor receives a discharge. If the case is dismissed or converted prior to 

completion of the plan, the secured creditor is entitled to retain its 

lien to the extent recognized under applicable nonbankruptcy law. 

Section 306(b) adds a new paragraph to section 1325(a) of the 

Bankruptcy Code specifying that Bankruptcy Code section 506 does 

not apply to a debt incurred within the two and one-half year period preceding the filing of the bankruptcy case if the debt is secured by a purchase money security interest in a motor vehicle acquired for the personal use of the debtor. Where the collateral consists of any other type of property having value, section 306(b) provides that section 506 of the Bankruptcy Code does not apply if the 

debt was incurred during the one-year period preceding the filing 

of the bankruptcy case. The 910-day period set forth in Section 

306(b) of the conference report represents a compromise between 

the House bill and Senate amendment. Section 306(b) of the House 

bill provided for a five-year period, while its Senate counterpart 

specified a three-year period. 

211

Section 306(c)(1) amends section 101 of the Bankruptcy Code 

to define the term ‘‘debtor’s principal residence’’ as a residential 

structure (including incidental property) without regard to whether 

or not such structure is attached to real property. The term includes an individual condominium or cooperative unit as well as a 

mobile or manufactured home, and a trailer. 

Section 306(c)(2) amends section 101 of the Bankruptcy Code 

to define the term ‘‘incidental property’’ as property commonly conveyed with a principal residence in the area where the real property is located. The term includes all easements, rights, appurtenances, fixtures, rents, royalties, mineral rights, oil or gas rights 

or profits, water rights, escrow funds, and insurance proceeds. Further, the term encompasses all replacements and additions. 

Sec. 307. Domiciliary requirements for exemptions 

Section 307 of the conference report is substantively identical 

to section 307 of the House bill and the Senate amendment. This 

provision amends section 522(b)(2)(A) of the Bankruptcy Code to 

extend the time that a debtor must be domiciled in a state from 

180 days to 730 days before he or she may claim that state’s exemptions. If the debtor’s domicile has not been located in a single 

state for the 730-day period, then the state where the debtor was 

domiciled in the 180-day period preceding the 730-day period (or 

the longer portion of such 180-day period) controls. If the effect of 

this provision is to render the debtor ineligible for any exemption, 

the debtor may elect to exempt property of the kind described in 

the federal exemption notwithstanding state opt out. 

Sec. 308. Reduction of homestead exemption for fraud 

Section 308 amends section 522 of the Bankruptcy Code to reduce the value of a debtor’s interest in the following property that 

may be claimed as exempt under certain circumstances: (i) real or 

personal property that the debtor or a dependent of the debtor uses 

as a residence, (ii) a cooperative that owns property that the debtor 

or a dependent of the debtor uses as a residence, (iii) a burial plot, 

or (iv) real or personal property that the debtor or dependent of the 

debtor claims as a homestead. Where nonexempt property is converted to the above-specified exempt property within the ten-year 

period preceding the filing of the bankruptcy case, the exemption 

must be reduced to the extent such value was acquired with the 

intent to hinder, delay or defraud a creditor. Section 308 represents 

a compromise between the House and Senate positions on the issue 

of homestead exemptions. In section 308 of the House bill, the 

reachback period is seven years. Section 308 of the Senate amendment imposes a flat $125,000 homestead cap, which does not apply 

to an exemption claimed by a family farmer for the farmer’s principal residence. 

Sec. 309. Protecting secured creditors in chapter 13 cases 

Section 309 of the conference report is substantively identical 

to section 309 of the House bill and the Senate amendment. Section 

309(a) amends Bankruptcy Code section 348(f)(1)(B) to provide that 

valuations of property and allowed secured claims in a chapter 13 

case only apply if the case is subsequently converted to one under 

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chapter 11 or 12. If the chapter 13 case is converted to one under 

chapter 7, then the creditor holding security as of the petition date 

shall continue to be secured unless its claim was paid in full as of 

the conversion date. In addition, unless a prebankruptcy default 

has been fully cured at the time of conversion, then the default in 

any bankruptcy proceeding shall have the effect given under applicable nonbankruptcy law. 

Section 309(b) amends section 365 of the Bankruptcy Code to 

provide that if a lease of personal property is rejected or not assumed by the trustee in a timely manner, such property is no 

longer property of the estate and the automatic stay under section 

362 with respect to such property is terminated. With regard to a 

chapter 7 case in which the debtor is an individual, the debtor may 

notify the creditor in writing of his or her desire to assume the 

lease. Upon being so notified, the creditor may, at its option, inform 

the debtor that it is willing to have the lease assumed and condition such assumption on cure of any outstanding default on terms 

set by the contract. If within 30 days after such notice the debtor 

gives written notice to the lessor that the lease is assumed, the 

debtor (not the bankruptcy estate) assumes the liability under the 

lease. Section 309(b) provides that the automatic stay of section 

362 and the discharge injunction of section 524 are not violated if 

the creditor notifies the debtor and negotiates a cure under section 

365(p)(2) (as amended). In a chapter 11 or 13 case where the debtor 

is an individual lessee with respect to a personal property lease 

and the lease is not assumed in the confirmed plan, the lease is 

deemed rejected as of the conclusion of the confirmation hearing. 

If the lease is rejected, the automatic stay under section 362 as 

well as the chapter 13 codebtor stay under section 1301 are automatically terminated with respect to such property. 

Section 309(c)(1) amends Bankruptcy Code section 

1325(a)(5)(B) to require that periodic payments pursuant to a chapter 13 plan with respect to a secured claim be made in equal 

monthly installments. Where the claim is secured by personal property, the amount of such payments shall not be less than the 

amount sufficient to provide adequate protection to the holder of 

such claim. Section 309(c)(2) amends section 1326(a) of the Bankruptcy Code to require a chapter 13 debtor to commence making 

payments within 30 days after the filing of the plan or the order 

for relief, whichever is earlier. The amount of such payment must 

be the amount which is proposed in the plan, scheduled in a personal property lease for that portion of the obligation that becomes 

due postpetition (which amount shall reduce the payment required 

to be made to such lessor pursuant to the plan), and which provides adequate protection directly to a creditor holding an allowed 

claim secured by personal property to the extent the claim is attributable to the purchase of such property (which amount shall reduce 

the payment required to be made to such secured creditor pursuant 

to the plan). Payments made pursuant to a plan must be retained 

by the chapter 13 trustee until confirmation or denial of confirmation. Section 309(c)(2) provides that if the plan is confirmed, the 

trustee must distribute payments received from the debtor as soon 

as practicable in accordance with the plan. If the plan is not confirmed, the trustee must return to the debtor payments not yet due 

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and owing to creditors. Pending confirmation and subject to section 

363, the court, after notice and a hearing, may modify the payments required under this provision. Section 309(c)(2) requires the 

debtor, within 60 days following the filing of the bankruptcy case, 

to provide reasonable evidence of any required insurance coverage 

with respect to the use or ownership of leased personal property or 

property securing, in whole or in part, a purchase money security 

interest. 

Sec. 310. Limitation on luxury goods 

Section 310 amends section 523(a)(2)(C) of the Bankruptcy 

Code. Under current law, consumer debts owed to a single creditor 

that, in the aggregate, exceed $1,075 for luxury goods or services 

incurred within 60 days before the commencement of the case are 

presumed to be nondischargeable. As amended, the presumption 

applies if the aggregate amount of consumer debts for luxury goods 

or services is more than $500 for luxury goods or services incurred 

by an individual debtor within 90 days before the order for relief. 

With respect to cash advances, current law provides that cash advances aggregating more than $1,075 that are extensions of consumer credit under an open-end credit plan obtained by an individual debtor within 60 days before the case is filed are presumed 

to be nondischargeable. As amended, section 523(a)(2)(C) presumes 

that cash advances aggregating more than $750 and that are incurred within 70 days are nondischargeable. The term, ‘‘luxury 

goods or services,’’ does not include goods or services reasonably 

necessary for the support or maintenance of the debtor or a dependent of the debtor. In addition, ‘‘an extension of consumer credit 

under an open-end credit plan’’ has the same meaning as this term 

has under the Consumer Credit Protection Act. With respect to the 

aggregate amount fixed for luxury goods and services under this 

provision, section 310 of the conference report reflects a compromise between the House bill, which has a $250 threshold, and 

the Senate amendment, which has a $750 threshold. 

Sec. 311. Automatic stay 

Section 311 of the conference report amends section 362(b) of 

the Bankruptcy Code to except from the automatic stay a judgment 

of eviction with respect to a residential leasehold. It represents a 

compromise between House and Senate conferees. 

The House bill excepts the following proceedings from the automatic stay: (1) the continuation of any eviction, unlawful detainer 

action, or similar proceeding by a lessor against a debtor involving 

residential real property where the debtor resides as a tenant 

under a rental agreement; (2) the commencement of any eviction, 

unlawful detainer action, or similar proceeding by a lessor against 

a debtor involving residential real property where the debtor resides as a tenant under a rental agreement that has terminated 

pursuant to the lease agreement or applicable State law; and (3) 

an eviction action based on endangerment to property or person, or 

the use of illegal drugs. With respect to granting relief from the 

automatic stay to residential leaseholds, the Senate provision permits an eviction proceeding to continue or to be commenced if: (1) 

the debtor failed to make a rental payment that first becomes due 

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under the unexpired term of a rental agreement or lease or a tenancy under applicable state or local rent control law, after the 

bankruptcy case was filed or during the ten-day period preceding 

the date of the filing of the petition, providing the lessor files with 

the court a certification that the debtor has not made the rent payment; or (2) the debtor has a month-to-month tenancy (or a shorter 

term) other than under applicable state or local rent control law 

where timely payments are made pursuant to clause (1) if the lessor files with the court a certification that the requirements of this 

clause have been met. In addition, the Senate provision permits the 

commencement or continuation of any eviction, unlawful detainer 

action or similar proceeding by a lessor if during the two-year period preceding the date of the filing of the petition, the lessee-debtor or another occupant of the premises: (1) filed a bankruptcy case 

during this period; and (2) failed to make any rental payment that 

first became due under applicable nonbankruptcy law after the filing of the prior case. Further, the Senate amendment permits an 

eviction action to proceed to the extent the proceeding seeks possession based on endangerment of property or the illegal use of controlled substances on that property, if the lessor files with the court 

a certification that such an eviction has been filed or the debtor has 

endangered the property or illegally used or allowed to be used a 

controlled substance on such property during the 30-day period 

preceding the date of the filing of the certification. The Senate 

amendment specifies certain procedural requirements with respect 

to certain of these proceedings. 

It is the intent of section 311 of the conference report to create 

an exception to the automatic stay of section 362(a)(3) to permit 

the recovery of possession by rental housing providers of their 

property in certain circumstances where a judgment for possession 

has been obtained against a debtor/resident before the filing of the 

petition for bankruptcy. At the same time, the section provides tenants a reasonable amount of time after filing the petition to cure 

the default giving rise to the judgment for possession as long as 

there are circumstances in which applicable non-bankruptcy law allows a default to be cured after a judgment has been obtained. It 

is also the intent of this section to permit eviction actions based on 

illegal use of controlled substances or endangering property to continue or to be commenced after the filing of the petition, in certain 

circumstances. 

Where non-bankruptcy law applicable in the jurisdiction does 

not permit a tenant to cure a monetary default after the judgment 

for possession has been obtained, the automatic stay of section 

362(a)(3) does not operate to limit action by a rental housing provider to proceed with, or a marshal, sheriff, or similar local officer 

to execute, the judgment for possession. Where the debtor claims 

that applicable law permits a tenant to cure after the judgment for 

possession has been obtained, the automatic stay operates only 

where the debtor files a certification with the bankruptcy petition 

asserting that applicable law permits such action and that the 

debtor or an adult dependent of the debtor has paid to the court 

all rent that will come due during the 30 days following the filing 

of the petition. If, within thirty days following the filing of the petition, the debtor or an adult dependent of the debtor certifies that 

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the entire monetary default that gave rise to the judgment for possession has been cured, the automatic stay remains in effect. 

If a lessor has filed or wishes to file an eviction action based 

on the use of illegal controlled substances or property 

endangerment, the section allows the lessor in certain cases to file 

a certification of such circumstance with the court and obtain an 

exception to the stay. 

For both the judgment based on monetary default and the controlled substance or endangerment exceptions, the section provides 

an opportunity for challenge by either the lessor or the tenant to 

certifications filed by the other party and a timely hearing for the 

court to resolve any disputed facts and rule on the factual or legal 

sufficiency of the certifications. Where the court finds for the lessor, 

the clerk shall immediately serve upon the parties a copy of the 

court’s order confirming that an exception to the automatic stay is 

applicable. Where the court finds for the tenant, the stay shall remain in effect. It is the intent of this section that the clerk’s certified copy of the docket or order shall be sufficient evidence that 

the exception under paragraph 22 or paragraph 23 is applicable for 

a marshal, sheriff, or similar local officer to proceed immediately 

to execute the judgment for possession if applicable law otherwise 

permits such action, or for an eviction action for use of illegal controlled substances or property endangerment to proceed. This section does not provide any new right to either landlords or tenants 

relating to evictions or defenses to eviction under otherwise applicable law. 

Sec. 312. Extension of period between bankruptcy discharges 

Section 312 of the conference report amends section 727(a)(8) 

of the Bankruptcy Code to extend the period before which a chapter 7 debtor may receive a subsequent chapter 7 discharge from six 

to 8 years. It also amends section 1328 to prohibit the issuance of 

a discharge in a subsequent chapter 13 case if the debtor received 

a discharge in a prior chapter 7, 11, or 12 case within four years 

preceding the filing of the subsequent chapter 13 case. This represents a compromise between the House bill, which sets forth a 

five-year period with respect to any case, and the Senate amendment, which sets forth a three-year period with respect to a prior 

chapter 7, 11, or 12 case. With respect to the extension of the time 

period between subsequent chapter 13 discharges, the conference 

report adopts the two-year period set forth in section 312 of the 

Senate amendment, but excludes the provision permitting the court 

to shorten this period if the debtor demonstrates extreme hardship. 

Sec. 313. Definition of household goods and antiques 

Section 313 represents a compromise among the House and 

Senate conferees. This provision is substantively similar to section 

313 of the House bill and the Senate amendment. Subsection (a) 

amends section 522(f) of the Bankruptcy Code to codify a modified 

version of the Federal Trade Commission’s definition of ‘‘household 

goods’’ for purposes of the avoidance of a nonpossessory, nonpurchase money lien in such property. It also specifies various items 

that are expressly not household goods. Section 313(b) requires the 

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pare a report containing findings with respect to the use of this 

definition. The report may include recommendations for amendments to the definition of ‘‘household goods’’ as codified in section 

522(f)(4). Section 313 of the conference report differs from its counterparts in the House bill and Senate amendment in three respects: 

(1) it specifies a monetary threshold for the exclusions pertaining 

to electronic entertainment equipment, antiques, and jewelry; (2) it 

eliminates the restriction in the House bill and Senate amendment 

pertaining to a personal computer; and (3) and specifies that works 

of art are not household goods, unless by or of the debtor or by any 

relative of the debtor. 

Sec. 314. Debt incurred to pay nondischargeable debts 

Section 314 is substantively identical to section 314 of the 

House bill and Senate amendment. Subsection (a) amends section 

523(a) of the Bankruptcy Code to make a debt incurred to pay a 

nondischargeable tax owed to a governmental unit (other than a 

tax owed to the United States) nondischargeable. Section 314(b) 

amends section 1328(a) of the Bankruptcy Code to make the following additional debts nondischargeable in a chapter 13 case: (1) 

debts for money, property, services, or extensions of credit obtained 

through fraud or by a false statement in writing under section 

523(a)(2)(A) and (B) of the Bankruptcy Code; (2) consumer debts 

owed to a single creditor that aggregate to more than $500 for luxury goods or services incurred by an individual debtor within 90 

days before the filing of the bankruptcy case, and cash advances 

aggregating more than $750 that are extensions of consumer credit 

obtained by a debtor under an open-end credit plan within 70 days 

before the order for relief under section 523(a)(2)(C) (as amended); 

(3) pursuant to section 523(a)(3) of the Bankruptcy Code, debts 

that require timely request for a dischargeability determination, if 

the creditor lacks notice or does not have actual knowledge of the 

case in time to make such request; (4) debts resulting from fraud 

or defalcation by the debtor acting as a fiduciary under section 

523(a)(4) of the Bankruptcy Code; and (5) debts for restitution or 

damages, awarded in a civil action against the debtor as a result 

of willful or malicious conduct by the debtor that caused personal 

injury to an individual or the death of an individual. 

Sec. 315. Giving creditors fair notice in chapters 7 and 13 cases 

Section 315 of the conference report amends several provisions 

of the Bankruptcy Code. Subsection (a) amends Bankruptcy Code 

section 342(c) to delete the provision specifying that the failure of 

a notice to include certain information required to be given by a 

debtor to a creditor does not invalidate the notice’s legal effect. It 

adds a provision requiring a debtor to send any notice he or she 

must provide under the Bankruptcy Code to the address stated by 

the creditor and to include in such notice the current account number, if within 90 days prior to the date that the debtor filed for 

bankruptcy relief the creditor in at least two communications sent 

to the debtor set forth such address and account number. If the 

creditor would be in violation of applicable nonbankruptcy law by 

sending any such communication during this time period, then the 

debtor must send the notice to the address provided by the creditor 

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stated in the last two communications containing the creditor’s address and such notice shall include the current account number. 

Section 315(a) also permits a creditor in a chapter 7 or 13 case 

(where the debtor is an individual) to file with the court and serve 

on the debtor the address to be used to notify such creditor in that 

case. Five days after receipt of such notice, the court and the debtor, respectively, must use the address so specified to provide notice 

to such creditor. In addition, section 315(a) specifies that if an entity files a notice with the court stating an address to be used generally by all bankruptcy courts for chapter 7 and 13 cases, or by 

particular bankruptcy courts, as specified by such entity. This address must be used by the court to supply notice in such cases 

within 30 days following the filing of such notice where the entity 

is a creditor. Notice given other than as provided in section 342 is 

not effective until it has been brought to the creditor’s attention. 

If the creditor has designated a person or organizational subdivision to be responsible for receiving notices concerning bankruptcy 

cases and has established reasonable procedures so that these notices will be delivered to such person or subdivision, a notice will 

not be deemed to have been received by the creditor until it has 

been received by such person or subdivision. This provision also 

prohibits the imposition of any monetary penalty for violation of 

the automatic stay or for the failure to comply with the Bankruptcy 

Code sections 542 and 543 unless the creditor has received effective 

notice under section 342. Section 315(a) of the conference report is 

substantively identical to section 315(a) of the House bill and Senate amendment. 

Section 315(b) amends section 521 to specify additional duties 

of a debtor. This provision requires the debtor to file a certificate 

executed by the debtor’s attorney or bankruptcy petition preparer 

stating that the attorney or preparer supplied the debtor with the 

notice required under Bankruptcy Code section 342(b). If the debtor 

is not represented by counsel and did not use the services of a 

bankruptcy petition preparer, then the debtor must sign a certificate stating that he or she obtained and read such notice. In addition, the debtor must file: (1) copies of all payment advices or other 

evidence of payment, if any, from any employer within 60 days preceding the bankruptcy filing; (2) a statement of the amount of 

monthly net income, itemized to show how such amount is calculated; and (3) a statement disclosing any reasonably anticipated 

increase in income or expenditures in the 12-month period following the date of filing. Upon request of a creditor, section 315(b) 

of the conference report requires the court to make the petition, 

schedules, and statement of financial affairs of an individual who 

is a chapter 7 or 13 debtor available to such creditor. 

In addition, section 315(b) requires such debtor to provide the 

trustee not later than seven days before the date first set for the 

meeting of creditors a copy of his or her Federal income tax return 

or transcript (at the election of the debtor) for the latest taxable period ending prior to the filing of the bankruptcy case for which a 

tax return was filed. Should the debtor fail to comply with this requirement, the case must be dismissed unless the debtor demonstrates that such failure was due to circumstances beyond the 

debtor’s control. In addition, the debtor must file copies of any 

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amendments to such tax returns. Upon request, the debtor must 

provide a copy of the tax return or transcript to the requesting 

creditor at the time the debtor supplies the return or transcript to 

the trustee. Should the debtor fail to comply with this requirement, 

the case must be dismissed unless the debtor demonstrates that 

such failure is due to circumstances beyond the debtor’s control. A 

creditor in a chapter 13 case may, at any time, file a notice with 

the court requesting a copy of the plan. The court must supply a 

copy of the chapter 13 plan at a reasonable cost not later than 5 

days after such request. This provision represents a compromise 

between section 315(b) of the House bill and the Senate amendment. The House bill was not limited to Federal tax returns and 

did not consistently include transcripts as an alternative. In addition, the conference report clarifies that this provision applies to 

Federal income tax returns. 

During the pendency of a chapter 7, 11 or 13 case, the debtor 

must file with the court, at the request of the judge, United States 

trustee, or any party in interest, at the time filed with the taxing 

authority, copies of any Federal income tax returns (or transcripts 

thereof) that were not filed for the three-year period preceding the 

date on which the order for relief was entered. In addition, the 

debtor must file copies of any amendments to such tax returns. 

In a chapter 13 case, the debtor must file a statement, under 

penalty of perjury, of income and expenditures in the preceding tax 

year and monthly income showing how the amounts were calculated. The statement must be filed on the date that is the later 

of 90 days after the close of the debtor’s tax year or one year after 

the order for relief, unless a plan has been confirmed. Thereafter, 

the statement must be filed on or before the date that is 45 days 

before the anniversary date of the plan’s confirmation, until the 

case is closed. The statement must disclose the amount and sources 

of the debtor’s income, the identity of any persons responsible with 

the debtor for the support of the debtor’s dependents, the identity 

of any persons who contributed to the debtor’s household expenses, 

and the amount of any such contributions. 

Section 315(b)(2) mandates that the tax returns, amendments 

thereto, and the statement of income and expenditures of an individual who is a chapter 7 or chapter 13 debtor be made available 

to the United States trustee or bankruptcy administrator, the 

trustee, and any party in interest for inspection and copying, subject to procedures established by the Director of the Administrative 

Office for United States Courts within 180 days from the date of 

enactment of this Act. The procedures must safeguard the confidentiality of any tax information required under this provision and include restrictions on creditor access to such information. In addition, the Director must, within 540 days from the Act’s enactment 

date, prepare and submit to Congress a report that assesses the effectiveness of such procedures and, if appropriate, includes recommendations for legislation to further protect the confidentiality 

of such tax information and to impose penalties for its improper 

use. If requested by the United States trustee or trustee, the debtor 

must provide a document establishing the debtor’s identity, which 

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fying information relating to the debtor. Section 315(b) is substantively similar to section 315(b) of the House bill and the Senate 

amendment. The conference report makes technical and clarifying 

revisions. 

Sec. 316. Dismissal for failure to timely file schedules or provide required information 

Section 316 of the conference report is similar to section 316 

of the House bill and the Senate amendment. This provision 

amends section 521 of the Bankruptcy Code to provide that if an 

individual debtor in a voluntary chapter 7 or chapter 13 case fails 

to file all of the information required under section 521(a)(1) within 

45 days of the date on which the case is filed, the case must be 

automatically dismissed, effective on the 46th day. The 45-day period may be extended for an additional 45-day period providing the 

debtor requests such extension prior to the expiration of the original 45-day period and the court finds justification for such extension. Upon request of a party in interest, the court must enter an 

order of dismissal within 5 days of such request. Section 316 of the 

conference report, unlike its House and Senate antecedents, provides that a court may decline to dismiss the case if: (1) the trustee 

files a motion before the stated time periods; (2) the court finds, 

after notice and a hearing, that the debtor in good faith attempted 

to file all the information required under section 521(a)(1)(B)(iv); 

and (3) the court finds that the best interests of creditors would be 

served by continued administration of the case. 

Sec. 317. Adequate time to prepare for hearing on confirmation of 

the plan 

Section 317 of the conference report is similar to section 317 

of the House bill and the Senate amendment. This provision 

amends section 1324 of the Bankruptcy Code to require the chapter 

13 confirmation hearing to be held not earlier than 20 days following the first date set for the meeting of creditors and not later 

than 45 days from this date, unless the court determines that it 

would be in the best interests of creditor and the estate to hold 

such hearing at an earlier date and there is no objection to such 

earlier date. The House and Senate antecedents to section 317 of 

the conference report do not include this exception.

Sec. 318. Chapter 13 plans to have a 5-year duration in certain 

cases 

Section 318 of the conference report is substantially identical 

to section 318 of the House bill and the Senate amendment. Subsection (1) amends Bankruptcy Code sections 1322(d) and 1325(b) 

to specify that a chapter 13 plan may not provide for payments 

over a period that is not less than five years if the current monthly 

income of the debtor and the debtor’s spouse combined exceeds certain monetary thresholds. 

If the current monthly income of the debtor and the debtor’s 

spouse fall below these thresholds, then the duration of the plan 

may not be longer than three years, unless the court, for cause, approves a longer period up to five years. The applicable commitment 

period may be less if the plan provides for payment in full of all 

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allowed unsecured claims over a shorter period. Section 318(2), (3), 

and (4) make conforming amendments to sections 1325(b) and 

1329(c) of the Bankruptcy Code. 

Sec. 319. Sense of Congress regarding expansion of rule 9011 of the 

Federal Rules of Bankruptcy Procedure 

Section 319 of the conference report expresses a sense of the 

Congress that Federal Rule of Bankruptcy Procedure 9011 be modified to require that any document, whether signed or unsigned, including schedules, supplied to the court or the trustee by a debtor 

may be submitted only after the debtor or the debtor’s attorney has 

made reasonable inquiry to verify that the information contained 

in such documents is well-grounded in fact and warranted by existing law or a good faith argument for the extension, modification, 

or reversal of existing law. Section 319 of the conference report is 

substantially identical to section 319 of the House bill and the Senate amendment. 

Sec. 320. Prompt relief from stay in individual cases 

Section 320 of the conference report is substantively identical 

to section 320 of the House bill and the Senate amendment. This 

provision amends section 362(e) of the Bankruptcy Code to terminate the automatic stay in a chapter 7, 11, or 13 case of an individual debtor within 60 days following a request for relief from the 

stay, unless the bankruptcy court renders a final decision prior to 

the expiration of the 60-day time period, such period is extended 

pursuant to agreement of all parties in interest, or a specific extension of time is required for good cause as described in findings 

made by the court. 

Sec. 321. Chapter 11 cases filed by individuals 

Section 321(a) of the conference report creates a new provision 

under chapter 11 of the Bankruptcy Code specifying that property 

of the estate of an individual debtor includes, in addition to that 

identified in section 541 of the Bankruptcy Code, all property of the 

kind described in section 541 that the debtor acquires after commencement of the case, but before the case is closed, dismissed or 

converted to a case under chapter 7, 12, or 13 (whichever occurs 

first). In addition, it includes earnings from services performed by 

the debtor after commencement of the case, but before the case is 

closed, dismissed or converted to a case under chapter 7, 12, or 13. 

Except as provided in section 1104 of the Bankruptcy Code or the 

order confirming a chapter 11 plan, section 321(a) provides that the 

debtor remains in possession of all property of the estate. Section 

321(a) is substantively identical to section 321(a) of the House bill 

and the Senate amendment. 

Section 321(b) amends Bankruptcy Code section 1123 to require the chapter 11 plan of an individual debtor to provide for the 

payment to creditors of all or such portion of the debtor’s earnings 

from personal services performed after commencement of the case 

or other future income that is necessary for the plan’s execution. 

This provision is substantively identical to section 321(b) of the 

House bill and the Senate amendment. 

221

Section 321(c) amends Bankruptcy Code section 1129(a) to include an additional requirement for confirmation in a chapter 11 

case of an individual debtor upon objection to confirmation by a 

holder of an allowed unsecured claim. In such instance, the value 

of property to be distributed under the plan (1) on account of such 

claim, as of the plan’s effective date, must not be less than the 

amount of such claim; or (2) is not less than the debtor’s projected 

disposable income (as defined in section 1325(b)(2)) to be received 

during the 5-year period beginning on the date that the first payment is due under the plan or during the plan’s term, whichever 

is longer. Section 321(c) also amends section 1129(b)(2)(B)(ii) of the 

Bankruptcy Code to provide that an individual chapter 11 debtor 

may retain property included in the estate under section 1115 (as 

added by the Act), subject to section 1129(a)(14). This provision is 

substantively identical to section 321(c) of the House bill and the 

Senate amendment. 

Section 321(d)(1) of the conference report reflects the Senate 

position represented in section 321(d) of the Senate amendment, 

which amends Bankruptcy Code section 1141(d) to provide that a 

discharge under chapter 11 does not discharge a debtor who is an 

individual from any debt excepted from discharge under Bankruptcy Code section 523. The House bill provides that a chapter 11 

debtor, including a corporation, is not discharged from any debt excepted from discharge under section 523. 

Section 321(d)(2) of the conference report provides that in a 

chapter 11 individual debtor is not discharged until all plan payments have been made. The court may grant a hardship discharge 

if the value of property actually distributed under the plan—as of 

the plan’s effective date—is not less than the amount that would 

have been available for distribution if the case was liquidated 

under chapter 7 on such date, and modification of the plan is not 

practicable. This provision is substantively identical to its counterparts in the House bill and Senate amendment. 

Section 321(e) of the conference report amends section 1127 to 

permit a plan in a chapter 11 case of an individual debtor to be 

modified postconfirmation for the purpose of increasing or reducing 

the amount of payments, extending or reducing the time period for 

such payments, or altering the amount of distribution to a creditor 

whose claim is provided for by the plan. Such modification may be 

made at any time on request of the debtor, trustee, United States 

trustee, or holder of an allowed unsecured claim, if the plan has 

not been substantially consummated. 

Section 321(f) specifies that sections 1121 through 1129 apply 

to such modification. In addition, it provides that the modified plan 

shall become the confirmed plan only if: (a) there has been disclosure pursuant to section 1125 (as the court directs); (b) notice and 

a hearing; and (c) such modification is approved. Subsections (e) 

and (f) of section 321 of the conference report are substantively 

identical to their counterparts in the House bill and the Senate 

amendment. 

Sec. 322. Limitations on homestead exemption 

Section 322(a) amends section 522 of the Bankruptcy Code to 

impose an aggregate monetary limitation of $125,000, subject to 

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Bankruptcy Code sections 544 and 548, on the value of property 

that the debtor may claim as exempt under State or local law pursuant to section 522(b)(3)(A) under certain circumstances. The 

monetary cap applies if the debtor acquired such property within 

the 1215-day period preceding the filing of the petition and the 

property consists of any of the following: (a) real or personal property of the debtor or that a dependent of the debtor uses as a residence; (b) an interest in a cooperative that owns property, which 

the debtor or the debtor’s dependent uses as a residence; (c) a burial plot for the debtor or the debtor’s dependent; or (d) real or personal property that the debtor or dependent of the debtor claims 

as a homestead. This limitation does not apply to a principal residence claimed as exempt by a family farmer. In addition, the limitation does not apply to any interest transferred from a debtor’s 

principal residence (which was acquired prior to the beginning of 

the specified time period) to the debtor’s current principal residence, if both the previous and current residences are located in 

the same State. 

Section 322(a) further amends section 522 to add a provision 

that does not allow a debtor to exempt any amount of an interest 

in property described in the preceding paragraph in excess of 

$125,000 if any of the following applies: 

(a) the court determines, after notice and a hearing, that 

the debtor has been convicted of a felony (as defined in section 

3156 of title 18), which under the circumstances, demonstrates 

that the filing of the case was an abuse of the provisions of the 

Bankruptcy Code; or 

(b) the debtor owes a debt arising from: 

(A) any violation of the federal securities laws defined 

in section 3(a)(47) of the Securities and Exchange Act of 

1934, any state securities laws, or any regulation or order 

issued under Federal securities laws or state securities 

laws; 

(B) fraud, deceit, or manipulation in a fiduciary capacity or in connection with the purchase or sale of any security registered under section 12 or 15(d) of the Securities 

Exchange Act of 1934, or under section 6 of the Securities 

Act of 1933; 

(C) any civil remedy under section 1964 of title 18 of 

the United States Code; or 

(D) any criminal act, intentional tort, or willful or 

reckless misconduct that caused serious physical injury or 

death to another individual in the preceding five years. 

The conferees intend that the language in section 522(q)(1) be liberally construed to encompass misconduct that rises above mere 

negligence under applicable state law. An exception to the monetary limit applies to the extent the value of the homestead property 

is reasonably necessary for the support of the debtor and any dependent of the debtor. 

Section 322(b) makes the monetary limitation set forth in section 322(a) subject to automatic adjustment pursuant to section 104 

of the Bankruptcy Code. 

This provision is substantively different from its House and 

Senate counterparts. Section 322 of the House bill imposes an agVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00222 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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gregate $100,000 homestead cap, which applies if the debtor acquired such property within the two-year period preceding the filing of the petition and the property consists. As with section 322 

of the conference report, the House provision includes the exception 

for a family farmer and the transfer of an interest in a principal 

residence of the debtor from a prior principal residence of the debtor acquired prior to the beginning of the two-year period. Section 

308 of the Senate amendment, on the other hand, imposes a flat 

$125,000 cap on a homestead exemption. 

Sec. 323. Excluding employee benefit plan participant contributions 

and other property from the estate 

Section 323 of the conference report is substantively identical 

to section 323 of the House bill and section 322 of the Senate 

amendment. It amends section 541(b) of the Bankruptcy Code to 

exclude as property of the estate funds withheld or received by an 

employer from its employees’ wages for payment as contributions 

to specified employee retirement plans, deferred compensation 

plans, and tax-deferred annuities. Such contributions do not constitute disposable income as defined in section 1325(b)(2) of the 

Bankruptcy Code. Section 323 also excludes as property of the estate funds withheld by an employer from the wages of its employees for payment as contributions to health insurance plans regulated by State law. 

Sec. 324. Exclusive jurisdiction in matters involving bankruptcy 

professionals 

Section 324 of the conference report amends section 1334 of 

title 28 of the United State Code to give a district court exclusive 

jurisdiction of all claims or causes of action involving the construction of section 327 of the Bankruptcy Code or rules relating to disclosure requirements under such provision. This provision is substantively identical to section 324 of the House bill and section 323 

of the Senate amendment. 

Sec. 325. United States trustee program filing fee increase 

Section 325 of the conference report is substantively identical 

to section 325 of the House bill and section 324 of the Senate 

amendment. Section 325(a) amends section 1930(a) of title 28 of 

the United States Code to increase the filing fees for chapter 7 and 

chapter 13 cases respectively to $160 and $150. Subsections 325(b) 

and (c) amend section 589a of title 28 of the United States Code 

and section 406(b) of the Judiciary Appropriations Act of 1990 to 

increase the percentage of the fees collected under section 1930 of 

title 28 of the United States Code that are paid to the United 

States Trustee System Fund. 

Sec. 326. Sharing of compensation 

Section 326 amends Bankruptcy Code section 504 to create a 

limited exception to the prohibition against fee sharing. The provision allows the sharing of compensation with bona fide public service attorney referral programs that operate in accordance with nonfederal law regulating attorney referral services and with rules of 

professional responsibility applicable to attorney acceptance of reVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00223 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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2Pub. L. No. 102–365, 106 Stat. 972 (1992). 

ferrals. This provision is substantively identical to section 326 of 

the House bill and section 325 of the Senate amendment. 

Sec. 327. Fair valuation of collateral 

Section 327 of the conference report amends section 506(a) of 

the Bankruptcy Code to provide that the value of an allowed claim 

secured by personal property that is an asset in an individual debtor’s chapter 7 or 13 case is determined based on the replacement 

value of such property as of the filing date of the bankruptcy case 

without deduction for selling or marketing costs. With respect to 

property acquired for personal, family, or household purposes, replacement value is the price a retail merchant would charge for 

property of that kind considering the age and condition of the property at the time its value is determined. This provision is identical 

to section 327 of the House bill and section 326 of the Senate 

amendment. 

Sec. 328. Defaults based on nonmonetary obligations 

Section 328 is substantively identical to section 328 of the 

House bill and section 327 of the Senate amendment. Subsection 

(a)(1) amends section 365(b) to provide that a trustee does not have 

to cure a default that is a breach of a provision (other than a penalty rate or penalty provision) relating to a default arising from 

any failure to perform a nonmonetary obligation under an unexpired lease of real property, if it is impossible for the trustee to 

cure the default by performing such nonmonetary act at and after 

the time of assumption. If the default arises from a failure to operate in accordance with a nonresidential real property lease, the default must be cured by performance at and after the time of assumption in accordance with the lease. Pecuniary losses resulting 

from such default must be compensated pursuant to section 

365(b)(1). In addition, section 328(a)(1) amends section 365(b)(2)(D) 

to clarify that it applies to penalty provisions. Section 328(a)(2) 

through (4) make technical revisions to section 365(c), (d) and (f) 

by deleting language that is no longer effective pursuant to the 

Rail Safety Enforcement and Review Act.2

Section 328(b) amends section 1124(2)(A) of the Bankruptcy 

Code to clarify that a claim is not impaired if section 365(b)(2) (as 

amended by this Act) expressly does not require a default with respect to such claim to be cured. In addition, it provides that any 

claim or interest that arises from the failure to perform a nonmonetary obligation (other than a default arising from the failure 

to operate a nonresidential real property lease subject to section 

365(b)(1)(A)), is impaired unless the holder of such claim or interest 

(other than the debtor or an insider) is compensated for any actual 

pecuniary loss incurred by the holder as a result of such failure. 

Sec. 329. Clarification of postpetition wages and benefits 

Section 329 amends Bankruptcy Code section 503(b)(1)(A) to 

accord administrative expense status to certain back pay awards. 

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eral or state law by the debtor pursuant to an action brought in 

a court or before the National Labor Relations Board, providing the 

bankruptcy court determines that the award will not substantially 

increase the probability of layoff or termination of current employees or of nonpayment of domestic support obligations. Section 329 

of the conference report substantively reflects the Senate position 

as represented in section 329 of the Senate amendment. The conference report clarifies the provision with respect to the timing of 

the unlawful conduct. There is no counterpart to this provision in 

the House bill. 

Sec. 330. Nondischargeability of debts incurred through violations 

of laws relating to the provision of lawful goods and services 

Section 330(a) amends Bankruptcy Code section 523(a) to prohibit the discharge of a debt that results from any judgment, order, 

consent order, or decree entered in any Federal or State court, or 

contained in any settlement agreement entered into by the debtor 

(including any court-ordered damages, fine, penalty, or attorney fee 

or cost owed by the debtor), that arises from: 

(a) the violation by the debtor of any Federal or State statutory law, including but not limited to violations of title 18 of 

the United States Code, that results from intentional actions 

of the debtor that—

(i) by force or threat of force or by physical obstruction, intentionally injure, intimidate, or interfere with or 

attempt to injure, intimidate or interfere with any person 

because that person is or has been, or in order to intimidate such person or any other person or class of persons 

from obtaining or providing lawful goods or services; 

(ii) by force of threat or force or by physical obstruction, intentionally injure, intimidate, or interfere with or 

attempt to injure, intimidate, or interfere with any person 

lawfully exercising or seeking to exercise the First Amendment right of religious freedom at a place of religious worship; or 

(iii) intentionally damage or destroy the property of a 

facility, or attempt to do so, because such facility provides 

lawful goods or services, or intentionally damage or destroy the property of a place of religious worship; or 

(b) a violation of a court order or injunction that protects 

access to a facility that or a person who provides lawful goods 

or services or the provision of lawful goods or services if such 

violation—

(i) is intentional or knowing; or 

(ii) occurs after a court has found that the debtor previously violated such court order or injunction, or any 

other court order or injunction that protects access to the 

same facility or the same person. 

The provision specifies that it shall not be construed to affect any 

expressive conduct, including peaceful picketing, peaceful prayer, 

or other peaceful demonstration, protected from legal prohibition 

by the First Amendment to the Constitution of the United States. 

226

Section 330(b) amends section 523(a)(13) of the Bankruptcy 

Code to make a debt for a criminal restitution order entered pursuant to state criminal law nondischargeable. 

Sec. 331. Delay of discharge during pendency of certain proceedings 

Section 330 amends section 727(a) of the Bankruptcy Code to 

require the court to withhold the entry of a debtor’s discharge order 

if the court, after notice and a hearing, finds that there is reasonable cause to believe that there is pending a proceeding in which 

the debtor may be found guilty of a felony of the kind described in 

section 522(q)(1) or liable for a debt of the kind described in section 

522(q)(2). There is no counterpart to this provision in either the 

House bill or Senate amendment. 

TITLE IV—GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS

SUBTITLE A—GENERAL BUSINESS BANKRUPTCY PROVISIONS

Sec. 401. Adequate protection for investors 

Section 401 is substantively identical to section 401 of the 

House bill and Senate amendment. Subsection (a) amends section 

101 of the Bankruptcy Code to define ‘‘securities self regulatory organization’’ as a securities association or national securities exchange registered with the Securities and Exchange Commission. 

Section 401(b) amends section 362 of the Bankruptcy Code to except from the automatic stay certain enforcement actions by a securities self regulatory organization. 

Sec. 402. Meetings of creditors and equity security holders 

Section 402 amends section 341 of the Bankruptcy Code to permit a court, on request of a party in interest and after notice and 

a hearing, to order the United States trustee not to convene a 

meeting of creditors or equity security holders if a debtor has filed 

a plan for which the debtor solicited acceptances prior to the commencement of the case. This provision is substantively identical to 

section 402 of the House bill and the Senate amendment. 

Sec. 403. Protection of refinance of security interest 

Section 403 amends section 547(e)(2) of the Bankruptcy Code 

to increase the perfection period from ten to 30 days for the purpose of determining whether a transfer is an avoidable preference. 

This provision is substantively identical to section 403 of the House 

bill and the Senate amendment. 

Sec. 404. Executory contracts and unexpired leases 

Section 404 is identical to section 404 of the House bill and the 

Senate amendment. Subsection (a) amends section 365(d)(4) of the 

Bankruptcy Code to establish a firm, bright line deadline by which 

an unexpired lease of nonresidential real property must be assumed or rejected. If such lease is not assumed or rejected by such 

deadline, then such lease shall be deemed rejected, and the trustee 

shall immediately surrender such property to the lessor. Section 

404(a) permits a bankruptcy trustee to assume or reject a lease on 

a date which is the earlier of the date of confirmation of a plan or 

the date which is 120 days after the date of the order for relief. A 

227

further extension of time may be granted, within the 120 day period, for an additional 90 days, for cause, upon motion of the trustee or lessor. Any subsequent extension can only be granted by the 

judge upon the prior written consent of the lessor: either by the lessor’s motion for an extension, or by a motion of the trustee, provided that the trustee has the prior written approval of the lessor. 

This provision is designed to remove the bankruptcy judge’s discretion to grant extensions of the time for the retail debtor to decide 

whether to assume or reject a lease after a maximum possible period of 210 days from the time of entry of the order of relief. Beyond that maximum period, there is no authority in the judge to 

grant further time unless the lessor has agreed in writing to the 

extension. 

Section 404(b) amends section 365(f)(1) to assure that section 

365(f) does not override any part of section 365(b). Thus, section 

404(b) makes a trustee’s authority to assign an executory contract 

or unexpired lease subject not only to section 365(c), but also to 

section 365(b), which is given full effect. Therefore, for example, assumption or assignment of a lease of real property in a shopping 

center must be subject to the provisions of the lease, such as use 

clauses. 

Sec. 405. Creditors and equity security holders committees 

Section 405 is substantively identical to section 405 of the 

House bill and the Senate amendment. Subsection (a) amends section 1102(a)(2) of the Bankruptcy Code to permit, after notice and 

a hearing, a court, on its own motion or on motion of a party in 

interest, to order a change in a committee’s membership to ensure 

adequate representation of creditors or equity security holders in a 

chapter 11 case. It specifies that the court may direct the United 

States trustee to increase the membership of a committee for the 

purpose of including a small business concern if the court determines that such creditor’s claim is of the kind represented by the 

committee and that, in the aggregate, is disproportionately large 

when compared to the creditor’s annual gross revenue. Section 

405(b) requires the committee to give creditors having claims of the 

kind represented by the committee access to information. In addition, the committee must solicit and receive comments from these 

creditors and, pursuant to court order, make additional reports or 

disclosures available to them. 

Sec. 406. Amendment to section 546 of title 11, United States Code 

Section 406 reflects the Senate position as represented in section 406 of the Senate amendment. The provision corrects an erroneous subsection designation in section 546 of the Bankruptcy 

Code. It redesignates the second subsection (g) as subsection (i). In 

addition, section 406 amends section 546(i) (as redesignated) to 

subject that provision to the prior rights of security interest holders. The House bill did not include this provision. Further, section 

406 adds a new provision to section 546 that prohibits a trustee 

from avoiding a warehouse lien for storage, transportation, or other 

costs incidental to the storage and handling of goods. It specifies 

that this prohibition must be applied in a manner consistent with 

228

any applicable state statute that is similar to section 7–209 of the 

Uniform Commercial Code. 

Sec. 407. Amendments to section 330(a) of title 11, United States 

Code 

Section 407 amends section 330(a)(3) of the Bankruptcy Code 

to clarify that this provision applies to examiners, chapter 11 trustees, and professional persons. This section also amends section 

330(a) to add a provision that requires a court, in determining the 

amount of reasonable compensation to award to a trustee, to treat 

such compensation as a commission pursuant to section 326 of the 

Bankruptcy Code. Section 407 is substantively identical to section 

407 of the House bill and the Senate amendment. 

Sec. 408. Postpetition disclosure and solicitation 

Section 408 amends section 1125 of the Bankruptcy Code to 

permit an acceptance or rejection of a chapter 11 plan to be solicited from the holder of a claim or interest if the holder was solicited before the commencement of the case in a manner that complied with applicable nonbankruptcy law. Section 408 is substantively identical to section 408 of the House bill and the Senate 

amendment. 

Sec. 409. Preferences 

Section 409 amends section 547(c)(2) of the Bankruptcy Code 

to provide that a trustee may not avoid a transfer to the extent 

such transfer was in payment of a debt incurred by the debtor in 

the ordinary course of the business or financial affairs of the debtor 

and the transferee and such transfer was made either: (1) in the 

ordinary course of the debtor’s and the transferee’s financial affairs 

or business; or (2) in accordance with ordinary business terms. 

Present law requires the recipient of a preferential transfer to establish both of these grounds in order to sustain a defense to a 

preferential transfer proceeding. In a case in which the debts are 

not primarily consumer debts, section 409 provides that a transfer 

may not be avoided if the aggregate amount of all property constituting or affected by the transfer is less than $5,000. This provision 

is substantively identical to section 409 of the House bill and the 

Senate amendment. 

Sec. 410. Venue of certain proceedings 

Section 410 amends section 1409(b) of title 28 of the United 

States Code to provide that a preferential transfer action in the 

amount of $10,000 or less pertaining to a nonconsumer debt 

against a noninsider defendant must be filed in the district where 

such defendant resides. This amount is presently fixed at $1,000. 

This provision is substantively identical to section 410 of the House 

bill and the Senate amendment. 

Sec. 411. Period for filing plan under chapter 11 

Section 411 amends section 1121(d) of the Bankruptcy Code to 

mandate that a chapter 11 debtor’s exclusive period for filing a 

plan may not be extended beyond a date that is 18 months after 

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sive period for obtaining acceptances of the plan may not be extended beyond 20 months after the order for relief. This provision 

is substantively identical to section 411 of the House bill and the 

Senate amendment. 

Sec. 412. Fees arising from certain ownership interests 

Section 412 amends section 523(a)(16) of the Bankruptcy Code 

to broaden the protections accorded to community associations with 

respect to fees or assessments arising from the debtor’s interest in 

a condominium, cooperative, or homeowners’ association. Irrespective of whether or not the debtor physically occupies such property, 

fees or assessments that accrue during the period the debtor or the 

trustee has a legal, equitable, or possessory ownership interest in 

such property are nondischargeable. This provision is substantively 

identical to section 412 of the House bill and the Senate amendment. 

Sec. 413. Creditor representation at first meeting of creditors 

Section 413 amends section 341(c) of the Bankruptcy Code to 

permit a creditor holding a consumer debt or any representative of 

such creditor, notwithstanding any local court rule, provision of a 

State constitution, or any other Federal or state nonbankruptcy 

law, to appear and participate at the meeting of creditors in chapter 7 and chapter 13 cases either alone or in conjunction with an 

attorney. In addition, the provision clarifies that it cannot be construed to require a creditor to be represented by counsel at any 

meeting of creditors. This provision is substantively identical to 

section 413 of the House bill and the Senate amendment. 

Sec. 414. Definition of disinterested person 

Section 414 amends section 101(14) of the Bankruptcy Code to 

eliminate the requirement that an investment banker be a disinterested person. This provision is substantively identical to section 

414 of the House bill and the Senate amendment. 

Sec. 415. Factors for compensation of professional persons 

Section 415 amends section 330(a)(3) of the Bankruptcy Code 

to permit the court to consider, in awarding compensation to a professional person, whether such person is board certified or otherwise has demonstrated skill and experience in the practice of bankruptcy law. This provision is substantively identical to section 415 

of the House bill and the Senate amendment. 

Sec. 416. Appointment of elected trustee 

Section 416 of the conference report is substantively identical 

to section 416 of the House bill and the Senate amendment. This 

provision amends section 1104(b) of the Bankruptcy Code to clarify 

the procedure for the election of a trustee in a chapter 11 case. Section 1104(b) permits creditors to elect an eligible, disinterested person to serve as the trustee in the case, provided certain conditions 

are met. Section 416 amends this provision to require the United 

States trustee to file a report certifying the election of a chapter 

11 trustee. Upon the filing of the report, the elected trustee is 

deemed to be selected and appointed for purposes of section 1104 

230

and the service of any prior trustee appointed in the case is terminated. Section 416 also clarifies that the court shall resolve any 

dispute arising out of a chapter 11 trustee election. 

Sec. 417. Utility service 

Section 417 amends section 366 of the Bankruptcy Code to provide that assurance of payment, for purposes of this provision, includes a cash deposit, letter of credit, certificate of deposit, surety 

bond, prepayment of utility consumption, or other form of security 

that is mutually agreed upon by the debtor or trustee and the utility. It also specifies that an administrative expense priority does 

not constitute an assurance of payment. With respect to chapter 11 

cases, section 417 permits a utility to alter, refuse or discontinue 

service if it does not receive adequate assurance of payment that 

is satisfactory to the utility within 30 days of the filing of the petition. The court, upon request of a party in interest, may modify the 

amount of this payment after notice and a hearing. In determining 

the adequacy of such payment, a court may not consider: (i) the absence of security before the case was filed; (ii) the debtor’s timely 

payment of utility service charges before the case was filed; or (iii) 

the availability of an administrative expense priority. Notwithstanding any other provision of law, section 417 permits a utility 

to recover or set off against a security deposit provided prepetition 

by the debtor to the utility without notice or court order. This provision is substantively identical to section 417 of the House bill and 

the Senate amendment. 

Sec. 418. Bankruptcy fees 

Section 418 of the conference report amends section 1930 of 

title 28 of the United States Code to permit a district court or a 

bankruptcy court, pursuant to procedures prescribed by the Judicial Conference of the United States, to waive the chapter 7 filing 

fee for an individual and certain other fees under subsections (b) 

and (c) of section 1930 if such individual’s income is less than 150 

percent of the official poverty level (as defined by the Office of 

Management and Budget) and the individual is unable to pay such 

fee in installments. section 418 also clarifies that section 1930, as 

amended, does not prevent a district or bankruptcy court from 

waiving other fees for creditors and debtors, if in accordance with 

Judicial Conference policy. This provision is substantively identical 

to section 418 of the House bill and the Senate amendment. 

Sec. 419. More complete information regarding assets of the estate 

Section 419 of the conference report is substantively identical 

to section 419 of the House bill and the Senate amendment. This 

provision requires the Advisory Committee on Bankruptcy Rules, 

after consideration of the views of the Director of the Executive Office for United States Trustees, to propose official rules and forms 

directing chapter 11 debtors to disclose information concerning the 

value, operations, and profitability of any closely held corporation, 

partnership, or other entity in which the debtor holds a substantial 

or controlling interest. Section 419 is intended to ensure that the 

debtor’s interest in any of these entities is used for the payment 

of allowed claims against debtor. 

231

SUBTITLE B—SMALL BUSINESS BANKRUPTCY PROVISIONS

Sec. 431. Flexible rules for disclosure statement and plan 

Section 431 of the conference report amends section 1125 of the 

Bankruptcy Code to streamline the disclosure statement process 

and to provide for more flexibility. This provision is substantively 

identical to section 431 of the House bill and the Senate amendment. Section 431(1) amends section 1125(a)(1) of the Bankruptcy 

Code to require a bankruptcy court, in determining whether a disclosure statement supplies adequate information, to consider the 

complexity of the case, the benefit of additional information to 

creditors and other parties in interest, and the cost of providing 

such additional information. With regard to a small business case, 

section 431(2) amends section 1125(f) to permit the court to dispense with a disclosure statement if the plan itself supplies adequate information. In addition, it provides that the court may approve a disclosure statement submitted on standard forms approved by the court or adopted under section 2075 of title 28 of the 

United States Code. Further, section 431(2) provides that the court 

may conditionally approve a disclosure statement, subject to final 

approval after notice and a hearing, and allow the debtor to solicit 

acceptances of the plan based on such disclosure statement. The 

hearing on the disclosure statement may be combined with the confirmation hearing. 

Sec. 432. Definitions 

Section 432 of the conference report is substantively similar to 

section 431 of the House bill and the Senate amendment. This provision amends section 101 of the Bankruptcy Code to define a 

‘‘small business case’’ as a chapter 11 case in which the debtor is 

a small business debtor. Section 432, in turn, defines a ‘‘small business debtor’’ as a person engaged in commercial or business activities (including an affiliate of such person that is also a debtor, but 

excluding a person whose primary activity is the business of owning or operating real property or activities incidental thereto) having aggregate noncontingent, liquidated secured and unsecured 

debts of not more than $2 million (excluding debts owed to affiliates or insiders of the debtor) as of the date of the petition or the 

order for relief. This monetary definition is a compromise. The 

House and Senate antecedents specified a $3 million definitional 

limit. This definition applies only in a case where the United 

States trustee has not appointed a creditors’ committee or where 

the court has determined that the committee of unsecured creditors 

is not sufficiently active and representative to provide effective 

oversight of the debtor. It does not apply to any member of a group 

of affiliated debtors that has aggregate noncontingent, liquidated 

secured and unsecured debts in excess of $2 million (excluding 

debts owed to one or more affiliates or insiders). The conference report also requires this monetary figure to be periodically adjusted 

for inflation pursuant to section 104 of the Bankruptcy Code. 

Sec. 433. Standard form disclosure statement and plan 

Section 433 of the conference report directs the Advisory Committee on Bankruptcy Rules of the Judicial Conference of the 

232

United States to propose for adoption standard form disclosure 

statements and reorganization plans for small business debtors. 

The provision directs that the forms be designed to achieve a practical balance between the needs of the court, case administrators, 

and other parties in interest to have reasonably complete information as well as the debtor’s need for economy and simplicity. This 

provision is substantively identical to section 433 of the House bill 

and the Senate amendment. 

Sec. 434. Uniform national reporting requirements 

Section 434 of the conference report is substantively identical 

to section 434 of the House bill and the Senate amendment. Subsection (a) adds a new provision to the Bankruptcy Code mandating additional reporting requirements for small business debtors. It requires a small business debtor to file periodic financial reports and other documents containing the following information 

with respect to the debtor’s business operations: (i) profitability; (ii) 

reasonable approximations of projected cash receipts and disbursements; (iii) comparisons of actual cash receipts and disbursements 

with projections in prior reports; (iv) whether the debtor is complying with postpetition requirements pursuant to the Bankruptcy 

Code and Federal Rules of Bankruptcy Procedure; (v) whether the 

debtor is timely filing tax returns and other government filings; 

and (vi) whether the debtor is paying taxes and other administrative expenses when due. In addition, the debtor must report on 

such other matters that are in the best interests of the debtor and 

the creditors and in the public interest. If the debtor is not in compliance with any postpetition requirements pursuant to the Bankruptcy Code and Federal Rules of Bankruptcy Procedure, or is not 

filing tax returns or other required governmental filings, paying 

taxes and other administrative expenses when due, the debtor 

must report: (a) what the failures are, (b) how they will be cured; 

(c) the cost of their cure; and (d) when they will be cured. Section 

434(b) specifies that the effective date of this provision is 60 days 

after the date on which the rules required under this provision are 

promulgated. 

Sec. 435. Uniform reporting rules and forms for small business 

cases 

Section 435 of the conference report is substantively identical 

to section 435 of the House bill and the Senate amendment. Subsection (a) mandates that the Advisory Committee on Bankruptcy 

Rules of the Judicial Conference of the United States propose official rules and forms with respect to the periodic financial reports 

and other information that a small business debtor must file concerning its profitability, cash receipts and disbursements, filing of 

its tax returns, and payment of its taxes and other administrative 

expenses. 

Section 435(b) requires the rules and forms to achieve a practical balance between the need for reasonably complete information 

by the bankruptcy court, United States trustee, creditors and other 

parties in interest, and the small business debtor’s interest in having such forms be easy and inexpensive to complete. The forms 

233

should also be designed to help the small business debtor better 

understand its financial condition and plan its future. 

Sec. 436. Duties in small business cases 

Section 436 of the conference report is substantively identical 

to section 436 of the House bill and the Senate amendment. Intended to implement greater administrative oversight and controls 

over small business chapter 11 cases, the provision requires a chapter 11 trustee or debtor to: 

(1) file with a voluntary petition (or in an involuntary case, 

within seven days from the date of the order for relief) the 

debtor’s most recent financial statements (including a balance 

sheet, statement of operations, cash flow statement, and Federal income tax return) or a statement explaining why such information is not available; 

(2) attend, through its senior management personnel and 

counsel, meetings scheduled by the bankruptcy court or the 

United States trustee (including the initial debtor interview 

and meeting of creditors pursuant to section 341 of the Bankruptcy Code), unless the court waives this requirement after 

notice and a hearing upon a finding of extraordinary and compelling circumstances; 

(3) timely file all requisite schedules and the statement of 

financial affairs, unless the court, after notice and a hearing, 

grants an extension of up to 30 days from the order of relief, 

absent extraordinary and compelling circumstances; 

(4) file all postpetition financial and other reports required 

by the Federal Rules of Bankruptcy Procedure or by local rule 

of the district court; 

(5) maintain insurance that is customary and appropriate 

for the industry, subject to section 363(c)(2); 

(6) timely file tax returns and other required government 

filings; 

(7) timely pay all administrative expense taxes (except for 

certain contested claims), subject to section 363(c)(2); and 

(8) permit the United States trustee to inspect the debtor’s 

business premises, books, and records at reasonable hours 

after appropriate prior written notice, unless notice is waived 

by the debtor. 

Sec. 437. Plan filing and confirmation deadlines 

Section 437 of the conference report amends section 1121(e) of 

the Bankruptcy Code with respect to the period of time within 

which a small business debtor must file and confirm a plan of reorganization. This provision is substantively identical to section 437 

of the House bill and the Senate amendment. It provides that a 

small business debtor’s exclusive period to file a plan is 180 days 

from the date of the order for relief, unless the period is extended 

after notice and a hearing, or the court, for cause, orders otherwise. 

It further provides that a small business debtor must file a plan 

and any disclosure statement not later than 300 days after the 

order for relief. These time periods and the time fixed in section 

1129(e) may be extended only if (a) the debtor, after providing notice to parties in interest, demonstrates by a preponderance of the 

234

evidence that it is more likely than not that the court will confirm 

a plan within a reasonable period of time; (b) a new deadline is imposed at the time the extension is granted; and (c) the order granting such extension is signed before the expiration of the existing 

deadline. 

Sec. 438. Plan confirmation deadline 

Section 438 of the conference report amends Bankruptcy Code 

section 1129 to require the court to confirm a plan not later than 

45 days after it is filed if the plan complies with the applicable provisions of the Bankruptcy Code, unless this period is extended pursuant to section 1121(e)(3). This provision is a compromise between 

section 438 of the House bill and the Senate amendment. The conference report clarifies that the plan must otherwise comply with 

applicable provisions of the Bankruptcy Code and includes a crossreference to section 1121(e)(3), as added by section 437 of this Act. 

The House provision specifies that a plan in a small business case 

must be confirmed not later than 175 days from the date of the 

order for relief, unless this period is extended pursuant to section 

1121(e)(3). The Senate amendment requires the plan to be confirmed within 45 days from the date on which a plan is filed, subject to extension pursuant to certain specified criteria. 

Sec. 439. Duties of the United States trustee 

Section 439 of the conference report is substantively identical 

to section 439 of the House bill and the Senate amendment. This 

provision amends section 586(a) of title 28 of the United States 

Code to require the United States trustee to perform the following 

additional duties with respect to small business debtors: 

(1) conduct an initial debtor interview before the meeting 

of creditors for the purpose of (a) investigating the debtor’s viability, (b) inquiring about the debtor’s business plan, (c) explaining the debtor’s obligation to file monthly operating reports, (d) attempting to obtain an agreed scheduling order setting various time frames (such as the date for filing a plan and 

effecting confirmation), and (e) informing the debtor of other 

obligations; 

(2) if determined to be appropriate and advisable, inspect 

the debtor’s business premises for the purpose of reviewing the 

debtor’s books and records and verifying that the debtor has 

filed its tax returns; 

(3) review and monitor diligently the debtor’s activities to 

determine as promptly as possible whether the debtor will be 

unable to confirm a plan; and 

(4) promptly apply to the court for relief in any case in 

which the United States trustee finds material grounds for dismissal or conversion of the case. 

Sec. 440. Scheduling conferences 

Section 440 amends section 105(d) of the Bankruptcy Code to 

mandate that a bankruptcy court hold status conferences as are 

necessary to further the expeditious and economical resolution of a 

bankruptcy case. This provision is identical to section 440 of the 

House bill and the Senate amendment. 

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Sec. 441. Serial filer provisions 

Section 441 of the conference report is substantively similar to 

section 441 of the House bill and the Senate amendment. Subsection (1) amends section 362 of the Bankruptcy Code to provide 

that a court may award only actual damages for a violation of the 

automatic stay committed by an entity in the good faith belief that 

subsection (h) of section 362 (as added by this Act) applies to the 

debtor. Section 441(2) adds a new subsection to section 362 of the 

Bankruptcy Code specifying that the automatic stay does not apply 

where the chapter 11 debtor: (1) is a debtor in a small business 

case pending at the time the subsequent case is filed; (2) was a 

debtor in a small business case dismissed for any reason pursuant 

to an order that became final in the two-year period ending on the 

date of the order for relief entered in the pending case; (3) was a 

debtor in small business case in which a plan was confirmed in the 

two-year period ending on the date of the order for relief entered 

in the pending case; or (4) is an entity that has acquired substantially all of the assets or business of a small business debtor described in the preceding paragraphs, unless such entity establishes 

by a preponderance of the evidence that it acquired the assets or 

business in good faith and not for the purpose of evading this provision. This exception was added to the conference report as a compromise. 

An exception to this provision applies to a chapter 11 case that 

is commenced involuntarily and involves no collusion between the 

debtor and the petitioning creditors. Also, it does not apply if the 

debtor proves by a preponderance of the evidence that: (1) the filing 

of the subsequent case resulted from circumstances beyond the 

debtor’s control and which were not foreseeable at the time the 

prior case was filed; and (2) it is more likely than not that the 

court will confirm a feasible plan of reorganization (but not a liquidating plan) within a reasonable time. 

Sec. 442. Expanded grounds for dismissal or conversion and appointment of trustee 

Section 442 largely reflects the Senate position as represented 

in section 442 of the Senate amendment. Subsection (a) amends 

section 1112(b) of the Bankruptcy Code to mandate that the court 

convert or dismiss a chapter 11 case, whichever is in the best interests of creditors and the estate, if the movant establishes cause, absent unusual circumstances. In this regard, the court must specify 

the circumstances that support the court’s finding that conversion 

or dismissal is not in the best interests of creditors and the estate. 

This exception was added to the conference report as a compromise. 

In addition, the provision specifies an exception to the provision’s mandatory requirement applies if: (1) the debtor or a party 

in interest objects and establishes that there is a reasonable likelihood that a plan will be confirmed within the time period set forth 

in section 1121(e) and 1129(e), or if these provisions are inapplicable, within a reasonable period of time; (2) the grounds for granting such relief include an act or omission of the debtor for which 

there exists a reasonable justification for such act or omission; and 

(3) such act or omission will be cured within a reasonable period 

of time. 

236

The court must commence the hearing on a section 1112(b) motion within 30 days of its filing and decide the motion not later 

than 15 days after commencement of the hearing unless the movant expressly consents to a continuance for a specified period of 

time or compelling circumstances prevent the court from meeting 

these time limits. Section 442 provides that the term ‘‘cause’’ under 

section 1112(b), as amended by this provision, includes the following: 

(1) substantial or continuing loss to or diminution of the 

estate and the absence of a reasonable likelihood of rehabilitation; 

(2) gross mismanagement of the estate; 

(3) failure to maintain appropriate insurance that poses a 

material risk to the estate or the public; 

(4) unauthorized use of cash collateral that is harmful to 

one or more creditors; 

(5) failure to comply with a court order; 

(6) unexcused failure to timely satisfy any filing or reporting requirement under the Bankruptcy Code or applicable rule; 

(7) failure to attend the section 341 meeting of creditors or 

an examination pursuant to Rule 2004 of the Federal Rules of 

Bankruptcy Procedure, without good cause shown by the debtor; 

(8) failure to timely provide information or to attend meetings reasonably requested by the United States trustee or 

bankruptcy administrator; 

(9) failure to timely pay taxes owed after the order for relief or to file tax returns due postpetition; 

(10) failure to file a disclosure statement or to confirm a 

plan within the time fixed by the Bankruptcy Code or pursuant 

to court order; 

(11) failure to pay any requisite fees or charges under 

chapter 123 of title 28 of the United States Code; 

(12) revocation of a confirmation order; 

(13) inability to effectuate substantial consummation of a 

confirmed plan; 

(14) material default by the debtor with respect to a confirmed plan; 

(15) termination of a plan by reason of the occurrence of 

a condition specified in the plan; and 

(16) the debtor’s failure to pay any domestic support obligation that first becomes payable postpetition. 

This definition of the term ‘‘cause’’ represents a compromise between the House and Senate conferees. 

Section 442(b) creates additional grounds for the appointment 

of a chapter 11 trustee under section 1104(a). It provides that 

should the bankruptcy court determine cause exists to convert or 

dismiss a chapter 11 case, it may appoint a trustee or examiner if 

in the best interests of creditors and the bankruptcy estate. Section 

442 of the conference report represents a compromise between the 

House and Senate conferees. Under the House version of this provision, the standard for the exception is a plan with a reasonable 

possibility of being confirmed will be filed within a reasonable period of time. The standard under the Senate amendment is reasonVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00236 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
237

able likelihood that a plan will be confirmed within specified time 

frames established in sections 1121(e) and 1129(e), or within a reasonable period of time in those cases where sections 1121(e) or 

1129(e) do not apply. 

Sec. 443. Study of operation of title 11, United States Code, with respect to small businesses 

Section 443 of the conference report is substantively identical 

to section 443 of the House bill and the Senate amendment. This 

provision directs the Administrator of the Small Business Administration, in consultation with the Attorney General, the Director of 

the Executive Office for United States Trustees, and the Director 

of the Administrative Office of the United States Courts, to conduct 

a study to determine: (i) the internal and external factors that 

cause small businesses (particularly sole proprietorships) to seek 

bankruptcy relief and the factors that cause small businesses to 

successfully complete their chapter 11 cases; and (ii) how the bankruptcy laws may be made more effective and efficient in assisting 

small business to remain viable. 

Sec. 444. Payment of interest 

Section 444 of the conference report is substantively identical 

to section 444 of the House bill and the Senate amendment. Subsection (1) amends section 362(d)(3) of the Bankruptcy Code to require a court to grant relief from the automatic stay within 30 days 

after it determines that a single asset real estate debtor is subject 

to this provision. Section 444(2) amends section 362(d)(3)(B) to 

specify that relief from the automatic stay shall be granted unless 

the single asset real estate debtor has commenced making monthly 

payments to each creditor secured by the debtor’s real property 

(other than a claim secured by a judgment lien or unmatured statutory lien) in an amount equal to the interest at the then applicable nondefault contract rate of interest on the value of the creditor’s interest in the real estate. It allows a debtor in its sole discretion to make the requisite interest payments out of rents or other 

proceeds generated by the real property, notwithstanding section 

363(c)(2). 

Sec. 445. Priority for administrative expenses 

Section 445 of the conference report is substantively identical 

to section 445 of the House bill and the Senate amendment. The 

provision amends section 503(b) of the Bankruptcy Code to add a 

new administrative expense priority for a nonresidential real property lease that is assumed under section 365 and then subsequently rejected. The amount of the priority is the sum of all monetary obligations due under the lease (excluding penalties and obligations arising from or relating to a failure to operate) for the twoyear period following the rejection date or actual turnover of the 

premises (whichever is later), without reduction or setoff for any 

reason, except for sums actually received or to be received from a 

nondebtor. Any remaining sums due for the balance of the term of 

the lease are treated as a claim under section 502(b)(6) of the 

Bankruptcy Code. 

238

Sec. 446. Duties with respect to a debtor who is a plan administrator of an employee benefit plan 

Section 446 of the conference report reflects the Senate position as represented in section 420 of the Senate amendment. There 

is no counterpart to this provision in the House bill. Subsection (a) 

amends Bankruptcy Code section 521(a) to require a debtor, unless 

a trustee is serving in the case, to serve as the administrator (as 

defined in the Employee Retirement Income Security Act) of an employee benefit plan if the debtor served in such capacity at the time 

the case was filed. Section 446(b) amends Bankruptcy Code section 

704 to require the chapter 7 trustee to perform the obligations of 

such administrator in a case where the debtor was required to perform such obligations. Section 446(c) amends Bankruptcy Code section 1106(a) to require a chapter 11 trustee to perform these obligations. 

Sec. 447. Appointment of committee of retired employees 

This provision amends section 1114(d) of the Bankruptcy Code 

to clarify that it is the responsibility of the United States trustee 

to appoint members to a committee of retired employees. There is 

no antecedent to this provision in either the House bill or the Senate amendment. 

TITLE V—MUNICIPAL BANKRUPTCY PROVISIONS

Sec. 501. Petition and proceedings related to petition 

Section 501 amends sections 921(d) and 301 of the Bankruptcy 

Code to clarify that the court must enter the order for relief in a 

chapter 9 case. This provision is substantively identical to section 

501 of the House bill and the Senate amendment. 

Sec. 502. Applicability of other sections to chapter 9 

Section 502 of the conference report is substantively identical 

to section 502 of the House bill and the Senate amendment. This 

provision amends section 901 of the Bankruptcy Code to make the 

following sections applicable to chapter 9 cases: (1) section 555 

(contractual right to liquidate, terminate or accelerate a securities 

contract); 

(2) section 556 (contractual right to liquidate, terminate or 

accelerate a commodities or forward contract); 

(3) section 559 (contractual right to liquidate, terminate or 

accelerate a repurchase agreement); 

(4) section 560 (contractual right to liquidate, terminate or 

accelerate a swap agreement); 

(5) section 561 (contractual right to liquidate, terminate, 

accelerate, or offset under a master netting agreement and 

across contracts); and 

(6) section 562 (damage measure in connection with swap 

agreements, securities contracts, forward contracts, commodity 

contracts, repurchase agreements, or master netting agreement). 

239

TITLE VI—BANKRUPTCY DATA

Sec. 601. Improved bankruptcy statistics 

Section 601 of the conference report is substantively similar to 

section 601 of the House bill and the Senate amendment. In recognition of the delayed effective date of this Act, section 601 extends the date by which the report described herein must be submitted. 

This provision amends chapter 6 of title 28 of the United 

States Code to require the clerk for each district (or the bankruptcy 

court clerk if one has been certified pursuant to section 156(b) of 

title 28 of the United States Code) to collect certain statistics for 

chapter 7, 11, and 13 cases in a standardized format prescribed by 

the Director of the Administrative Office of the United States 

Courts and to make this information available to the public. Not 

later than June 1, 2005, the Director must submit a report to Congress concerning the statistical information collected and then must 

report annually thereafter. The statistics must be itemized by 

chapter of the Bankruptcy Code and be presented in the aggregate 

for each district. The specific categories of information that must 

be gathered include the following: 

(1) scheduled total assets and liabilities of debtors who are 

individuals with primarily consumer debts under chapters 7, 

11 and 13 by category; 

(2) such debtors’ current monthly income, average income, 

and average expenses; 

(3) the aggregate amount of debts discharged during the 

reporting period based on the difference between the total 

amount of scheduled debts and by categories that are predominantly nondischargeable; 

(4) the average time between the filing of the bankruptcy 

case and the closing of the case; 

(5) the number of cases in which reaffirmation agreements 

were filed, the total number of reaffirmation agreements filed, 

the number of cases in which the debtor was pro se and a reaffirmation agreement was filed, and the number of cases in 

which the reaffirmation agreement was approved by the court; 

(6) for chapter 13 cases, information on the number of (a) 

orders determining the value of secured property in an amount 

less than the amount of the secured claim, (b) final orders that 

determined the value of property securing a claim, (c) cases 

dismissed, (d) cases dismissed for failure to make payments 

under the plan, (e) cases refiled after dismissal, (f) cases in 

which the plan was completed (separately itemized with respect to the number of modifications made before completion of 

the plan, and (g) cases in which the debtor had previously 

sought bankruptcy relief within the six years preceding the filing of the present case; 

(7) the number of cases in which creditors were fined for 

misconduct and the amount of any punitive damages awarded 

for creditor misconduct; and 

(8) the number of cases in which sanctions under rule 9011 

of the Federal Rules of Bankruptcy Procedure were imposed 

240

against a debtor’s counsel and the damages awarded under 

this rule. 

Section 601 provides that the amendments in this provision take 

effect 18 months after the date of enactment of this Act. 

Sec. 602. Uniform rules for the collection of bankruptcy data 

Section 602 of the conference report is substantively identical 

to section 602 of the House bill and the Senate amendment. It 

amends chapter 39 of title 28 of the United States Code to add a 

provision requiring the Attorney General to promulgate rules mandating the establishment of uniform forms for final reports in chapter 7, 12 and 13 cases and periodic reports in chapter 11 cases. 

This provision also specifies that these reports be designed to facilitate compilation of data and to provide maximum public access by 

physical inspection at one or more central filing locations and by 

electronic access through the Internet or other appropriate media. 

The information should enable an evaluation of the efficiency and 

practicality of the Federal bankruptcy system. In issuing rules, the 

Attorney General must consider: (1) the reasonable needs of the 

public for information about the Federal bankruptcy system; (2) the 

economy, simplicity, and lack of undue burden on persons obligated 

to file the reports; and (3) appropriate privacy concerns and safeguards. Section 602 provides that final reports by trustees in chapter 7, 12, and 13 cases include the following information: (1) the 

length of time the case was pending; (2) assets abandoned; (3) assets exempted; (4) receipts and disbursements of the estate; (5) administrative expenses, including those associated with section 

707(b) of the Bankruptcy Code, and the actual costs of administering chapter 13 cases; (6) claims asserted; (7) claims allowed; 

and (8) distributions to claimants and claims discharged without 

payment. With regard to chapter 11 cases, section 602 provides 

that periodic reports include the following information regarding: 

(1) the standard industry classification for businesses conducted by the debtor, as published by the Department of Commerce; 

(2) the length of time that the case was pending; 

(3) the number of full-time employees as of the date of the 

order for relief and at the end of each reporting period; 

(4) cash receipts, cash disbursements, and profitability of 

the debtor for the most recent period and cumulatively from 

the date of the order for relief; 

(5) the debtor’s compliance with the Bankruptcy Code, including whether tax returns have been filed and taxes have 

been paid; 

(6) professional fees approved by the court for the most recent period and cumulatively from the date of the order for relief; and

(7) plans filed and confirmed, including the aggregate recoveries of holders by class and as a percentage of total claims 

of an allowed class. 

Sec. 603. Audit procedures 

Section 603 is substantively identical to section 603 of the 

House bill and the Senate amendment. Subsection (a)(1) requires 

241

the Attorney General (for judicial districts served by United States 

trustees) and the Judicial Conference of the United States (for judicial districts served by bankruptcy administrators) to establish procedures to determine the accuracy, veracity, and completeness of 

petitions, schedules and other information filed by debtors pursuant to sections 111, 521 and 1322 of the Bankruptcy Code. Section 

603(a)(1) requires the audits to be conducted in accordance with 

generally accepted auditing standards and performed by independent certified public accountants or independent licensed public 

accountants. It permits the Attorney General and the Judicial Conference to develop alternative auditing standards not later than 

two years after the date of enactment of this Act. Section 603(a)(2) 

requires these procedures to: (1) establish a method of selecting appropriate qualified contractors to perform these audits; (2) establish a method of randomly selecting cases for audit, and that a 

minimum of at least one case out of every 250 cases be selected for 

audit; (3) require audits in cases where the schedules of income 

and expenses reflect greater than average variances from the statistical norm for the district if they occur by reason of higher income or higher expenses than the statistical norm in which the 

schedules were filed; and (4) require the aggregate results of such 

audits, including the percentage of cases by district in which a material misstatement of income or expenditures is reported, to be 

made available to the public on an annual basis. 

Section 603(b) amends section 586 of title 28 of the United 

States Code to require the United States trustee to submit reports 

as directed by the Attorney General, including the results of audits 

performed under section 603(a). In addition, it authorizes the 

United States trustee to contract with auditors to perform the audits specified in this provision. Further, it requires the report of 

each audit to be filed with the court and transmitted to the United 

States trustee. The report must specify material misstatements of 

income, expenditures or assets. In a case where a material 

misstatement has been reported, the clerk must provide notice of 

such misstatement to creditors and the United States trustee must 

report it to the United States Attorney, if appropriate, for possible 

criminal prosecution. If advisable, the United States trustee must 

also take appropriate action, such as revoking the debtor’s discharge. 

Section 603(c) amends section 521 of the Bankruptcy Code to 

make it a duty of the debtor to cooperate with an auditor. Section 

603(d) amends section 727 of the Bankruptcy Code to add, as a 

ground for revocation of a chapter 7 discharge the debtor’s failure 

to: (a) satisfactorily explain a material misstatement discovered as 

the result of an audit pursuant to this provision; or (b) make available for inspection all necessary documents or property belonging 

to the debtor that are requested in connection with such audit. Section 603(e) provides that the amendments made by this provision 

take effect 18 months after the Act’s date of enactment. 

Sec. 604. Sense of Congress regarding availability of bankruptcy 

data 

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242

ruptcy clerks in electronic form (to the extent such data relates to 

public records pursuant to section 107 of the Bankruptcy Code) 

should be made available to the public in a useable electronic form 

in bulk, subject to appropriate privacy concerns and safeguards as 

determined by the Judicial Conference of the United States. It also 

states that a uniform bankruptcy data system should be established that uses a single set of data definitions and forms to collect 

such data and that data for any particular bankruptcy case should 

be aggregated in electronic format. This provision is substantively 

identical to section 604 of the House bill and the Senate amendment. 

TITLE VII—BANKRUPTCY TAX PROVISIONS

Sec. 701. Treatment of certain tax liens 

Section 701 of the conference report is substantively identical 

to section 701 of the House bill and the Senate amendment. Subsection (a) makes several amendments to section 724 of the Bankruptcy Code to provide greater protection for holders of ad valorem 

tax liens on real or personal property of the estate. Many school 

boards obtain liens on real property to ensure collection of unpaid 

ad valorem taxes. Under current law, local governments are sometimes unable to collect these taxes despite the presence of a lien 

because they may be subordinated to certain claims and expenses 

as a result of section 724. Section 701(a) is intended to protect the 

holders of these tax liens from, among other things, erosion of their 

claims’ status by expenses incurred under chapter 11 of the Bankruptcy Code. Pursuant to section 701(a), subordination of ad valorem tax liens is still possible under section 724(b), but limited to 

the payment of: (1) claims incurred under chapter 7 for wages, salaries, or commissions (but not expenses incurred under chapter 11); 

(2) claims for wages, salaries, and commissions entitled to priority 

under section 507(a)(4); and (3) claims for contributions to employee benefit plans entitled to priority under section 507(a)(5). Before a tax lien on real or personal property may be subordinated 

pursuant to section 724, the chapter 7 trustee must exhaust all 

other unencumbered estate assets and, consistent with section 506, 

recover reasonably necessary costs and expenses of preserving or 

disposing of such property. Section 701(b) amends section 505(a)(2) 

of the Bankruptcy Code to prevent a bankruptcy court from determining the amount or legality of an ad valorem tax on real or personal property if the applicable period for contesting or redetermining the amount of the claim under nonbankruptcy law has expired. 

Sec. 702. Treatment of fuel tax claims 

Section 702 is substantively identical to section 702 of the 

House bill and the Senate amendment. The provision amends section 501 of the Bankruptcy Code to simplify the process for filing 

of claims by states for certain fuel taxes. Rather than requiring 

each state to file a claim for these taxes (as is the case under current law), section 702 permits the designated ‘‘base jurisdiction’’ under the International Fuel Tax Agreement to file a claim on behalf of all states, which would then be allowed as a single claim. 

243

Sec. 703. Notice of request for a determination of taxes 

Under current law, a trustee or debtor in possession may request a governmental unit to determine administrative tax liabilities in order to receive a discharge of those liabilities. There are 

no requirements as to the content or form of such notice to the government. Section 703 of the conference report amends section 

505(b) of the Bankruptcy Code to require the clerk of each district 

to maintain a list of addresses designated by governmental units 

for service of section 505 requests. In addition, the list may also include information concerning filing requirements specified by such 

governmental units. If a governmental entity does not designate an 

address and provide that address to the bankruptcy court clerk, 

any request made under section 505(b) of the Bankruptcy Code 

may be served at the address of the appropriate taxing authority 

of that governmental unit. This provision is substantively identical 

to section 703 of the House bill and the Senate amendment. 

Sec. 704. Rate of interest on tax claims 

Under current law, there is no uniform rate of interest applicable to tax claims. As a result, varying standards have been used 

to determine the applicable rate. Section 704 of the conference report amends the Bankruptcy Code to add section 511 for the purpose of simplifying the interest rate calculation. It provides that for 

all tax claims (federal, state, and local), including administrative 

expense taxes, the interest rate shall be determined in accordance 

with applicable nonbankruptcy law. With respect to taxes paid 

under a confirmed plan, the rate of interest is determined as of the 

calendar month in which the plan is confirmed. This provision is 

substantively identical to section 704 of the House bill and the Senate amendment. 

Sec. 705. Priority of tax claims 

Under current law, a tax claim is entitled to be treated as a 

priority claim if it arises within certain specified time periods. In 

the case of income taxes, a priority arises, among other time periods, if the tax return was due within 3 years of the filing of the 

bankruptcy petition or if the assessment of the tax was made within 240 days of the filing of the petition. The 240-day period is tolled 

during the time that an offer in compromise is pending (plus 30 

days). Though the statute is silent, most courts have also held that 

the 3-year and 240-day time periods are tolled during the pendency 

of a previous bankruptcy case. Section 705 amends section 

507(a)(8) of the Bankruptcy Code to codify the rule tolling priority 

periods during the pendency of a previous bankruptcy case during 

that 240-day period together with an additional 90 days. It also includes tolling provisions to adjust for the collection due process 

rights provided by the Internal Revenue Service Restructuring and 

Reform Act of 1998. During any period in which the government 

is prohibited from collecting a tax as a result of a request by the 

debtor for a hearing and an appeal of any collection action taken 

against the debtor, the priority is tolled, plus 90 days. Also, during 

any time in which there was a stay of proceedings in a prior bankruptcy case or collection of an income tax was precluded by a confirmed bankruptcy plan, the priority is tolled, plus 90 days. This 

244

3 96 T.C. 895 (1991). 

provision is substantively identical to section 705 of the House bill 

and the Senate amendment. 

Sec. 706. Priority property taxes incurred 

Under current law, many provisions of the Bankruptcy Code 

are keyed to the word ‘‘assessed.’’ While this term has an accepted 

meaning in the federal system, it is not used in many state and 

local statutes and has created some confusion. To eliminate this 

problem with respect to real property taxes, section 706 amends 

section 507(a)(8)(B) of the Bankruptcy Code by replacing the word 

‘‘assessed’’ with ‘‘incurred’’. This provision is substantively identical 

to section 706 of the House bill and the Senate amendment. 

Sec. 707. No discharge of fraudulent taxes in chapter 13 

Under current law, a debtor’s ability to discharge tax debts 

varies depending on whether the debtor is in chapter 7 or chapter 

13. In a chapter 7 case, taxes from a return due within 3 years of 

the petition date, taxes assessed within 240 days, or taxes related 

to an unfiled return or false return are not dischargeable. Chapter 

13, on the other hand, allows these obligations to be discharged. 

Section 707 of the conference report amends Bankruptcy Code section 1328(a)(2) to prohibit the discharge of tax claims described in 

section 523(a)(1)(B) and (C) as well as claims for a tax required to 

be collected or withheld and for which the debtor is liable in whatever capacity pursuant to section 507(a)(8)(C). This provision is 

substantively identical to section 707 of the House bill and the Senate amendment. 

Sec. 708. No discharge of fraudulent taxes in chapter 11 

Section 708 of the conference report largely reflects the Senate 

position as represented in section 708 of the Senate amendment. 

Under current law, the confirmation of a chapter 11 plan discharges a corporate debtor from most debts. Section 708 amends 

section 1141(d) of the Bankruptcy Code to except from discharge in 

corporate chapter 11 case a debt specified in subsections 

523(a)(2)(A) and (B) of the Bankruptcy Code owed to a domestic 

governmental unit. In addition, it excepts from discharge a debt 

owed to a person as the result of an action filed under subchapter 

III of chapter 37 of title 31 of the United States Code or any similar state statute. In contrast, the House renders any debt under 

section 523(a)(2) nondischargeable in a corporate chapter 11 case. 

Like the House provision and its Senate counterpart, however, section 708 excepts from discharge a debt for a tax or customs duty 

with respect to which the debtor made a fraudulent tax return or 

willfully attempted in any manner to evade or defeat such tax. 

Sec. 709. Stay of tax proceedings limited to prepetition taxes 

Under current law, the filing of a petition for relief under the 

Bankruptcy Code activates an automatic stay that enjoins the commencement or continuation of a case in the federal tax court. This 

rule was arguably extended in Halpern v. Commissioner,3 which 

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volving a postpetition year. To address this issue, section 709 of the 

conference report amends section 362(a)(8) of the Bankruptcy Code 

to specify that the automatic stay is limited to an individual debtor’s prepetition taxes (taxes incurred before entering bankruptcy). 

The amendment clarifies that the automatic stay does not apply to 

an individual debtor’s postpetition taxes. In addition, section 709 

allows the bankruptcy court to determine whether the automatic 

stay applies to the postpetition tax liabilities of a corporate debtor. 

This provision is substantively identical to section 709 of the House 

bill and the Senate amendment. 

Sec. 710. Periodic payment of taxes in chapter 11 cases 

Section 710 of the conference report amends section 1129(a)(9) 

of the Bankruptcy Code to provide that the allowed amount of priority tax claims (as of the plan’s effective date) must be paid in regular cash installments within five years from the entry of the order 

for relief. The manner of payment may not be less favorable than 

that accorded the most favored nonpriority unsecured class of 

claims under section 1122(b). In addition, it requires the same payment treatment to be accorded to secured section 507(a)(8) claims 

of a governmental unit. This provision is substantively identical to 

section 710 of the House bill and the Senate amendment. 

Sec. 711. Avoidance of statutory liens prohibited 

The Internal Revenue Code gives special protections to certain 

purchasers of securities and motor vehicles notwithstanding the existence of a filed tax lien. Section 711 of the conference report 

amends section 545(2) of the Bankruptcy Code to prevent that provision’s special protections from being used to avoid an otherwise 

valid lien. Specifically, it prevents the avoidance of unperfected 

liens against a bona fide purchaser, if the purchaser qualifies as 

such under section 6323 of the Internal Revenue Code or a similar 

provision under state or local law. Section 711 is substantively 

identical to section 711 of the House bill and the Senate amendment. 

Sec. 712. Payment of taxes in the conduct of business 

Although current law generally requires trustees and receivers 

to pay taxes in the ordinary course of the debtor’s business, the 

payment of administrative expenses must first be authorized by the 

court. Section 712(a) of the conference report amends section 960 

of title 28 of the United States Code to clarify that postpetition 

taxes in the ordinary course of business must be paid on or before 

when such tax is due under applicable nonbankruptcy law, with 

certain exceptions. This requirement does not apply if the obligation is a property tax secured by a lien against property that is 

abandoned under section 554 within a reasonable time after the 

lien attaches. In addition, the requirement does not pertain where 

the payment is excused under the Bankruptcy Code. With respect 

to chapter 7 cases, section 712(a) provides that the payment of a 

tax claim may be deferred until final distribution pursuant to section 726 if the tax was not incurred by a chapter 7 trustee or if 

the court, prior to the due date of the tax, finds that the estate has 

insufficient funds to pay all administrative expenses in full. Section 

246

712(b) amends section 503(b)(1)(B)(i) of the Bankruptcy Code to 

clarify that this provision applies to secured as well as unsecured 

tax claims, including property taxes based on liability that is in 

rem, in personam or both. Section 712(c) amends section 503(b)(1) 

to exempt a governmental unit from the requirement to file a request for payment of an administrative expense. Section 712(d)(1) 

amends section 506(b) to provide that to the extent that an allowed 

claim is oversecured, the holder is entitled to interest and any reasonable fees, costs, or charges provided for under state law. Section 

712(d)(2), in turn, amends section 506(c) to permit a trustee to recover from a secured creditor the payment of all ad valorem property taxes. Section 712 of the conference report is substantively 

identical to section 712 of the House bill and the Senate amendment. 

Sec. 713. Tardily filed priority tax claims 

Section 713 of the conference report is substantively identical 

to section 713 of the House bill and the Senate amendment. This 

provision amends section 726(a)(1) of the Bankruptcy Code to require a claim under section 507 that is not timely filed pursuant 

to section 501 to be entitled to a distribution if such claim is filed 

the earlier of the date that is ten days following the mailing to 

creditors of the summary of the trustee’s final report or before the 

trustee commences final distribution. 

Sec. 714. Income tax returns prepared by tax authorities 

Section 714 of the conference report is substantively identical 

to section 714 of the House bill and the Senate amendment. This 

provision amends section 523(a) of the Bankruptcy Code to provide 

that a return filed on behalf of a taxpayer who has provided information sufficient to complete a return constitutes filing a return 

(and the debt can be discharged), but that a return filed on behalf 

of a taxpayer based on information the Secretary obtains through 

testimony or otherwise does not constitute filing a return (and the 

debt cannot be discharged). 

Sec. 715. Discharge of the estate’s liability for unpaid taxes 

Under the Bankruptcy Code, a trustee or debtor in possession 

may request a prompt audit to determine postpetition tax liabilities. If the government does not make a determination or request 

an extension of time to audit, then the trustee or debtor in possession’s determination of taxes will be final. Several court cases have 

held that while this protects the debtor and the trustee, it does not 

necessarily protect the estate. Section 715 of the conference report 

amends section 505(b) of the Bankruptcy Code to clarify that the 

estate is also protected if the government does not request an audit 

of the debtor’s tax returns. Therefore, if the government does not 

make a determination of postpetition tax liabilities or request extension of time to audit, then the estate’s liability for unpaid taxes 

is discharged. This provision is substantively identical to section 

715 of the House bill and the Senate amendment. 

247

Sec. 716. Requirement to file tax returns to confirm chapter 13 

plans 

Under current law, a debtor may enjoy the benefits of chapter 

13 even if delinquent in the filing of tax returns. Section 716 of the 

conference report responds to this problem. This provision is substantively identical to section 716 of the House bill and the Senate 

amendment. Subsection (a) amends section 1325(a) of the Bankruptcy Code to require a chapter 13 debtor file all applicable Federal, state, and local tax returns as a condition of confirmation as 

required by section 1308 (as added by section 716(b)). Section 

716(b) adds section 1308 to chapter 13. This provision requires a 

chapter 13 debtor to be current on the filing of tax returns for the 

four-year period preceding the filing of the case. If the returns are 

not filed by the date on which the meeting of creditors is first 

scheduled, the trustee may hold open that meeting for a reasonable 

period of time to allow the debtor to file any unfiled returns. The 

additional period of time may not extend beyond 120 days after the 

date of the meeting of the creditors or beyond the date on which 

the return is due under the last automatic extension of time for filing. The debtor, however, may obtain an extension of time from the 

court if the debtor demonstrates by a preponderance of the evidence that the failure to file was attributable to circumstances beyond the debtor’s control. 

Section 716(c) amends section 1307 of the Bankruptcy Code to 

provide that if a chapter 13 debtor fails to file a tax return as required by section 1308, the court must dismiss the case or convert 

it to one under chapter 7 (whichever is in the best interests of 

creditors and the estate) on request of a party in interest or the 

United States trustee after notice and a hearing. 

Section 716(d) amends section 502(b)(9) of the Bankruptcy 

Code to provide that in a chapter 13 case, a governmental unit’s 

tax claim based on a return filed under section 1308 shall be 

deemed to be timely filed if the claim is filed within 60 days from 

the date on which such return is filed. Section 716(e) states the 

sense of the Congress that the Advisory Committee on Bankruptcy 

Rules of the Judicial Conference of the United States should propose for adoption official rules with respect an objection by a governmental unit to confirmation of a chapter 13 plan when such 

claim pertains to a tax return filed pursuant to section 1308. 

Sec. 717. Standards for tax disclosure 

Before creditors and stockholders may be solicited to vote on 

a chapter 11 plan, the plan proponent must file a disclosure statement that provides adequate information to holders of claims and 

interests so they can make a decision as to whether or not to vote 

in favor of the plan. As the tax consequences of a plan can have 

a significant impact on the debtor’s reorganization prospects, section 717 amends section 1125(a) of the Bankruptcy Code to require 

that a chapter 11 disclosure statement discuss the plan’s potential 

material Federal tax consequences to the debtor, any successor to 

the debtor, and to a hypothetical investor that is representative of 

the claimants and interest holders in the case. This provision is 

substantively identical to section 717 of the House bill and the Senate amendment. 

248

Sec. 718. Setoff of tax refunds 

Under current law, the filing of a bankruptcy petition automatically stays the setoff of a prepetition tax refund against a 

prepetition tax obligation unless the bankruptcy court approves the 

setoff. Interest and penalties that may continue to accrue may also 

be nondischargeable pursuant to section 523(a)(1) of the Bankruptcy Code and cause individual debtors undue hardship. Section 

718 of the conference report amends section 362(b) of the Bankruptcy Code to create an exception to the automatic stay whereby 

such setoff could occur without court order unless it would not be 

permitted under applicable nonbankruptcy law because of a pending action to determine the amount or legality of the tax liability. 

In that circumstance, the governmental authority may hold the refund pending resolution of the action, unless the court, on motion 

of the trustee and after notice and a hearing, grants the taxing authority adequate protection pursuant to section 361. Section 718 is 

substantively identical to section 718 of the House bill and the Senate amendment. 

Sec. 719. Special provisions related to the treatment of state and 

local taxes 

Section 719 of the conference report is substantively identical 

to section 719 of the House bill and the Senate amendment. This 

provision conforms state and local income tax administrative issues 

to the Internal Revenue Code. For example, under federal law, a 

bankruptcy petitioner filing on March 5 has two tax years—January 1 to March 4, and March 5 to December 31. Under the Bankruptcy Code, however, state and local tax years are divided differently—January 1 to March 5, and March 6 to December 31. Section 719 requires the states to follow the federal convention. It conforms state and local tax administration to the Internal Revenue 

Code in the following areas: division of tax liabilities and responsibilities between the estate and the debtor, tax consequences with 

respect to partnerships and transfers of property, and the taxable 

period of a debtor. Section 719 does not conform state and local tax 

rates to federal tax rates. 

Sec. 720. Dismissal for failure to timely file tax returns 

Under existing law, there is no definitive rule with respect to 

whether a bankruptcy court may dismiss a bankruptcy case if the 

debtor fails to file returns for taxes incurred postpetition. Section 

720 of the conference report amends section 521 of the Bankruptcy 

Code to allow a taxing authority to request that the court dismiss 

or convert a bankruptcy case if the debtor fails to file a postpetition 

tax return or obtain an extension. If the debtor does not file the 

required return or obtain the extension within 90 days from the 

time of the request by the taxing authority to file the return, the 

court must convert or dismiss the case, whichever is in the best interest of creditors and the estate. Section 720 is substantively identical to section 720 of the House bill and the Senate amendment. 

249

4The text of the Model Law and the Report of UNCITRAL on its adoption are found at U.N. 

G.A., 52d Sess., Supp. No. 17 (A/52/17) (‘‘Report’’). That Report and the Guide to Enactment of 

the UNCITRAL Model Law on Cross-Border Insolvency, U.N. Gen. Ass., UNCITRAL 30th Sess. 

U.N. Doc. A/CN.9/442 (1997) (‘‘Guide’’), which was discussed in the negotiations leading to the 

Model Law and published by UNCITRAL as an aid to enacting countries, should be consulted 

for guidance as to the meaning and purpose of its provisions. The development of the provisions 

in the negotiations at UNCITRAL, in which the United States was an active participant, is recounted in the interim reports of the Working Group that are cited in the Report. 5See section 1529 and commentary.

6Guide at 16–19. 7See id. at 18, ¶ 60; 19 ¶ 66. 

TITLE VIII—ANCILLARY AND OTHER CROSS-BORDER CASES

Title VIII of the conference report adds a new chapter to the 

Bankruptcy Code for transnational bankruptcy cases. It incorporates the Model Law on Cross-Border Insolvency to encourage cooperation between the United States and foreign countries with respect to transnational insolvency cases. Title VIII is intended to 

provide greater legal certainty for trade and investment as well as 

to provide for the fair and efficient administration of cross-border 

insolvencies, which protects the interests of creditors and other interested parties, including the debtor. In addition, it serves to protect and maximize the value of the debtor’s assets. Title VIII is 

substantially identical to title VIII of the House bill and the Senate 

amendment. 

Sec. 801. Amendment to add chapter 15 to title 11, United States 

Code 

Section 801 introduces chapter 15 to the Bankruptcy Code, 

which is the Model Law on Cross-Border Insolvency (‘‘Model Law’’) 

promulgated by the United Nations Commission on International 

Trade Law (‘‘UNCITRAL’’) at its Thirtieth Session on May 12–30, 

1997.4 Cases brought under chapter 15 are intended to be ancillary 

to cases brought in a debtor’s home country, unless a full United 

States bankruptcy case is brought under another chapter. Even if 

a full case is brought, the court may decide under section 305 to 

stay or dismiss the United States case under the other chapter and 

limit the United States’ role to an ancillary case under this chapter.5 If the full case is not dismissed, it will be subject to the provisions of this chapter governing cooperation, communication and coordination with the foreign courts and representatives. In any case, 

an order granting recognition is required as a prerequisite to the 

use of sections 301 and 303 by a foreign representative. 

Sec. 1501. Purpose and scope of application 

Section 1501 combines the Preamble to the Model Law (subsection (1)) with its article 1 (subsections (2) and (3)).6 It largely 

tracks the language of the Model Law with appropriate United 

States references. However, it adds in subsection (3) an exclusion 

of certain natural persons who may be considered ordinary consumers. Although the consumer exclusion is not in the text of the 

Model Law, the discussions at UNCITRAL recognized that such exclusion would be necessary in countries like the United States 

where there are special provisions for consumer debtors in the insolvency laws.7

The reference to section 109(e) essentially defines ‘‘consumer 

debtors’’ for purposes of the exclusion by incorporating the debt 

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8 Id. at 17. 

9See section 1505. 

10Guide at 19–21, ¶¶ 67–68. 

limitations of that section, but not its requirement of regular income. The exclusion adds a requirement that the debtor or debtor 

couple be citizens or long-term legal residents of the United States. 

This ensures that residents of other countries will not be able to 

manipulate this exclusion to avoid recognition of foreign proceedings in their home countries or elsewhere. 

The first exclusion in subsection (c) constitutes, for the United 

States, the exclusion provided in article 1, subsection (2), of the 

Model Law.8 Foreign representatives of foreign proceedings which 

are excluded from the scope of chapter 15 may seek comity from 

courts other than the bankruptcy court since the limitations of section 1509(b)(2) and (3) would not apply to them. 

The reference to section 109(b) interpolates into chapter 15 the 

entities governed by specialized insolvency regimes under United 

States law which are currently excluded from liquidation proceedings under title 11. Section 1501 contains an exception to the 

section 109(b) exclusions so that foreign proceedings of foreign insurance companies are eligible for recognition and relief under 

chapter 15 as they had been under section 304. However, section 

1501(d) has the effect of leaving to State regulation any deposit, escrow, trust fund or the like posted by a foreign insurer under State 

law. 

Sec. 1502. Definitions 

‘‘Debtor’’ is given a special definition for this chapter. This definition does not come from the Model Law, but is necessary to eliminate the need to refer repeatedly to ‘‘the same debtor as in the foreign proceeding.’’ With certain exceptions, the term ‘‘person’’ used 

in the Model Law has been replaced with ‘‘entity,’’ which is defined 

broadly in section 101(15) to include natural persons and various 

legal entities, thus matching the intended breadth of the term ‘‘person’’ in the Model Law. The exceptions include contexts in which 

a natural person is intended and those in which the Model Law 

language already refers to both persons and entities other than 

persons. The definition of ‘‘trustee’’ for this chapter ensures that 

debtors in possession and debtors, as well as trustees, are included 

in the term.9

The definition of ‘‘within the territorial jurisdiction of the 

United States’’ in subsection (7) is not taken from the Model Law. 

It has been added because the United States, like some other countries, asserts insolvency jurisdiction over property outside its territorial limits under appropriate circumstances. Thus a limiting 

phrase is useful where the Model Law and this chapter intend to 

refer only to property within the territory of the enacting state. In 

addition, a definition of ‘‘recognition’’ supplements the Model Law 

definitions and merely simplifies drafting of various other sections 

of chapter 15. 

Two key definitions of ‘‘foreign proceeding’’ and ‘‘foreign representative,’’ are found in sections 101(23) and (24), which have 

been amended consistent with Model Law article 2.10 The definitions of ‘‘establishment,’’ ‘‘foreign court,’’ ‘‘foreign main proceeding,’’

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11See Guide at 19, (Model Law) 21 ¶ 75 (concerning establishment); 21 ¶ 74 (concerning foreign court); 21 ¶¶ 72, 73 and 75 (concerning foreign main and non-main proceedings). 12See id. at 21, ¶ 75. 13See id. at 22, Art. 3. 14See id. at 23, Art. 4. 15 New section 1410 of title 28 provides as follows: 

A case under chapter 15 of title 11 may be commenced in the district court for the district— (1) in which the debtor has its principal place of business or principal assets in the United 

States; 

(2) if the debtor does not have a place of business or assets in the United States, in which 

there is pending against the debtor an action or proceeding or enforcement of judgment in a 

Federal or State court; or 

(3) in a case other than those specified in paragraph (1) or (2), in which venue will be consistent with the interests of justice and the convenience of the parties having regard to the relief 

sought by the foreign representative. 

and ‘‘foreign non-main proceeding’’ have been taken from Model 

Law article 2, with only minor language variations necessary to 

comport with United States terminology. Additionally, defined 

terms have been placed in alphabetical order.11 In order to be recognized as a foreign non-main proceeding, the debtor must at least 

have an establishment in that foreign country.12

Sec. 1503. International obligations of the United States 

This section is taken exactly from the Model Law with only 

minor adaptations of terminology.13 Although this section makes 

an international obligation prevail over chapter 15, the courts will 

attempt to read the Model Law and the international obligation so 

as not to conflict, especially if the international obligation addresses a subject matter less directly related than the Model Law to a 

case before the court. 

Sec. 1504. Commencement of ancillary case 

Article 4 of the Model Law is designed for designation of the 

competent court which will exercise jurisdiction under the Model 

Law. In United States law, section 1334(a) of title 28 gives exclusive jurisdiction to the district courts in a ‘‘case’’ under this title.14

Therefore, since the competent court has been determined in title 

28, this section instead provides that a petition for recognition commences a ‘‘case,’’ an approach that also invokes a number of other 

useful procedural provisions. In addition, a new subsection (P) to 

section 157 of title 28 makes cases under this chapter part of the 

core jurisdiction of bankruptcy courts if referred by the district 

courts, thus completing the designation of the competent court. Finally, the particular bankruptcy court that will rule on the petition 

is determined pursuant to a revised section 1410 of title 28 governing venue and transfer.15

The title ‘‘ancillary’’ in this section and in the title of this chapter emphasizes the United States policy in favor of a general rule 

that countries other than the home country of the debtor, where a 

main proceeding would be brought, should usually act through ancillary proceedings in aid of the main proceedings, in preference to 

a system of full bankruptcies (often called ‘‘secondary’’ proceedings) 

in each state where assets are found. Under the Model Law, notwithstanding the recognition of a foreign main proceeding, full 

bankruptcy cases are permitted in each country (see sections 1528 

and 1529). In the United States, the court will have the power to 

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16See Guide at 24. 17See id. at 24, Art. 5. 18See id. at 23–24, ¶ 82. 19See id. at 25. 20 Id. at 26. 

suspend or dismiss such cases where appropriate under section 

305. 

Sec. 1505. Authorization to act in a foreign country 

The language in this section varies from the wording of article 

5 of the Model Law as necessary to comport with United States law 

and terminology. The slight alteration to the language in the last 

sentence is meant to emphasize that the identification of the trustee or other entity entitled to act is under United States law, while 

the scope of actions that may be taken by the trustee or other entity under foreign law is limited by the foreign law.16

The related amendment to section 586(a)(3) of title 28 makes 

acting pursuant to authorization under this section an additional 

power of a trustee or debtor in possession. While the Model Law 

automatically authorizes an administrator to act abroad, this section requires all trustees and debtors to obtain court approval before acting abroad. That requirement is a change from the language of the Model Law, but one that is purely internal to United 

States law.17 Its main purpose is to ensure that the court has 

knowledge and control of possibly expensive activities, but it will 

have the collateral benefit of providing further assurance to foreign 

courts that the United States debtor or representative is under judicial authority and supervision. This requirement means that the 

first-day orders in reorganization cases should include authorization to act under this section where appropriate. 

This section also contemplates the designation of an examiner 

or other natural person to act for the estate in one or more foreign 

countries where appropriate. One instance might be a case in 

which the designated person had a special expertise relevant to 

that assignment. Another might be where the foreign court would 

be more comfortable with a designated person than with an entity 

like a debtor in possession. Either are to be recognized under the 

Model Law.18

Sec. 1506. Public policy exception 

This provision follows the Model Law article 5 exactly, is 

standard in UNCITRAL texts, and has been narrowly interpreted 

on a consistent basis in courts around the world. The word ‘‘manifestly’’ in international usage restricts the public policy exception 

to the most fundamental policies of the United States.19

Sec. 1507. Additional assistance 

Subsection (1) follows the language of Model Law article 7.20

Subsection (2) makes the authority for additional relief (beyond 

that permitted under sections 1519–1521, below) subject to the conditions for relief heretofore specified in United States law under 

section 304, which is repealed. This section is intended to permit 

the further development of international cooperation begun under 

section 304, but is not to be the basis for denying or limiting relief 

253

21 Id. 22 Id. at 26, ¶ 91. 

otherwise available under this chapter. The additional assistance is 

made conditional upon the court’s consideration of the factors set 

forth in the current subsection 304(c) in a context of a reasonable 

balancing of interests following current case law. The references to 

‘‘estate’’ in section 304 have been changed to refer to the debtor’s 

property, because many foreign systems do not create an estate in 

insolvency proceedings of the sort recognized under this chapter. 

Although the case law construing section 304 makes it clear that 

comity is the central consideration, its physical placement as one 

of six factors in subsection (c) of section 304 is misleading, since 

those factors are essentially elements of the grounds for granting 

comity. Therefore, in subsection (2) of this section, comity is raised 

to the introductory language to make it clear that it is the central 

concept to be addressed.21

Sec. 1508. Interpretation 

This provision follows conceptually Model Law article 8 and is 

a standard one in recent UNCITRAL treaties and model laws. 

Changes to the language were made to express the concepts more 

clearly in United States vernacular.22 Interpretation of this chapter 

on a uniform basis will be aided by reference to the Guide and the 

Reports cited therein, which explain the reasons for the terms used 

and often cite their origins as well. Uniform interpretation will also 

be aided by reference to CLOUT, the UNCITRAL Case Law On 

Uniform Texts, which is a service of UNCITRAL. CLOUT receives 

reports from national reporters all over the world concerning court 

decisions interpreting treaties, model laws, and other text promulgated by UNCITRAL. Not only are these sources persuasive, but 

they advance the crucial goal of uniformity of interpretation. To the 

extent that the United States courts rely on these sources, their decisions will more likely be regarded as persuasive elsewhere. 

Sec. 1509. Right of direct access 

This section implements the purpose of article 9 of the Model 

Law, enabling a foreign representative to commence a case under 

this chapter by filing a petition directly with the court without preliminary formalities that may delay or prevent relief. It varies the 

language to fit United States procedural requirements and it imposes recognition of the foreign proceeding as a condition to further 

rights and duties of the foreign representative. If recognition is 

granted, the foreign representative will have full capacity under 

United States law (subsection (b)(1)), may request such relief in a 

state or federal court other than the bankruptcy court (subsection 

(b)(2)), and may be granted comity or cooperation by such nonbankruptcy court (subsection (b)(3) and (c)). Subsections (b)(2), 

(b)(3), and (c) make it clear that chapter 15 is intended to be the 

exclusive door to ancillary assistance to foreign proceedings. The 

goal is to concentrate control of these questions in one court. That 

goal is important in a federal system like that of the United States 

with many different courts, state and federal, that may have pending actions involving the debtor or the debtor’s property. This secVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00253 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
254

23See id. at 23, Art. 4, ¶¶79–83; 27 Art. 9, ¶93. 24See id. at 27, Art. 9; 34–35, Art. 15 and ¶¶116–119; 39–40, Art. 18, ¶¶133–134; see also 

sections 1515(3), 1518. 25 Id. at 27, ¶93. 26See id. at 28, Art. 11. 

tion, therefore, completes for the United States the work of article 

4 of the Model Law (‘‘competent court’’) as well as article 9.23

Although a petition under current section 304 is the proper 

method for achieving deference by a United States court to a foreign insolvency under present law, some cases in state and federal 

courts under current law have granted comity suspension or dismissal of cases involving foreign proceedings without requiring a 

section 304 petition or even referring to the requirements of that 

section. Even if the result is correct in a particular case, the procedure is undesirable, because there is room for abuse of comity. Parties would be free to avoid the requirements of this chapter and the 

expert scrutiny of the bankruptcy court by applying directly to a 

state or federal court unfamiliar with the statutory requirements. 

Such an application could be made after denial of a petition under 

this chapter. This section concentrates the recognition and deference process in one United States court, ensures against abuse, 

and empowers a court that will be fully informed of the current 

status of all foreign proceedings involving the debtor.24

Subsection (d) has been added to ensure that a foreign representative cannot seek relief in courts in the United States after 

being denied recognition by the court under this chapter. Subsection (e) makes activities in the United States by a foreign representative subject to applicable United States law, just as 28 

U.S.C. section 959 does for a domestic trustee in bankruptcy.25

Subsection (f) provides a limited exception to the prior recognition 

requirement so that collection of a claim which is property of the 

debtor, for example an account receivable, by a foreign representative may proceed without commencement of a case or recognition 

under this chapter. 

Sec. 1510. Limited jurisdiction 

Section 1510, article 10 of the Model Law, is modeled on section 306 of the Bankruptcy Code. Although the language referring 

to conditional relief in section 306 is not included, the court has the 

power under section 1522 to attach appropriate conditions to any 

relief it may grant. Nevertheless, the authority in section 1522 is 

not intended to permit the imposition of jurisdiction over the foreign representative beyond the boundaries of the case under this 

chapter and any related actions the foreign representative may 

take, such as commencing a case under another chapter of this 

title. 

Sec. 1511. Commencement of Case Under Section 301 or 303

This section reflects the intent of article 11 of the Model Law, 

but adds language that conforms to United States law or that is 

otherwise necessary in the United States given its many bankruptcy court districts and the importance of full information and 

coordination among them.26 Article 11 does not distinguish between voluntary and involuntary proceedings, but seems to have 

255

27 Id. at 38, ¶¶97–99. 28 Id. at 29, Art. 12. 29 Id. at 29, ¶¶10–102. 30 Id. at 30, ¶103. 31See id. at 30, ¶104. 32See id. at 31, ¶105. 33See Model Law, Art. 14; Guide at 31–32, ¶¶ 106–109. 

implicitly assumed an involuntary proceeding.27 Subsection 1(a)(2) 

goes farther and permits a voluntary filing, with its much simpler 

requirements, if the foreign proceeding that has been recognized is 

a main proceeding. 

Sec. 1512. Participation of a foreign representative in a case 

under this title 

This section tracks article 12 of the Model Law with a slight 

alteration to tie into United States procedural terminology.28 The 

effect of this section is to make the recognized foreign representative a party in interest in any pending or later commenced United 

States bankruptcy case.29 Throughout this chapter, the word ‘‘case’’ has been substituted for the word ‘‘proceeding’’ in the Model Law 

when referring to cases under the United States Bankruptcy Code, 

to conform to United States usage. 

Sec. 1513. Access of foreign creditors to a case under this title 

This section mandates nondiscriminatory or ‘‘national’’ treatment for foreign creditors, except as provided in subsection (b) and 

section 1514. It follows the intent of Model Law article 13, but the 

language required alteration to fit into the Bankruptcy Code.30 The 

law as to priority for foreign claims that fit within a class given 

priority treatment under section 507 (for example, foreign employees or spouses) is unsettled. This section permits the continued development of case law on that subject and its general principle of 

national treatment should be an important factor to be considered. 

At a minimum, under this section, foreign claims must receive the 

treatment given to general unsecured claims without priority, unless they are in a class of claims in which domestic creditors would 

also be subordinated.31 The Model Law allows for an exception to 

the policy of nondiscrimination as to foreign revenue and other 

public law claims.32 Such claims (such as tax and Social Security 

claims) have been traditionally denied enforcement in the United 

States, inside and outside of bankruptcy. The Bankruptcy Code is 

silent on this point, so the rule is purely a matter of traditional 

case law. It is not clear if this policy should be maintained or modified, so this section leaves this question to developing case law. It 

also allows the Department of the Treasury to negotiate reciprocal 

arrangements with our tax treaty partners in this regard, although 

it does not mandate any restriction of the evolution of case law 

pending such negotiations. 

Sec. 1514. Notification of foreign creditors concerning a case 

under title 11 

This section ensures that foreign creditors receive proper notice 

of cases in the United States.33 As a ‘‘foreign creditor’’ is not a defined term, foreign addresses are used as the distinguishing factor. 

The Federal Rules of Bankruptcy Procedure (‘‘Rules’’) should be 

256

34Guide at 33, ¶ 111. 35 Id. at 31, Art. 14(3)(a). 36 Id. at 33. 37See id. at 36, ¶ 121. 38 Id. at 36. 39 Id. at 36, Art. 16(3). 40 Id. 41 Id. at 37. 

amended to conform to the requirements of this section, including 

a special form for initial notice to such creditors. In particular, the 

Rules must provide additional time for such creditors to file proofs 

of claim where appropriate and require the court to make specific 

orders in that regard in proper circumstances. The notice must 

specify that secured claims must be asserted, because in many 

countries such claims are not affected by an insolvency proceeding 

and need not be filed.34 If a foreign creditor has made an appropriate request for notice, it will receive notices in every instance 

where notices would be sent to other creditors who have made such 

requests. Subsection (d) replaces the reference to ‘‘a reasonable 

time period’’ in Model Law article 14(3)(a).35 It makes clear that 

the Rules, local rules, and court orders must make appropriate adjustments in time periods and bar dates so that foreign creditors 

have a reasonable time within which to receive notice or take an 

action. 

Sec. 1515. Application for recognition of a foreign proceeding 

This section follows article 15 of the Model Law with minor 

changes.36 The Rules will require amendment to provide forms for 

some or all of the documents mentioned in this section, to make 

necessary additions to Rules 1000 and 2002 to facilitate appropriate notices of the hearing on the petition for recognition, and to 

require filing of lists of creditors and other interested persons who 

should receive notices. Throughout the Model Law, the question of 

notice procedure is left to the law of the enacting state.37

Sec. 1516. Presumptions concerning recognition 

This section follows article 16 of the Model Law with minor 

changes.38 Although sections 1515 and 1516 are designed to make 

recognition as simple and expedient as possible, the court may hear 

proof on any element stated. The ultimate burden as to each element is on the foreign representative, although the court is entitled 

to shift the burden to the extent indicated in section 1516. The 

word ‘‘proof’’ in subsection (3) has been changed to ‘‘evidence’’ to 

make it clearer using United States terminology that the ultimate 

burden is on the foreign representative.39 ‘‘Registered office’’ is the 

term used in the Model Law to refer to the place of incorporation 

or the equivalent for an entity that is not a natural person.40 The 

presumption that the place of the registered office is also the center 

of the debtor’s main interest is included for speed and convenience 

of proof where there is no serious controversy. 

Sec. 1517. Order granting recognition 

This section closely tracks article 17 of the Model Law, with a 

few exceptions.41 The decision to grant recognition is not dependent 

upon any findings about the nature of the foreign proceedings of 

257

42 Report of the working group on Insolvency Law on the work of its Twentieth Session (Vienna, 7–18 October 1996), at 6, ¶¶ 16–20. 43Guide at 37, Art. 17(1)(d). 44 Id. 45 Id. at 39–40, ¶¶ 133, 134. 

the sort previously mandated by section 304(c) of the Bankruptcy 

Code. The requirements of this section, which incorporates the definitions in section 1502 and sections 101(23) and (24), are all that 

must be fulfilled to attain recognition. Reciprocity was specifically 

suggested as a requirement for recognition on more than one occasion in the negotiations that resulted in the Model Law. It was rejected by overwhelming consensus each time. The United States 

was one of the leading countries opposing the inclusion of a reciprocity requirement.42 In this regard, the Model Law conforms to 

section 304, which has no such requirement. 

The drafters of the Model Law understood that only a main 

proceeding or a non-main proceeding meeting the standards of section 1502 (that is, one brought where the debtor has an establishment) were entitled to recognition under this section. The Model 

Law has been slightly modified to make this point clear by referring to the section 1502 definition of main and non-main proceedings, as well as to the general definition of a foreign proceeding 

in section 101(23). A petition under section 1515 must show that 

proceeding is a main or a qualifying non-main proceeding in order 

to obtain recognition under this section. 

Consistent with the position of various civil law representatives in the drafting of the Model Law, recognition creates a status 

with the effects set forth in section 1520, so those effects are not 

viewed as orders to be modified, as are orders granting relief under 

sections 1519 and 1521. Subsection (4) states the grounds for modifying or terminating recognition. On the other hand, the effects of 

recognition (found in section 1520 and including an automatic stay) 

are subject to modification under section 362(d), made applicable 

by section 1520(2), which permits relief from the automatic stay of 

section 1520 for cause. 

Paragraph 1(d) of section 17 of the Model Law has been omitted as an unnecessary requirement for United States purposes, because a petition submitted to the wrong court will be dismissed or 

transferred under other provisions of United States law.43 The reference to section 350 refers to the routine closing of a case that has 

been completed and will invoke requirements including a final report from the foreign representative in such form as the Rules may 

provide or a court may order.44

Sec. 1518. Subsequent information 

This section follows the Model Law, except to eliminate the 

word ‘‘same’’, which is rendered unnecessary by the definition of 

‘‘debtor’’ in section 1502, and to provide for a formal document to 

be filed with the court.45 Judges in several jurisdictions, including 

the United States, have reported a need for a requirement of complete and candid reports to the court of all proceedings, worldwide, 

involving the debtor. This section will ensure that such information 

is provided to the court on a timely basis. Any failure to comply 

with this section will be subject to the sanctions available to the 

258

46 Id. at 40. 47 Id. at 42, Art. 20 1(a), (b). 48 Id. at 42, 45. 49 Id. at 42, Art. 20(2); 44, ¶¶ 148, 150. 

court for violations of the statute. The section leaves to the Rules 

the form of the required notice and related questions of notice to 

parties in interest, the time for filing, and the like. 

Sec. 1519. Relief may be granted upon petition for recognition 

of a foreign proceeding 

This section generally follows article 19 of the Model Law.46

The bankruptcy court will have jurisdiction to grant emergency relief under Rule 7065 pending a hearing on the petition for recognition. This section does not expand or reduce the scope of section 

105 as determined by cases under section 105 nor does it modify 

the sweep of sections 555 to 560. Subsection (d) precludes injunctive relief against police and regulatory action under section 1519, 

leaving section 105 as the only avenue for such relief. Subsection 

(e) makes clear that this section contemplates injunctive relief and 

that such relief is subject to specific rules and a body of jurisprudence. Subsection (f) was added to complement amendments to the 

Bankruptcy Code provisions dealing with financial contracts. 

Sec. 1520. Effects of recognition of a foreign main proceeding 

In general, this chapter sets forth all the relief that is available 

as a matter of right based upon recognition hereunder, although 

additional assistance may be provided under section 1507 and this 

chapter have no effect on any relief currently available under section 105. The stay created by article 20 of the Model Law is imported to chapter 15 from existing provisions of the Code. Subsection (a)(1) combines subsections 1(a) and (b) of article 20 of the 

Model Law, because section 362 imposes the restrictions required 

by those two subsections as well as additional restrictions.47

Subsections (a)(2) and (4) apply the Bankruptcy Code sections 

that impose the restrictions called for by subsection 1(c) of the 

Model Law. In both cases, the provisions are broader and more 

complete than those contemplated by the Model Law, but include 

all the restraints the Model Law provisions would impose.48 As the 

foreign proceeding may or may not create an ‘‘estate’’ similar to 

that created in cases under this title, the restraints are applicable 

to actions against the debtor under section 362(a) and with respect 

to the property of the debtor under the remaining sections. The 

only property covered by this section is property within the territorial jurisdiction of the United States as defined in section 1502. 

To achieve effects on property of the debtor which is not within the 

territorial jurisdiction of the United States, the foreign representative would have to commence a case under another chapter of this 

title. 

By applying sections 361 and 362, subsection (a) makes applicable the United States exceptions and limitations to the restraints 

imposed on creditors, debtors, and other in a case under this title, 

as stated in article 20(2) of the Model Law.49 It also introduces the 

concept of adequate protection provided in sections 362 and 363. 

These exceptions and limitations include those set forth in sections 

259

50 Id. at 42, Art. 20(3); 44–45, ¶¶ 151, 152. 51 Id. 52 Id. at 45–46, Art. 21. 53 Id. at 46, Art. 21(2); 47, Art. 22(1). 54See id. at 46–47, ¶¶ 158, 160.

362(b), (c) and (d). As a result, the court has the power to terminate the stay pursuant to section 362(d), for cause, including a failure of adequate protection.50

Subsection (a)(2), by its reference to sections 363 and 552 adds 

to the powers of a foreign representative of a foreign main proceeding an automatic right to operate the debtor’s business and exercise the power of a trustee under sections 363 and 542, unless 

the court orders otherwise. A foreign representative of a foreign 

main proceeding may need to continue a business operation to 

maintain value and granting that authority automatically will 

eliminate the risk of delay. If the court is uncomfortable about this 

authority in a particular situation, it can ‘‘order otherwise’’ as part 

of the order granting recognition. 

Two special exceptions to the automatic stay are embodied in 

subsections (b) and (c). To preserve a claim in certain foreign countries, it may be necessary to commence an action. Subsection (b) 

permits the commencement of such an action, but would not allow 

for its further prosecution. Subsection (c) provides that there is no 

stay of the commencement of a full United States bankruptcy case. 

This essentially provides an escape hatch through which any entity, including the foreign representative, can flee into a full case. 

The full case, however, will remain subject to subchapters IV and 

V on cooperation and coordination of proceedings and to section 305 

providing for stay or dismissal. Section 108 of the Bankruptcy Code 

provides the tolling protection intended by Model Law article 20(3), 

so no exception is necessary for claims that might be extinguished 

under United States law.51

Sec. 1521. Relief that may be granted upon recognition of a 

foreign proceeding 

This section follows article 21 of the Model Law, with detailed 

changes to conform to United States law.52 The exceptions in subsection (a)(7) relate to avoiding powers. The foreign representative’s 

status as to such powers is governed by section 1523 below. The 

avoiding power in section 549 and the exceptions to that power are 

covered by section 1520(a)(2). The word ‘‘adequately’’ in the Model 

Law, articles 21(2) and 22(1), has been changed to ‘‘sufficiently’’ in 

sections 1521(b) and 1522(a) to avoid confusion with a very specialized legal term in United States bankruptcy, ‘‘adequate protection.’’ 53 Subsection (c) is designed to limit relief to assets having 

some direct connection with a non-main proceeding, for example 

where they were part of an operating division in the jurisdiction of 

the non-main proceeding when they were fraudulently conveyed 

and then brought to the United States.54 Subsections (d), (e) and 

(f) are identical to those same subsections of section 1519. This section does not expand or reduce the scope of relief currently available in ancillary cases under sections 105 and 304 nor does it modify the sweep of sections 555 through 560. 

260

55 Id. at 47. 56 Id. at 48–49 57See id. at 49, ¶ 166. 58 Id. at 49. 59 Id. at 50. 

Sec. 1522. Protection of creditors and other interested persons 

This section follows article 22 of the Model Law with changes 

for United States usage and references to relevant Bankruptcy 

Code sections.55 It gives the bankruptcy court broad latitude to 

mold relief to meet specific circumstances, including appropriate responses if it is shown that the foreign proceeding is seriously and 

unjustifiably injuring United States creditors. For a response to a 

showing that the conditions necessary to recognition did not actually exist or have ceased to exist, see section 1517. Concerning the 

change of ‘‘adequately’’ in the Model Law to ‘‘sufficiently’’ in this 

section, see section 1521. Subsection (d) is new and simply makes 

clear that an examiner appointed in a case under chapter 15 shall 

be subject to certain duties and bonding requirements based on 

those imposed on trustees and examiners under other chapters of 

this title. 

Sec. 1523. Actions to avoid acts detrimental to creditors 

This section follows article 23 of the Model Law, with wording 

to fit it within procedure under this title.56 It confers standing on 

a recognized foreign representative to assert an avoidance action 

but only in a pending case under another chapter of this title. The 

Model Law is not clear about whether it would grant standing in 

a recognized foreign proceeding if no full case were pending. This 

limitation reflects concerns raised by the United States delegation 

during the UNCITRAL debates that a simple grant of standing to 

bring avoidance actions neglects to address very difficult choice of 

law and forum issues. This limited grant of standing in section 

1523 does not create or establish any legal right of avoidance nor 

does it create or imply any legal rules with respect to the choice 

of applicable law as to the avoidance of any transfer of obligation.57

The courts will determine the nature and extent of any such action 

and what national law may be applicable to such action. 

Sec. 1524. Intervention by a foreign representative 

The wording is the same as the Model Law, except for a few 

clarifying words.58 This section gives the foreign representative 

whose foreign proceeding has been recognized the right to intervene in United States cases, state or federal, where the debtor is 

a party. Recognition being an act under federal bankruptcy law, it 

must take effect in state as well as federal courts. This section does 

not require substituting the foreign representative for the debtor, 

although that result may be appropriate in some circumstances. 

Sec. 1525. Cooperation and direct communication between the 

court and foreign courts or foreign representatives 

The wording of this provision is nearly identical to that of the 

Model Law.59 The right of courts to communicate with other courts 

in worldwide insolvency cases is of central importance. This section 

authorizes courts to do so. This right must be exercised, however, 

261

60 Id. at 51. 61Guide at 51, 53. 62See e.g., In re Maxwell Communication Corp., 93 F.2d 1036 (2d Cir. 1996). 63Guide at 54–55. 

with due regard to the rights of the parties. Guidelines for such 

communications are left to the federal rules of bankruptcy procedure. 

Sec. 1526 Cooperation and direct communication between the 

trustee and foreign courts or foreign representatives 

This section closely tracks the Model Law.60 The language in 

Model Law article 26 concerning the trustee’s function was eliminated as unnecessary because it is always implied under United 

States law. The section authorizes the trustee, including a debtor 

in possession, to cooperate with other proceedings. Subsection (3) 

is not taken from the Model Law but is added so that any examiner 

appointed under this chapter will be designated by the United 

States Trustee and will be bonded. 

Sec. 1527. Forms of cooperation 

This section is identical to the Model Law.61 United States 

bankruptcy courts already engage in most of the forms of cooperation described here, but they now have explicit statutory authorization for acts like the approval of protocols of the sort used in 

cases.62

Sec. 1528. Commencement of a case under title 11 after recognition of a foreign main proceeding 

This section follows the Model Law, with specifics of United 

States law replacing the general clause at the end of the section 

to cover assets normally included within the jurisdiction of the 

United States courts in bankruptcy cases, except where assets are 

subject to the jurisdiction of another recognized proceeding.63 In a 

full bankruptcy case, the United States bankruptcy court generally 

has jurisdiction over assets outside the United States. Here that jurisdiction is limited where those assets are controlled by another 

recognized proceeding, if it is a main proceeding. 

The court may use section 305 of this title to dismiss, stay, or 

limit a case as necessary to promote cooperation and coordination 

in a cross-border case. In addition, although the jurisdictional limitation applies only to United States bankruptcy cases commenced 

after recognition of a foreign proceeding, the court has ample authority under the next section and section 305 to exercise its discretion to dismiss, stay, or limit a United States case filed after a petition for recognition of a foreign main proceeding has been filed but 

before it has been approved, if recognition is ultimately granted. 

Sec. 1529. Coordination of a case under title 11 and a foreign 

proceeding 

This section follows the Model Law almost exactly, but subsection (4) adds a reference to section 305 to make it clear the 

bankruptcy court may continue to use that section, as under 

present law, to dismiss or suspend a United States case as part of 

262

64 Id. at 55–56. 65 Id. at 57. 66 Id. at 58. 67 Id. at 59. 68 Id. at 51–52, 71. 

coordination and cooperation with foreign proceedings.64 This provision is consistent with United States policy to act ancillary to a 

foreign main proceeding whenever possible. 

Sec. 1530. Coordination of more than one foreign proceeding 

This section follows exactly article 30 of the Model Law.65 It 

ensures that a foreign main proceeding will be given primacy in the 

United States, consistent with the overall approach of the United 

States favoring assistance to foreign main proceedings. 

Sec. 1531. Presumption of insolvency based on recognition of 

a foreign main proceeding 

This section follows the Model Law exactly, inserting a reference to the standard for an involuntary case under this title.66

Where an insolvency proceeding has begun in the home country of 

the debtor, and in the absence of contrary evidence, the foreign representative should not have to make a new showing that the debtor 

is in the sort of financial distress requiring a collective judicial 

remedy. The word ‘‘proof’’ in this provision here means ‘‘presumption.’’ The presumption does not arise for any purpose outside this 

section. 

Sec. 1532. Rule of payment in concurrent proceeding 

This section follows the Model Law exactly and is very similar 

to prior section 508(a), which is repealed. The Model Law language 

is somewhat clearer and broader than the equivalent language of 

prior section 508(a).67

Sec. 802. Other amendments to titles 11 and 28, United States Code 

Section 802(a) amends section 103 of the Bankruptcy Code to 

clarify the provisions of the Code that apply to chapter 15 and to 

specify which portions of chapter 15 apply in cases under other 

chapters of title 11. Section 802(b) amends the Bankruptcy Code’s 

definitions of foreign proceeding and foreign representative in section 101. The new definitions are nearly identical to those contained in the Model Law but add to the phrase ‘‘under a law relating to insolvency’’ the words ‘‘or debt adjustment.’’ This addition 

emphasizes that the scope of the Model Law and chapter 15 is not 

limited to proceedings involving only debtors which are technically 

insolvent, but broadly includes all proceedings involving debtors in 

severe financial distress, so long as those proceedings also meet the 

other criteria of section 101(24).68

Section 802(c) amends section 157(b)(2) of title 28 to provide 

that proceedings under chapter 15 will be core proceedings while 

other amendments to title 28 provide that the United States trustee’s standing extends to cases under chapter 15 and that the 

United States trustee’s duties include acting in chapter 15 cases. 

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263

ruptcy case under chapters 7 and 13 of this title, subject to deference to foreign proceedings under chapter 15 and section 305, the 

situation is different in a case commenced under chapter 15. There 

the United States is acting solely in an ancillary position, so jurisdiction over property is limited to that stated in chapter 15. 

Section 802(d) amends section 109 of the Bankruptcy Code to 

permit recognition of foreign proceedings involving foreign insurance companies and involving foreign banks which do not have a 

branch or agency in the United States (as defined in 12 U.S.C. 

3101). While a foreign bank not subject to United States regulation 

will be eligible for chapter 15 as a consequence of the amendment 

to section 109, section 303 prohibits the commencement of a full involuntary case against such a foreign bank unless the bank is a 

debtor in a foreign proceeding. 

While section 304 is repealed and replaced by chapter 15, access to the jurisprudence which developed under section 304 is preserved in the context of new section 1507. On deciding whether to 

grant the additional assistance contemplated by section 1507, the 

court must consider the same factors specified in former section 

304. The venue provisions for cases ancillary to foreign proceedings 

have been amended to provide a hierarchy of choices beginning 

with principal place of business in the United States, if any. If 

there is no principal place of business in the United States, but 

there is litigation against a debtor, then the district in which the 

litigation is pending would be the appropriate venue. In any other 

case, venue must be determined with reference to the interests of 

justice and the convenience of the parties. 

TITLE IX—FINANCIAL CONTRACT PROVISIONS

Sec. 901. Treatment of certain agreements by conservators or receivers of insured depository institutions 

Subsections (a) through (f) of section 901 of the conference report amend the Federal Deposit Insurance Act’s (FDIA) definitions 

of ‘‘qualified financial contract,’’ ‘‘securities contract,’’ ‘‘commodity 

contract,’’ ‘‘forward contract,’’ ‘‘repurchase agreement’’ and ‘‘swap 

agreement’’ to make them consistent with the definitions in the 

Bankruptcy Code and to reflect the enactment of the Commodity 

Futures Modernization Act of 2000 (CFMA). It is intended that the 

legislative history and case law surrounding those terms, to the 

date of this amendment, be incorporated into the legislative history 

of the FDIA. 

Subsection (b) amends the definition of ‘‘securities contract’’ expressly to encompass margin loans, to clarify the coverage of securities options and to clarify the coverage of repurchase and reverse 

repurchase transactions. The reference in subsection (b) to a ‘‘guarantee by or to any securities clearing agency’’ is intended to cover 

other arrangements, such as novation, that have an effect similar 

to a guarantee. The reference to a ‘‘loan’’ of a security in the definition is intended to apply to loans of securities, whether or not for 

a ‘‘permitted purpose’’ under margin regulations. The reference to 

‘‘repurchase and reverse repurchase transactions’’ is intended to 

eliminate any inquiry under the qualified financial contract provisions of the FDIA as to whether a repurchase or reverse repurVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00263 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
264

69See 12 C.F.R. § 360.5. 

chase transaction is a purchase and sale transaction or a secured 

financing. Repurchase and reverse repurchase transactions meeting 

certain criteria are already covered under the definition of ‘‘repurchase agreement’’ in the FDIA (and a regulation of the Federal Deposit Insurance Corporation (FDIC)). Repurchase and reverse repurchase transactions on all securities (including, for example, equity securities, asset-backed securities, corporate bonds and commercial paper) are included under the definition of ‘‘securities contract’’. 

Subsection (b) also specifies that purchase, sale and repurchase 

obligations under a participation in a commercial mortgage loan do 

not constitute ‘‘securities contracts.’’ While a contract for the purchase, sale or repurchase of a participation may constitute a ‘‘securities contract,’’ the purchase, sale or repurchase obligation embedded in a participation agreement does not make that agreement a 

‘‘securities contract.’’ A number of terms used in the qualified financial contract provisions, but not defined therein, are intended to have the meanings 

set forth in the analogous provisions of the Bankruptcy Code or 

Federal Deposit Insurance Corporation Improvement Act 

(‘‘FDICIA’’), such as, for example, ‘‘securities clearing agency’’. The 

term ‘‘person,’’ however, is not intended to be so interpreted. Instead, ‘‘person’’ is intended to have the meaning set forth in section 

1 of title 1 of the United States Code. 

Section 901(b) reflects the Senate position as represented in 

section 901(b) of the Senate amendment. The House version of this 

provision did not include the clarification that the definition applies 

to mortgage loans. The conference report also includes the Senate 

amendment’s clarification of the reference to guarantee or reimbursement obligation. 

Section 901(c) amends the definition of ‘‘commodity contract’’ in 

section 11(e)(8)(D)(iii) of the Federal Deposit Insurance Act. It reflects the Senate position as represented in section 901(c) of the 

Senate amendment, which includes the Senate amendment’s clarification of the reference to guarantee or reimbursement obligation. 

Section 901(d) amends section 11(e)(8)(D)(iv) of the Federal Deposit 

Insurance Act with respect to its definition of a ‘‘forward contract’’. 

It reflects the Senate position as represented in section 901(d) of 

the Senate amendment, which includes the Senate amendment’s 

clarification of the reference to guarantee or reimbursement obligation. 

Subsection (e) amends the definition of ‘‘repurchase agreement’’

to codify the substance of the FDIC’s 1995 regulation defining repurchase agreement to include those on qualified foreign government securities.69 The term ‘‘qualified foreign government securities’’ is defined to include those that are direct obligations of, or 

fully guaranteed by, central governments of members of the Organization for Economic Cooperation and Development (OECD). Subsection (e) reflects developments in the repurchase agreement markets, which increasingly use foreign government securities as the 

underlying asset. The securities are limited to those issued by or 

guaranteed by full members of the OECD, as well as countries that 

265

have concluded special lending arrangements with the International Monetary Fund associated with the Fund’s General Arrangements to Borrow. 

Subsection (e) also amends the definition of ‘‘repurchase agreement’’ to include those on mortgage-related securities, mortgage 

loans and interests therein, and expressly to include principal and 

interest-only U.S. government and agency securities as securities 

that can be the subject of a ‘‘repurchase agreement.’’ The reference 

in the definition to United States government- and agency-issued 

or fully guaranteed securities is intended to include obligations 

issued or guaranteed by Fannie Mae and the Federal Home Loan 

Mortgage Corporation (Freddie Mac) as well as all obligations eligible for purchase by Federal Reserve banks under the similar language of section 14(b) of the Federal Reserve Act. This amendment 

is not intended to affect the status of repos involving securities or 

commodities as securities contracts, commodity contracts, or forward contracts, and their consequent eligibility for similar treatment under the qualified financial contract provisions. In particular, an agreement for the sale and repurchase of a security 

would continue to be a securities contract as defined in the FDIA, 

even if not a ‘‘repurchase agreement’’ as defined in the FDIA. Similarly, an agreement for the sale and repurchase of a commodity, 

even though not a ‘‘repurchase agreement’’ as defined in the FDIA, 

would continue to be a forward contract for purposes of the FDIA. 

Subsection (e), like subsection (b) for ‘‘securities contracts,’’

specifies that repurchase obligations under a participation in a 

commercial mortgage loan do not make the participation agreement 

a ‘‘repurchase agreement.’’ Such repurchase obligations embedded 

in participations in commercial loans (such as recourse obligations) 

do not constitute a ‘‘repurchase agreement.’’ A repurchase agreement involving the transfer of participations in commercial mortgage loans with a simultaneous agreement to repurchase the participation on demand or at a date certain one year or less after 

such transfer, however, would constitute a ‘‘repurchase agreement’’

as well as a ‘‘securities contract’’. Section 901(e) reflects the Senate 

position as represented in section 901(e) of the Senate amendment. 

The House version of this provision did not include the clarification 

that the definition applies to mortgage loans. The conference report 

also includes the Senate amendment’s clarification of the reference 

to guarantee or reimbursement obligation. 

Section 901(f) of the conference report amends the definition of 

‘‘swap agreement’’ to include an ‘‘interest rate swap, option, future, 

or forward agreement, including a rate floor, rate cap, rate collar, 

cross-currency rate swap, and basis swap; a spot, same day-tomorrow, tomorrow-next, forward, or other foreign exchange or precious 

metals agreement; a currency swap, option, future, or forward 

agreement; an equity index or equity swap, option, future, or forward agreement; a debt index or debt swap, option, future, or forward agreement; a total return, credit spread or credit swap, option, future, or forward agreement; a commodity index or commodity swap, option, future, or forward agreement; or a weather 

swap, weather derivative, or weather option.’’ As amended, the definition of ‘‘swap agreement’’ will update the statutory definition 

266

and achieve contractual netting across economically similar transactions. 

The definition of ‘‘swap agreement’’ originally was intended to 

provide sufficient flexibility to avoid the need to amend the definition as the nature and uses of swap transactions matured. To that 

end, the phrase ‘‘or any other similar agreement’’ was included in 

the definition. (The phrase ‘‘or any similar agreement’’ has been 

added to the definitions of ‘‘forward contract,’’ ‘‘commodity contract,’’ ‘‘repurchase agreement’’ and ‘‘securities contract’’ for the 

same reason.) To clarify this, subsection (f) expands the definition 

of ‘‘swap agreement’’ to include ‘‘any agreement or transaction that 

is similar to any other agreement or transaction referred to in [section 11(e)(8)(D)(vi) of the FDIA] and is of a type that has been, is 

presently, or in the future becomes, the subject of recurrent dealings in the swap markets . . . and that is a forward, swap, future, 

or option on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt 

instruments, quantitative measures associated with an occurrence, 

extent of an occurrence, or contingency associated with a financial, 

commercial, or economic consequence, or economic or financial indices or measures of economic or financial risk or value.’’

The definition of ‘‘swap agreement,’’ however, should not be interpreted to permit parties to document non-swaps as swap transactions. Traditional commercial arrangements, such as supply 

agreements, or other non-financial market transactions, such as 

commercial, residential or consumer loans, cannot be treated as 

‘‘swaps’’ under either the FDIA or the Bankruptcy Code simply because the parties purport to document or label the transactions as 

‘‘swap agreements.’’ In addition, these definitions apply only for 

purposes of the FDIA and the Bankruptcy Code. These definitions, 

and the characterization of a certain transaction as a ‘‘swap agreement,’’ are not intended to affect the characterization, definition, or 

treatment of any instruments under any other statute, regulation, 

or rule including, but not limited to, the statutes, regulations or 

rules enumerated in subsection (f). Similarly, Section 17 and a new 

paragraph of Section 11(e) of the FDIA provide that the definitions 

of ‘‘securities contract,’’ ‘‘repurchase agreement,’’ ‘‘forward contract,’’

and ‘‘commodity contract,’’ and the characterization of certain 

transactions as such a contract or agreement, are not intended to 

affect the characterization, definition, or treatment of any instruments under any other statute, regulation, or rule including, but 

not limited to, the statutes, regulations or rules enumerated in subsection (f). 

The definition also includes any security agreement or arrangement, or other credit enhancement, related to a swap agreement, including any guarantee or reimbursement obligation related 

to a swap agreement. This ensures that any such agreement, arrangement or enhancement is itself deemed to be a swap agreement, and therefore eligible for treatment as such for purposes of 

termination, liquidation, acceleration, offset and netting under the 

FDIA and the Bankruptcy Code. Similar changes are made in the 

definitions of ‘‘forward contract,’’ ‘‘commodity contract,’’ ‘‘repurchase 

agreement’’ and ‘‘securities contract.’’

267

The use of the term ‘‘forward’’ in the definition of ‘‘swap agreement’’ is not intended to refer only to transactions that fall within 

the definition of ‘‘forward contract.’’ Instead, a ‘‘forward’’ transaction could be a ‘‘swap agreement’’ even if not a ‘‘forward contract.’’

Section 901(f) reflects the Senate position as reflected in section 901(f) of the Senate amendment. The Senate amendment clarifies that the definition pertains to an agreement or transaction is 

‘‘of a type that’’ has been, presently, or in the future becomes, the 

subject of recurrent dealings in the swap markets. The House 

version did not include this clarification. Section 901(f) also eliminates the reference in the House provision to regulations promulgated by the Securities and Exchange Commission (SEC) or the 

Commodity Futures Trading Commission (CFTC). 

Section 901(g) of the conference report is substantively identical to section 901(g) of the House bill and the Senate amendment. 

It amends the FDIA by adding a definition for ‘‘transfer,’’ which is 

a key term used in the FDIA, to ensure that it is broadly construed 

to encompass dispositions of property or interests in property. The 

definition tracks that in section 101 of the Bankruptcy Code. 

Section 901(h) makes clarifying technical changes to conform 

the receivership and conservatorship provisions of the FDIA. It also 

clarifies that the FDIA expressly protects rights under security 

agreements, arrangements or other credit enhancements related to 

one or more qualified financial contracts (QFCs). An example of a 

security arrangement is a right of setoff, and examples of other 

credit enhancements are letters of credit, guarantees, reimbursement obligations and other similar agreements. Section 901(h) is 

substantively identical to section 901(h) of the House bill and Senate amendment. 

Section 901(i) of the conference report clarifies that no provision of Federal or state law relating to the avoidance of preferential 

or fraudulent transfers (including the anti-preference provision of 

the National Bank Act) can be invoked to avoid a transfer made 

in connection with any QFC of an insured depository institution in 

conservatorship or receivership, absent actual fraudulent intent on 

the part of the transferee. Section 901(i) is substantively identical 

to section 901(i) of the House bill and Senate amendment. 

Sec. 902. Authority of the corporation with respect to failed and failing institutions 

Section 902 of the conference report provides that no provision 

of law, including FDICIA, shall be construed to limit the power of 

the FDIC to transfer or to repudiate any QFC in accordance with 

its powers under the FDIA. As discussed below, there has been 

some uncertainty regarding whether or not FDICIA limits the authority of the FDIC to transfer or to repudiate QFCs of an insolvent financial institution. Section 902, as well as other provisions 

in the Act, clarify that FDICIA does not limit the transfer powers 

of the FDIC with respect to QFCs. Section 902 denies enforcement 

to ‘‘walkaway’’ clauses in QFCs. A walkaway clause is defined as 

a provision that, after calculation of a value of a party’s position 

or an amount due to or from one of the parties upon termination, 

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ment obligation of a party or extinguishes a payment obligation of 

a party in whole or in part solely because of such party’s status as 

a non-defaulting party. Section 902 is substantively identical to 

section 902 of the House bill and Senate amendment. 

Sec. 903. Amendments relating to transfers of qualified financial 

contracts 

Section 903 of the conference report amends the FDIA to expand the transfer authority of the FDIC to permit transfers of 

QFCs to ‘‘financial institutions’’ as defined in FDICIA or in regulations. This provision is substantively identical to section 903(a) of 

the House bill and the Senate amendment. It will allow the FDIC 

to transfer QFCs to a non-depository financial institution, provided 

the institution is not subject to bankruptcy or insolvency proceedings. 

The new FDIA provision specifies that when the FDIC transfers QFCs that are cleared on or subject to the rules of a particular 

clearing organization, the transfer will not require the clearing organization to accept the transferee as a member of the organization. This provision gives the FDIC flexibility in resolving QFCs 

cleared on or subject to the rules of a clearing organization, while 

preserving the ability of such organizations to enforce appropriate 

risk reducing membership requirements. The amendment does not 

require the clearing organization to accept for clearing any QFCs 

from the transferee, except on the terms and conditions applicable 

to other parties permitted to clear through that clearing organization. ‘‘Clearing organization’’ is defined to mean a ‘‘clearing organization’’ within the meaning of FDICIA (as amended both by the 

CFMA and by Section 906 of the Act). 

The new FDIA provision also permits transfers to an eligible 

financial institution that is a non-U.S. person, or the branch or 

agency of a non-U.S. person or a U.S. financial institution that is 

not an FDIC-insured institution if, following the transfer, the contractual rights of the parties would be enforceable substantially to 

the same extent as under the FDIA. It is expected that the FDIC 

would not transfer QFCs to such a financial institution if there 

were an impending change of law that would impair the enforceability of the parties’ contractual rights. 

Section 903(b) amends the notification requirements following 

a transfer of the QFCs of a failed depository institution to require 

the FDIC to notify any party to a transferred QFC of such transfer 

by 5:00 p.m. (Eastern Time) on the business day following the date 

of the appointment of the FDIC acting as receiver or following the 

date of such transfer by the FDIC acting as a conservator. This 

amendment is consistent with the policy statement on QFCs issued 

by the FDIC on December 12, 1989. Section 903(b) is substantively 

identical to section 903(b) of the House bill and the Senate amendment. 

Section 903(c) amends the FDIA to clarify the relationship between the FDIA and FDICIA. It is substantively identical to section 903(c) of the House bill and the Senate amendment. There has 

been some uncertainty whether FDICIA permits counterparties to 

terminate or liquidate a QFC before the expiration of the time period provided by the FDIA during which the FDIC may repudiate 

269

or transfer a QFC in a conservatorship or receivership. Subsection 

(c) provides that a party may not terminate a QFC based solely on 

the appointment of the FDIC as receiver until 5:00 p.m. (Eastern 

Time) on the business day following the appointment of the receiver or after the person has received notice of a transfer under 

FDIA section 11(d)(9), or based solely on the appointment of the 

FDIC as conservator, notwithstanding the provisions of FDICIA. 

This provides the FDIC with an opportunity to undertake an orderly resolution of the insured depository institution. 

Section 903(c) also prohibits the enforcement of rights of termination or liquidation that arise solely because of the insolvency of 

the institution or are based on the ‘‘financial condition’’ of the depository institution in receivership or conservatorship. For example, termination based on a cross-default provision in a QFC that 

is triggered upon a default under another contract could be rendered ineffective if such other default was caused by an acceleration of amounts due under that other contract, and such acceleration was based solely on the appointment of a conservator or receiver for that depository institution. Similarly, a provision in a 

QFC permitting termination of the QFC based solely on a downgraded credit rating of a party will not be enforceable in an FDIC 

receivership or conservatorship because the provision is based solely on the financial condition of the depository institution in default. 

However, any payment, delivery or other performance-based default, or breach of a representation or covenant putting in question 

the enforceability of the agreement, will not be deemed to be based 

solely on financial condition for purposes of this provision. The 

amendment is not intended to prevent counterparties from taking 

all actions permitted and recovering all damages authorized upon 

repudiation of any QFC by a conservator or receiver, or from taking 

actions based upon a receivership or other financial condition-triggered default in the absence of a transfer (as contemplated in Section 11(e)(10) of the FDIA). The amendment allows the FDIC to 

meet its obligation to provide notice to parties to transferred QFCs 

by taking steps reasonably calculated to provide notice to such parties by the required time. This is consistent with the existing policy 

statement on QFCs issued by the FDIC on December 12, 1989. 

Finally, the amendment permits the FDIC to transfer QFCs of 

a failed depository institution to a bridge bank or a depository institution organized by the FDIC for which a conservator is appointed either (i) immediately upon the organization of such institution or (ii) at the time of a purchase and assumption transaction 

between the FDIC and the institution. This provision clarifies that 

such institutions are not to be considered financial institutions that 

are ineligible to receive such transfers under FDIA section 11(e)(9). 

This is consistent with the existing policy statement on QFCs 

issued by the FDIC on December 12, 1989. 

Sec. 904. Amendments relating to disaffirmance or repudiation of 

qualified financial contracts 

Section 904 of the conference report limits the disaffirmance 

and repudiation authority of the FDIC with respect to QFCs so 

that such authority is consistent with the FDIC’s transfer authority 

under FDIA section 11(e)(9). This ensures that no disaffirmance, 

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repudiation or transfer authority of the FDIC may be exercised to 

‘‘cherry-pick’’ or otherwise treat independently all the QFCs between a depository institution in default and a person or any affiliate of such person. The FDIC has announced that its policy is not 

to repudiate or disaffirm QFCs selectively. This unified treatment 

is fundamental to the reduction of systemic risk. Section 904 reflects the Senate position as represented in section 904 of the Senate amendment. The House version of section 904 did not include 

the savings clause provision. 

Sec. 905. Clarifying amendment relating to master agreements 

Section 905 of the conference report specifies that a master 

agreement for one or more securities contracts, commodity contracts, forward contracts, repurchase agreements or swap agreements will be treated as a single QFC under the FDIA (but only 

to the extent the underlying agreements are themselves QFCs). 

This provision ensures that cross-product netting pursuant to a 

master agreement, or pursuant to an umbrella agreement for separate master agreements between the same parties, each of which 

is used to document one or more qualified financial contracts, will 

be enforceable under the FDIA. Cross-product netting permits a 

wide variety of financial transactions between two parties to be 

netted, thereby maximizing the present and potential future riskreducing benefits of the netting arrangement between the parties. 

Express recognition of the enforceability of such cross-product master agreements furthers the policy of increasing legal certainty and 

reducing systemic risks in the case of an insolvency of a large financial participant. Section 905 is substantively identical to section 

905 of the House bill and the Senate amendment. 

Sec. 906. Federal Deposit Insurance Corporation Improvement Act 

of 1991 

Section 906(a) of the conference report is substantively identical to section 906(a) of the House bill and the Senate amendment. 

Subsection (a)(1) amends the definition of ‘‘clearing organization’’ to 

include clearinghouses that are subject to exemptions pursuant to 

orders of the Securities and Exchange Commission or the Commodity Futures Trading Commission and to include multilateral 

clearing organizations (the definition of which was added to 

FDICIA by the CFMA). 

FDICIA provides that a netting arrangement will be enforced 

pursuant to its terms, notwithstanding the failure of a party to the 

agreement. The current netting provisions of FDICIA, however, 

limit this protection to ‘‘financial institutions,’’ which include depository institutions. Section 906(a)(2) amends the FDICIA definition 

of covered institutions to include (i) uninsured national and State 

member banks, irrespective of their eligibility for deposit insurance 

and (ii) foreign banks (including the foreign bank and its branches 

or agencies as a combined group, or only the foreign bank parent 

of a branch or agency). The latter change will extend the protections of FDICIA to ensure that U.S. financial organizations participating in netting agreements with foreign banks are covered by the 

Act, thereby enhancing the safety and soundness of these arrangements. It is intended that a non-defaulting foreign bank and its 

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branches and agencies be considered to be a single financial institution for purposes of the bilateral netting provisions of FDICIA 

(except to the extent that the non-defaulting foreign bank and its 

branches and agencies on the one hand, and the defaulting financial institution, on the other, have entered into agreements that 

clearly evidence an intention that the non-defaulting foreign bank 

and its branches and agencies be treated as separate financial institutions for purposes of the bilateral netting provisions of 

FDICIA). 

Subsection (a)(3) amends the FDICIA to provide that, for purposes of FDICIA, two or more clearing organizations that enter into 

a netting contract are considered ‘‘members’’ of each other. This 

assures the enforceability of netting arrangements involving two or 

more clearing organizations and a member common to all such organizations, thus reducing systemic risk in the event of the failure 

of such a member. Under the current FDICIA provisions, the enforceability of such arrangements depends on a case-by-case determination that clearing organizations could be regarded as members 

of each other for purposes of FDICIA. 

Section 906(a)(4) of the conference report amends the FDICIA 

definition of netting contract and the general rules applicable to 

netting contracts. The current FDICIA provisions require that the 

netting agreement must be governed by the law of the United 

States or a State to receive the protections of FDICIA. Many of 

these agreements, however, particularly netting arrangements covering positions taken in foreign exchange dealings, are governed by 

the laws of a foreign country. This subsection broadens the definition of ‘‘netting contract’’ to include those agreements governed by 

foreign law, and preserves the FDICIA requirement that a netting 

contract not be invalid under, or precluded by, Federal law. 

Section 906(b) and (c) of the conference report are substantively identical to their counterparts in section 906 of the 

House bill and the Senate amendment. These provisions establish 

two exceptions to FDICIA’s protection of the enforceability of the 

provisions of netting contracts between financial institutions and 

among clearing organization members. First, the termination provisions of netting contracts will not be enforceable based solely on (i) 

the appointment of a conservator for an insolvent depository institution under the FDIA or (ii) the appointment of a receiver for such 

institution under the FDIA, if such receiver transfers or repudiates 

QFCs in accordance with the FDIA and gives notice of a transfer 

by 5:00 p.m. on the business day following the appointment of a receiver. This change is made to confirm the FDIC’s flexibility to 

transfer or repudiate the QFCs of an insolvent depository institution in accordance with the terms of the FDIA. This modification 

also provides important legal certainty regarding the treatment of 

QFCs under the FDIA, because the current relationship between 

the FDIA and FDICIA is unclear. 

The second exception provides that FDICIA does not override 

a stay order under SIPA with respect to foreclosure on securities 

(but not cash) collateral of a debtor (section 911 of the conference 

report makes a conforming change to SIPA). There is also an exception relating to insolvent commodity brokers. Subsections (b) and 

(c) also clarify that a security agreement or other credit enhanceVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00271 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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ment related to a netting contract is enforceable to the same extent 

as the underlying netting contract. 

Section 906(d) of the conference report adds a new section 407 

to FDICIA. This new section provides that, notwithstanding any 

other law, QFCs with uninsured national banks, uninsured Federal 

branches or agencies, or Edge Act corporations, or uninsured State 

member banks that operate, or operate as, a multilateral clearing 

organization and that are placed in receivership or conservatorship 

will be treated in the same manner as if the contract were with an 

insured national bank or insured Federal branch for which a receiver or conservator was appointed. This provision will ensure 

that parties to QFCs with these institutions will have the same 

rights and obligations as parties entering into the same agreements 

with insured depository institutions. The new section also specifically limits the powers of a receiver or conservator for such an institution to those contained in 12 U.S.C. §§ 1821(e)(8), (9), (10), and 

(11), which address QFCs. 

While the amendment would apply the same rules to such institutions that apply to insured institutions, the provision would 

not change the rules that apply to insured institutions. Nothing in 

this section would amend the International Banking Act, the Federal Deposit Insurance Act, the National Bank Act, or other statutory provisions with respect to receiverships of insured national 

banks or Federal branches. 

Section 906(d) reflects the Senate position in Section 906(d) of 

the Senate amendment. It does not include the reference in the 

House provision concerning a receiver of an uninsured national 

bank, or Federal branch or agency. The conference report also 

eliminates the reference to the Board of Governors of the Federal 

Reserve System in the case of a corporation chartered under section 25A of the Federal Reserve Act. 

Sec. 907. Bankruptcy law amendments 

Section 907 of the conference report makes a series of amendments to the Bankruptcy Code. Subsection (a)(1) amends the Bankruptcy Code definitions of ‘‘repurchase agreement’’ and ‘‘swap 

agreement’’ to conform with the amendments to the FDIA contained in sections 2(e) and 2(f) of the Act. 

In connection with the definition of ‘‘repurchase agreement,’’

the term ‘‘qualified foreign government securities’’ is defined to include securities that are direct obligations of, or fully guaranteed 

by, central governments of members of the Organization for Economic Cooperation and Development (OECD). This language reflects developments in the repurchase agreement markets, which 

increasingly use foreign government securities as the underlying 

asset. The securities are limited to those issued by or guaranteed 

by full members of the OECD, as well as countries that have concluded special lending arrangements with the International Monetary Fund associated with the Fund’s General Arrangements to 

Borrow. The term ‘‘stockbroker,’’ as defined in Bankruptcy Code 

section 101(53A), is intended to include within its scope an ‘‘OTC 

derivatives dealer’’, as that term is defined in Rule 3b–12 of the Securities Exchange Act of 1934, as amended, which is the new class 

of broker-dealer created by the Securities and Exchange CommisVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00272 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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sion in 1999 to engage in over-the-counter derivatives transactions 

that are securities. 

Subsection (a)(1) also amends the definition of ‘‘repurchase 

agreement’’ to include those on mortgage-related securities, mortgage loans and interests therein, and expressly to include principal 

and interest-only U.S. government and agency securities as securities that can be the subject of a ‘‘repurchase agreement.’’ The reference in the definition to United States government- and agencyissued or fully guaranteed securities is intended to include obligations issued or guaranteed by Fannie Mae and the Federal Home 

Loan Mortgage Corporation (Freddie Mac) as well as all obligations 

eligible for purchase by Federal Reserve banks under the similar 

language of section 14(b) of the Federal Reserve Act. 

This amendment is not intended to affect the status of repos 

involving securities or commodities as securities contracts, commodity contracts, or forward contracts, and their consequent eligibility for similar treatment under other provisions of the Bankruptcy Code. In particular, an agreement for the sale and repurchase of a security would continue to be a securities contract as defined in the Bankruptcy Code and thus also would be subject to the 

Bankruptcy Code provisions pertaining to securities contracts, even 

if not a ‘‘repurchase agreement’’ as defined in the Bankruptcy Code. 

Similarly, an agreement for the sale and repurchase of a commodity, even though not a ‘‘repurchase agreement’’ as defined in 

the Bankruptcy Code, would continue to be a forward contract for 

purposes of the Bankruptcy Code and would be subject to the 

Bankruptcy Code provisions pertaining to forward contracts. 

Subsection (a)(1) specifies that repurchase obligations under a 

participation in a commercial mortgage loan do not make the participation agreement a ‘‘repurchase agreement.’’ Such repurchase 

obligations embedded in participations in commercial loans (such 

as recourse obligations) do not constitute a ‘‘repurchase agreement.’’ However, a repurchase agreement involving the transfer of 

participations in commercial mortgage loans with a simultaneous 

agreement to repurchase the participation on demand or at a date 

certain one year or less after such transfer would constitute a ‘‘repurchase agreement’’ (as well as a ‘‘securities contract’’). 

The definition of ‘‘swap agreement’’ is amended to include an 

‘‘interest rate swap, option, future, or forward agreement, including 

a rate floor, rate cap, rate collar, cross-currency rate swap, and 

basis swap; a spot, same day-tomorrow, tomorrow-next, forward, or 

other foreign exchange or precious metals agreement; a currency 

swap, option, future, or forward agreement; an equity index or equity swap, option, future, or forward agreement; a debt index or 

debt swap, option, future, or forward agreement; a total return, 

credit spread or credit swap, option, future, or forward agreement; 

a commodity index or commodity swap, option, future, or forward 

agreement; or a weather swap, weather derivative, or weather option.’’ As amended, the definition of ‘‘swap agreement’’ will update 

the statutory definition and achieve contractual netting across economically similar transactions. 

The definition of ‘‘swap agreement’’ originally was intended to 

provide sufficient flexibility to avoid the need to amend the definition as the nature and uses of swap transactions matured. To that 

274

end, the phrase ‘‘or any other similar agreement’’ was included in 

the definition. (The phrase ‘‘or any similar agreement’’ has been 

added to the definitions of ‘‘forward contract,’’ ‘‘commodity contract,’’ ‘‘repurchase agreement,’’ and ‘‘securities contract’’ for the 

same reason.) To clarify this, subsection (a)(1) expands the definition of ‘‘swap agreement’’ to include ‘‘any agreement or transaction 

that is similar to any other agreement or transaction referred to in 

[Section 101(53B) of the Bankruptcy Code] and that is of a type 

that has been, is presently, or in the future becomes, the subject 

of recurrent dealings in the swap markets * * * and [that] is a 

forward, swap, future, or option on one or more rates, currencies, 

commodities, equity securities or other equity instruments, debt securities or other debt instruments, quantitative measures associated with an occurrence, extent of an occurrence, or contingency associated with a financial, commercial, or economic consequence, or 

economic or financial indices or measures of economic or financial 

risk or value.’’

The definition of ‘‘swap agreement’’ in this subsection should 

not be interpreted to permit parties to document non-swaps as 

swap transactions. Traditional commercial arrangements, such as 

supply agreements, or other non-financial market transactions, 

such as commercial, residential or consumer loans, cannot be treated as ‘‘swaps’’ under either the FDIA or the Bankruptcy Code because the parties purport to document or label the transactions as 

‘‘swap agreements.’’ These definitions, and the characterization of 

a certain transaction as a ‘‘swap agreement,’’ are not intended to 

affect the characterization, definition, or treatment of any instruments under any other statute, regulation, or rule including, but 

not limited to, the statutes, regulations or rules enumerated in subsection (a)(1)(C). The definition also includes any security agreement or arrangement, or other credit enhancement, related to a 

swap agreement, including any guarantee or reimbursement obligation related to a swap agreement. This ensures that any such 

agreement, arrangement or enhancement is itself deemed to be a 

swap agreement, and therefore eligible for treatment as such for 

purposes of termination, liquidation, acceleration, offset and netting under the Bankruptcy Code and the FDIA. Similar changes 

are made in the definitions of ‘‘forward contract,’’ ‘‘commodity contract,’’ ‘‘repurchase agreement,’’ and ‘‘securities contract.’’ An example of a security arrangement is a right of setoff; examples of other 

credit enhancements are letters of credit and other similar agreements. A security agreement or arrangement or guarantee or reimbursement obligation related to a ‘‘swap agreement,’’ ‘‘forward contract,’’ ‘‘commodity contract,’’ ‘‘repurchase agreement’’ or ‘‘securities 

contract’’ will be such an agreement or contract only to the extent 

of the damages in connection with such agreement measured in accordance with Section 562 of the Bankruptcy Code (added by the 

Act). This limitation does not affect, however, the other provisions 

of the Bankruptcy Code (including Section 362(b)) relating to security arrangements in connection with agreements or contracts that 

otherwise qualify as ‘‘swap agreements,’’ ‘‘forward contracts,’’ ‘‘commodity contracts,’’ ‘‘repurchase agreements’’ or ‘‘securities contracts.’’

275

The use of the term ‘‘forward’’ in the definition of ‘‘swap agreement’’ is not intended to refer only to transactions that fall within 

the definition of ‘‘forward contract.’’ Instead, a ‘‘forward’’ transaction could be a ‘‘swap agreement’’ even if not a ‘‘forward contract.’’

Subsections (a)(2) and (a)(3) amend the Bankruptcy Code definitions of ‘‘securities contract’’ and ‘‘commodity contract,’’ respectively, to conform them to the definitions in the FDIA. 

Subsection (a)(2), like the amendments to the FDIA, amends 

the definition of ‘‘securities contract’’ expressly to encompass margin loans, to clarify the coverage of securities options and to clarify 

the coverage of repurchase and reverse repurchase transactions. 

The reference in subsection (b) to a ‘‘guarantee’’ by or to a ‘‘securities clearing agency’’ is intended to cover other arrangements, such 

as novation, that have an effect similar to a guarantee. The reference to a ‘‘loan’’ of a security in the definition is intended to 

apply to loans of securities, whether or not for a ‘‘permitted purpose’’ under margin regulations. The reference to ‘‘repurchase and 

reverse repurchase transactions’’ is intended to eliminate any inquiry under section 555 and related provisions as to whether a repurchase or reverse repurchase transaction is a purchase and sale 

transaction or a secured financing. Repurchase and reverse repurchase transactions meeting certain criteria are already covered 

under the definition of ‘‘repurchase agreement’’ in the Bankruptcy 

Code. Repurchase and reverse repurchase transactions on all securities (including, for example, equity securities, asset-backed securities, corporate bonds and commercial paper) are included under the 

definition of ‘‘securities contract’’. A repurchase or reverse repurchase transaction which is a ‘‘securities contract’’ but not a ‘‘repurchase agreement’’ would thus be subject to the ‘‘counterparty limitations’’ contained in section 555 of the Bankruptcy Code (i.e., only 

stockbrokers, financial institutions, securities clearing agencies and 

financial participants can avail themselves of section 555 and related provisions). 

Subsection (a)(2) also specifies that purchase, sale and repurchase obligations under a participation in a commercial mortgage 

loan do not constitute ‘‘securities contracts.’’ While a contract for 

the purchase, sale or repurchase of a participation may constitute 

a ‘‘securities contract,’’ the purchase, sale or repurchase obligation 

embedded in a participation agreement does not make that agreement a ‘‘securities contract.’’

Section 907(a) reflects the Senate position as represented in 

section 907(a) of the Senate amendment. The House version of this 

provision did not include the clarification that the definition applies 

to mortgage loans. The conference report also includes the Senate 

amendment’s clarification of the reference to guarantee or reimbursement obligation. 

Section 907(b) amends the Bankruptcy Code definitions of ‘‘financial institution’’ and ‘‘forward contract merchant.’’ It is substantively identical to section 907(b) of the House bill and the Senate amendment. The definition for ‘‘financial institution’’ includes 

Federal Reserve Banks and the receivers or conservators of insolvent depository institutions. With respect to securities contracts, 

the definition of ‘‘financial institution’’ expressly includes investVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00275 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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ment companies registered under the Investment Company Act of 

1940. 

Subsection (b) also adds a new definition of ‘‘financial participant’’ to limit the potential impact of insolvencies upon other major 

market participants. This definition will allow such market participants to close-out and net agreements with insolvent entities under 

sections 362(b)(6), 555, and 556 even if the creditor could not qualify as, for example, a commodity broker. Sections 362(b)(6), 555 and 

556 preserve the limitations of the right to close-out and net such 

contracts, in most cases, to entities who qualify under the Bankruptcy Code’s counterparty limitations. However, where the 

counterparty has transactions with a total gross dollar value of at 

least $1 billion in notional or actual principal amount outstanding 

on any day during the previous 15-month period, or has gross 

mark-to-market positions of at least $100 million (aggregated 

across counterparties) in one or more agreements or transactions 

on any day during the previous 15-month period, sections 362(b)(6), 

555 and 556 and corresponding amendments would permit it to exercise netting and related rights irrespective of its inability otherwise to satisfy those counterparty limitations. This change will help 

prevent systemic impact upon the markets from a single failure, 

and is derived from threshold tests contained in Regulation EE 

promulgated by the Federal Reserve Board in implementing the 

netting provisions of the Federal Deposit Insurance Corporation 

Improvement Act. It is intended that the 15-month period be measured with reference to the 15 months preceding the filing of a petition by or against the debtor. ‘‘Financial participant’’ is also defined to include ‘‘clearing organizations’’ within the meaning of FDICIA (as amended by the 

CFMA and Section 906 of the Act). This amendment, together with 

the inclusion of ‘‘financial participants’’ as eligible counterparties in 

connection with ‘‘commodity contracts,’’ ‘‘forward contracts’’ and ‘‘securities contracts’’ and the amendments made in other Sections 

of the Act to include ‘‘financial participants’’ as counterparties eligible for the protections in respect of ‘‘swap agreements’’ and ‘‘repurchase agreements’’, take into account the CFMA and will allow 

clearing organizations to benefit from the protections of all of the 

provisions of the Bankruptcy Code relating to these contracts and 

agreements. This will further the goal of promoting the clearing of 

derivatives and other transactions as a way to reduce systemic 

risk. The definition of ‘‘financial participant’’ (as with the other provisions of the Bankruptcy Code relating to ‘‘securities contracts,’’

‘‘forward contracts,’’ ‘‘commodity contracts,’’ ‘‘repurchase agreements’’ and ‘‘swap agreements’’) is not mutually exclusive, i.e., an 

entity that qualifies as a ‘‘financial participant’’ could also be a 

‘‘swap participant,’’ ‘‘repo participant,’’ ‘‘forward contract merchant,’’ ‘‘commodity broker,’’ ‘‘stockbroker,’’ ‘‘securities clearing 

agency’’ and/or ‘‘financial institution.’’

Section 907(c) of the conference report adds to the Bankruptcy 

Code new definitions for the terms ‘‘master netting agreement’’ and 

‘‘master netting agreement participant.’’ The definition of ‘‘master 

netting agreement’’ is designed to protect the termination and 

close-out netting provisions of cross-product master agreements between parties. Such an agreement may be used (i) to document a 

277

wide variety of securities contracts, commodity contracts, forward 

contracts, repurchase agreements and swap agreements or (ii) as 

an umbrella agreement for separate master agreements between 

the same parties, each of which is used to document a discrete type 

of transaction. The definition includes security agreements or arrangements or other credit enhancements related to one or more 

such agreements and clarifies that a master netting agreement will 

be treated as such even if it documents transactions that are not 

within the enumerated categories of qualifying transactions (but 

the provisions of the Bankruptcy Code relating to master netting 

agreements and the other categories of transactions will not apply 

to such other transactions). A ‘‘master netting agreement participant’’ is any entity that is a party to an outstanding master netting 

agreement with a debtor before the filing of a bankruptcy petition. 

Section 907(c) is substantively identical to section 907(c) of the 

House bill and the Senate amendment. 

Subsection (d) amends section 362(b) of the Bankruptcy Code 

to protect enforcement, free from the automatic stay, of setoff or 

netting provisions in swap agreements and in master netting 

agreements and security agreements or arrangements related to 

one or more swap agreements or master netting agreements. This 

provision parallels the other provisions of the Bankruptcy Code 

that protect netting provisions of securities contracts, commodity 

contracts, forward contracts, and repurchase agreements. Because 

the relevant definitions include related security agreements, the 

references to ‘‘setoff’’ in these provisions, as well as in section 

362(b)(6) and (7) of the Bankruptcy Code, are intended to refer also 

to rights to foreclose on, and to set off against obligations to return, 

collateral securing swap agreements, master netting agreements, 

repurchase agreements, securities contracts, commodity contracts, 

or forward contracts. Collateral may be pledged to cover the cost 

of replacing the defaulted transactions in the relevant market, as 

well as other costs and expenses incurred or estimated to be incurred for the purpose of hedging or reducing the risks arising out 

of such termination. Enforcement of these agreements and arrangements free from the automatic stay is consistent with the policy 

goal of minimizing systemic risk. 

Subsection (d) also clarifies that the provisions protecting 

setoff and foreclosure in relation to securities contracts, commodity 

contracts, forward contracts, repurchase agreements, swap agreements, and master netting agreements free from the automatic 

stay apply to collateral pledged by the debtor but that cannot technically be ‘‘held by’’ the creditor, such as receivables and book-entry 

securities, and to collateral that has been repledged by the creditor 

and securities re-sold pursuant to repurchase agreements. Section 

907(d) is substantively identical to section 907(d) of the House bill 

and the Senate amendment. 

Subsections (e) and (f) of section 907 of the conference report 

amend sections 546 and 548(d) of the Bankruptcy Code to provide 

that transfers made under or in connection with a master netting 

agreement may not be avoided by a trustee except where such 

transfer is made with actual intent to hinder, delay or defraud and 

not taken in good faith. This amendment provides the same protections for a transfer made under, or in connection with, a master 

278

netting agreement as currently is provided for margin payments, 

settlement payments and other transfers received by commodity 

brokers, forward contract merchants, stockbrokers, financial institutions, securities clearing agencies, repo participants, and swap 

participants under sections 546 and 548(d), except to the extent the 

trustee could otherwise avoid such a transfer made under an individual contract covered by such master netting agreement. Subsections (e) and (f) are substantively identical to section 907(f) of 

the House bill and the Senate amendment. 

Subsections (g), (h), (i), and (j) of section 907 clarify that the 

provisions of the Bankruptcy Code that protect (i) rights of liquidation under securities contracts, commodity contracts, forward contracts and repurchase agreements also protect rights of termination 

or acceleration under such contracts, and (ii) rights to terminate 

under swap agreements also protect rights of liquidation and acceleration. These provisions are substantively similar to their counterparts in section 907 of the House bill and Senate amendment. 

Section 907(k) of the conference report represents the Senate 

position as reflected in section 907(k) of the Senate amendment. It 

adds a new section 561 to the Bankruptcy Code to protect the contractual right of a master netting agreement participant to enforce 

any rights of termination, liquidation, acceleration, offset or netting 

under a master netting agreement. Such rights include rights arising (i) from the rules of a derivatives clearing organization, multilateral clearing organization, securities clearing agency, securities 

exchange, securities association, contract market, derivatives transaction execution facility or board of trade, (ii) under common law, 

law merchant or (iii) by reason of normal business practice. This 

reflects the enactment of the CFMA and the current treatment of 

rights under swap agreements under section 560 of the Bankruptcy 

Code. Similar changes to reflect the enactment of the CFMA have 

been made to the definition of ‘‘contractual right’’ for purposes of 

Sections 555, 556, 559 and 560 of the Bankruptcy Code. 

Subsections (b)(2)(A) and (b)(2)(B) of new Section 561 limit the 

exercise of contractual rights to net or to offset obligations where 

the debtor is a commodity broker and one leg of the obligations 

sought to be netted relates to commodity contracts traded on or 

subject to the rules of a contract market designated under the 

Commodity Exchange Act or a derivatives transaction execution facility registered under the Commodity Exchange Act. Under subsection (b)(2)(A) netting or offsetting is not permitted in these circumstances if the party seeking to net or to offset has no positive 

net equity in the commodity accounts at the debtor. Subsection 

(b)(2)(B) applies only if the debtor is a commodity broker, acting on 

behalf of its own customer, and is in turn a customer of another 

commodity broker. In that case, the latter commodity broker may 

not net or offset obligations under such commodity contracts with 

other claims against its customer, the debtor. Subsections (b)(2)(A) 

and (b)(2)(B) limit the depletion of assets available for distribution 

to customers of commodity brokers. Subsection (b)(2)(C) provides an 

exception to subsections (b)(2)(A) and (b)(2)(B) for cross-margining 

and other similar arrangements approved by, or submitted to and 

not rendered ineffective by, the Commodity Futures Trading Commission, as well as certain other netting arrangements. 

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For the purposes of Bankruptcy Code sections 555, 556, 559, 

560 and 561, it is intended that the normal business practice in the 

event of a default of a party based on bankruptcy or insolvency is 

to terminate, liquidate or accelerate securities contracts, commodity 

contracts, forward contracts, repurchase agreements, swap agreements and master netting agreements with the bankrupt or insolvent party. The protection of netting and offset rights in sections 

560 and 561 is in addition to the protections afforded in sections 

362(b)(6), (b)(7), (b)(17) and (b)(28) of the Bankruptcy Code. 

Under the Act, the termination, liquidation or acceleration 

rights of a master netting agreement participant are subject to limitations contained in other provisions of the Bankruptcy Code relating to securities contracts and repurchase agreements. In particular, if a securities contract or repurchase agreement is documented under a master netting agreement, a party’s termination, 

liquidation and acceleration rights would be subject to the provisions of the Bankruptcy Code relating to orders authorized under 

the provisions of SIPA or any statute administered by the SEC. In 

addition, the netting rights of a party to a master netting agreement would be subject to any contractual terms between the parties limiting or waiving netting or set off rights. Similarly, a waiver 

by a bank or a counterparty of netting or set off rights in connection with QFCs would be enforceable under the FDIA. 

New Section 561 of the Bankruptcy Code clarifies that the provisions of the Bankruptcy Code related to securities contracts, commodity contracts, forward contracts, repurchase agreements, swap 

agreements and master netting agreements apply in a proceeding 

ancillary to a foreign insolvency proceeding under new section 304 

of the Bankruptcy Code. 

Subsections (l) and (m) of section 907 of the conference report 

clarify that the exercise of termination and netting rights will not 

otherwise affect the priority of the creditor’s claim after the exercise of netting, foreclosure and related rights. These provisions are 

substantively identical to there counterparts in the House bill and 

the Senate amendment. 

Subsection (n) amends section 553 of the Bankruptcy Code to 

clarify that the acquisition by a creditor of setoff rights in connection with swap agreements, repurchase agreements, securities contracts, forward contracts, commodity contracts and master netting 

agreements cannot be avoided as a preference. This subsection also 

adds setoff of the kinds described in sections 555, 556, 559, 560, 

and 561 of the Bankruptcy Code to the types of setoff excepted 

from section 553(b). This provision generally represents the Senate’s position as represented in Section 907(n) of the Senate 

amendment. 

Section 907(o), as well as other subsections of the Act, adds references to ‘‘financial participant’’ in all the provisions of the Bankruptcy Code relating to securities, forward and commodity contracts and repurchase and swap agreements. This provision generally represents the Senate’s position as represented in Section 

907(o) of the Senate amendment. 

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Sec. 908. Recordkeeping requirements 

Section 908 of the conference report amends section 11(e)(8) of 

the Federal Deposit Insurance Act to explicitly authorize the FDIC, 

in consultation with appropriate Federal banking agencies, to prescribe regulations on recordkeeping by any insured depository institution with respect to QFCs only if the insured financial institution 

is in a troubled condition (as such term is defined in the FDIA). 

Section 908 reflects the Senate position in section 908 of the Senate 

amendment, which includes clarifying references to insured depository institution and institutions in troubled condition. 

Sec. 909. Exemptions from contemporaneous execution requirement 

Section 909 of the conference report amends FDIA section 

13(e)(2) to provide that an agreement for the collateralization of 

governmental deposits, bankruptcy estate funds, Federal Reserve 

Bank or Federal Home Loan Bank extensions of credit or one or 

more QFCs shall not be deemed invalid solely because such agreement was not entered into contemporaneously with the acquisition 

of the collateral or because of pledges, delivery or substitution of 

the collateral made in accordance with such agreement.

The amendment codifies portions of policy statements issued 

by the FDIC regarding the application of section 13(e), which codifies the ‘‘D’Oench Duhme’’ doctrine. With respect to QFCs, this 

codification recognizes that QFCs often are subject to collateral and 

other security arrangements that may require posting and return 

of collateral on an ongoing basis based on the mark-to-market values of the collateralized transactions. The codification of only portions of the existing FDIC policy statements on these and related 

issues should not give rise to any negative implication regarding 

the continued validity of these policy statements. Section 909 is 

substantively identical to section 909 of the House bill and the Senate amendment. 

Sec. 910. Damage measure 

Section 910 of the conference report adds a new section 562 to 

the Bankruptcy Code providing that damages under any swap 

agreement, securities contract, forward contract, commodity contract, repurchase agreement or master netting agreement will be 

calculated as of the earlier of (i) the date of rejection of such agreement by a trustee or (ii) the date or dates of liquidation, termination or acceleration of such contract or agreement. Section 910 

reflects the Senate’s position as represented in section 910 of the 

Senate amendment. 

Section 562 provides an exception to the rules in (i) and (ii) if 

there are no commercially reasonable determinants of value as of 

such date or dates, in which case damages are to be measured as 

of the earliest subsequent date or dates on which there are commercially reasonable determinants of value. Although it is expected 

that in most circumstances damages would be measured as of the 

date or dates of either rejection or liquidation, termination or acceleration, in certain unusual circumstances, such as dysfunctional 

markets or liquidation of very large portfolios, there may be no 

commercially reasonable determinants of value for liquidating any 

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70 11 U.S.C. § 109(f). 71 11 U.S.C. § 101(19). 72 11 U.S.C. § 1202. 

such agreements or contracts or for liquidating all such agreements 

and contracts in a large portfolio on a single day. 

The party determining damages is given limited discretion to 

determine the dates as of which damages are to be measured. Its 

actions are circumscribed unless there are no ‘‘commercially reasonable’’ determinants of value for it to measure damages on the 

date or dates of either rejection or liquidation, termination or acceleration. The references to ‘‘commercially reasonable’’ are intended 

to reflect existing state law standards relating to a creditor’s actions in determining damages. New section 562 provides that if 

damages are not measured as of either the date of rejection or the 

date or dates of liquidation, termination or acceleration and the 

other party challenges the timing of the measurement of damages 

by the party determining the damages, that party has the burden 

of proving the absence of any commercially reasonable determinants of value. 

New section 562 is not intended to have any impact on the determination under the Bankruptcy Code of the timing of damages 

for contracts and agreements other than those specified in section 

562. Also, section 562 does not apply to proceedings under the 

FDIA, and it is not intended that Section 562 have any impact on 

the interpretation of the provisions of the FDIA relating to timing 

of damages in respect of QFCs or other contracts. 

Sec. 911. SIPA stay 

Section 911 of the conference report amends SIPA to provide 

that an order or decree issued pursuant to SIPA shall not operate 

as a stay of any right of liquidation, termination, acceleration, offset or netting under one or more securities contracts, commodity 

contracts, forward contracts, repurchase agreements, swap agreements or master netting agreements (as defined in the Bankruptcy 

Code and including rights of foreclosure on collateral), except that 

such order or decree may stay any right to foreclose on or dispose 

of securities (but not cash) collateral pledged by the debtor or sold 

by the debtor under a repurchase agreement or lent by the debtor 

under a securities lending agreement. A corresponding amendment 

to FDICIA is made by section 906. A creditor that was stayed in 

exercising rights against such securities would be entitled to postinsolvency interest to the extent of the value of such securities. 

Section 911 is substantively identical to section 911 of the House 

bill and the Senate amendment. 

TITLE X—PROTECTION OF FAMILY FARMERS

Sec. 1001. Permanent reenactment of chapter 12 

Chapter 12 is a specialized form of bankruptcy relief available 

only to a ‘‘family farmer with regular annual income,’’ 70 a defined 

term.71 This form of bankruptcy relief permits eligible family farmers, under the supervision of a bankruptcy trustee,72 to reorganize 

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73 11 U.S.C. § 1222. 74For example, chapter 12 is typically less complex and expensive than chapter 11, a form 

of bankruptcy relief generally utilized to effectuate large corporate reorganizations. 75 Chapter 13, a form of bankruptcy relief for individuals seeking to reorganize their debts, 

limits its eligibility to debtors with debts in lower amounts than permitted for eligibility purposes under chapter 12. Cf. 11 U.S.C. §§ 109(e), 101(18). 76Pub. L. No. 99–554, § 255, 100 Stat. 3088, 3105 (1986). 77See U.S. Dept. of Agriculture, Info. Bull. No. 724–09, Issues in Agricultural and Rural Finance: Do Farmers Need a Separate Chapter in the Bankruptcy Code? (Oct. 1997). As one of 

the principal proponents of this legislation explained: ‘‘I doubt there will be anything that we do that will have such an immediate impact in the 

grassroots of our country with respect to the situation that exists in most of the heartland, and 

that is in the agricultural sector * * * ‘‘You know, William Jennings Bryan in his famous speech, the Cross of Gold, almost 60 years 

ago [sic], stated these words: ‘Destroy our cities and they will spring up again as if by magic; 

but destroy our farms, and the grass will grow in every city in our country.’

‘‘This legislation will hopefully stem the tide that we have seen so recently in the massive 

bankruptcies in the family farm area.’’

132 Cong. Rec. 28147 (1986) (statement of Rep. Mike Synar (D-Okla.)). 

78Pub. L. No. 107–171, § 10814 (2002).

their debts pursuant to a repayment plan.73 The special attributes 

of chapter 12 make it better suited to meet the particularized needs 

of family farmers in financial distress than other forms of bankruptcy relief, such as chapter 11 74 and chapter 13.75

Chapter 12 was enacted on a temporary seven-year basis as 

part of the Bankruptcy Judges, United States Trustees, and Family 

Farmer Bankruptcy Act of 1986 76 in response to the farm financial 

crisis of the early- to mid-1980’s.77 It was subsequently reenacted 

and extended on several occasions. The most recent extension, authorized as part of the Farm Security and Rural Investment Act of 

2002, provides that chapter remains in effect until December 31, 

2002.78

Section 1001(a) of the conference report reenacts chapter 12 of 

the Bankruptcy Code and provides that such reenactment takes effect as of the date of enactment. Section 1001(b) makes a conforming amendment to section 302 of the Bankruptcy Judges, 

United States Trustees, and Family Farmer Bankruptcy Act of 

1986. As a result of this provision, chapter 12 becomes a permanent form of relief under the Bankruptcy Code. Section 1001 is substantively identical to section 1001 of the House bill and the Senate 

amendment. 

Sec. 1002. Debt limit increase 

Section 1002 of the conference report amends section 104(b) of 

the Bankruptcy Code to provide for periodic adjustments for inflation of the debt eligibility limit for family farmers. This provision 

represents a compromise between section 1002 of the House bill 

and the Senate amendment. The Senate version required the adjustment to become effective as of April 1, 2001 or 60 days after 

the date of enactment of this Act. The House provision allows for 

a prospective effective date of April 1, 2004. 

Sec. 1003. Certain claims owed to governmental units 

Section 1003 of the conference report is substantively identical 

to section 1003 of the House bill and the Senate amendment. Subsection (a) amends section 1222(a) of the Bankruptcy Code to add 

an exception with respect to payments to a governmental unit for 

a debt entitled to priority under section 507 if such debt arises 

from the sale, transfer, exchange, or other disposition of an asset 

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used in the debtor’s farming operation, but only if the debtor receives a discharge. Section 1003(b) amends section 1231(b) of the 

Bankruptcy Code to have it apply to any governmental unit. Subsection (c) provides that section 1003 becomes effective on the date 

of enactment of this Act and applies to cases commenced after such 

effective date. 

Sec. 1004. Definition of family farmer 

Section 1004 of the conference report amends the definition of ‘‘family farmer’’ in section 101(18) of the Bankruptcy Code to in- crease the debt eligibility limit from $1,500,000 to $3,237,000. It 

also reduces the percentage of the farmer’s liabilities that must 

arise out of the debtor’s farming operation for eligibility purposes 

from 80 percent to 50 percent. Section 1004 represents a compromise. It takes into consideration the adjustment that went into 

effect on April 1, 2001 pursuant to Bankruptcy Code section 104. 

There is no counterpart to this provision in the House bill. 

Sec. 1005. Elimination of requirement that family farmer and 

spouse receive over 50 percent of income from farming operation 

in year prior to bankruptcy 

Section 1005 of the conference report amends the Bankruptcy 

Code’s definition of ‘‘family farmer’’ with respect to the determination of the farmer’s income. Current law provides that a debtor, in 

order to be eligible to be a family farmer, must derive a specified 

percentage of his or her income from farming activities for the taxable year preceding the commencement of the bankruptcy case. 

Section 1005 adjusts the threshold percentage to be met during either: (1) the taxable year preceding the filing of the bankruptcy 

case; or (2) the taxable year in the second and third taxable years 

preceding the filing of the bankruptcy case. Section 1005 represents 

a compromise between the House bill and Senate amendment. The 

Senate provision sets the determination period as at least one of 

the three years preceding the filing of the bankruptcy case. There 

is no counterpart to this provision in the House bill. 

Sec. 1006. Prohibition of retroactive assessment of disposable income 

Section 1006 of the conference report amends the Bankruptcy 

Code in two respects concerning chapter 12 plans. Section 1006(a) 

amends Bankruptcy Code section 1225(b) to permit the court to 

confirm a plan even if the distribution proposed under the plan 

equal or exceeds the debtor’s projected disposable income for that 

period, providing the plan otherwise satisfies the requirements for 

confirmation. Section 1006(b) amends Bankruptcy Code section 

1229 to restrict the bases for modifying a confirmed chapter 12 

plan. Specifically, Section 1006(b) to provide that a confirmed chapter 12 plan may not be modified to increase the amount of payments due prior to the date of the order modifying the confirmation 

of the plan. Where the modification is based on an increase in the 

debtor’s disposable income, the plan may not be modified to require 

payments to unsecured creditors in any particular month in an 

amount greater than the debtor’s disposable income for that month, 

unless the debtor proposes such a modification. Section 1006(b) furVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00283 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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ther provides that a modification of a plan shall not require payments that would leave the debtor with insufficient funds to carry 

on the farming operation after the plan is completed, unless the 

debtor proposes such a modification. Section 1006 of the conference 

report reflects the Senate position as represented in section 1006 

of the Senate amendment. There is no counterpart to this provision 

in the House bill. 

Sec. 1007. Family fishermen 

Section 1007 of the conference report is a compromise between 

the House and Senate. Subsection (a) of the conference report 

amends Bankruptcy Code section 101 to add definitions of ‘‘commercial fishing operation,’’ ‘‘commercial fishing vessel,’’ ‘‘family fisherman’’ and ‘‘family fisherman with regular annual income’’. The 

definition of ‘‘commercial fishing operation’’ includes the catching or 

harvesting of fish, shrimp, lobsters, urchins, seaweed, shellfish, or 

other aquatic species or products. The term ‘‘commercial fishing 

vessel’’ is defined as a vessel used by a fisher to ‘‘carry out a commercial fishing operation’’. The term ‘‘family fisherman’’ is defined 

as an individual engaged in a commercial fishing operation, with 

an aggregate debt limit of $1.5 million. The definition specifies that 

at least 80 percent of those debts must be derived from a commercial fishing operation. The percentage of income that must be derived from such operation is specified to be more than 50 percent 

of the individual’s gross income for the taxable year preceding the 

taxable year in which the case was filed. Similar provisions are included for corporations and partnerships. The term ‘‘family fisherman with regular annual income’’ is defined as a family fisherman 

whose annual income is sufficiently stable and regular to enable 

such person to make payments under a chapter 12 plan. Section 

1007(b) amends Bankruptcy Code section 109 to provide that a 

family fisherman is eligible to be a debtor under chapter 12. 

Section 1007(c) amends the heading of chapter 12 to include a 

reference to family fisherman and makes conforming revisions to 

Sections 1203 and 1206. The conference report does not include a 

provision in the Senate amendment, which requires certain maritime liens to be treated as unsecured claims. It also does not include provisions in the Senate amendment concerning the codebtor 

stay.

TITLE XI—HEALTH CARE AND EMPLOYEE BENEFITS

Sec. 1101. Definitions 

Section 1101 of the conference report is substantively identical 

to section 1101 of the House bill and the Senate amendment. Subsection (a) amends section 101 of the Bankruptcy Code to add a 

definition of ‘‘health care business’’. The definition includes any 

public or private entity (without regard to whether that entity is 

for or not for profit) that is primarily engaged in offering to the 

general public facilities and services for diagnosis or treatment of 

injury, deformity or disease; and surgical, drug treatment, psychiatric or obstetric care. It also includes the following entities: (1) 

a general or specialized hospital; (2) an ancillary ambulatory, emergency, or surgical treatment facility; (3) a hospice; (d) a home 

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health agency; (e) other health care institution that is similar to an 

entity referred to in (a) through (d); and other long-term care facility. These include a skilled nursing facility, intermediate care facility; assisted living facility, home for the aged, domiciliary care facility, and health care institution that is related to an aforementioned facility. Section 1101(b) amends Bankruptcy Code section 

101 to add a definition of ‘‘patient’’. The term means any person 

who obtains or receives services from a health care business. Section 1101(c) amends section 101 of the Bankruptcy Code to add a 

definition of ‘‘patient records’’. The term means any written document relating to a patient or record recorded in a magnetic, optical, 

or other form of electronic medium. Section 1101(d) specifies that 

the amendments effected by new section 101(27A) do not affect the 

interpretation of section 109(b). 

Sec. 1102. Disposal of patient records 

Section 1102 of the conference report is substantively identical 

to section 1102 of the House bill and the Senate amendment. It 

adds a provision to the Bankruptcy Code specifying requirements 

for the disposal of patient records in a chapter 7, 9, or 11 case of 

a health care business where the trustee lacks sufficient funds to 

pay for the storage of such records in accordance with applicable 

Federal or state law. The requirements chiefly consist of providing 

notice to the affected patients and specifying the method of disposal 

for unclaimed records. They are intended to protect the privacy and 

confidentiality of a patient’s medical records when they are in the 

custody of a health care business in bankruptcy. The provision 

specifies the following requirements: 

(1) The trustee shall: (a) publish notice in one or more appropriate newspapers stating that if the records are not claimed by the 

patient or an insurance provider (if permitted under applicable 

law) within 90 days of the date of such notice, then the trustee will 

destroy such records; and (b) during such 90-day period, attempt to 

directly notify by mail each patient and appropriate insurance carrier of the claiming or disposing of such records. 

(2) If after providing such notice patient records are not 

claimed within the specified period, the trustee shall, upon the expiration of such period, send a request by certified mail to each appropriate federal agency to request permission from such agency to 

deposit the records with the agency. 

(3) If after providing the notice under 1 and 2 above, patient 

records are not claimed, the trustee shall destroy such records as 

follows: (a) by shredding or burning, if the records are written; or 

(b) by destroying the records so that their information cannot be retrieved, if the records are magnetic, optical or electronic. 

It is anticipated that if the estate of the debtor lacks the funds 

to pay for the costs and expenses related to the above, the trustee 

may recover such costs and expenses under section 506(c) of the 

Bankruptcy Code. 

Sec. 1103. Administrative expense claim for costs of closing a health 

care business and other administrative expenses 

Section 1103 of the conference report is substantively identical 

to section 1103 of the House bill and the Senate amendment. It 

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amends section 503(b) of the Bankruptcy Code to provide that the 

actual, necessary costs and expenses of closing a health care business (including the disposal of patient records or transferral of patients) incurred by a trustee, Federal agency, or a department or 

agency of a State are allowed administrative expenses. The conference report does not include a duplicative and unrelated provision in the House bill and Senate amendment pertaining to nonresidential real property leases. 

Sec. 1104. Appointment of ombudsman to act as patient advocate 

Section 1104 of the conference report adds a provision to the 

Bankruptcy Code requiring the court to order the appointment of 

an ombudsman to monitor the quality of patient care within 30 

days after commencement of a chapter 7, 9, or 11 health care business bankruptcy case, unless the court finds that such appointment 

is not necessary for the protection of patients under the specific 

facts of the case. The ombudsman must be a disinterested person. 

If the health care business is a long-term care facility, a person 

who is serving as a State Long-Term Care Ombudsman of the 

Older Americans Act of 1965 may be appointed as the ombudsman 

in such case. The ombudsman must: (1) monitor the quality of patient care to the extent necessary under the circumstances, including interviewing patients and physicians; (2) report to the court, 

not less than 60 days from the date of appointment and then every 

60 days thereafter, at a hearing or in writing regarding the quality 

of patient care at the health care business involved; and (3) notify 

the court by motion or written report (with notice to appropriate 

parties in interest) if the ombudsman determines that the quality 

of patient care is declining significantly or is otherwise being materially compromised. The provision requires the ombudsman to 

maintain any information obtained that relates to patients (including patient records) as confidential. Section 1104(b) amends section 

330(a)(1) of the Bankruptcy Code to authorize the payment of reasonable compensation to an ombudsman. Section 1104 reflects the 

Senate position as represented in section 1104 of the Senate 

amendment. The conference report includes the Senate’s provision 

with respect to a case where the United States trustee does not appoint a State Long-Term Care Ombudsman. The House bill did not 

include this provision. 

Sec. 1105. Debtor in possession; duty of trustee to transfer patients 

Section 1105 of the conference report is identical to section 

1105 of the House bill and the Senate amendment. This provision 

amends section 704(a) of the Bankruptcy Code to require a chapter 

7 trustee, chapter 11 trustee, and chapter 11 debtor in possession 

to use all reasonable and best efforts to transfer patients from a 

health care business that is in the process of being closed to an appropriate health care business. The transferee health care business 

should be in the vicinity of the transferor health care business, provide the patient with services that are substantially similar to 

those provided by the transferor health care business, and maintain a reasonable quality of care. 

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Sec. 1106. Exclusion from program participation not subject to automatic stay 

Section 1106 amends section 362(b) of the Bankruptcy Code to 

except from the automatic stay the exclusion by the Secretary of 

Health and Human Services of a debtor from participation in the 

medicare program or other specified Federal health care programs. 

This provision is substantively identical to section 1106 of the 

House bill and the Senate amendment. 

TITLE XII—TECHNICAL AMENDMENTS

Sec. 1201. Definitions 

Section 1201 of the conference report is substantively identical 

to section 1201 of the House bill and the Senate amendment. This 

provision amends the definitions contained in section 101 of the 

Bankruptcy Code. Paragraphs (1), (2), (4), and (7) of section 1201 

make technical changes to section 101 to convert each definition 

into a sentence (thereby facilitating future amendments to the separate paragraphs) and to redesignate the definitions in correct and 

completely numerical sequence. Paragraph (3) of section 1101 

makes necessary and conforming amendments to cross references 

to the newly redesignated definitions. 

Paragraph (5) of section 1201 concerns single asset real estate 

debtors. A single asset real estate chapter 11 case presents special 

concerns. As the name implies, the principal asset in this type of 

case consists of some form of real estate, such as undeveloped land. 

Typically, the form of ownership of a single asset real estate debtor 

is a corporation or limited partnership. The largest creditor in a 

single asset real estate case is typically the secured lender who advanced the funds to the debtor to acquire the real property. Often, 

a single asset real estate debtor resorts to filing for bankruptcy relief for the sole purpose of staying an impending foreclosure proceeding or sale commenced by the secured lender. Foreclosure actions are filed when the debtor lacks sufficient cash flow to service 

the debt and maintain the property. Taxing authorities may also 

have liens against the property. Based on the nature of its principal asset, a single asset real estate debtor often has few, if any, 

unsecured creditors. If unsecured creditors exist, they may have 

only nominal claims against the single asset real estate debtor. Depending on the nature and ownership of any business operating on 

the debtor’s real property, the debtor may have few, if any, employees. Accordingly, there may be little interest on behalf of unsecured 

creditors in a single asset real estate case to serve on a creditors’

committee. 

In 1994, the Bankruptcy Code was amended to accord special 

treatment for single asset real estate debtors. It defined this type 

of debtor as a bankruptcy estate comprised of a single piece of real 

property or project, other than residential real property with fewer 

than four residential units. The property or project must generate 

substantially all of the debtor’s gross income. A debtor that conducts substantial business on the property beyond that relating to 

its operation is excluded from this definition. In addition, the definition fixed a monetary cap. To qualify as a single asset real estate 

debtor, the debtor could not have noncontingent, liquidated secured 

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debts in excess of $4 million. Subparagraph (5)(A) amends the definition of ‘‘single asset real estate’’ to exclude family farmers from 

this definition. Paragraph (5)(B) amends section 101(51B) of the 

Bankruptcy Code to eliminate the $4 million debt limitation on single asset real estate. The present $4 million cap prevents the use 

of the expedited relief procedure in many commercial property reorganizations, and effectively provides an opportunity for a number 

of debtors to abusively file for bankruptcy in order to obtain the 

protection of the automatic stay against their creditors. As a result 

of this amendment, creditors in more cases will be able to obtain 

the expedited relief from the automatic stay which is made available under section 362(d)(3) of the Bankruptcy Code. 

Paragraph (6) of section 1201, together with section 1214, respond to a 1997 Ninth Circuit case, in which two purchase money 

lenders (without knowledge that the debtor had recently filed an 

undisclosed chapter 11 case that was subsequently converted to 

chapter 7), funded the debtor’s acquisition of an apartment complex 

and recorded their purchase-money deed of trust immediately following recordation of the deed to the debtors. Specifically, it 

amends the definition of ‘‘transfer’’ in section 101(54) of the Bankruptcy Code to include the ‘‘creation of a lien.’’ This amendment 

gives expression to a widely held understanding since the enactment of the Bankruptcy Reform Act of 1978, that is, a transfer includes the creation of a lien. 

Sec. 1202. Adjustment of dollar amounts 

Section 1202 of the conference report is substantively identical 

to section 1202 of the House bill and the Senate amendment. This 

provision corrects an omission in section 104(b) of the Bankruptcy 

Code to include a reference to section 522(f)(3). 

Sec. 1203. Extension of time 

Section 1203 of the conference report makes a technical 

amendment to correct a reference error described in amendment 

notes contained in the United States Code. As specified in the 

amendment note relating to subsection (c)(2) of section 108 of the 

Bankruptcy Code, the amendment made by section 257(b)(2)(B) of 

Public Law 99–554 could not be executed as stated. This provision 

is substantively identical to section 1203 of the House bill and the 

Senate amendment. 

Sec. 1204. Technical amendments 

Section 1204 of the conference report is identical to section 

1204 of the House bill and the Senate amendment. This provision 

makes technical amendments to Bankruptcy Code sections 

109(b)(2) (to strike an statutory cross reference), 541(b)(2) (to add 

‘‘or’’ to the end of this provision), and 522(b)(1) (to replace ‘‘product’’

with ‘‘products’’). Section 1204 is substantively identical to section 

1204 of the House bill and the Senate amendment. 

Sec. 1205. Penalty for persons who negligently or fraudulently prepare bankruptcy petitions 

Section 1205 of the conference report amends section 110(j)(4) 

of the Bankruptcy Code to change the reference to attorneys from 

289

the singular possessive to the plural possessive. This provision is 

substantively identical to section 1205 of the House bill and the 

Senate amendment. 

Sec. 1206. Limitation on compensation of professional persons 

Section 328(a) of the Bankruptcy Code provides that a trustee 

or a creditors’ and equity security holders’ committee may, with 

court approval, obtain the services of a professional person on any 

reasonable terms and conditions of employment, including on a retainer, on an hourly basis, or on a contingent fee basis. Section 

1206 of the conference report amends section 328(a) to include compensation ‘‘on a fixed or percentage fee basis’’ in addition to the 

other specified forms of reimbursement. This provision is substantively identical to section 1206 of the House bill and the Senate 

amendment. 

Sec. 1207. Effect of conversion 

Section 1207 of the conference report makes a technical correction in section 348(f)(2) of the Bankruptcy Code to clarify that the 

first reference to property, like the subsequent reference to property, is a reference to property of the estate. This provision is substantively identical to section 1207 of the House bill and the Senate 

amendment. 

Sec. 1208. Allowance of administrative expenses 

Section 1208 of the conference report amends section 503(b)(4) 

of the Bankruptcy Code to limit the types of compensable professional services rendered by an attorney or accountant that can 

qualify as administrative expenses in a bankruptcy case. Expenses 

for attorneys or accountants incurred by individual members of 

creditors’ or equity security holders’ committees are not recoverable, but expenses incurred for such professional services incurred 

by such committees themselves would be. This provision is substantively identical to section 1208 of the House bill and the Senate 

amendment. 

Sec. 1209. Exceptions to discharge 

Section 1209 of the conference report is substantively identical 

to section 1209 of the House bill and the Senate amendment. This 

provision amends section 523(a) of the Bankruptcy Code to correct 

a technical error in the placement of paragraph (15), which was 

added to section 523 by section 304(e)(1) of the Bankruptcy Reform 

Act of 1994. Section 1209 also amends section 523(a)(9), which 

makes nondischargeable any debt resulting from death or personal 

injury arising from the debtor’s unlawful operation of a motor vehicle while intoxicated, to add ‘‘watercraft, or aircraft’’ after ‘‘motor 

vehicle.’’ Neither additional term should be defined or included as 

a ‘‘motor vehicle’’ in section 523(a)(9) and each is intended to comprise unpowered as well as motor-powered craft. Congress previously made the policy judgment that the equities of persons injured by drunk drivers outweigh the responsible debtor’s interest in 

a fresh start, and here clarifies that the policy applies not only on 

land but also on the water and in the air. Viewed from a practical 

standpoint, this provision closes a loophole that gives intoxicated 

290

79For a description of these errors, see the appropriate footnote and amendment notes in the 

United States Code. 

watercraft and aircraft operators preferred treatment over intoxicated motor vehicle drivers and denies victims of alcohol and drug 

related boat and plane accidents the same rights accorded to automobile accident victims under current law. Finally, this section corrects a grammatical error in section 523(e). 

Sec. 1210. Effect of discharge 

Section 1210 of the conference report makes technical amendments to correct errors in section 524(a)(3) of the Bankruptcy Code 

caused by section 257(o)(2) of Public Law 99–554 and section 

501(d)(14)(A) of Public Law 103–394.79 This provision is substantively identical to section 1210 of the House bill and the Senate 

amendment. 

Sec. 1211. Protection against discriminatory treatment 

Section 1211 of the conference report is substantively identical 

to section 1211 of the House bill and the Senate amendment. This 

provision conforms a reference to its antecedent reference in section 

525(c) of the Bankruptcy Code. The omission of ‘‘student’’ before 

‘‘grant’’ in the second place it appears in section 525(c) made possible the interpretation that a broader limitation on lender discretion was intended, so that no loan could be denied because of a 

prior bankruptcy if the lending institution was in the business of 

making student loans. Section 1211 is intended to make clear that 

lenders involved in making government guaranteed or insured student loans are not barred by this Bankruptcy Code provision from 

denying other types of loans based on an applicant’s bankruptcy 

history; only student loans and grants, therefore, cannot be denied 

under section 525(c) because of a prior bankruptcy. 

Sec. 1212. Property of the estate 

Production payments are royalties tied to the production of a 

certain volume or value of oil or gas, determined without regard to 

production costs. They typically would be paid by an oil or gas operator to the owner of the underlying property on which the oil or 

gas is found. Under section 541(b)(4)(B)(ii) of the Bankruptcy Code, 

added by the Bankruptcy Reform Act of 1994, production payments 

are generally excluded from the debtor’s estate, provided they could 

be included only by virtue of section 542 of the Bankruptcy Code, 

which relates generally to the obligation of those holding property 

which belongs in the estate to turn it over to the trustee. Section 

1212 of the conference report adds to this proviso a reference to 

section 365 of the Bankruptcy Code, which authorizes the trustee 

to assume or reject an executory contract or unexpired lease. It 

thereby clarifies the original Congressional intent to generally exclude production payments from the debtor’s estate. This provision 

is substantively identical to section 1212 of the House bill and the 

Senate amendment.

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80Levit v. Ingersoll Rand Fin. Corp., 874 F.2d 1186 (7th Cir. 1989); see, e.g., Ray v. City Bank 

and Trust Co. (In re C–L Cartage Co.), 899 F.2d 1490 (6th Cir. 1990); Manufacturers Hanover 

Leasing Corp. v. Lowrey (In re Robinson Bros. Drilling, Inc.), 892 F.2d 850 (10th Cir. 1989). 

Sec. 1213. Preferences 

Section 547 of the Bankruptcy Code authorizes a trustee to 

avoid a preferential payment made to a creditor by a debtor within 

90 days of filing, whether the creditor is an insider or an outsider. 

To address the concern that a corporate insider (such as an officer 

or director who is a creditor of his or her own corporation has an 

unfair advantage over outside creditors, section 547 also authorizes 

a trustee to avoid a preferential payment made to an insider creditor between 90 days and one year before filing. Several recent 

cases, including DePrizio,80 allowed the trustee to ‘‘reach-back’’ and 

avoid a transfer to a noninsider creditor which fell within the 90-

day to one-year time frame if an insider benefitted from the transfer in some way. This had the effect of discouraging lenders from 

obtaining loan guarantees, lest transfers to the lender be vulnerable to recapture by reason of the debtor’s insider relationship with 

the loan guarantor. Section 202 of the Bankruptcy Reform Act of 

1994 addressed the DePrizio problem by inserting a new section 

550(c) into the Bankruptcy Code to prevent avoidance or recovery 

from a noninsider creditor during the 90-day to one-year period 

even though the transfer to the noninsider benefitted an insider 

creditor. The 1994 amendments, however, failed to make a corresponding amendment to section 547, which deals with the avoidance of preferential transfers. As a result, a trustee could still utilize section 547 to avoid a preferential lien given to a noninsider 

bank, more than 90 days but less than one year before bankruptcy, 

if the transfer benefitted an insider guarantor of the debtor’s debt. 

Accordingly, section 1213 of the conference report makes a perfecting amendment to section 547 to provide that if the trustee 

avoids a transfer given by the debtor to a noninsider for the benefit 

of an insider creditor between 90 days and one year before filing, 

that avoidance is valid only with respect to the insider creditor. 

Thus both the previous amendment to section 550 and the perfecting amendment to section 547 protect the noninsider from the 

avoiding powers of the trustee exercised with respect to transfers 

made during the 90-day to one year pre-filing period. This provision is intended to apply to any case, including any adversary proceeding, that is pending or commenced on or after the date of enactment of this Act. Section 1213 is substantively identical to section 1213 of the House bill and the Senate amendment. 

Sec. 1214. Postpetition transactions 

Section 1214 of the conference report amends section 549(c) of 

the Bankruptcy Code to clarify its application to an interest in real 

property. This amendment should be construed in conjunction with 

section 1201 of the Act. This provision is substantively identical to 

section 1214 of the House bill and the Senate amendment. 

Sec. 1215. Disposition of property of the estate 

Section 1215 of the conference report amends section 726(b) of 

the Bankruptcy Code to strike an erroneous reference. This proviVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00291 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
292

81For a description of the errors, see the appropriate footnote and amendment notes in the 

United States Code. 

sion is substantively identical to section 1215 of the House bill and 

the Senate amendment. 

Sec. 1216. General provisions 

Section 1216 of the conference report amends section 901(a) of 

the Bankruptcy Code to correct an omission in a list of sections applicable to cases under chapter 9 of title 11 of the United States 

Code. This provision is substantively identical to section 1216 of 

the House bill and the Senate amendment. 

Sec. 1217. Abandonment of railroad line 

Section 1217 of the conference report amends section 1170(e)(1) 

of the Bankruptcy Code to reflect the fact that section 11347 of title 

49 of the United States Code was repealed by section 102(a) of Public Law 104–88 and that provisions comparable to section 11347 

appear in section 11326(a) of title 49 of the United States Code. 

This provision is substantively identical to section 1217 of the 

House bill and the Senate amendment. 

Sec. 1218. Contents of plan 

Section 1218 of the conference report amends section 1172(c)(1) 

of the Bankruptcy Code to reflect the fact that section 11347 of title 

49 of the United States Code was repealed by section 102(a) of Public Law 104–88 and that provisions comparable to section 11347 

appear in section 11326(a) of title 49 of the United States Code. 

This provision is substantively identical to section 1218 of the 

House bill and the Senate amendment. 

Sec. 1219. Bankruptcy cases and proceedings 

Section 1219 of the conference report amends section 1334(d) 

of title 28 of the United States Code to make clarifying references.81 This provision is substantively identical to section 1220 

of the House bill and section 1219 of the Senate amendment. 

Sec. 1220. Knowing disregard of bankruptcy law or rule 

Section 1220 of the conference report amends section 156(a) of 

title 18 of the United States Code to make stylistic changes and 

correct a reference to the Bankruptcy Code. This provision is substantively identical to section 1221 of the House bill and section 

1220 of the Senate amendment. 

Sec. 1221. Transfers made by nonprofit charitable corporations 

Section 1221 of the conference report amends section 363(d) of 

the Bankruptcy Code to restrict the authority of a trustee to use, 

sale, or lease property by a nonprofit corporation or trust. First, the 

use, sell or lease must be in accordance with applicable nonbankruptcy law and to the extent it is not inconsistent with any relief 

granted under certain specified provisions of section 362 of the 

Bankruptcy Code concerning the applicability of the automatic 

stay. Second, section 1221 imposes similar restrictions with regard 

to plan confirmation requirements for chapter 11 cases. Third, it 

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amends section 541 of the Bankruptcy Code to provide that any 

property of a bankruptcy estate in which the debtor is a nonprofit 

corporation (as described in certain provisions of the Internal Revenue Code) may not be transferred to an entity that is not a corporation, but only under the same conditions that would apply if 

the debtor was not in bankruptcy. The amendments made by this 

section apply to cases pending on the date of enactment or to cases 

filed after such date. Section 1221 provides that a court may not 

confirm a plan without considering whether this provision would 

substantially affect the rights of a party in interest who first acquired rights with respect to the debtor postpetition. Nothing in 

this provision may be construed to require the court to remand or 

refer any proceeding, issue, or controversy to any other court or to 

require the approval of any other court for the transfer of property. 

This provision is substantively identical to section 1222 of the 

House bill and section 1221 of the Senate amendment. 

Sec. 1222. Protection of valid purchase money security interests 

Section 1222 of the conference report extends the applicable 

perfection period for a Security interest in property of the debtor 

in section 547(c)(3)(B) of the Bankruptcy Code from 20 to 30 days. 

This provision is substantively identical to section 1223 of the 

House bill and section 1222 of the Senate amendment. 

Sec. 1223. Bankruptcy judgeships 

The substantial increase in bankruptcy case filings clearly creates a need for additional bankruptcy judgeships. In the 105th 

Congress, the House responded to this need by passing H.R. 1596, 

which would have created additional permanent and temporary 

bankruptcy judgeships and extended an existing temporary position. Section 1223 generally incorporates H.R. 1596 as it passed the 

House with provisions extending four existing temporary judgeships. Moreover, it includes the Senate amendment’s provision for 

additional bankruptcy judgeships for the districts of South Carolina, Nevada, and Delaware. In addition, section 1223 of the conference report provides that the extension periods for the temporary judgeships in the Northern District of Alabama, the Western District of Tennessee, and the Districts of Delaware and Puerto 

Rico begin from the date of enactment of this Act. The conference 

report authorizes two judgeships for the District of Delaware in addition to the two provided for in the House bill and the Senate 

amendment for a total of four judgeships for that District. 

Sec. 1224. Compensating trustees 

Section 1224 of the conference report amends section 1326 of 

the Bankruptcy Code to provide that if a chapter 7 trustee has 

been allowed compensation as a result of the conversion or dismissal of the debtor’s prior case pursuant to section 707(b) and 

some portion of that compensation remains unpaid, the amount of 

any such unpaid compensation must be repaid in the debtor’s subsequent chapter 13 case. This payment must be prorated over the 

term of the plan and paid on a monthly basis. The amount of the 

monthly payment may not exceed the greater of $25 or the amount 

payable to unsecured nonpriority creditors as provided by the plan, 

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multiplied by five percent and the result divided by the number of 

months of the plan. This provision is substantively identical to section 1225 of the House bill and section 1224 of the Senate amendment. 

Sec. 1225. Amendment to section 362 of title 11, United States Code 

Section 1225 of the conference report amends section 362(b) of 

the Bankruptcy Code to except from the automatic stay the creation or perfection of a statutory lien for an ad valorem property 

tax or for a special tax or special assessment on real property 

(whether or not ad valorem) that is imposed by a governmental 

unit, if such tax or assessment becomes due after the filing of the 

petition. This provision is substantively identical to section 1226 of 

the House bill and section 1225 of the Senate amendment. 

Sec. 1226. Judicial education 

Section 1226 of the conference report requires the Director of 

the Federal Judicial Center, in consultation with the Director of 

the Executive Office for United States Trustees, to develop materials and conduct training as may be useful to the courts in implementing this Act, including the needs-based reforms under section 

707(b) (as amended by this Act) and amendments pertaining to reaffirmation agreements. This provision is substantively identical to 

section 1227 of the House bill and section 1226 of the Senate 

amendment. 

Sec. 1227. Reclamation 

Section 1227 of the conference report amends section 546(c) of 

the Bankruptcy Code to provide that the rights of a trustee under 

sections 544(a), 545, 547, and 549 are subject to the rights of a seller of goods to reclaim goods sold in the ordinary course of business 

to the debtor if: (1) the debtor received these goods while insolvent 

not later than 45 days prior to the commencement of the case, and 

(2) written demand for reclamation of the goods is made not later 

than 45 days after receipt of such goods by the debtor or not later 

than 20 days after the commencement of the case, if the 45-day period expires after the commencement of the case. If the seller fails 

to provide notice in the manner provided in this provision, the seller may still assert the rights set forth in section 503(b)(7) of the 

Bankruptcy Code. Section 1227(b) amends Bankruptcy Code section 

503(b) to provide that the value of any goods received by a debtor 

not later than within 20 days prior to the commencement of a 

bankruptcy case in which the goods have been sold to the debtor 

in the ordinary course of the debtor’s business is an allowed administrative expense. 

Section 1227 of the conference report reflects section 1227 of 

the Senate amendment, which clarifies when certain specified time 

frames begin. Section 1228 of the House bill did not include this 

clarification. 

Sec. 1228. Providing requested tax documents to the court 

Section 1228 of the conference report is substantively identical 

to section 1229 of the House bill and section 1228 of the Senate 

amendment. Subsection (a) provides that the court may not grant 

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a discharge to an individual in a case under chapter 7 unless requested tax documents have been provided to the court. Section 

1228(b) similarly provides that the court may not confirm a chapter 

11 or 13 plan unless requested tax documents have been filed with 

the court. Section 1228(c) directs the court to destroy documents 

submitted in support of a bankruptcy claim not sooner than three 

years after the date of the conclusion of a bankruptcy case filed by 

an individual debtor under chapter 7, 11, or 13. In the event of a 

pending audit or enforcement action, the court may extend the time 

for destruction of such requested tax documents. 

Sec. 1229. Encouraging creditworthiness 

Section 1229 of the conference report is substantively identical 

to section 1230 of the House bill and section 1229 of the Senate 

amendment. Subsection (a) expresses the sense of the Congress 

that lenders may sometimes offer credit to consumers indiscriminately and that resulting consumer debt may be a major contributing factor leading to consumer insolvency. Section 1229(b) directs 

the Board of Governors of the Federal Reserve to study certain consumer credit industry solicitation and credit granting practices as 

well as the effect of such practices on consumer debt and insolvency. The specified practices involve the solicitation and extension 

of credit on an indiscriminate basis that encourages consumers to 

accumulate additional debt and where the lender fails to ensure 

that the consumer borrower is capable of repaying the debt. Section 

1229(c) requires the study described in subsection (b) to be prepared within 12 months from the date of the Act’s enactment. This 

provision authorizes the Board to issue regulations requiring additional disclosures to consumers and permits it to undertake any 

other actions consistent with its statutory authority, which are necessary to ensure responsible industry practices and to prevent resulting consumer debt and insolvency. 

Sec. 1230. Property no longer subject to redemption 

Section 1230 of the conference report is substantively identical 

to section 1231 of the House bill and section 1230 of the Senate 

amendment. This provision amends section 541(b) of the Bankruptcy Code to provide that, under certain circumstances, an interest of the debtor in tangible personal property (other than securities, or written or printed evidences of indebtedness or title) that 

the debtor pledged or sold as collateral for a loan or advance of 

money given by a person licensed under law to make such loan or 

advance is not property of the estate. Subject to subchapter III of 

chapter 5 of the Bankruptcy Code, the provision applies where (a) 

the property is in the possession of the pledgee or transferee; (b) 

the debtor has no obligation to repay the money, redeem the collateral, or buy back the property at a stipulated price; and (c) neither 

the debtor nor the trustee have exercised any right to redeem provided under the contract or State law in a timely manner as provided under State law and section 108(b) of the Bankruptcy Code. 

Sec. 1231. Trustees 

Section 1231 of the conference report is substantively identical 

to section 1232 of the House bill and section 1231 of the Senate 

296

amendment. The provision establishes a series of procedural protections for chapter 7 and chapter 13 trustees concerning final 

agency decisions relating to trustee appointments and future case 

assignments. Section 1231(a) amends section 586(d) of title 28 of 

the United States Code to allow a chapter 7 or chapter 13 trustee 

to obtain judicial review of such decisions by commencing an action 

in the United States district court after the trustee exhausts all 

available administrative remedies. Unless the trustee elects an administrative hearing on the record, the trustee is deemed to have 

exhausted all administrative remedies under this provision if the 

agency fails to make a final agency decision within 90 days after 

the trustee requests an administrative remedy. The provision requires the Attorney General to promulgate procedures to implement this provision. It further provides that the agency’s decision 

must be affirmed by the district court unless it is unreasonable and 

without cause based on the administrative record before the

agency. 

Section 1231(b) amends section 586(e) of title 28 of the United 

States Code to permit a chapter 13 trustee to obtain judicial review 

of certain final agency actions relating to claims for actual, necessary expenses under section 586(e). The trustee may commence 

an action in the United States district court where the trustee resides. The agency’s decision must be affirmed by the district court 

unless it is unreasonable and without cause based on the administrative record before the agency. It directs the Attorney General to 

prescribe procedures to implement this provision. 

Sec. 1232. Bankruptcy forms 

Section 1232 of the conference report is substantively identical 

to section 1233 of the House bill and section 1232 of the Senate 

amendment. This provision amends section 2075 of title 28 of the 

United States Code to require the bankruptcy rules promulgated 

under this provision to prescribe a form for the statement specified 

under section 707(b)(2)(C) of the Bankruptcy Code and to provide 

general rules on the content of such statement. 

Sec. 1233. Direct appeals of bankruptcy matters to courts of appeals 

Under current law, appeals from decisions rendered by the 

bankruptcy court are either heard by the district court or a bankruptcy appellate panel. In addition to the time and cost factors attendant to the present appellate system, decisions rendered by a 

district court as well as a bankruptcy appellate panel are generally 

not binding and lack stare decisis value. 

To address these problems, section 1233 of the conference report amends section 158(d) of title 28 to establish a procedure to 

facilitate appeals of certain decisions, judgments, orders and decrees of the bankruptcy courts to the circuit courts of appeals by 

means of a two-step certification process. The first step is a certification by the bankruptcy court, district court, or bankruptcy appellate panel (acting on its own motion or on the request of a party, 

or the appellants and appellees acting jointly). Such certification 

must be issued by the lower court if: (1) the bankruptcy court, district court, or bankruptcy appellate panel determines that one or 

more of certain specified standards are met; or (2) a majority in 

297

number of the appellants and a majority in number of the appellees request certification and represent that one or more of the 

standards are met. The second step is authorization by the circuit 

court of appeals. Jurisdiction for the direct appeal would exist in 

the circuit court of appeals only if the court of appeals authorizes 

the direct appeal. 

This procedure is intended to be used to settle unresolved 

questions of law where there is a need to establish clear binding 

precedent at the court of appeals level, where the matter is one of 

public importance, where there is a need to resolve conflicting decisions on a question of law, or where an immediate appeal may materially advance the progress of the case or proceeding. The courts 

of appeals are encouraged to authorize direct appeals in these circumstances. While fact-intensive issues may occasionally offer 

grounds for certification even when binding precedent already exists on the general legal issue in question, it is anticipated that 

this procedure will rarely be used in that circumstance or in an attempt to bring to the circuit courts of appeals matters that can appropriately be resolved initially by district court judges or bankruptcy appellate panels. 

Section 1233 reflects a compromise between the House and 

Senate conferees. The House provision amends section 158(d) of 

title 28 of the United States Code to deem a judgment, decision, 

order, or decree of a bankruptcy judge to be a judgment, decision, 

order, or decree of the district court entered 31 days after an appeal of such judgment, decision, order or decree is filed with the 

district court, unless: (1) the district court issues a decision on the 

appeal within 30 days after such appeal is filed or enters an order 

extending the 30-day period for cause upon motion of a party or by 

the court sua sponte; or (2) all parties to the appeal file written 

consent that the district court may retain such appeal until it enters a decision. Section 1233 of the Senate amendment, on the 

other hand, allows a court of appeals to hear an appeal of a bankruptcy court order only if the bankruptcy court, district court, 

bankruptcy appellate panel, or the parties jointly certify: (1) the appeal concerns a substantial question of law, question of law requiring resolution of conflicting decisions, or a matter of public importance; and (2) an immediate appeal may materially advance the 

progress of the case or proceeding. It further provides that an appeal under this provision does not stay proceedings in the court 

from which the order or decree originated, unless the originating 

court or the court of appeals orders such a stay. 

Sec. 1234. Involuntary cases 

Section 1234 of the conference report amends the Bankruptcy 

Code’s criteria for commencing an involuntary bankruptcy case. 

Current law renders a creditor ineligible if its claim is contingent 

as to liability or the subject of a bona fide dispute. This provision 

amends section 303(b)(1) to specify that a creditor would be ineligible to file an involuntary petition if the creditor’s claim was the 

subject of a bona fide dispute as to liability or amount. It further 

provides that the claims needed to meet the monetary threshold 

must be undisputed. The provision makes a conforming revision to 

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actment of this Act and applies to cases commenced after such 

date. This provision represents the Senate position as reflected in 

section 1235 of the Senate amendment. There is no counterpart to 

section 1234 of the conference report in the House bill. 

Sec. 1235. Federal election law fines and penalties as nondischargeable debt 

Section 1235 of the conference report amends section 523(a) of 

the Bankruptcy Code to make debts incurred to pay fines or penalties imposed under Federal election law nondischargeable. This 

provision represents the Senate’s position as reflected in section 

1236 of the Senate amendment. There is no counterpart to this provision in the House bill. 

TITLE XIII—CONSUMER CREDIT DISCLOSURE

Sec. 1301. Enhanced disclosures under an open end credit plan 

Section 1301 of the conference report is substantively identical 

to section 1301 of the House bill and Senate amendment. Subsection (a) amends section 127(b) of the Truth in Lending Act to 

mandate the inclusion of certain specified disclosures in billing 

statements with respect to various open end credit plans. In general, these statements must contain an example of the time it 

would take to repay a stated balance at a specified interest rate. 

In addition, they must warn the borrower that making only the 

minimum payment will increase the amount of interest that must 

be paid and the time it takes to repay the balance. Further, a tollfree telephone number must be provided where the borrower can 

obtain an estimate of the time it would take to repay the balance 

if only minimum payments are made. With respect to a creditor 

whose compliance with title 15 of the United States Code is enforced by the Federal Trade Commission (FTC), the billing statement must advise the borrower to contact the FTC at a toll-free 

telephone number to obtain an estimate of the time it would take 

to repay the borrower’s balance. Section 1301(a) permits the creditor to substitute an example based on a higher interest rate. As 

necessary, the provision requires the Board of Governors of the 

Federal Reserve System (‘‘Board’’), to periodically recalculate by 

rule the interest rate and repayment periods specified in Section 

1301(a). With respect to the toll-free telephone number, section 

1301(a) permits a third party to establish and maintain it. Under 

certain circumstances, the toll-free number may connect callers to 

an automated device. 

For a period not to exceed 24 months from the effective date 

of the Act, the Board is required to establish and maintain a tollfree telephone number (or provide a toll-free telephone number established and maintained by a third party) for use by creditors that 

are depository institutions (as defined in section 3 of the Federal 

Deposit Insurance Act), including a Federal or State credit union 

(as defined in section 101 of the Federal Credit Union Act), with 

total assets not exceeding $250 million. Not later than six months 

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ing and Financial Services of the House of Representatives. In addition, section 1301(a) requires the Board to establish a detailed 

table illustrating the approximate number of months that it would 

take to repay an outstanding balance if a consumer pays only the 

required minimum monthly payments and if no other advances are 

made. The table should reflect a significant number of different annual percentage rates, and account balances, minimum payment 

amounts. The Board must also promulgate regulations providing 

instructional guidance regarding the manner in which the information contained in the tables should be used to respond to a request 

by an obligor under this provision. Section 1301(a) provides that 

the disclosure requirements of this provision are inapplicable to 

any charge card account where the primary purpose of which is to 

require payment of charges in full each month. 

Section 1301(b)(1) requires the Federal Reserve Board to promulgate regulations implementing section 1301(a)’s amendments to 

section 127. Section 1301(b)(2) specifies that the effective date of 

the amendments under subsection (a) and the regulations required 

under this provision shall not take effect until the later of 18 

months after the date of enactment of this Act or 12 months after 

the publication of final regulations by the Board. 

Section 1301(c) authorizes the Federal Reserve Board to conduct a study to determine the types of information available to potential borrowers from consumer credit lending institutions regarding factors qualifying potential borrowers for credit, repayment requirements, and the consequences of default. The provision specifies the factors that should be considered. The study’s findings 

must be submitted to Congress and include recommendations for 

legislative initiatives, based on the Board’s findings. 

Sec. 1302. Enhanced disclosure for credit extensions secured by a 

dwelling 

Section 1302 of the conference report is identical to section 

1302 of the House bill and the Senate amendment. Subsection 

(a)(1) amends section 127A(a)(13) of the Truth in Lending Act to 

require a statement in any case in which the extension of credit exceeds the fair market value of a dwelling specifying that the interest on the portion of the credit extension that is greater than the 

fair market value of the dwelling is not tax deductible for Federal 

income tax purposes. Section 1302(a)(2) amends section 147(b) of 

the Truth in Lending Act to require an advertisement relating to 

an extension of credit that may exceed the fair market value of a 

dwelling and such advertisement is disseminated in paper form to 

the public or through the Internet (as opposed to dissemination by 

radio or television) to include a specified statement. The statement 

must disclose that the interest on the portion of the credit extension that is greater than the fair market value of the dwelling is 

not tax deductible for Federal income tax purposes and that the 

consumer should consult a tax advisor for further information regarding the deductibility of interest and charges. 

With respect to non-open end credit extensions, section 

1302(b)(1) amends section 128 of the Truth in Lending Act to require that a consumer receive a specified statement at the time he 

or she applies for credit with respect to a consumer credit transVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00299 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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action secured by the consumer’s principal dwelling and where the 

credit extension may exceed the fair market value of the dwelling 

must contain a specified statement. The statement must disclose 

that the interest on the portion of the credit extension that exceeds 

the dwelling’s fair market value is not tax deductible for Federal 

income tax purposes and that the consumer should consult a tax 

advisor for further information regarding the deductibility of interest and charges. Section 1302(b)(2) requires certain advertisements 

disseminated in paper form to the public or through the Internet 

that relate to a consumer credit transaction secured by a consumer’s principal dwelling where the extension of credit may exceed the dwelling’s fair market value to contain specified statements. These statements advise that the interest on the portion of 

the credit extension that is greater than the fair market value of 

the dwelling is not tax deductible for Federal income tax purposes 

and that the consumer should consult a tax advisor for further information regarding the deductibility of interest and charges. 

Section 1302(c)(1) requires the Federal Reserve Board to promulgate regulations implementing the amendments effectuated by 

this provision. Section 1302(c)(2) provides that these regulations 

shall not take effect until the later of 12 months following the Act’s 

enactment date or 12 months after the date of publication of such 

final regulations by the Board. 

Sec. 1303. Disclosures related to ‘‘introductory rates’’

Section 1303 of the conference report is substantively identical 

to section 1303 of the House bill and the Senate amendment. Subsection (a) amends section 127(c) of the Truth in Lending Act by 

adding a provision to add further requirements for applications, solicitations and related materials that are subject to section 

127(c)(1). With respect to an application or solicitation to open a 

credit card account and all promotional materials accompanying 

such application or solicitation involving an ‘‘introductory rate’’

offer, such materials must do the following if they offer a temporary annual percentage rate of interest: 

(16) the term ‘‘introductory’’ in immediate proximity to 

each listing of the temporary annual percentage interest rate 

applicable to such account; 

(17) if the annual percentage interest rate that will apply 

after the end of the temporary rate period will be a fixed rate, 

the time period in which the introductory period will end and 

the annual percentage rate that will apply after the end of the 

introductory period must be clearly and conspicuously stated in 

a prominent location closely proximate to the first listing of the 

temporary annual percentage rate; 

(18) if the annual percentage rate that will apply after the 

end of the temporary rate period will vary in accordance with 

an index, the time period in which the introductory period will 

end and the rate that will apply after that, based on an annual 

percentage rate that was in effect 60 days before the date of 

mailing of the application or solicitation must be clearly and 

conspicuously stated in a prominent location closely proximate 

to the first listing of the temporary annual percentage rate. 

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The second and third provisions described above do not apply 

to any listing of a temporary annual percentage rate on an envelope or other enclosure in which an application or solicitation to 

open a credit card account is mailed. With respect to an application 

or solicitation to open a credit card account for which disclosure is 

required pursuant to section 127(c)(1) of the Truth in Lending Act, 

section 1303(a) specifies that certain statements be made if the 

rate of interest is revocable under any circumstance or upon any 

event. The statements must clearly and conspicuously appear in a 

prominent manner on or with the application or solicitation. The 

disclosures include a general description of the circumstances that 

may result in the revocation of the temporary annual percentage 

rate and an explanation of the type of interest rate that will apply 

upon revocation of the temporary rate. 

To implement this provision, section 1303(b) amends section 

127(c) of the Truth in Lending Act to define various relevant terms 

and requires the Board to promulgate regulations. The provision 

does not become effective until the earlier of 12 months after the 

Act’s enactment date or 12 months after the date of publication of 

such final regulations. 

Sec. 1304. Internet-based credit card solicitations 

Section 1304 of the conference report is substantively identical 

to section 1304 of the House bill and the Senate amendment. Subsection (a) amends section 127(c) of the Truth in Lending Act to require any solicitation to open a credit card account for an open end 

consumer credit plan through the Internet or other interactive computer service to clearly and conspicuously include the disclosures 

required under section 127(c)(1)(A) and (B). It also specifies that 

the disclosure required pursuant to section 127(c)(1)(A) be readily 

accessible to consumers in close proximity to the solicitation and be 

updated regularly to reflect current policies, terms, and fee 

amounts applicable to the credit card account. Section 1304(a) defines terms relevant to the Internet. 

Section 1304(b) requires the Federal Reserve Board to promulgate regulations implementing this provision. It also provides that 

the amendments effectuated by section 1304 do not take effect until 

the later of 12 months after the Act’s enactment date or 12 months 

after the date of publication of such regulations. 

Sec. 1305. Disclosures related to late payment deadlines and penalties 

Section 1305 of the conference report is substantively identical 

to section 1305 of the House bill and the Senate amendment. Subsection (a) amends section 127(b) of the Truth in Lending Act to 

provide that if a late payment fee is to be imposed due to the obligor’s failure to make payment on or before a required payment due 

date, the billing statement must specify the date on which that 

payment is due (or if different the earliest date on which a late 

payment fee may be charged) and the amount of the late payment 

fee to be imposed if payment is made after such date. 

Section 1305(b) requires the Federal Reserve Board to promulgate regulations implementing this provision. The amendments effectuated by this provision and the regulations promulgated thereVerDate Jul 19 2002 07:18 Jul 30, 2002 Jkt 080862 PO 00000 Frm 00301 Fmt 6604 Sfmt 6601 E:\HR\OC\HR617.XXX pfrm72 PsN: HR617
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under shall not take effect until the later of 12 months after the 

Act’s enactment date or 12 months after the date of publication of 

the regulations. 

Sec. 1306. Prohibition on certain actions for failure to incur finance 

charges 

Section 1306 of the conference report is substantively identical 

to section 1306 of the House bill and the Senate amendment. Subsection (a) amends section 127 of the Truth in Lending Act to add 

a provision prohibiting a creditor of an open end consumer credit 

plan from terminating an account prior to its expiration date solely 

because the consumer has not incurred finance charges on the account. The provision does not prevent the creditor from terminating 

such account for inactivity for three or more consecutive months. 

Section 1306(b) requires the Federal Reserve Board to promulgate regulations implementing the amendments effectuated by section 1306(a) and provides that they do not become effective until 

the later of 12 months after the Act’s enactment date or 12 months 

after the date of publication of such final regulations. 

Sec. 1307. Dual use debit card 

Section 1307 of the conference report is substantively identical 

to section 1307 of the House bill and the Senate amendment. Subsection (a) provides that the Federal Reserve Board may conduct 

a study and submit a report to Congress containing its analysis of 

consumer protections under existing law to limit the liability of 

consumers for unauthorized use of a debit card or similar access 

device. The report must include recommendations for legislative 

initiatives, if any, based on its findings. 

Section 1307(b) provides that the Federal Reserve Board, in 

preparing its report, may include analysis of section 909 of the 

Electronic Fund Transfer Act to the extent this provision is in effect at the time of the report and the implementing regulations. In 

addition, the analysis may pertain to whether any voluntary industry rules have enhanced or may enhance the level of protection afforded consumers in connection with such unauthorized use liability and whether amendments to the Electronic Fund Transfer Act 

or implementing regulations are necessary to further address adequate protection for consumers concerning unauthorized use liability. 

Sec. 1308. Study of bankruptcy impact of credit extended to dependent students 

Section 1308 of the conference report is substantively identical 

to section 1308 of the House bill and the Senate amendment. This 

provision directs the Board of Governors of the Federal Reserve to 

study the impact that the extension of credit to dependents (defined under the Internal Revenue Code of 1986) who are enrolled 

in postsecondary educational institutions has on the rate of bankruptcy cases filed. The report must be submitted to the Senate and 

House of Representatives no later than one year from the Act’s enactment date. 

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Sec. 1309. Clarification of clear and conspicuous 

Section 1309 of the conference report is substantively identical 

to section 1309 of the House bill and the Senate amendment. Subsection (a) requires the Board (in consultation with other Federal 

banking agencies, the National Credit Union Administration 

Board, and the Federal Trade Commission) to promulgate regulations not later than six months after the Act’s enactment date to 

provide guidance on the meaning of the term ‘‘clear and conspicuous’’ as it is used in section 127(b)(11)(A), (B) and (C) and section 127(c)(6)(A)(ii) and (iii) of the Truth in Lending Act. 

Section 1309(b) provides that regulations promulgated under 

section 1309(a) shall include examples of clear and conspicuous 

model disclosures for the purpose of disclosures required under the 

Truth in Lending Act provisions set forth therein. 

Section 1309(c) requires the Federal Reserve Board, in promulgating regulations under this provision, to ensure that the clear 

and conspicuous standard required for disclosures made under the 

Truth in Lending Act provisions set forth in section 1309(a) can be 

implemented in a manner that results in disclosures which are reasonably understandable and designed to call attention to the nature and significance of the information in the notice. 

TITLE XIV—GENERAL EFFECTIVE DATE; APPLICATION OF

AMENDMENTS

Sec. 1401. Effective date; application of amendments 

Section 1401 of the conference report is identical to section 

1401 of the House bill and section 1501 of the Senate amendment. 

Subsection (a) states that the Act shall take effect 180 days after 

the date of enactment, unless otherwise specified in this Act. Section 1401(b) provides that the amendments made by this Act shall 

not apply to cases commenced under the Bankruptcy Code before 

the Act’s effective date, unless otherwise specified in this Act. The 

provision specifies that the amendments made by sections 308 and 

322 shall apply to cases commenced on or after the date of enactment of this Act.

From the Committee on the Judiciary, for consideration of 

the House bill and the Senate amendment, and modifications committed to conference: 

F. JAMES SENSENBRENNER, 

HENRY J. HYDE, 

GEORGE W. GEKAS, 

LAMAR SMITH, STEVE CHABOT, 

BOB BARR, 

RICK BOUCHER, 

From the Committee on Financial Services, for consideration of secs. 901–906, 907A–909, 911, and 1301–1309 of 

the House bill, and secs. 901–906, 907A–909, 911, 913–4, 

and title XIII of the Senate amendment, and modifications 

committed to conference: 

MICHAEL G. OXLEY, 

SPENCER BACHUS, 

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From the Committee on Energy and Commerce, for consideration of title XIV of the Senate amendment, and modifications committed to conference: 

BILLY TAUZIN, JOE BARTON, From the Committee on Education and the Workforce, for 

consideration of sec. 1403 of the Senate amendment, and 

modifications committed to conference: 

JOHN BOEHNER, MICHAEL N. CASTLE, Managers on the Part of the House.

PATRICK LEAHY, 

JOE BIDEN, 

CHARLES SCHUMER, 

ORRIN HATCH, 

CHUCK GRASSLEY, 

JON KYL, 

MIKE DEWINE, 

JEFF SESSIONS, 

MITCH MCCONNELL, 

Managers on the Part of the Senate.

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