I
105TH CONGRESS
2D SESSION
H. R. 3146
To amend title 11 of the United States Code relating to bankruptcy.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 3, 1998
Mr. NADLER (for himself, Mr. CONYERS, and Mr. HILLIARD) introduced the
following bill; which was referred to the Committee on the Judiciary
A BILL
To amend title 11 of the United States Code relating to
bankruptcy.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Consumer Lenders and Borrowers Bankruptcy Account-
ability Act of 1998’’.
(b) TABLE OF CONTENTS.—The table of contents is
as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Discouraging reckless lending practices.
Sec. 3. Discouraging wage seizures which push people into bankruptcy.
Sec. 4. Stop creditors’ abuses of the bankruptcy system.
Sec. 5. Improve debtors’ understanding of bankruptcy options and alternatives.
Sec. 6. Increase incentives for voluntary repayment plans.
Sec. 7. Provide fair property exemptions and prevent high-rollers from abusing
the system.
Sec. 8. Prevent abuse of bankruptcy system by debtors who can afford to pay
their debts.
Sec. 9. Prevent abusive bankruptcy filings.
Sec. 10. Improve accuracy of debtors’ bankruptcy schedules.
Sec. 11. Ensure proportionate and fair recoveries for creditors.
Sec. 12. Prevent windfalls for undersecured creditors.
Sec. 13. Reinforce the fresh start.
Sec. 14. Clarifying amendments.
Sec. 15. Applicability of amendments.
SEC. 2. DISCOURAGING RECKLESS LENDING PRACTICES.
(a) LIMITING CLAIMS ARISING FROM IRRESPON-
SIBLE LEADERSHIP PRACTICES.—Section 502(b) of title
11, United States Code, is amended—
(1) in paragraph (8) by striking ‘‘or’’ at the
end,
(2) in paragraph (9) by striking the period at
the end and inserting a semicolon, and
(3) by adding at the end the following:
‘‘(10) the claim is—
‘‘(A) based upon an extension to an indi-
vidual of unsecured credit which caused, and
which the claimant knew or should have known
would cause, the debtor’s aggregate unsecured
debts to exceed 40 percent of the debtor’s an-
nual gross income; or
‘‘(B) based on a secured debt if the credi-
tor has violated section 129(h) of the Truth in
Lending Act;
est in a period of less than 15 years from the due
date of the periodic payment; or
‘‘(15) the claim is made by a creditor, its
agents, or assignees based on a debt with respect to
which the creditor, its agents or assignees engaged
in conduct which violated section 805, 806, 807, or
808 of the Fair Credit Reporting Act whether or not
such creditor is a debt collector as defined by section
803(6) of such Act. Civil liability against such credi-
tor, agent or assignee under section 813 of such Act
shall also be available whether or not such creditor
is a debt collector as defined by section 803(6) of
such Act.’’.
(b) CLARIFY THE DISCHARGEABILITY OF CREDIT
CARD DEBT IN A WAY THAT PLACES SOME RESPON-
SIBILITY ON CREDITORS FOR IRRESPONSIBLE LENDING
PRACTICES.—
(1) REQUIREMENTS.—Section 523(a)(2) of title
11, United States Code, is amended—
(A) in subparagraph (B) by striking ‘‘or’’
at the end,
(B) in subparagraph (C) by striking the
period at the end and inserting ‘‘; or’’, and
(C) by adding at the end the following:
‘‘(D) except as provided in subparagraph
(C), consumer debts under an open end credit
plan (as defined section 103 of the Truth in
Lending Act) are dischargeable unless—
‘‘(i) the creditor establishes the re-
quirements of subparagraph (B) with re-
spect to the consumer’s credit application;
or
‘‘(ii) the creditor establishes actual
and reasonable reliance on an express
fraudulent statement made by the debtor
in connection with an extension of credit in
excess of the amount available under the
open end credit plan.’’.
(2) PROOF.—Section 523 of title 11, United
States Code, is amended by adding at the end the
following:
‘‘(h) Proof of fraud under this section shall be made
by clear and convincing evidence.’’.
SEC. 3. DISCOURAGING WAGE SEIZURES WHICH PUSH PEO-
PLE INTO BANKRUPTCY.
Section 547 of title 11, United States Code, is
amended—
(1) in subsection (e)(3) by adding at the end
the following:
‘‘In the case of wages or other income of an individual
debtor, a transfer of the right to receive such income is
not effective until the time that the income is to be paid
to the debtor.’’; and
(2) by amending subsection (c)(8) to read as
follows:
‘‘(8) that is a voluntary transfer of property
that has an aggregate amount less than $600.’’.
SEC. 4. STOP CREDITORS’ ABUSES OF THE BANKRUPTCY
SYSTEM.
(a) SANCTIONS
FOR CREDITOR ABUSES
OF
THE
BANKRUPTCY SYSTEM.—
(1) ALLOWANCE OF CLAIMS OR INTERESTS.—
Section 502 of title 11, United States Code, is
amended by adding at the end the following:
‘‘(k)(1) If, in a case of an individual debtor, following
an objection filed by the debtor, a claim (other than a
claim for a debt for alimony or child support) is disallowed
or reduced by an amount representing more than 5 per-
cent of the original filed claim or $500, whichever is less,
the court shall award the debtor reasonable attorneys’ fees
and costs.
‘‘(2) If, in a case of an individual debtor, the court
finds that the position of any claimant with respect to
whom an objection is timely filed under this section is not
substantially justified, the court shall also award damages
in the amount of $5,000 and may, in appropriate cir-
cumstances, award punitive damages.’’.
(2) 
EXCEPTIONS
TO
DISCHARGE.—Section
523(d) of title 11, United States Code, is amended
to read as follows:
‘‘(d) If a creditor requests a determination of
dischargeability of a consumer debt under this section
(other than under paragraph (5) or (15) of subsection
(a)), and such debt is discharged, the court shall award
to the debtor reasonable attorneys’ fees and costs. If the
court finds that the position of any creditor proceeding
under this section is not substantially justified, the court
shall also award three times actual damages (but not less
than $5,000) and, may, in appropriate circumstances,
award punitive damages.’’.
(3) EFFECT OF DISCHARGE.—Section 524 of
title 11, United States Code, is amended by adding
at the end the following:
‘‘(i) A creditor’s failure to credit payments received
under a plan confirmed under this title in the manner and
amounts required by the plan shall be considered to be
an act described in subsection (a)(2) or, if such failure
occurs before the discharge, an act in violation of section
362(a) of this title.
‘‘(j)(1) A creditor may not charge a debtor or a debt-
or’s account for attorney’s fees or costs related to work
performed in connection with a case under this title except
to the extent that such fees are reasonable under the
standards of section 330(a) of this title for actual, nec-
essary services rendered, approved by the court, and con-
sistent with applicable contracts and nonbankruptcy law.
‘‘(2) A charge made in violation of paragraph (1)
shall be considered to be an act described in subsection
(a)(2) or, if such charge occurs before the discharge, of
section 362(a) of this title.
‘‘(k) An individual injured by any willful violation of
discharge in a case under this title shall recover 3 times
actual damages but not less than $5,000, plus costs and
attorneys’ fees, and, in appropriate circumstances, may re-
cover punitive damages.’’.
(4) AUTOMATIC STAY.—Section 362(h) of title
11, United States Code, is amended—
(A) by striking ‘‘actual damages, includ-
ing’’ and inserting ‘‘3 times actual damages
(but not less than $5,000)’’,
(B) by inserting ‘‘(1)’’ after ‘‘(h)’’, and
(C) by adding at the end the following:
‘‘(2) If the court finds that the position of any credi-
tor filing a motion for relief from a stay under this section
is not substantially justified, the court shall award dam-
ages in the amount of 3 times the debtor’s actual damages
(but not less than $5,000) plus costs and attorneys’ fees.’’.
(5) ELIGIBILITY FOR RELIEF.—Section 109 of
title 11, United States Code, is amended by adding
at the end the following:
‘‘(h) If a creditor files a motion to dismiss a case on
the grounds that the debtor may not be a debtor under
the chapter under which the case is pending and if such
motion is denied or withdrawn, the court shall award the
debtor a reasonable attorney’s fee and costs. If the court
finds that the position of any party filing a motion under
this section is not substantially justified, the court shall
award to the debtor damages in the amount of 3 times
the debtor’s actual damages incurred in opposing such mo-
tion (but not less than $5,000) and, in appropriate cir-
cumstances, may award punitive damages.’’.
(b) DISMISSAL.—Section 707 of title 11, United
States Code, is amended by adding at the end the follow-
ing:
‘‘(c) If a creditor files a motion to dismiss a case
under this section and such motion is denied or with-
drawn, the court shall award the debtor a reasonable at-
torney’s fee and costs. If the court finds that the position
of any party filing a motion under this section is not sub-
stantially justified, the court shall award to the debtor
damages in the amount of 3 times the debtor’s actual
damages (but not less than $5,000) and may, in appro-
priate circumstances, award punitive damages.’’.
(c) PROHIBIT REAFFIRMATIONS AND THREATS OF
REPOSESSION AGAINST DEBTORS WHO ARE CURRENT IN
THEIR PAYMENTS.—
(1) EFFECT OF DISCHARGE.—Section 524 of
title 11, United States Code, is amended—
(A) in subsection (a)—
(i) in paragraph (2) by striking ‘‘and’’
at the end,
(ii) in paragraph (3) by striking the
period at the end and inserting ‘‘; and’’,
and
(iii) by adding at the end the follow-
ing:
‘‘(4) operates as an injunction against any act
to enforce against property of the debtor any lien to
the extent that lien secures any such debt, or to ac-
celerate any such debt, based solely upon the com-
mencement of a case under this title, the insolvency
or financial condition of the debtor, or on appoint-
ment of or taking possession by a trustee in a case
under this title, notwithstanding any provision in an
agreement, transfer instrument, or applicable law,
whether or not discharge of such debt is waived.’’,
(B) in subsection (c) by striking ‘‘is en-
forceable’’ the first place it appears and all that
follows through the period at the end, and in-
serting ‘‘is not enforceable, whether or not dis-
charge of such debt is waived.’’, and
(C) by striking subsection (d).
(2) REDEMPTION.—Section 722 of title 11,
United States Code, is amended—
(A) by—
(i) striking ‘‘tangible’’ and all that fol-
lows through ‘‘use’’, and inserting ‘‘prop-
erty, other than real property subject to a
security interest’’, and
(ii) by striking ‘‘dischargeable con-
sumer’’,
(B) by inserting ‘‘(a)’’ after ‘‘§ 722’’, and
(C) by adding at the end the following:
‘‘(b) The debtor may pay the amount necessary to
redeem the property under subsection (a) of this section
in installments over such period, and on such terms, as
the court may order.’’.
SEC. 5. IMPROVE DEBTORS’ UNDERSTANDING OF BANK-
RUPTCY OPTIONS AND ALTERNATIVES.
Section 521 of title 11, United States Code, is
amended by adding at the end the following:
‘‘(6) With the petition for relief, an individual
or joint debtor filing for relief under chapter 7 or
chapter 13 shall file a statement acknowledging re-
ceipt of an explanation on an Official Form promul-
gated by the Judicial Conference of the United
States of the relief available under both chapters,
and of the relief which is provided by private credit
counseling agencies. Such an explanation shall also
include detailed information regarding the sources of
funding for private credit counseling agencies.’’.
SEC. 6. INCREASE INCENTIVES FOR VOLUNTARY REPAY-
MENT PLANS.
(a) AMENDMENT
TO
FAIR
CREDIT
REPORTING
ACT.—Section 605(a)(1) of the Fair Credit Reporting Act
(15 U.S.C. 1681c(a)(1)) is amended to read as follows:
‘‘(1) Cases under—
‘‘(A) chapter 7 or 11 of title 11 of the United
States Code that, from the date of entry of the order
for relief antedate the report by more than 10 years;
‘‘(B) chapter 12 or 13 of title 11 of the United
States Code in which a discharge has been entered,
that, from the date of entry of the order for relief
antedate the report by more than 5 years;
‘‘(C) chapter 12 or 13 of title 11 of the United
States Code in which a discharge has not been en-
tered, that, from the date of entry of the order for
relief antedate the report by more than 10 years;
and
‘‘(D) when information can no longer be re-
ported based on subparagraph (B), no consumer re-
porting agency may make any consumer report con-
taining any of the information provided for under
paragraphs (1) through (6) which antedates the
order for relief in the case covered by subparagraph
(B).’’.
(b) EFFECTIVE IMPLEMENTATION OF CHAPTER 13
PLANS.—Section 1325 of title 11, United States Code, is
amended by adding at the end the following:
‘‘(d) A court may not require as a condition of con-
firmation under subsection (a)(3), payments to holders of
allowed unsecured claims that exceed the greater of the
amount required under subsection (a)(4) or the amount
required under subsection (b).’’.
(c) CLASSIFICATION OF CLAIMS IN CHAPTER 13.—
Section 1322(b)(1) of title 11, United States Code, is
amended to read as follows:
‘‘(1) designate a class or classes of unsecured
claims, as provided in section 1122 of this title, but
may not discriminate unfairly against any class so
designated; however, such plan may designate dif-
ferent treatment for claims for a debt of the debtor
if—
‘‘(A) an individual is liable on such debt
with the debtor; or
‘‘(B) such debt is of a kind excepted from
discharge under section 1328(a) of this title;’’.
(d) 5-YEAR CHAPTER 13 PLANS.—Section 1322(d)
is amended to read as follows:
‘‘(d) The plan may not provide for payments over a
period that is longer than 3 years, unless the debtor pro-
poses a longer period, but the court may not approve a
period that is longer than 5 years.’’.
(e) VALUATION OF SECURED CLAIM AT CONFIRMA-
TION.—Section 1327(a) of title 11, United States Code,
is amended by adding at the end the following:
‘‘If a plan proposes to value property to determine a credi-
tor’s secured claim pursuant to section 506(a), and the
creditor receives notice of proposed valuation and con-
firmation hearing, such value shall be established by the
confirmed plan, whether or not the holder of the claim
has filed a proof of claim. If the plan does not so provide,
any party may obtain a determination of the amount of
an allowed secured claim, either before or after the con-
firmation, whether or not the holder of the claim has filed
a proof of claim.’’.
(f) PROTECTING CHAPTER 13 DEBTOR’S PROPERTY
DURING CASE.—Section 1306(c) of title 11, United States
Code, is amended by adding at the end the following:
‘‘(c) During the pendency of a chapter 13 case, sec-
tion 362 shall protect property of the estate which has
revested in the debtor to the same extent as it protects
other property of the estate.’’.
(g) INCENTIVES FOR CONSENSUAL MODIFICATION
OF MORTGAGES.—Section 1322 of title 11, United States
Code, is amended by adding at the end the following:
‘‘(f) Notwithstanding subsection (b)(2) and applica-
ble nonbankruptcy law, the rights of a holder of a secured
claim may be modified with the consent of the holder of
the claim by capitalizing the amount of any default, and
amortizing any balance over an agreed term not less than
the existing term of the loan, at an interest rate equivalent
to or below the interest rate in effect on that claim at
the time of modification. If a modification agreement is
filed with the court at the time it is made, relief from the
automatic stay shall thereafter be granted pursuant to sec-
tion 362(d)(1) of this title upon motion, if the debtor is
more than 60 days delinquent pursuant to the agreement
at the time of the hearing on the motion.’’.
SEC. 7. PROVIDE FAIR PROPERTY EXEMPTIONS AND PRE-
VENT HIGH-ROLLERS FROM ABUSING THE
SYSTEM.
(a) PERMIT EFFECTIVE USE OF EXEMPTIONS.—Sec-
tion 522 of title 11, United States Code, is amended by
adding at the end the following:
‘‘(n) If, in the 1-year period ending on the date of
the filing of the petition and while the debtor was insol-
vent, the debtor makes property exempt under subsection
(b) by converting property to a form of property that is
exempt in an unlimited amount, such property shall not
be exempt under this section to the extent that the value
of the debtor’s interest in the property that is converted
exceeds $100,000. Such conversion shall not otherwise be
a basis for denying an exemption and shall not be the basis
for denying the debtor other relief under this title.’’.
(b) ESTABLISH
A MODEST FLOOR
FOR EXEMP-
TIONS.—Section 522(b)(1) of title 11, United States Code,
is amended by striking ‘‘unless the State law that is appli-
cable to the debtor under paragraph (2)(A) specifically
does not so authorize’’.
SEC. 8. PREVENT ABUSE OF BANKRUPTCY SYSTEM BY
DEBTORS WHO CAN AFFORD TO PAY THEIR
DEBTS.
(a) DISMISSAL.—Section 707(b) of title 11, United
States Code, is amended—
(1) by striking ‘‘substantial’’,
(2) by inserting ‘‘(1)’’ after ‘‘(b)’’, and
(3) by adding at the end the following:
‘‘(2) A case shall be considered to be an abuse of the
provisions of this chapter if, after providing a reasonable
standard of living for the debtor and the debtor’s depend-
ents that is not excessive, including payments on secured
debts, nondischargeable debts, priority debts, and arrear-
ages on all such debts, the debtor is able to pay the debt-
or’s unsecured nonpriority debts as they come due or to
pay them in full over a 36-month chapter 13 plan, and
the court after consideration of all the circumstances finds
the case to be an abuse of this chapter.
‘‘(3) The trustee shall examine the income, expenses
and circumstances of each debtor whose income exceeds
the income set forth in paragraph (4) and refer to the
United States trustee any case in which the debtor is a
debtor of the kind described in paragraph (2). The United
States trustee, in the discretion of the United States trust-
ee, may bring a motion under this section.
‘‘(4) Notwithstanding any other provision of this sub-
section, a case shall not be considered to be an abuse of
the provisions of this chapter if the debtor’s household in-
come does not exceed $60,000, adjusted upward by $5,000
for each household member exceeding 4.
‘‘(5) Notwithstanding subsection (b)(1), a creditor
may present facts pertinent to a finding of abuse to the
trustee at the meeting of creditors held pursuant to sec-
tion 341(a) of this title.’’.
(b) CONFORMING AMENDMENT.—Section 104(b)(1)
of title 11, United States Code, is amended by inserting
‘‘707(b),’’ after ‘‘523(a)(2)(C)’’.
SEC. 9. PREVENT ABUSIVE BANKRUPTCY FILINGS.
(a) PREVENT ABUSE OF BANKRUPTCY FILINGS.—
Section 362 of title 11, United States Code, is amended
by adding at the end the following:
‘‘(i)(1) The stay under subsection (a) shall terminate
30 days after the order for relief if—
‘‘(A) the debtor has filed 2 prior cases within
6-years period ending on the date of the order for
relief; and
‘‘(B) the debtor has been a debtor in a prior
case that was dismissed in the 180-day period end-
ing on the date of the order for relief.
‘‘(2)(A) Paragraph (1) shall not apply if the debtor
files and serves on all secured creditors and real property
lessors a motion for continuation of the stay and notice
of a hearing on that motion and no objection to continu-
ation of the stay is filed by such creditor, such lessor, or
the trustee.
‘‘(B) If the debtor files and serves a motion and no-
tice as described in subparagraph (A), and such objection
is filed timely, the court, after notice and a hearing, shall
enter an order terminating the stay—
‘‘(i) with respect to the objecting creditor or the
objecting lessor; or
‘‘(ii) if the trustee objects, with respect to such
creditors and such lessors as the court may order;
unless the debtor proves that there is a reasonable pros-
pect of a feasible plan being completed in the case or in
a chapter 7 case, there is cause for continuing the stay.
In deciding the motion the court may consider any appro-
priate factors, including changes in the debtor’s cir-
cumstances, the debtor’s efforts in prior cases, the amount
of arrears, circumstances of the prior cases, the debtor’s
honesty with the court, and differences in chapter 13 plans
between the prior cases and the current case.
‘‘(j)(1) The filing of a petition under section 301 or
302 of this title does not operate as a stay under sub-
section (a) of this section if—
‘‘(A) the debtor has filed 3 prior cases in the
6-year period ending on the date of the order for re-
lief; and
‘‘(B) the debtor has been a debtor in a prior
case that was dismissed in the 180-day period end-
ing on the date of the order for relief.
‘‘(2) Notwithstanding paragraph (1), the court may
on motion of the debtor impose a stay of the same scope
as that of subsection (a), or of a lesser scope, if the debtor
proves that there is a reasonable prospect of a feasible
plan being completed in the case. In deciding the motion
the court may consider factors including changes in the
debtor’s circumstances, the debtor’s efforts in prior cases,
the amount of arrears, other circumstances in prior cases,
the debtor’s honesty with the court, and differences in
chapter 13 plans between the prior cases and the current
case.
‘‘(k)(1) After notice and a hearing, the court may
enter an order suspending, for a period not to exceed 6
years, the operation of the stay provided under subsection
(a) with respect to particular real property if the debtor
transferred, or was the transferee in a transfer of, such
property, or an interest in such property, to avoid fore-
closure or eviction. Such an order shall be effective against
any debtor having actual notice of the order or, if the
order is filed in an official public record where the title
to the property may be searched, constructive notice of
the order.
‘‘(2) Notwithstanding an order entered under para-
graph (1), a debtor in a case under this title may request
the court to impose a stay to protect such property, and
the court shall grant such stay if the debtor—
‘‘(A) has an interest in such property that
would be adversely affected by the order entered
under such paragraph; and
‘‘(B) did not participate in a transfer of such
property, or an interest in such property, to avoid
foreclosure or eviction.’’.
(b) POLICING NONATTORNEY PETITION PREPAR-
ERS.—
(1) 
PREPARATION
OF
PETITIONS.—Section
110(a)(1) of title 11, United States Code, is amend-
ed by inserting ‘‘under the direct active supervision
of that attorney’’ after ‘‘or an employee of an attor-
ney’’.
(2) NOTICE.—Section 110(b)(1) of title 11,
United States Code, is amended by adding at the
end the following:
‘‘Before accepting any fees from the debtor, the bank-
ruptcy petition preparer must provide to the debtor a writ-
ten Notice to Debtors About Bankruptcy Petition Prepar-
ers, an official form promulgated by the Judicial Con-
ference of the United States. Such notice shall inform the
debtor in simple language that bankruptcy petition pre-
parers are not attorneys and cannot practice law or give
legal advice. The notice shall contain a description of ex-
amples of legal advice which bankruptcy petition preparers
are not authorized to give. A court may adopt rules or
guidelines setting a maximum fee for typing and
photocopying bankruptcy petitions and schedules which
the court finds reasonable for a bankruptcy petition pre-
parer to charge. A Notice to Debtors must be signed by
the debtor and filed along with any document for filing.’’.
(3) LIMITATION
ON
EXECUTION
OF
DOCU-
MENTS.—Section 110(e)(1) of title 11, United
States Code, is amended by adding at the end the
following:
‘‘Nor shall a bankruptcy petition preparer offer a potential
bankruptcy debtor any legal advice which shall include the
following:
this subsection or of subsection (b), (c), (d), (e), (f), (g),
or (i)’’.
(5) PENALTY.—Section 110(h) of title 11,
United States Code, is amended by adding at the
end the following:
‘‘(5) A bankruptcy petition preparer shall be fined
not more than $500 for each violation of paragraph
(h)(1).’’.
SEC. 10. IMPROVE ACCURACY OF DEBTORS’ BANKRUPTCY
SCHEDULES.
Section 727(a) of title 11, United States Code, is
amended—
(1) in paragraph (9) by striking ‘‘or’’ at the
end,
(2) in paragraph (10) by striking the period at
the end and inserting ‘‘; or’’, and
(3) by adding at the end the following:
‘‘(11) the debtor intentionally omitted property
of the estate from the debtor’s schedule of assets,
such omission was material, and the debtor would
not have been entitled to fully exempt such property
if it had been timely listed in the schedules.’’.
SEC. 11. ENSURE PROPORTIONATE AND FAIR RECOVERIES
FOR CREDITORS.
(a) RESTRICTING INTEREST ON INTEREST.—Section
1322(e) of title 11, United States Code, is amended by
inserting ‘‘, except the satisfaction of any penalty rate’’
before the period at the end.
(b) SATISFACTION OF SECURED CLAIMS.—Section
1325(a)(5)(B)(i) is amended to read as follows:
‘‘(i) the plan provides that the holder of
such claim retain the lien securing such claim
until such allowed secured claim is paid, at
which time the lien is extinguished;’’.
(c) ADEQUATELY COMPENSATE SECURED CREDI-
TORS
FOR
DEFERRED
PAYMENTS.—Section
1325(a)(5)(B) of title 11, United States Code, is amended
by striking clause (ii) and inserting the following:
‘‘(ii) the value of property to be distributed
under the plan on account of such claim is not
less than the allowed amount of such claim; and
‘‘(iii) the compensation for delay in pay-
ments on allowed secured claims made pursuant
to clause (ii) shall be the interest rate paid on
6-month United States treasury bill plus 2 per-
cent or the nondefault interest rate set in the
claim’s underlying contract, whichever rate is
less; or’’.
SEC. 
12. 
PREVENT 
WINDFALLS 
FOR 
UNDERSECURED
CREDITORS.
(a) INVALIDATING HIDDEN SECURITY INTERESTS
AND VALUELESS HOUSEHOLD LIENS.—
(1) EXEMPT PROPERTY.—Section 522(f) of title
11, United States Code, is amended by adding at
the end the following:
‘‘(4) A lien held by a creditor on an interest of
the debtor in any item of household furnishings,
household goods, wearing apparel, appliances, books,
animals, crops, musical instruments, or jewelry held
primarily for the personal, family, or household use
of the debtor or a dependent of the debtor shall be
void unless—
‘‘(A) the holder of the lien files with the
court and serves on the debtor, within 30 days
after the meeting of creditors or before the
hearing on confirmation of a plan, whichever
occurs first, a sworn declaration that the pur-
chase price for the particular item that is sub-
ject to such lien exceeded $1,500, and
‘‘(B)(i) the debtor does not timely object to
such declaration; or
‘‘(ii)(I) the debtor objects to such declara-
tion; and
‘‘(II) the court finds that the purchase
price of the item exceeded $1,500 and that such
lien is not avoidable under paragraph (f)(1) of
this section.’’.
(2) 
CONFORMING
AMENDMENT.—Section
104(b)(1) of title 11, United States Code, is amend-
ed by inserting ‘‘522(f),’’ after ‘‘522(d)’’.
(b) ELIMINATE UNENFORCEABLE TAX LIENS.—
(1) TAX LIENS.—Section 522(c)(2)(B) of title
11, United States Code, is amended by inserting
‘‘and which has not been avoided under this section’’
before the period at the end.
(2) FIXING
OF
LIENS.—Section 522(f)(1) of
title 11, United States Code, is amended by adding
at the end the following:
‘‘(C) a tax lien, to the extent that under
applicable nonbankruptcy law such lien was un-
enforceable immediately before the order for re-
lief as to property of the debtor.’’.
(c) TREAT RENT-TO-OWN TRANSACTIONS AS CRED-
IT SALES.—
(1) DEFINITIONS.—Section 101 of title 11,
United States Code, is amended—
(A) by inserting after paragraph (8) the
following:
‘‘(8A) ‘consumer good’ means an item of per-
sonal property (excluding a motor vehicle and a
motor home) acquired by an individual primarily for
a personal, family, or household purpose;’’; and
(B) by inserting after paragraph (45) the
following:
‘‘(45A) ‘rent-to-own contract’ means an agree-
ment, in the form of a terminable lease or bailment
of a consumer good, between an individual and an
entity regularly engaged in the business of making
consumer goods available to individuals under
which—
‘‘(A) the lessee or bailee—
‘‘(i) has the right of possession and
use of the consumer good; and
‘‘(ii) has the option to renew the
agreement periodically by making pay-
ments specified in the agreement; and
‘‘(B) the lessor or bailor agrees, orally or
in writing, to transfer ownership of the con-
sumer good to the lessee or bailee upon the ful-
fillment of all obligations of the lessee or bailee
for the transfer under the agreement;’’.
(2) CASES UNDER CHAPTER 7.—(A) Subchapter
II of chapter 7 of title 11, United States Code, is
amended by adding at the end the following:
‘‘§ 729. Rent-to-own contracts
‘‘In a proceeding under this chapter in which the
debtor is in possession of a consumer good under a rent-
to-own contract, the debtor and the lessor or bailor shall
be accorded the same rights and obligations with respect
to the consumer good as such lessor or bailor would be
accorded if the rent-to-own contract had been a purchase
contract.’’.
(B) The table of sections of chapter 7 of title
11, United States Code, is amended by adding at
the end of the items relating to subchapter II the
following:
‘‘729. Rent-to-own contracts.’’.
(3) CASES
UNDER
CHAPTER 13.—(A) Sub-
chapter I of chapter 13 of title 11, United States
Code, is amended by adding at the end the follow-
ing:
‘‘§ 1308. Rent-to-own contracts
‘‘In a proceeding under this chapter in which the
debtor is in possession of a consumer good under a rent-
to-own contract, the debtor and the lessor or bailor shall
be accorded the same rights and obligations with respect
to the consumer good as such lessor or bailor would be
accorded if the rent-to-own contract had been a purchase
contract.’’.
(B) The table of sections of chapter 13 is
amended by adding at the end of the items relating
to subchapter I the following:
‘‘1308. Rent-to-own contracts.’’.
(d) VALUATION OF PROPERTY.—The last sentence of
section 506(a) of title 11, United States Code, is amended
to read as follows:
‘‘Such value shall be the liquidation value of the property
which shall be not more than the cash wholesale value of
the property and shall be determined in conjunction with
any hearing on a plan or after notice and a hearing pursu-
ant to any other provision of this title when they are paid
in full.’’.
(e) REQUIRE PROOF OF CLAIM.—Section 1327(c) of
title 11 is amended to read as follows:
‘‘(c) Except as otherwise provided in the plan or in
the order confirming the plan, the property of the estate
and the debtor, whether or not revested in the debtor
under subsection (b), is free and clear of—
‘‘(1) any claim or interest of any creditor pro-
vided for by the plan; and
‘‘(2) any lien held by a holder of a secured
claim with notice of the case that has not filed a
timely proof of claim and served that proof of claim
on the debtor and the debtor’s attorney, except that
a lien which has been duly perfected prior to the pe-
tition date and is secured by a claim provided for
under section 1322(b)(5) may be so affected only to
the extent the plan proposes to cure any default.’’.
(f) PERMIT CHAPTER 13 DEBTORS TO SAVE HOMES
ENCUMBERED BY UNDERSECURED MORTGAGES.—Sec-
tion 1322(b) of title 11, United States Code, is amended—
(1) by inserting ‘‘purchase money’’ after ‘‘only
by a’’, and
(2) by adding at the end the following:
‘‘(11) provide for payment of allowed secured
claims consistent with section 1325(a)(5) of this
title, over a period exceeding the period permitted
under subsection (d).’’.
SEC. 13. REINFORCE THE FRESH START.
(a) RESTORATION OF AN EFFECTIVE DISCHARGE.—
Section 523(a) of title 11, United States Code, is amend-
ed—
(1) by striking paragraph (14),
(2) in paragraph (17)—
(A) by striking ‘‘by a court’’ and inserting
‘‘on a prisoner by any court’’,
(B) by striking ‘‘section 1915(b) or (f)’’
and inserting ‘‘subsection (b) or (f)(2) of sec-
tion 1915, and
(C) by inserting ‘‘(or a similar non-Federal
law)’’ after ‘‘title 28’’ each place it appears, and
(3) by redesignating paragraphs (15) through
(18) as paragraphs (14) through (17), respectively.
(b) PROTECTION OF RETIREMENT FUNDS IN BANK-
RUPTCY.—Section 522 of title 11, United States Code, is
amended—
(1) in subsection (b)(2) by adding at the end
the following:
‘‘(C) retirement funds to the extent exempt
from taxation under section 401, 403, 408,
414, 457, or 501(a) of the Internal Revenue
Code of 1986,’’, and
(2) in subsection (d) by adding at the end the
following:
‘‘(12) retirement funds to the extent exempt
from taxation under 401, 403, 408, 414, 457, or
501(a) of the Internal Revenue Code of 1986.’’.
(c) EFFECTIVE PROTECTION FOR UTILITY SERVICE
IN THE WAKE OF DEREGULATION.—Section 366 of title
11, United States Code, is amended by adding at the end
the following:
‘‘(c) For the purposes of this section, the term ‘util-
ity’ includes any provider of gas, electric, telephone, tele-
communication, cable television, satellite communication,
water, or sewer service, whether or not such service is a
regulated monopoly.’’.
SEC. 14. CLARIFYING AMENDMENTS.
(a) CLARIFYING THE ANTI-DISCRIMINATION PROVI-
SIONS OF THE CODE.—Section 525 of title 11, United
States Code, is amended—
(1) in subsection (a) by striking ‘‘other simi-
lar’’, and
(2) by adding at the end the following:
‘‘(d) For purposes of this section, ‘grant’ includes any
right, benefit or privilege.’’.
(b) CLARIFYING THE MEANING OF ‘‘LIQUIDATED’’.—
Section 101 of title 11, United States Code, is amended
by inserting after paragraph (37) the following:
‘‘(37A) ‘liquidated’ means readily determinable
in a fixed amount and not subject to bona fide dis-
pute;’’.
(c) CLARIFYING
THE MEANING
OF ‘‘HOUSEHOLD
GOODS’’.—Section 101 of title 11, United States Code,
is amended by inserting after paragraph (27) the follow-
ing: