This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

29339

Vol. 63, No. 103

Friday, May 29, 1998

DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Part 1962

RIN 0560–AE62

Post Bankruptcy Loan Servicing

Notices

AGENCIES: Rural Housing Service, Rural

Business-Cooperative Service, Rural

Utilities Service, and Farm Service

Agency, USDA.

ACTION: Final rule.

SUMMARY: The Farm Service Agency

(FSA) is amending its regulations

regarding servicing accounts when a

bankruptcy filing is dismissed. This

change will clarify when a Notice of the

Availability of Loan Service and Debt

Settlement Programs for Delinquent

Farm Borrowers will be sent to a

borrower who is in or has been

dismissed from bankruptcy. The

intended effect of this rule is to improve

the efficiency of the Agency’s servicing

of delinquent borrowers who have filed

bankruptcy petitions.

EFFECTIVE DATE: May 29, 1998.

FOR FURTHER INFORMATION CONTACT:

Kimberly R. Laris, Senior Loan Officer,

Farm Service Agency, U.S. Department

of Agriculture, Room 5441–S, 1400

Independence Age., SW, Washington,

D.C. 20250–0523; Telephone: 202–720–

1659, e-mail: klaris@wdc.fsa.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be

not significant for purposes of Executive

Order 12866 and, therefore, has not

been reviewed by the Office of

Management and Budget.

Regulatory Flexibility Act

New provisions included in this rule

will not have a significant economic

impact on a substantial number of small

entities. It will not impact small entities

to a greater extent than large entities,

except to the extent that large entities

may not be eligible for loan assistance

to begin with, since they would be

considered larger than a family-sized

farm. Thus large entities may not be

borrowers who have filed bankruptcy

petitions, and therefore, subject to these

rules. To the extent that large entities

qualify for Farm Loan Program loan

assistance and file bankruptcy petitions,

large entities are subject to these rules

to the same extent as small entities.

Therefore, this rule is determined to be

exempt from the requirements of the

Regulatory Flexibility Act (5 U.S.C.

601).

Environmental Impact Statement

This document has been reviewed in

accordance with 7 CFR part 1940,

subpart G, ‘‘Environmental Program.’’

The issuing agencies have determined

that this action does not significantly

affect the quality of human

environment, and in accordance with

the National Environmental Policy Act

of 1969, Pub. L. 91–190, an

Environmental Impact Statement is not

required.

Executive Order 12988

This final rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. All State and local laws

and regulations that are in conflict with

this rule will be preempted. No

retroactive effect will be given to this

rule. Administrative proceedings in

accordance with 7 CFR parts 11 and 780

must be exhausted before bringing suit

in court challenging action taken under

this rule unless those regulations

specifically allow bringing suit at an

earlier time.

Federal Assistance Programs Affected

10.404—Emergency Loans

10.406—Farm Operating Loans

10.407—Farm Ownership Loans

Executive Order 12372

For reasons set forth in the notice to

7 CFR part 3015, subpart V (48 FR

29115, June 24, 1983), Farm Operating

Loans and Emergency Loans are

excluded from the scope of Executive

Order 12372, which requires

intergovernmental consultation with

State and local officials. However, the

Soil and Water Loan and Farm

Ownership Loan Programs are subject to

the provisions of Executive Order

12372. The Agency has conducted the

intergovernmental consultation

requirements in accordance with RD

Instruction 1940–J. (See the Notice

related to 7 CFR 3015, subpart V, at 48

FR 29112, June 24, 1983; 49 FR 22675,

May 31, 1984; 50 FR 14088, April 10,

1985.)

The Unfunded Mandates Reform Act of

1995

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), Pub. L.

104–4, establishes requirements for

Federal agencies to assess the effects of

their regulatory actions on State, local

and tribal governments and the private

sector of $100 million or more in any 1

year. Under section 202 of the UMRA,

FSA generally must prepare a written

statement, including a cost-benefit

analysis, for proposed and final rules

with ‘‘Federal mandates’’ that may

result in expenditures to State, local, or

tribal governments, in the aggregate, or

to the private sector of $100 million or

more in any 1 year. When such a

statement is needed for a rule, section

202 of the UMRA generally requires

FSA to identify and consider a

reasonable number of regulatory

alternatives and adopt the least costly,

more cost-effective or least burdensome

alternative that achieves the objectives

of the rule.

This rule contains no Federal

mandates (under regulatory provisions

of title II of the UMRA) for State, local,

and tribal governments or the private

sector. Thus, this rule is not subject to

the requirements of sections 202 and

205 of the UMRA.

Discussion

These changes involve the Farm Loan

Programs (FLP) loans of FSA formerly

administered by the Farmers Home

Administration (FmHA). The Farmer

Programs loans reassignment of this

program to FSA was authorized by the

Department of Agriculture

Reorganization Act of 1994 (Pub. L.

103–354, 108 Stat.3178).

Current FSA direct FLP loan servicing

regulations require that a ‘‘Notice of the

Availability of Loan Service Programs

and Debt Settlement Programs for

Delinquent Farm Borrowers,’’ be sent to
29340 Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 /Rules and Regulations

borrowers if their bankruptcy is

dismissed. A delinquent account

servicing notice, pursuant to 7 CFR part

1951, subpart S, may be sent in such

cases, even if the borrower had already

exhausted all servicing rights and the

account had been accelerated prior to

the bankruptcy filing. Repeating the

notice may cause extensive delays in the

collection of accounts and substantially

wastes the money and time of the

Agency by requiring a procedure which

has already been completed. To ensure

that borrowers who had filed

bankruptcy but whose bankruptcy was

dismissed would receive the initial

notification of loan servicing options

required by § 331D of the Consolidated

Farm and Rural Development Act, the

regulations at 7 CFR 1962.47(d)(2) were

rigidly written and construed. However,

they were not intended to require

renotification if the borrower’s servicing

rights had been exhausted prior to the

bankruptcy filing.

In certain situations, the Agency is

limiting the issuance of a new loan

servicing summary notice authorized

under § 331D of the Consolidated Farm

and Rural Development Act (Act).

Provided the account has not been

accelerated, the attorney for the

borrower and the borrower will be

notified only of the loan servicing

options that remain when the

bankruptcy is filed. That notification

will also occur upon dismissal of a

bankruptcy action without confirmation

of a bankruptcy plan, and upon default

in a confirmed bankruptcy plan if the

bankruptcy has been dismissed or

closed and the borrower has not

substantially completed the confirmed

plan. No additional primary loan

servicing action will be given upon

discharge under chapter 7 of the

Bankruptcy Code.

The Agency’s present loan servicing

program has been in effect since October

14, 1988, and borrowers have had many

opportunities to apply for loan

servicing. Section 1816 of the Food,

Agriculture, Conservation, and Trade

Act of 1990 limited the amount of debt

the Agency could forgive to $300,000

per borrower, and limited writedowns

and buyouts under § 353 of the

Consolidated Farm and Rural

Development Act (Con Act) to one per

borrower on loans made after January 6,

1988.

Section 648(b) of the Federal

Agriculture Improvement and Reform

Act of 1996 (1996 Act) added § 373 to

the Con Act in which Congress imposed

the further limitation that the Agency

may not provide debt forgiveness on a

direct loan if the borrower has already

received debt forgiveness on another

direct loan. Section 640(2) of the 1996

Act added a definition of debt

forgiveness as § 343(a)(12) of the Con

Act that includes discharging of debt as

a result of bankruptcy. Based on these

limitations, it is no longer appropriate

for the Agency to renotify all borrowers

who have previously exhausted loan

servicing options and have been unable

to correct their delinquency or service

their debt. Many of these borrowers will

no longer be eligible for additional loan

servicing.

A proposed rule was published on

July 18, 1996, (61 FR 37405–07) with a

comment period ending August 2, 1996.

Comments were received from only one

party, an organization representing

family farmers. Their comments were

divided into four parts. First, it was

recommended that the rule be clarified

by requiring that notices be sent also to

the borrower at his or her address to

ensure proper notification when a

bankrupt borrower is not represented by

an attorney. Since this recommendation

may help to ensure proper notification,

it was adopted.

Second, the commenter felt that the

requirement in the proposed rule that to

be considered for servicing, a bankrupt

borrower and his or her attorney must

both request loan servicing in writing

was overly burdensome. The Agency

agrees with the commenter and has

amended the rule accordingly by

requiring either the bankrupt borrower

or his or her attorney to submit a request

for servicing.

Third, the commenter noted that the

rule could be interpreted to preclude

sending loan servicing notices to a

bankrupt borrower who becomes

delinquent on an approved plan of

reorganization, even if the borrower has

performed under the plan, if the

borrower has received notices in the

past. In response, the paragraph noted

by the commenter was amended to

require the following: (1) if the borrower

has not exhausted servicing rights, the

notice explaining FSA’s Farm Loan

Programs will be sent to a borrower

whose bankruptcy is dismissed before

one full payment is made under the

plan, unless the borrower’s account is

under the jurisdiction of the bankruptcy

court or has been referred to the

Department of Justice; and (2) a new

loan servicing summary notice will be

sent to a borrower who has a plan

confirmed by the court if the borrower

substantially complies with the

bankruptcy plan, but later defaults on

the plan, and the bankruptcy is

dismissed, provided the lack of

compliance is for reasons beyond the

borrower’s control and the account has

not been accelerated.

As was the case under the predecessor

rule, in the situation described in item

(2) of the preceding paragraph, no new

loan servicing summary notices will be

sent if the Agency is advised that

sending the notices is inconsistent with

the provisions of the confirmed

bankruptcy plan or the Bankruptcy

Code. Also, no notices will be sent if the

case is within the jurisdiction of the

bankruptcy court or has been referred to

the Department of Justice. This

exception is provided to correct

situations where there are jurisdictional

conflicts between those delegated to

finally decide the matter. The Agency

wished to conform to jurisdictional

principles that establish the superior

authority of a bankruptcy court and the

Department of Justice. Of course, any

borrower who has satisfactorily

completed the confirmed plan will be

treated the same as any other

rehabilitated borrower for the purpose

of loan servicing.

The Agency believes that these

changes to the proposed rule conform to

the spirit of the commenter’s objections

because they provide that most

delinquent borrowers, except as

explained above, who have substantially

complied with their bankruptcy plans

will receive an additional opportunity

to apply for loan servicing within the

parameters provided by Congress. This

policy is justified because the

obligations of these borrowers to the

Agency have been modified by a

confirmed bankruptcy plan (for

borrowers filing under chapter 11 of the

Bankruptcy Code) or by a completed

bankruptcy plan (for borrowers filing

under chapters 12 and 13 of the

Bankruptcy Code), and they have

substantially complied with this

obligation.

While Lee v. Yuetter, 917 F.2d 1104

(8th Cir.1990), upheld the Agency’s

regulation providing that discharged

chapter 7 borrowers did not have

outstanding obligations to the Agency

and were not borrowers for primary loan

servicing purposes, this holding is

limited to borrowers discharged under

chapter 7 of the Bankruptcy Code. See

Lee v. Yeutter, 106 B.R. 588, 592 (D.

Minn., 1989), which contrasted

borrowers discharged under chapter 7 of

the Bankruptcy Code who have no debt

to the Agency that could be further

restructured with those borrowers who

filed under the reorganization chapters

of the Bankruptcy Code who have

obligations to the Agency under their

confirmed bankruptcy plans which are

capable of being restructured.

Accordingly, the Agency has always

considered borrowers discharged under

confirmed reorganization bankruptcy
Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 /Rules and Regulations 29341

plans to still be ‘‘borrowers.’’ While

discharged reorganization borrowers

who have completed a confirmed plan,

like other borrowers who have received

previous debt forgiveness from the

Agency on another loan, cannot receive

additional debt forgiveness, as defined

by § 343(a)(12) of the Con Act, they may

be eligible for other servicing options

provided by FSA regulations.

The commenter also was disturbed by

the Agency’s removal of internal agency

processes from its published regulations

and placing these items in a handbook

which would be available to the public

upon request at no cost. The commenter

expressed concerns that the Agency’s

streamlining efforts may undercut the

rulemaking process and substantive

requirements upon which public

comment should be solicited will be left

out of the Federal Register. The

commenter offered the example of the

former Agricultural Stabilization and

Conservation Service allegedly

maintaining handbook provisions that

conflicted with published regulations,

and using the handbook instead of

regulations to implement substantive

provisions. As an alternative, the

commenter suggests that the Agency

narrowly define the content of the

handbook so that it would include only

those items which are clearly internal

operating procedures.

The commenter’s concerns are

understandable. However, Agency

regulations, as they are currently

written, contain an excessive amount of

specific internal policy. In accordance

with a Governmentwide mandate of the

National Performance Review, the

Agency must remove internal

administrative processes from the

regulations. In addition, 5 U.S.C. 551

does not require the publication of

internal administrative processes not

affecting the general public. Reform of

FSA regulations will ultimately obsolete

the regulations of the defunct FmHA,

reduce the burden associated with

making policy changes, improve the

readability of regulations and reduce the

volume of extraneous published

material.

For example, in this rule, the Agency

is removing the specific references to

Exhibit D (Notice to Borrower’s

Attorney Regarding Loan Servicing

Options) of this subpart, that is sent

with the loan servicing notices to

explain the interrelationship of the loan

servicing programs to the bankruptcy

petitions filed under chapters 7, 11, 12,

and 13 of the Bankruptcy Code. While

the Agency will continue to use this

type of specialized notice, there is no

statutory requirement that this type of

notice be sent. Since these matters

involve internal operating procedures,

the requirement will be contained in the

Agency’s handbook only, with the

regulations referencing only that a

notice will be sent. Similarly, the

Agency has removed Exhibit D from this

subpart. Since this document is an

informational cover letter sent with the

notices, the Agency is not required to

publish it.

The commenter suggested that the

FSA handbooks be available to the

general public through the FSA Web

Page. Currently, the FSA Web Page is

limited to general information on the

Agency’s programs; however, the

Agency does plan to provide FSA

handbooks through a Web Page as soon

as resources are available. The

procedures used by the USDA, Rural

Development agencies, which include

many procedures of the former FmHA,

are available on the World Wide Web at

http://www.rdinit.usda.gov/regs/. This

includes procedures that are shared by

FSA Farm Loan Programs and the Rural

Development agencies, including the

one affected by this final rule, RD

Instruction 1962–A.

Good cause is shown to make this rule

immediately effective upon publication

in the Federal Register and without the

30-day period required by 5 U.S.C. 551.

This rule substantially improves the

efficiency of the Agency’s servicing of

delinquent borrowers who have filed

bankruptcy petitions by revising the

requirement that additional loan

servicing notices be sent whenever a

bankruptcy is dismissed. Also, the

Agency will notify borrowers within the

jurisdiction of the bankruptcy court of

remaining servicing rights rather than

beginning the lengthy servicing process

anew whenever a bankruptcy is filed,

regardless of whether the account has

been previously accelerated or the

Agency has previously sent servicing

notices. Expediting liquidation when

servicing rights have been exhausted

serves the public interest. Therefore,

good cause is shown to make this final

rule effective immediately.

List of Subjects in 7 CFR Part 1962

Crops, Government property,

Livestock, Loan programs—agriculture,

Rural areas.

Accordingly, chapter XVIII, title 7,

Code of Federal Regulations, is

amended as follows:

PART 1962—PERSONAL PROPERTY

1. The authority citation for part 1962

continues to read as follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42

U.S.C. 1480.

Subpart A—Servicing and Liquidation

of Chattel Security

2. Section 1962.47 is revised to read

as follows:

§ 1962.47 Bankruptcy and insolvency.

(a) Borrower files bankruptcy. When

the Agency becomes aware that a Farm

Loan Programs borrower has filed for

protection under Title 11 of the United

States Code (bankruptcy), the borrower

and the borrower’s attorney, if any, will

be notified in writing of the borrower’s

remaining servicing options.

(1) If the borrower wishes to apply for

servicing options remaining, the

borrower, or the borrower’s attorney on

behalf of the borrower, must sign and

return the appropriate response form, or

similar written request for servicing,

and any forms or information as

requested by the Agency, within 60 days

from the date the borrower or the

borrower’s attorney received the

notification, or the time remaining from

a previous notification that was

suspended when the borrower filed

bankruptcy, whichever is greater.

(2) The Agency will consider a

request for servicing options to be an

acknowledgment that the Agency will

not be interfering with any rights or

protections under the Bankruptcy Code

and its automatic stay provisions.

(3) The Agency’s processing of any

request for servicing may include

consideration of primary and

preservation loan servicing options,

notification of the Agency’s decision on

the request or application for servicing,

mediation, and holding of any meetings

or appeals requested by the borrower.

(4) If court approval is required for the

borrower to exercise these servicing

rights, it will be the borrower or the

borrower’s attorney’s responsibility to

obtain that approval.

(5) If a plan is confirmed before

servicing and any appeal is completed

under 7 CFR part 11, the Agency will

complete the servicing or appeals

process and may consent to a postconfirmation modification of the plan if

it is consistent with the Bankruptcy

Code and 7 CFR part 1951, subpart S,

as appropriate.

(6) In chapter 7 cases, the Agency will

not provide primary loan servicing to a

borrower discharged in bankruptcy

unless the borrower reaffirms the entire

Agency debt. If the chapter 7 debtor

obtains the permission of the court and

reaffirms the debt, the loan servicing

application will be processed in

accordance with 7 CFR part 1951,

subpart S. If the borrower reaffirms the

Agency debt in order to be considered

for restructuring but is later denied
29342 Federal Register / Vol. 63, No. 103 / Friday, May 29, 1998 /Rules and Regulations

restructuring, the borrower may revoke

the reaffirmation subject to the

provisions of the Bankruptcy Code. No

reaffirmation is necessary for any

discharged chapter 7 borrower to be

eligible for preservation loan servicing

in accordance with 7 CFR part 1951,

subpart S.

(b) Borrower defaults on plan or

bankruptcy is dismissed—(1) 90 days

past due on a reorganization plan while

still under court jurisdiction.

(i) If allowed by the Bankruptcy Code

or court, the borrower and the

borrower’s attorney, if any, will be

notified of any remaining servicing

options under 7 CFR part 1951, subpart

S, that were not exhausted prior to filing

bankruptcy or during the bankruptcy

proceedings according to paragraph (a)

of this section.

(ii) No notices will be sent if the

account was previously accelerated,

such action is inconsistent with the

provisions of the confirmed bankruptcy

plan or the Bankruptcy Code, or the case

has been referred to the Department of

Justice.

(iii) If a borrower operating under a

confirmed bankruptcy plan desires to

apply for loan servicing and qualifies for

servicing under 7 CFR part 1951,

subpart S, the borrower must also

comply with Bankruptcy Code rules and

requirements concerning modification

of the plan.

(2) Bankruptcy is dismissed without a

confirmed plan. If the borrower’s

bankruptcy is dismissed without a

confirmed plan, and the borrower is in

default on Farm Loan Programs loans,

the borrower’s account will be

liquidated after all remaining servicing

options under 7 CFR part 1951, subpart

S are exhausted. The borrower will be

notified of any servicing options

remaining according to 7 CFR part 1951,

subpart S. Notwithstanding the previous

sentence, no notices will be sent if the

account was previously accelerated, the

Agency is advised that such an act is

inconsistent with the confirmed

bankruptcy plan or the Bankruptcy

Code, or the account has been referred

to the Department of Justice.

(3) Bankruptcy is dismissed after a

confirmed reorganization plan. If a

bankruptcy is dismissed after a

reorganization plan was confirmed, the

account will be serviced as follows:

(i) If the borrower has substantially

complied with the plan, but later

defaults for reasons beyond the

borrower’s control, (see 7 CFR

1951.909(c)), the borrower will be

notified of loan servicing in accordance

with 7 CFR 1951.907. No notices will be

sent if the account was previously

accelerated; such action is inconsistent

with the provisions of the confirmed

bankruptcy plan or the Bankruptcy

Code; or the case has been referred to

the Department of Justice.

(ii) If the borrower failed to make one

full payment under the plan, or did not

comply with the plan for reasons not

beyond the borrower’s control, the

borrower will be serviced according to

paragraph (b)(2) of this section.

(c) Servicing of bankruptcy loans after

the case is closed. In chapter 11, 12, or

13 cases after the case is closed and the

discharge order is issued by the court,

if the borrower becomes delinquent after

performing as agreed under the plan, the

borrower will be sent a notice

explaining the loan servicing options

available under 7 CFR part 1951,

subpart S. The borrower’s attorney of

record will be sent a courtesy copy if the

bankruptcy has not been closed for at

least 2 years. No notices will be sent if

the account has been accelerated, such

act is inconsistent with the provisions of

a confirmed bankruptcy plan or other

provisions of the Bankruptcy Code, or

the account has been referred to the

Department of Justice.

(d) Liquidation. The account will be

liquidated after obtaining any necessary

relief, if required, from the automatic

stay. In chapter 7 cases after discharge,

the account can be liquidated if the debt

has not been reaffirmed and the

property is no longer part of the estate.

Liquidation can proceed prior to

discharge if allowed by the court.

(1) If the borrower or borrower’s

attorney was not previously notified of

any remaining servicing options

available under 7 CFR part 1951,

subpart S before or during the course of

the bankruptcy proceedings, the

borrower and the borrower’s attorney

will be sent the notices referenced in

paragraph (c) of this section prior to

liquidating any security property.

(2) If the borrower or the borrower’s

attorney had been previously notified of

loan servicing options remaining, the

account will be liquidated.

3. Exhibit D of subpart A is removed

and reserved.

Signed in Washington, D.C., on March 21,

1998.

August Schumacher, Jr.,

Under Secretary for Farm and Foreign

Agricultural Services.

Signed in Washington, D.C., on April 6,

1998.

Jill Long Thompson,

Under Secretary for Rural Development.

[FR Doc. 98–14007 Filed 5–28–98; 8:45 am]

BILLING CODE 3410–05–P

DEPARTMENT OF AGRICULTURE

Animal and Plant Health Inspection

Service

9 CFR Part 97

[Docket No. 98–051–1]

Commuted Traveltime Periods:

Overtime Services Relating to Imports

and Exports

AGENCY: Animal and Plant Health

Inspection Service, USDA.

ACTION: Final rule.

SUMMARY: We are amending the

regulations concerning overtime

services provided by employees of

Veterinary Services for travel from

Champlain, NY, to Highgate, VT.

Commuted traveltime allowances are

the periods of time required for

Veterinary Services employees to travel

from their dispatch points and return

there from the places where they

perform Sunday, holiday, or other

overtime duty. The Government charges

a fee for certain overtime services

provided by Veterinary Services

employees and, under certain

circumstances, the fee may include the

cost of commuted traveltime. This

action is necessary to inform the public

of commuted traveltime for these

locations.

EFFECTIVE DATE: May 29, 1998.

FOR FURTHER INFORMATION CONTACT: Ms.

Louise Rakestraw Lothery, Director,

Resource Management Support, VS,

APHIS, 4700 River Road Unit 44,

Riverdale, MD 20737, (301) 734–7517.

SUPPLEMENTARY INFORMATION:

Background

The regulations in 9 CFR, chapter I,

subchapter D, and 7 CFR, chapter III,

require inspection, laboratory testing,

certification, or quarantine of certain

animals, animal products, plants, plant

products, or other commodities

intended for importation into, or

exportation from, the United States.

When these services must be provided

by an employee of Veterinary Services

(VS) on a Sunday or holiday, or at any

other time outside the VS employee’s

regular duty hours, the Government

charges a fee for the services in

accordance with 9 CFR part 97. Under

circumstances described in 97.1(a), this

fee may include the cost of commuted

traveltime. Section 97.2 contains

administrative instructions prescribing

commuted traveltime allowances, which

reflect, as nearly as practicable, the

periods of time required for VS

employees to travel from their dispatch

points and return there from the places