I 

113TH CONGRESS 

2D SESSION H. R. 5421 

To amend title 11 of the United States Code in order to facilitate the 

resolution of an insolvent financial institution in bankruptcy. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 9, 2014 

Mr. BACHUS (for himself, Mr. GOODLATTE, and Mr. CONYERS) introduced the 

following bill; which was referred to the Committee on the Judiciary 

A BILL 

To amend title 11 of the United States Code in order to 

facilitate the resolution of an insolvent financial institution in bankruptcy. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Financial Institution 

5 Bankruptcy Act of 2014’’. 

6 SEC. 2. GENERAL PROVISIONS RELATING TO COVERED FI7 NANCIAL CORPORATIONS. 

8 (a) DEFINITION.—Section 101 of title 11, United 

9 States Code, is amended by inserting the following after 

10 paragraph (9): 


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1 ‘‘(9A) The term ‘covered financial corporation’ 

2 means any corporation incorporated or organized 

3 under any Federal or State law, other than a stock4 broker, a commodity broker, or an entity of the kind 

5 specified in paragraph (2) or (3) of section 109(b), 

6 that is— 

7 ‘‘(A) a bank holding company, as defined 

8 in section 2(a) of the Bank Holding Company 

9 Act of 1956; or 

10 ‘‘(B) a corporation that exists for the pri11 mary purpose of owning, controlling and financ12 ing its subsidiaries, that has total consolidated 

13 assets of $50,000,000,000 or greater, and for 

14 which, in its most recently completed fiscal 

15 year— 

16 ‘‘(i) annual gross revenues derived by 

17 the corporation and all of its subsidiaries 

18 from activities that are financial in nature 

19 (as defined in section 4(k) of the Bank 

20 Holding Company Act of 1956) and, if ap21 plicable, from the ownership or control of 

22 one or more insured depository institu23 tions, represents 85 percent or more of the 

24 consolidated annual gross revenues of the 

25 corporation; or 


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1 ‘‘(ii) the consolidated assets of the 

2 corporation and all of its subsidiaries re3 lated to activities that are financial in na4 ture (as defined in section 4(k) of the 

5 Bank Holding Company Act of 1956) and, 

6 if applicable, related to the ownership or 

7 control of one or more insured depository 

8 institutions, represents 85 percent or more 

9 of the consolidated assets of the corpora10 tion.’’. 

11 (b) APPLICABILITY OF CHAPTERS.—Section 103 of 

12 title 11, United States Code, is amended by adding at the 

13 end the following: 

14 ‘‘(l) Subchapter V of chapter 11 of this title applies 

15 only in a case under chapter 11 concerning a covered fi16 nancial corporation.’’. 

17 (c) WHO MAY BE A DEBTOR.—Section 109 of title 

18 11, United States Code, is amended— 

19 (1) in subsection (b)— 

20 (A) in paragraph (2), by striking ‘‘or’’ at 

21 the end; 

22 (B) in paragraph (3)(B), by striking the 

23 period at the end and inserting ‘‘; or’’; and 

24 (C) by adding at the end the following: 

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


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1 (2) in subsection (d)— 

2 (A) by striking ‘‘and’’ before ‘‘an unin3 sured State member bank’’; 

4 (B) by striking ‘‘or’’ before ‘‘a corpora5 tion’’; and 

6 (C) by inserting ‘‘, or a covered financial 

7 corporation’’ after ‘‘Federal Deposit Insurance 

8 Corporation Improvement Act of 1991’’. 

9 (d) CONVERSION TO CHAPTER 7.—Section 1112 of 

10 title 11, United States Code, is amended by adding at the 

11 end the following: 

12 ‘‘(g) Notwithstanding section 109(b), the court may 

13 convert a case under subchapter V to a case under chapter 

14 7 if— 

15 ‘‘(1) a transfer approved under section 1185 

16 has been consummated; 

17 ‘‘(2) the court has ordered the appointment of 

18 a special trustee under section 1186; and 

19 ‘‘(3) the court finds, after notice and a hearing, 

20 that conversion is in the best interest of the credi21 tors and the estate.’’. 

22 (e)(1) Section 726(a)(1) of title 11, United States 

23 Code, is amended by inserting after ‘‘first,’’ the following: 

24 ‘‘in payment of any unpaid fees, costs, and expenses of 

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


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1 (2) Section 1129(a) of title 11, United States Code, 

2 is amended by inserting after paragraph (16) the fol3 lowing: 

4 ‘‘(17) In a case under subchapter V, all payable 

5 fees, costs, and expenses of the special trustee have 

6 been paid or the plan provides for the payment of 

7 all such fees, costs, and expenses on the effective 

8 date of the plan. 

9 ‘‘(18) In a case under subchapter V, confirma10 tion of the plan is not likely to cause serious adverse 

11 effects on financial stability in the United States.’’. 

12 (f) Section 322(b)(2) of title 11, United States Code, 

13 is amended by striking ‘‘The’’ and inserting ‘‘In cases 

14 under subchapter V, the United States trustee shall rec15 ommend to the court, and in all other cases, the’’. 

16 SEC. 3. LIQUIDATION, REORGANIZATION, OR RECAPITAL17 IZATION OF A COVERED FINANCIAL COR18 PORATION. 

19 Chapter 11 of title 11, United States Code, is amend20 ed by adding at the end the following: 


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1 ‘‘SUBCHAPTER V—LIQUIDATION, REORGANIZA2 TION, OR RECAPITALIZATION OF A COV3 ERED FINANCIAL CORPORATION 

4 ‘‘§ 1181. Inapplicability of other sections 

5 ‘‘Sections 303 and 321(c) do not apply in a case 

6 under this subchapter concerning a covered financial cor7 poration. 

8 ‘‘§ 1182. Definitions for this subchapter 

9 ‘‘In this subchapter, the following definitions shall 

10 apply: 

11 ‘‘(1) The term ‘Board’ means the Board of 

12 Governors of the Federal Reserve System. 

13 ‘‘(2) The term ‘bridge company’ means a newly 

14 formed corporation to which property of the estate 

15 may be transferred under section 1185(a) and the 

16 equity securities of which may be transferred to a 

17 special trustee under section 1186(a). 

18 ‘‘(3) The term ‘capital structure debt’ means all 

19 unsecured debt of the debtor for borrowed money, 

20 other than a qualified financial contract, for which 

21 the debtor is the primary obligor other than debt se22 cured by a lien on property of the estate that is to 

23 be transferred to a bridge company pursuant to an 

24 order of the court under section 1185(a). 


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1 ‘‘(4) The term ‘contractual right’ means a con2 tractual right of a kind defined in section 555, 556, 

3 559, 560, or 561. 

4 ‘‘(5) The term ‘qualified financial contract’ 

5 means any contract of a kind defined in paragraph 

6 (25), (38A), (47), or (53B) of section 101, section 

7 741(7), or paragraph (4), (5), (11), or (13) of sec8 tion 761. 

9 ‘‘(6) The term ‘special trustee’ means the trust10 ee of a trust formed under section 1186(a)(1). 

11 ‘‘§ 1183. Commencement of a case concerning a cov12 ered financial corporation 

13 ‘‘(a) A case under this subchapter concerning a cov14 ered financial corporation may be commenced by the filing 

15 of a petition with the court— 

16 ‘‘(1) by the debtor under section 301 only if the 

17 debtor states to the best of its knowledge under pen18 alty of perjury in the petition that it is a covered fi19 nancial corporation; or 

20 ‘‘(2) by the Board only if the Board states to 

21 the best of its knowledge under penalty of perjury 

22 in the petition that— 

23 ‘‘(A) the debtor is a covered financial cor24 poration that— 


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1 ‘‘(i) has incurred losses that will de2 plete all or substantially all of the capital 

3 of the covered financial corporation, and 

4 there is no reasonable prospect for the cov5 ered financial corporation to avoid such de6 pletion; 

7 ‘‘(ii) is insolvent; 

8 ‘‘(iii) is not paying, or is unable to 

9 pay, the debts of the covered financial cor10 poration (other than debts subject to a 

11 bona fide dispute as to liability or amount) 

12 as they become due; or 

13 ‘‘(iv) is likely to be in a financial con14 dition specified in clause (i), (ii), or (iii) 

15 sufficiently soon such that the immediate 

16 commencement of a case under this sub17 chapter is necessary to prevent serious ad18 verse effects on financial stability in the 

19 United States; and 

20 ‘‘(B) the commencement of a case under 

21 this title and effecting a transfer under section 

22 1185 is necessary to prevent serious adverse ef23 fects on financial stability in the United States. 

24 ‘‘(b)(1) Unless the debtor consents to an order for 

25 relief, the court shall hold a hearing on the Board’s petiVerDate Mar 15 2010 21:43 Sep 10, 2014 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H5421.IH H5421

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1 tion under subsection (a)(2) as soon as practicable but not 

2 later than 16 hours after the Board files such a petition, 

3 with notice only to— 

4 ‘‘(A) the covered financial corporation; 

5 ‘‘(B) the Federal Deposit Insurance Corpora6 tion; 

7 ‘‘(C) the Office of the Comptroller of the Cur8 rency of the Department of the Treasury; and 

9 ‘‘(D) the Secretary of the Treasury. 

10 ‘‘(2) Only the Board and the entities specified in 

11 paragraph (1) and their counsel may participate in a hear12 ing described in this subsection. The Board or the trustee 

13 may request that pleadings, hearings, transcripts, and or14 ders in connection with a hearing described in this sub15 section be sealed if their disclosure could create financial 

16 instability in the United States. 

17 ‘‘(3) All pleadings, hearings, transcripts, and orders 

18 sealed under paragraph (2) shall be available to only the 

19 court, the appellate panel, the covered financial corpora20 tion, the Federal Deposit Insurance Corporation, the Of21 fice of the Comptroller of the Currency of the Department 

22 of the Treasury, the Secretary of the Treasury, and the 

23 Board. Notwithstanding paragraph (2), if the case is dis24 missed, all court documents, including pleadings, hearings, 

25 transcripts, and orders, shall be permanently sealed. 


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1 ‘‘(c)(1) The commencement of a case under sub2 section (a)(1) constitutes an order for relief under this 

3 subchapter. 

4 ‘‘(2) In a case commenced under subsection (a)(2), 

5 after notice and hearing required under subsection (b) and 

6 not later than 18 hours after the filing of the Board’s peti7 tion, the court shall enter— 

8 ‘‘(A) an order for relief— 

9 ‘‘(i) if the Board has shown at the hearing 

10 under this subsection that the requirements 

11 under subsection (a)(2) are supported by a pre12 ponderance of the evidence; or 

13 ‘‘(ii) if the debtor consents to the Board’s 

14 petition under subsection (a)(2); or 

15 ‘‘(B) an order dismissing the case. 

16 ‘‘(d)(1) The covered financial corporation or the 

17 Board may appeal to the court of appeals from an order 

18 entered by the court under subsection (c)(2) not later than 

19 1 hour after the court enters such order, with notice only 

20 to the entities specified in subsection (b)(1) and the 

21 Board. Such order shall be stayed pending such appeal. 

22 ‘‘(2) The appellate panel specified under section 

23 298(c)(1) of title 28 for the judicial circuit in which the 

24 case is pending shall hear the appeal under paragraph (1) 

25 within 12 hours of the filing of the notice of appeal under 


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1 this subsection. The standard of review shall be abuse of 

2 discretion. The appellate panel shall enter an order deter3 mining the matter that is the subject of the appeal not 

4 later than 14 hours after the notice of appeal is filed. 

5 ‘‘(3) The court may not, on account of an appeal 

6 from an order for relief under section 1183(d)(1), delay 

7 any proceeding under section 1185, except that the court 

8 shall not authorize a transfer under section 1185 before 

9 the determination of the appeal. 

10 ‘‘(e) The members of the board of directors (or body 

11 performing similar functions) of a covered financial com12 pany shall have no liability to shareholders, creditors or 

13 other parties in interest for a good faith filing or con14 senting in good faith to a petition with respect to a case 

15 under this subchapter, or for any reasonable action taken 

16 in good faith in contemplation of or in connection with 

17 such a petition or a transfer under section 1185 or section 

18 1186, whether prior to or after commencement of the case. 

19 ‘‘(f) Counsel to the debtor or the Board shall provide, 

20 to the greatest extent practicable, sufficient confidential 

21 notice to the Office of Court Services of the Administrative 

22 Office of the United States Courts regarding the potential 

23 commencement of a subchapter V case without disclosing 

24 the identity of the potential debtor in order to allow such 

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1 ability of one of the bankruptcy judges designated under 

2 section 298(b)(1) of title 28 to be available to preside over 

3 such subchapter V case. 

4 ‘‘§ 1184. Regulators 

5 ‘‘The Board, the Securities Exchange Commission, 

6 the Office of the Comptroller of the Currency of the De7 partment of the Treasury, and the Federal Deposit Insur8 ance Corporation may raise and may appear and be heard 

9 on any issue in any case or proceeding under this sub10 chapter. 

11 ‘‘§ 1185. Special transfer of property of the estate 

12 ‘‘(a) On request of the trustee or the Board, and after 

13 notice and a hearing that shall occur not less than 24 

14 hours after the order for relief, the court may order a 

15 transfer under this section of property of the estate, and 

16 the assignment of executory contracts, unexpired leases, 

17 and qualified financial contracts of the debtor, to a bridge 

18 company. Upon the entry of an order approving such 

19 transfer, any property transferred, and any executory con20 tracts, unexpired leases, and qualified financial contracts 

21 assigned under such order shall no longer be property of 

22 the estate. Except as provided under this section, the pro23 visions of sections 363 and 365 shall apply to a transfer 

24 and assignment under this section. 


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1 ‘‘(b) Unless the court orders otherwise, notice of a 

2 request for an order under subsection (a) shall consist of 

3 electronic or telephonic notice of not less than 24 hours 

4 to— 

5 ‘‘(1) the debtor; 

6 ‘‘(2) the holders of the 20 largest secured 

7 claims against the debtor; 

8 ‘‘(3) the holders of the 20 largest unsecured 

9 claims against the debtor; 

10 ‘‘(4) counterparties to any debt, executory con11 tract, unexpired lease, and qualified financial con12 tract requested to be transferred under this section; 

13 ‘‘(5) the Board; 

14 ‘‘(6) the Federal Deposit Insurance Corpora15 tion; 

16 ‘‘(7) the Secretary of the Treasury and the Of17 fice of the Comptroller of the Currency of the Treas18 ury; 

19 ‘‘(8) the Securities and Exchange Commission; 

20 ‘‘(9) the United States trustee or bankruptcy 

21 administrator; and 

22 ‘‘(10) each primary financial regulatory agency, 

23 as defined in section 2(12) of the Dodd-Frank Wall 

24 Street Reform and Consumer Protection Act, with 


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1 respect to any affiliate the equity securities of which 

2 are proposed to be transferred under this section. 

3 ‘‘(c) The court may not order a transfer under this 

4 section unless the court determines, based upon a prepon5 derance of the evidence, that— 

6 ‘‘(1) the transfer under this section is necessary 

7 to prevent serious adverse effects on financial sta8 bility in the United States; 

9 ‘‘(2) the transfer does not provide for the as10 sumption of any capital structure debt by the bridge 

11 company; 

12 ‘‘(3) the transfer does not provide for the trans13 fer to the bridge company of any property of the es14 tate that is subject to a lien securing a debt, execu15 tory contract, unexpired lease or agreement of the 

16 debtor unless— 

17 ‘‘(A)(i) the bridge company assumes such 

18 debt, executory contract, unexpired lease or 

19 agreement, including any claims arising in re20 spect thereof that would not be allowed secured 

21 claims under section 506(a)(1) and after giving 

22 effect to such transfer, such property remains 

23 subject to the lien securing such debt, executory 

24 contract, unexpired lease or agreement; and 


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1 ‘‘(ii) the court has determined that as2 sumption of such debt, executory contract, un3 expired lease or agreement by the bridge com4 pany is in the best interests of the estate; or 

5 ‘‘(B) such property is being transferred to 

6 the bridge company in accordance with the pro7 visions of section 363; 

8 ‘‘(4) the transfer does not provide for the as9 sumption by the bridge company of any debt, execu10 tory contract, unexpired lease or agreement of the 

11 debtor secured by a lien on property in which the es12 tate has an interest unless the transfer provides for 

13 such property to be transferred to the bridge com14 pany in accordance with paragraph (3)(A) of this 

15 subsection; 

16 ‘‘(5) the transfer does not provide for the trans17 fer of the equity of the debtor; 

18 ‘‘(6) the party requesting the transfer under 

19 this subsection has demonstrated that the bridge 

20 company is not likely to fail to meet the obligations 

21 of any debt, executory contract, qualified financial 

22 contract, or unexpired lease assumed and assigned 

23 to the bridge company; 

24 ‘‘(7) the transfer provides for the transfer to a 

25 special trustee all of the equity securities in the 


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1 bridge company and appointment of a special trustee 

2 in accordance with section 1186; 

3 ‘‘(8) after giving effect to the transfer, ade4 quate provision has been made for the fees, costs, 

5 and expenses of the estate and special trustee; and 

6 ‘‘(9) the bridge company will have governing 

7 documents, and initial directors and senior officers, 

8 that are in the best interest of creditors and the es9 tate. 

10 ‘‘(d) Immediately before a transfer under the section, 

11 the bridge company that is the recipient of the transfer 

12 shall— 

13 ‘‘(1) not have any property, executory con14 tracts, unexpired leases, or debts, other than any 

15 property acquired or executory contracts, unexpired 

16 leases, or debts assumed when acting as a transferee 

17 of a transfer under this section; and 

18 ‘‘(2) have equity securities that are property of 

19 the estate, which may be sold or distributed in ac20 cordance with this title. 

21 ‘‘§ 1186. Special trustee 

22 ‘‘(a)(1) An order approving a transfer under section 

23 1185 shall require the trustee to transfer to a qualified 

24 and independent special trustee all of the equity securities 

25 in the bridge company that is the recipient of a transfer 


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1 under section 1185 to hold in trust for the sole benefit 

2 of the estate, subject to satisfaction of the special trustee’s 

3 fees, costs, and expenses. The trust of which the special 

4 trustee is the trustee shall be a newly formed trust gov5 erned by a trust agreement approved by the court as in 

6 the best interests of the estate, and shall exist for the sole 

7 purpose of holding and administering, and shall be per8 mitted to dispose of, the equity securities of the bridge 

9 company in accordance with the trust agreement. 

10 ‘‘(2) In connection with the hearing to approve a 

11 transfer under section 1185, the trustee shall confirm to 

12 the court that the Board has been consulted regarding the 

13 identity of the proposed special trustee and advise the 

14 court of the results of such consultation. 

15 ‘‘(b) The trust agreement governing the trust shall 

16 provide— 

17 ‘‘(1) for the payment of the fees, costs, ex18 penses, and indemnities of the special trustee from 

19 the assets of the debtor’s estate; 

20 ‘‘(2) that the special trustee provide— 

21 ‘‘(A) quarterly reporting to the estate, 

22 which shall be filed with the court; and 

23 ‘‘(B) information about the bridge com24 pany reasonably requested by a party in inter25 est to prepare a disclosure statement for a plan 


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1 providing for distribution of any securities of 

2 the bridge company if such information is nec3 essary to prepare such disclosure statement; 

4 ‘‘(3) that for as long as the equity securities of 

5 the bridge company are held by the trust, the special 

6 trustee shall file a notice with the court in connec7 tion with— 

8 ‘‘(A) any change in a director or senior of9 ficer of the bridge company; 

10 ‘‘(B) any modification to the governing 

11 documents of the bridge company; and 

12 ‘‘(C) any material corporate action of the 

13 bridge company, including— 

14 ‘‘(i) recapitalization; 

15 ‘‘(ii) a material borrowing; 

16 ‘‘(iii) termination of an intercompany 

17 debt or guarantee; 

18 ‘‘(iv) a transfer of a substantial por19 tion of the assets of the bridge company; 

20 or 

21 ‘‘(v) the issuance or sale of any secu22 rities of the bridge company; 

23 ‘‘(4) that any sale of any equity securities of 

24 the bridge company shall not be consummated until 

25 the special trustee consults with the Federal Deposit 


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1 Insurance Corporation and the Board regarding 

2 such sale and discloses the results of such consulta3 tion with the court; 

4 ‘‘(5) that, subject to reserves for payments per5 mitted under paragraph (1) provided for in the trust 

6 agreement, the proceeds of the sale of any equity se7 curities of the bridge company by the special trustee 

8 be held in trust for the benefit of or transferred to 

9 the estate; 

10 ‘‘(6) the process and guidelines for the replace11 ment of the special trustee; and 

12 ‘‘(7) that the property held in trust by the spe13 cial trustee is subject to distribution in accordance 

14 with subsection (c). 

15 ‘‘(c)(1) The special trustee shall distribute the assets 

16 held in trust— 

17 ‘‘(A) if the court confirms a plan in the case, 

18 in accordance with the plan on the effective date of 

19 the plan; or 

20 ‘‘(B) if the case is converted to a case under 

21 chapter 7, as ordered by the court. 

22 ‘‘(2) As soon as practicable after a final distribution 

23 under paragraph (1), the office of the special trustee shall 

24 terminate, except as may be necessary to wind up and con25 clude the business and financial affairs of the trust. 


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

2 section, the special trustee shall be subject only to applica3 ble nonbankruptcy law, and the actions and conduct of 

4 the special trustee shall no longer be subject to approval 

5 by the court in the case under this subchapter. 

6 ‘‘§ 1187. Temporary and supplemental automatic stay; 

7 assumed debt 

8 ‘‘(a)(1) A petition filed under section 1183 operates 

9 as a stay, applicable to all entities, of the termination, ac10 celeration, or modification of any debt, contract, lease, or 

11 agreement of the kind described in paragraph (2), or of 

12 any right or obligation under any such debt, contract, 

13 lease, or agreement, solely because of— 

14 ‘‘(A) a default by the debtor under any such 

15 debt, contract, lease, or agreement; or 

16 ‘‘(B) a provision in such debt, contract, lease, 

17 or agreement, or in applicable nonbankruptcy law, 

18 that is conditioned on— 

19 ‘‘(i) the insolvency or financial condition of 

20 the debtor at any time before the closing of the 

21 case; 

22 ‘‘(ii) the commencement of a case under 

23 this title concerning the debtor; 

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1 cerning the debtor or by a custodian before the 

2 commencement of the case; or 

3 ‘‘(iv) a credit rating agency rating, or ab4 sence or withdrawal of a credit rating agency 

5 rating— 

6 ‘‘(I) of the debtor at any time after 

7 the commencement of the case; 

8 ‘‘(II) of an affiliate during the period 

9 from the commencement of the case until 

10 48 hours after such order is entered; 

11 ‘‘(III) of the bridge company while the 

12 trustee or the special trustee is a direct or 

13 indirect beneficial holder of more than 50 

14 percent of the equity securities of— 

15 ‘‘(aa) the bridge company; or 

16 ‘‘(bb) the affiliate, if all of the di17 rect or indirect interests in the affil18 iate that are property of the estate 

19 are transferred under section 1185; or 

20 ‘‘(IV) of an affiliate while the trustee 

21 or the special trustee is a direct or indirect 

22 beneficial holder of more than 50 percent 

23 of the equity securities of— 

24 ‘‘(aa) the bridge company; or 


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1 ‘‘(bb) the affiliate, if all of the di2 rect or indirect interests in the affil3 iate that are property of the estate 

4 are transferred under section 1185. 

5 ‘‘(2) A debt, contract, lease, or agreement described 

6 in this paragraph is— 

7 ‘‘(A) any debt (other than capital structure 

8 debt), executory contract, or unexpired lease of the 

9 debtor (other than a qualified financial contract); 

10 ‘‘(B) any agreement under which the debtor 

11 issued or is obligated for debt (other than capital 

12 structure debt); 

13 ‘‘(C) any debt, executory contract, or unexpired 

14 lease of an affiliate (other than a qualified financial 

15 contract); or 

16 ‘‘(D) any agreement under which an affiliate 

17 issued or is obligated for debt. 

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

19 ‘‘(A) for the benefit of the debtor, upon the ear20 liest of— 

21 ‘‘(i) 48 hours after the commencement of 

22 the case; 

23 ‘‘(ii) assumption of the debt, contract, 

24 lease, or agreement by the bridge company 


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1 under an order authorizing a transfer under 

2 section 1185; or 

3 ‘‘(iii) a final order of the court denying the 

4 request for a transfer under section 1185; and 

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

6 earliest of— 

7 ‘‘(i) the entry of an order authorizing a 

8 transfer under section 1185 in which the direct 

9 or indirect interests in the affiliate that are 

10 property of the estate are not transferred under 

11 section 1185; 

12 ‘‘(ii) a final order by the court denying the 

13 request for a transfer under section 1185; or 

14 ‘‘(iii) 48 hours after the commencement of 

15 the case if the court has not ordered a transfer 

16 under section 1185. 

17 ‘‘(4) Subsections (d), (e), (f), and (g) of section 362 

18 apply to a stay under this subsection. 

19 ‘‘(b) A debt, executory contract (other than a quali20 fied financial contract), or unexpired lease of the debtor, 

21 or an agreement under which the debtor has issued or is 

22 obligated for any debt, may be assumed by a bridge com23 pany in a transfer under section 1185 notwithstanding 

24 any provision in an agreement or in applicable nonbank25 ruptcy law that— 


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1 ‘‘(1) prohibits, restricts, or conditions the as2 signment of the debt, contract, lease, or agreement; 

3 or 

4 ‘‘(2) terminates or modifies, or permits a party 

5 other than the debtor to terminate or modify, the 

6 debt, contract, lease, or agreement on account of— 

7 ‘‘(A) the assignment of the debt, contract, 

8 lease, or agreement; or 

9 ‘‘(B) a change in control of any party to 

10 the debt, contract, lease, or agreement. 

11 ‘‘(c)(1) A debt, contract, lease, or agreement of the 

12 kind described in subparagraph (A) or (B) of subsection 

13 (a)(2) may not be terminated or modified, and any right 

14 or obligation under such debt, contract, lease, or agree15 ment may not be terminated or modified, as to the bridge 

16 company solely because of a provision in the debt, con17 tract, lease, or agreement or in applicable nonbankruptcy 

18 law— 

19 ‘‘(A) of the kind described in subsection 

20 (a)(1)(B) as applied to the debtor; 

21 ‘‘(B) that prohibits, restricts, or conditions the 

22 assignment of the debt, contract, lease, or agree23 ment; or 

24 ‘‘(C) that terminates or modifies, or permits a 

25 party other than the debtor to terminate or modify, 


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1 the debt, contract, lease or agreement on account 

2 of— 

3 ‘‘(i) the assignment of the debt, contract, 

4 lease, or agreement; or 

5 ‘‘(ii) a change in control of any party to 

6 the debt, contract, lease, or agreement. 

7 ‘‘(2) If there is a default by the debtor under a provi8 sion other than the kind described in paragraph (1) in 

9 a debt, contract, lease or agreement of the kind described 

10 in subparagraph (A) or (B) of subsection (a)(2), the 

11 bridge company may assume such debt, contract, lease, 

12 or agreement only if the bridge company— 

13 ‘‘(A) shall cure the default; 

14 ‘‘(B) compensates, or provides adequate assur15 ance in connection with a transfer under section 

16 1185 that the bridge company will promptly com17 pensate, a party other than the debtor to the debt, 

18 contract, lease, or agreement, for any actual pecu19 niary loss to the party resulting from the default; 

20 and 

21 ‘‘(C) provides adequate assurance in connection 

22 with a transfer under section 1185 of future per23 formance under the debt, contract, lease, or agree24 ment, as determined by the court under section 

25 1185(c)(4). 


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1 ‘‘§ 1188. Treatment of qualified financial contracts 

2 and affiliate contracts 

3 ‘‘(a) Notwithstanding sections 362(b)(6), 362(b)(7), 

4 362(b)(17), 362(b)(27), 362(o), 555, 556, 559, 560, and 

5 561, a petition filed under section 1183 operates as a stay, 

6 during the period specified in section 1187(a)(3)(A), ap7 plicable to all entities, of the exercise of a contractual 

8 right— 

9 ‘‘(1) to cause the modification, liquidation, ter10 mination, or acceleration of a qualified financial con11 tract of the debtor or an affiliate; 

12 ‘‘(2) to offset or net out any termination value, 

13 payment amount, or other transfer obligation arising 

14 under or in connection with a qualified financial con15 tract of the debtor or an affiliate; or 

16 ‘‘(3) under any security agreement or arrange17 ment or other credit enhancement forming a part of 

18 or related to a qualified financial contract of the 

19 debtor or an affiliate. 

20 ‘‘(b)(1) During the period specified in section 

21 1187(a)(3)(A), the trustee or the affiliate shall perform 

22 all payment and delivery obligations under such qualified 

23 financial contract of the debtor or the affiliate, as the case 

24 may be, that become due after the commencement of the 

25 case. The stay provided under subsection (a) terminates 

26 as to a qualified financial contract of the debtor or an 


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1 affiliate immediately upon the failure of the trustee or the 

2 affiliate, as the case may be, to perform any such obliga3 tion during such period. 

4 ‘‘(2) Any failure by a counterparty to any qualified 

5 financial contract of the debtor or any affiliate to perform 

6 any payment or delivery obligation under such qualified 

7 financial contract, including during the pendency of the 

8 stay provided under subsection (a), shall constitute a 

9 breach of such qualified financial contract by the 

10 counterparty. 

11 ‘‘(c) A qualified financial contract between an entity 

12 and the debtor may not be assigned to or assumed by the 

13 bridge company in a transfer under section 1185 unless— 

14 ‘‘(1) all qualified financial contracts between 

15 the entity and the debtor are assigned to and as16 sumed by the bridge company in the transfer under 

17 section 1185; 

18 ‘‘(2) all claims of the entity against the debtor 

19 under any qualified financial contract between the 

20 entity and the debtor (other than any claim that, 

21 under the terms of the qualified financial contract, 

22 is subordinated to the claims of general unsecured 

23 creditors) are assigned to and assumed by the bridge 

24 company; 


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1 ‘‘(3) all claims of the debtor against the entity 

2 under any qualified financial contract between the 

3 entity and the debtor are assigned to and assumed 

4 by the bridge company; and 

5 ‘‘(4) all property securing or any other credit 

6 enhancement furnished by the debtor for any quali7 fied financial contract described in paragraph (1) or 

8 any claim described in paragraph (2) or (3) under 

9 any qualified financial contract between the entity 

10 and the debtor is assigned to and assumed by the 

11 bridge company. 

12 ‘‘(d) Notwithstanding any provision of a qualified fi13 nancial contract or of applicable nonbankruptcy law, a 

14 qualified financial contract of the debtor that is assumed 

15 or assigned in a transfer under section 1185 may not be 

16 accelerated, terminated, or modified, after the entry of the 

17 order approving a transfer under section 1185, and any 

18 right or obligation under the qualified financial contract 

19 may not be accelerated, terminated, or modified, after the 

20 entry of the order approving a transfer under section 1185 

21 solely because of a condition described in section 

22 1187(c)(1), other than a condition of the kind specified 

23 in section 1187(a)(1)(B)(iv)(III) or section 1187(b) that 

24 occurs after property of the estate no longer includes a 

25 direct beneficial interest or an indirect beneficial interest 


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1 through the special trustee, in more than 50 percent of 

2 the equity securities of the bridge company. 

3 ‘‘(e) Notwithstanding any provision of any agreement 

4 or in applicable nonbankruptcy law, an agreement of an 

5 affiliate (including an executory contract, an unexpired 

6 lease, qualified financial contract, or an agreement under 

7 which the affiliate issued or is obligated for debt) and any 

8 right or obligation under such agreement may not be ter9 minated or modified, solely because of a condition de10 scribed in section 1187(c)(1), other than a condition of 

11 the kind specified in section 1187(a)(1)(B)(iv)(III) or sec12 tion 1187(b) that occurs after the bridge company is no 

13 longer a direct or indirect beneficial holder of more than 

14 50 percent of the equity securities of the affiliate, at any 

15 time after the commencement of the case if— 

16 ‘‘(1) all direct or indirect interests in the affil17 iate that are property of the estate are transferred 

18 under section 1185 to the bridge company within the 

19 period specified in subsection (a); 

20 ‘‘(2) the bridge company assumes— 

21 ‘‘(A) any guarantee or other credit en22 hancement issued by the debtor relating to the 

23 agreement of the affiliate; and 

24 ‘‘(B) any right of setoff, netting arrange25 ment, or debt of the debtor that directly arises 


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1 out of or directly relates to the guarantee or 

2 credit enhancement; and 

3 ‘‘(3) any property of the estate that directly 

4 serves as collateral for the guarantee or credit en5 hancement is transferred to the bridge company. 

6 ‘‘§ 1189. Licenses, permits, and registrations 

7 ‘‘(a) Notwithstanding any otherwise applicable non8 bankruptcy law, if a request is made under section 1185 

9 for a transfer of property of the estate, any Federal, State, 

10 or local license, permit, or registration that the debtor or 

11 an affiliate had immediately before the commencement of 

12 the case and that is proposed to be transferred under sec13 tion 1185 may not be terminated or modified at any time 

14 after the request solely on account of— 

15 ‘‘(1) the insolvency or financial condition of the 

16 debtor at any time before the closing of the case; 

17 ‘‘(2) the commencement of a case under this 

18 title concerning the debtor; 

19 ‘‘(3) the appointment of or taking possession by 

20 a trustee in a case under this title concerning the 

21 debtor or by a custodian before the commencement 

22 of the case; or 

23 ‘‘(4) a transfer under section 1185. 

24 ‘‘(b) Notwithstanding any otherwise applicable non25 bankruptcy law, any Federal, State, or local license, perVerDate Mar 15 2010 21:43 Sep 10, 2014 Jkt 039200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\H5421.IH H5421

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1 mit, or registration that the debtor had immediately before 

2 the commencement of the case that is included in a trans3 fer under section 1185 shall be valid and all rights and 

4 obligations thereunder shall vest in the bridge company. 

5 ‘‘§ 1190. Exemption from securities laws 

6 ‘‘For purposes of section 1145, a security of the 

7 bridge company shall be deemed to be a security of a suc8 cessor to the debtor under a plan if the court approves 

9 the disclosure statement for the plan as providing ade10 quate information (as defined in section 1125(a)) about 

11 the bridge company and the security. 

12 ‘‘§ 1191. Inapplicability of certain avoiding powers 

13 ‘‘A transfer made or an obligation incurred by the 

14 debtor to an affiliate prior to or after the commencement 

15 of the case, including any obligation released by the debtor 

16 or the estate to or for the benefit of an affiliate, in con17 templation of or in connection with a transfer under sec18 tion 1185 is not avoidable under section 544, 547, 

19 548(a)(1)(B), or 549, or under any similar nonbankruptcy 

20 law. 

21 ‘‘§ 1192. Consideration of financial stability 

22 ‘‘The court may consider the effect that any decision 

23 in connection with this subchapter may have on financial 

24 stability in the United States.’’. 


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

2 (a) AMENDMENT TO CHAPTER 13.—Chapter 13 of 

3 title 28, United States Code, is amended by adding at the 

4 end the following: 

5 ‘‘§ 298. Judge for a case under subchapter V of chap6 ter 11 of title 11 

7 ‘‘(a) Notwithstanding section 295, the Chief Justice 

8 of the United States shall designate not fewer than 3 

9 judges of the courts of appeals in not fewer than 4 circuits 

10 to serve on an appellate panel to be available to hear an 

11 appeal under section 1183 of title 11 in a case under such 

12 title concerning a covered financial corporation. Appellate 

13 judges may request to be considered by the Chief Justice 

14 of the United States for such designation. 

15 ‘‘(b)(1) Notwithstanding section 295, the Chief Jus16 tice of the United States shall designate not fewer than 

17 10 bankruptcy judges to be available to hear a case under 

18 subchapter V of chapter 11 of title 11. Bankruptcy judges 

19 may request to be considered by the Chief Justice of the 

20 United States for such designation. 

21 ‘‘(2) Notwithstanding section 155, a case under sub22 chapter V of chapter 11 of title 11 shall be heard under 

23 section 157 by a bankruptcy judge designated under para24 graph (1), who shall be assigned to hear such case by the 

25 chief judge of the court of appeals for the circuit embrac26 ing the district in which the case is pending. To the greatVerDate Mar 15 2010 21:43 Sep 10, 2014 Jkt 039200 PO 00000 Frm 00032 Fmt 6652 Sfmt 6201 E:\BILLS\H5421.IH H5421

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1 est extent practicable, the approvals required under sec2 tion 155 should be obtained. 

3 ‘‘(3) If the bankruptcy judge assigned to hear a case 

4 under paragraph (2) is not assigned to the district in 

5 which the case is pending, the bankruptcy judge shall be 

6 temporarily assigned to the district. 

7 ‘‘(c)(1) The court of appeals shall have jurisdiction 

8 of appeals from all orders for relief and orders of dismissal 

9 under section 1183 of title 11. 

10 ‘‘(2) Notwithstanding section 295, in an appeal under 

11 paragraph (1) in a case under title 11 concerning a cov12 ered financial corporation shall be heard by— 

13 ‘‘(A) 3 judges selected from the appellate panel 

14 designated under subsection (a); or 

15 ‘‘(B) if the 3 judges of such panel are not im16 mediately available to hear the case, 3 judges des17 ignated under subsection (a) from another circuit 

18 and assigned by the Chief Justice of the United 

19 States to hear the case. 

20 ‘‘(3) If any of the judges of the appellate panel speci21 fied in paragraph (2) is not assigned to the circuit in 

22 which the appeal is pending, the judges shall be tempo23 rarily assigned to the circuit. 


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1 ‘‘(4) A case under subchapter V of chapter 11 of title 

2 11, and all proceedings in the case, shall take place in 

3 the district in which the case is pending. 

4 ‘‘(d) In this section, the term ‘covered financial cor5 poration’ has the meaning given that term in section 

6 101(9A) of title 11.’’. 

7 (b) AMENDMENT TO SECTION 1334.—Section 1334 

8 of title 28, United States Code, is amended by adding at 

9 the end the following: 

10 ‘‘(f) This section does not grant jurisdiction to the 

11 district court after a transfer pursuant to an order under 

12 section 1185 of title 11 of any proceeding related to a spe13 cial trustee appointed, or to a bridge company formed, in 

14 connection with a case under subchapter V of chapter 11 

15 of title 11.’’. 

16 (c) TECHNICAL AND CONFORMING AMENDMENT.— 

17 The table of sections for chapter 13 of title 28, United 

18 States Code, is amended by adding at the end the fol19 lowing: 

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

Æ 


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