I 
118TH CONGRESS 
2D SESSION H. R. 10538 
To amend title 11, United States Code, to improve protections for employees 
and retirees in business bankruptcies. 
IN THE HOUSE OF REPRESENTATIVES 
DECEMBER 19, 2024 
Mr. NADLER (for himself and Mr. CORREA) introduced the following bill; 
which was referred to the Committee on the Judiciary 
A BILL 
To amend title 11, United States Code, to improve protec-
tions for employees and retirees in business bankruptcies. 
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 
‘‘Protecting Employees and Retirees in Business Bank-
ruptcies Act of 2024’’. 
(b) TABLE OF CONTENTS.—The table of contents of 
this Act is as follows: 
Sec. 1. Short title; table of contents. 
Sec. 2. Findings. 
TITLE I—IMPROVING RECOVERIES FOR EMPLOYEES AND 
RETIREES 
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Sec. 101. Increased wage priority. 
Sec. 102. Claim for stock value losses in defined contribution plans. 
Sec. 103. Priority for severance pay and contributions to employee benefit 
plans. 
Sec. 104. Financial returns for employees and retirees. 
Sec. 105. Priority for WARN Act damages. 
TITLE II—REDUCING EMPLOYEES’ AND RETIREES’ LOSSES 
Sec. 201. Rejection of collective bargaining agreements. 
Sec. 202. Payment of insurance benefits to retired employees. 
Sec. 203. Protection of employee benefits in a sale of assets. 
Sec. 204. Claim for pension losses. 
Sec. 205. Payments by secured lender. 
Sec. 206. Preservation of jobs and benefits. 
Sec. 207. Termination of exclusivity. 
Sec. 208. Claim for withdrawal liability. 
TITLE III—RESTRICTING EXECUTIVE COMPENSATION PROGRAMS 
Sec. 301. Executive compensation upon exit from bankruptcy. 
Sec. 302. Limitations on executive compensation enhancements. 
Sec. 303. Prohibition against special compensation payments. 
Sec. 304. Assumption of executive benefit plans. 
Sec. 305. Recovery of executive compensation. 
Sec. 306. Preferential compensation transfer. 
TITLE IV—OTHER PROVISIONS 
Sec. 401. Union proof of claim. 
Sec. 402. Exception from automatic stay. 
Sec. 403. Effect on collective bargaining agreements under the Railway Labor 
Act. 
SEC. 2. FINDINGS. 
The Congress finds the following: 
(1) Business bankruptcies have increased 
sharply in recent years and remain at high levels. 
These bankruptcies include several of the largest 
business bankruptcy filings in history. As the use of 
bankruptcy has expanded, job preservation and re-
tirement security are placed at greater risk. 
(2) Laws enacted to improve recoveries for em-
ployees and retirees and limit their losses in bank-
ruptcy cases have not kept pace with the increasing 
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and broader use of bankruptcy by businesses in all 
sectors of the economy. However, while protections 
for employees and retirees in bankruptcy cases have 
eroded, management compensation plans devised for 
those in charge of troubled businesses have become 
more prevalent and are escaping adequate scrutiny. 
(3) Changes in the law regarding these matters 
are urgently needed as bankruptcy is used to ad-
dress increasingly more complex and diverse condi-
tions affecting troubled businesses and industries. 
TITLE 
I—IMPROVING 
RECOV-
ERIES FOR EMPLOYEES AND 
RETIREES 
SEC. 101. INCREASED WAGE PRIORITY. 
Section 507(a) of title 11, United States Code, is 
amended— 
(1) in paragraph (4)— 
(A) by redesignating subparagraphs (A) 
and (B) as clauses (i) and (ii), respectively; 
(B) in the matter preceding clause (i), as 
so redesignated, by inserting ‘‘(A)’’ before 
‘‘Fourth’’; 
(C) in subparagraph (A), as so designated, 
in the matter preceding clause (i), as so redes-
ignated— 
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(i) by striking ‘‘$10,000’’ and insert-
ing ‘‘$20,000’’; 
(ii) by striking ‘‘within 180 days’’; 
and 
(iii) by striking ‘‘or the date of the 
cessation of the debtor’s business, which-
ever occurs first,’’; and 
(D) by adding at the end the following: 
‘‘(B) Severance pay described in subparagraph 
(A)(i) shall be deemed earned in full upon the layoff 
or termination of employment of the individual to 
whom the severance is owed.’’; and 
(2) in paragraph (5)— 
(A) in subparagraph (A)— 
(i) by striking ‘‘within 180 days’’; and 
(ii) by striking ‘‘or the date of the 
cessation of the debtor’s business, which-
ever occurs first’’; and 
(B) by striking subparagraph (B) and in-
serting the following: 
‘‘(B) for each such plan, to the extent of 
the number of employees covered by each such 
plan, multiplied by $20,000.’’. 
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SEC. 102. CLAIM FOR STOCK VALUE LOSSES IN DEFINED 
CONTRIBUTION PLANS. 
Section 101(5) of title 11, United States Code, is 
amended— 
(1) in subparagraph (A), by striking ‘‘or’’ at 
the end; 
(2) in subparagraph (B), by striking the period 
at the end and inserting ‘‘; or’’; and 
(3) by adding at the end the following: 
‘‘(C) right or interest in equity securities 
of the debtor, or an affiliate of the debtor, if— 
‘‘(i) the equity securities are held in a 
defined contribution plan (within the 
meaning of section 3(34) of the Employee 
Retirement Income Security Act of 1974 
(29 U.S.C. 1002(34))) for the benefit of 
an individual who is not an insider, a sen-
ior executive officer, or any of the 20 high-
est compensated employees of the debtor 
who are not insiders or senior executive of-
ficers; 
‘‘(ii) the equity securities were attrib-
utable to either employer contributions by 
the debtor or an affiliate of the debtor, or 
elective deferrals (within the meaning of 
section 402(g) of the Internal Revenue 
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Code of 1986), and any earnings thereon; 
and 
‘‘(iii) an employer or plan sponsor 
who has commenced a case under this title 
has committed fraud with respect to such 
plan or has otherwise breached a duty to 
the 
participant 
that 
has 
proximately 
caused the loss of value.’’. 
SEC. 103. PRIORITY FOR SEVERANCE PAY AND CONTRIBU-
TIONS TO EMPLOYEE BENEFIT PLANS. 
Section 503(b) of title 11, United States Code, is 
amended— 
(1) in paragraph (8)(B), by striking ‘‘and’’ at 
the end; 
(2) in paragraph (9), by striking the period and 
inserting a semicolon; and 
(3) by adding at the end the following: 
‘‘(10) severance pay owed to employees of the 
debtor (other than to an insider of the debtor, a sen-
ior executive officer of the debtor, the 20 highest 
compensated employees of the debtor who are not in-
siders or senior executive officers, any department or 
division manager of the debtor, or any consultant 
providing services to the debtor), under a plan, pro-
gram, or policy generally applicable to employees of 
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the debtor (but not under an individual contract of 
employment), or owed pursuant to a collective bar-
gaining agreement, for layoff or termination on or 
after the date of the filing of the petition, which pay 
shall be deemed earned in full upon such layoff or 
termination of employment; and 
‘‘(11) any contribution to an employee benefit 
plan that is due on or after the date of the filing of 
the petition.’’. 
SEC. 104. FINANCIAL RETURNS FOR EMPLOYEES AND RE-
TIREES. 
Section 1129(a) of title 11, United States Code is 
amended— 
(1) by striking paragraph (13) and inserting 
the following: 
‘‘(13) With respect to retiree benefits, as that 
term is defined in section 1114(a), the plan— 
‘‘(A) provides for the continuation after 
the effective date of the plan of payment of all 
retiree benefits at the level established pursuant 
to subsection (e)(1)(B) or (g) of section 1114 
at any time before the date of confirmation of 
the plan, for the duration of the period for 
which the debtor has obligated itself to provide 
such benefits, or if no modifications are made 
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before confirmation of the plan, the continu-
ation of all such retiree benefits maintained or 
established in whole or in part by the debtor be-
fore the date of the filing of the petition; and 
‘‘(B) provides for recovery of claims arising 
from the modification of retiree benefits or for 
other financial returns, as negotiated by the 
debtor and the authorized representative (to the 
extent that such returns are paid under, rather 
than outside of, a plan).’’; and 
(2) by adding at the end the following: 
‘‘(17) The plan provides for recovery of dam-
ages payable for the rejection of a collective bar-
gaining agreement, or for other financial returns as 
negotiated by the debtor and the authorized rep-
resentative under section 1113 (to the extent that 
such returns are paid under, rather than outside of, 
a plan).’’. 
SEC. 105. PRIORITY FOR WARN ACT DAMAGES. 
Section 503(b)(1)(A)(ii) of title 11, United States 
Code is amended by inserting ‘‘any back pay, civil penalty, 
or damages for a violation of any Federal or State labor 
and employment law, including the Worker Adjustment 
and Retraining Notification Act (29 U.S.C. 2101 et seq.) 
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and any comparable State law, and’’ before ‘‘wages and 
benefits’’ each place that term appears. 
TITLE II—REDUCING EMPLOY-
EES’ AND RETIREES’ LOSSES 
SEC. 201. REJECTION OF COLLECTIVE BARGAINING AGREE-
MENTS. 
Section 1113 of title 11, United States Code, is 
amended by striking subsections (a) through (f) and in-
serting the following: 
‘‘(a) The debtor in possession, or the trustee if one 
has been appointed under this chapter, other than as pro-
vided in section 103(m) for collective bargaining agree-
ments covered by the Railway Labor Act (45 U.S.C. 151 
et seq.), may reject a collective bargaining agreement only 
in accordance with this section. In this section, a reference 
to the trustee includes the debtor in possession. 
‘‘(b) No provision of this title shall be construed to 
permit the trustee to unilaterally terminate or alter any 
provision of a collective bargaining agreement before com-
plying with this section. The trustee shall timely pay all 
monetary obligations arising under the terms of the collec-
tive bargaining agreement. Any such payment required to 
be made before a plan confirmed under section 1129 is 
effective has the status of an allowed administrative ex-
pense under section 503. 
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the collective bargaining agreement or for interim relief 
pursuant to this section. 
‘‘(3) In consideration of Federal policy encouraging 
the practice and process of collective bargaining and in 
recognition of the bargained-for expectations of the em-
ployees covered by the collective bargaining agreement, 
modifications proposed by the trustee— 
‘‘(A) shall be proposed only as part of a pro-
gram of workforce and nonworkforce cost savings 
devised for the reorganization of the debtor, includ-
ing savings in management personnel costs; 
‘‘(B) shall be limited to modifications designed 
to achieve a specified aggregate financial contribu-
tion for the employees covered by the collective bar-
gaining agreement (taking into consideration any 
labor cost savings negotiated within the 12-month 
period before the filing of the petition), and shall be 
not more than the minimum savings essential to per-
mit the debtor to exit bankruptcy, such that con-
firmation of a plan of reorganization is not likely to 
be followed by the liquidation, or the need for fur-
ther financial reorganization, of the debtor (or any 
successor to the debtor) in the short term; and 
‘‘(C) shall not be disproportionate or overly bur-
den the employees covered by the collective bar-
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gaining agreement, either in the amount of the cost 
savings sought from such employees or the nature of 
the modifications. 
‘‘(d)(1) If, after a period of negotiations, the trustee 
and the labor organization have not reached an agreement 
over mutually satisfactory modifications, and further ne-
gotiations are not likely to produce mutually satisfactory 
modifications, the trustee may file a motion seeking rejec-
tion of the collective bargaining agreement after notice 
and a hearing. Absent agreement of the parties, no such 
hearing shall be held before the expiration of the 21-day 
period beginning on the date on which notice of the hear-
ing is provided to the labor organization representing the 
employees covered by the collective bargaining agreement. 
Only the debtor and the labor organization may appear 
and be heard at such hearing. An application for rejection 
shall seek rejection effective upon the entry of an order 
granting the relief. 
‘‘(2) In consideration of Federal policy encouraging 
the practice and process of collective bargaining and in 
recognition of the bargained-for expectations of the em-
ployees covered by the collective bargaining agreement, the 
court may grant a motion seeking rejection of a collective 
bargaining agreement only if, based on clear and con-
vincing evidence— 
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‘‘(A) the court finds that the trustee has com-
plied with the requirements of subsection (c); 
‘‘(B) the court has considered alternative pro-
posals by the labor organization and has concluded 
that such proposals do not meet the requirements of 
subsection (c)(3)(B); 
‘‘(C) the court finds that further negotiations 
regarding the proposal of the trustee or an alter-
native proposal by the labor organization are not 
likely to produce an agreement; 
‘‘(D) the court finds that implementation of the 
proposal of the trustee shall not— 
‘‘(i) cause a material diminution in the 
purchasing power of the employees covered by 
the collective bargaining agreement; 
‘‘(ii) adversely affect the ability of the 
debtor to retain an experienced and qualified 
workforce; or 
‘‘(iii) impair the labor relations of the 
debtor such that the ability to achieve a feasible 
reorganization would be compromised; and 
‘‘(E) the court concludes that rejection of the 
collective bargaining agreement and immediate im-
plementation of the proposal of the trustee is essen-
tial to permit the debtor to exit bankruptcy, such 
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that confirmation of a plan of reorganization is not 
likely to be followed by liquidation, or the need for 
further financial reorganization, of the debtor (or 
any successor to the debtor) in the short term. 
‘‘(3) If, during the bankruptcy, the trustee has imple-
mented a program of incentive pay, bonuses, or other fi-
nancial returns for an insider of the debtor, a senior exec-
utive officer of the debtor, any of the 20 highest com-
pensated employees of the debtor who are not insiders or 
senior executive officers, any department or division man-
ager of the debtor, or any consultant providing services 
to the debtor, or such a program was implemented within 
180 days before the date of the filing of the petition, the 
court shall presume that the trustee has failed to satisfy 
the requirements of subsection (c)(3)(C). 
‘‘(4) In no case shall the court enter an order reject-
ing a collective bargaining agreement that would result in 
modifications to a level lower than the level proposed by 
the trustee in the proposal found by the court to have com-
plied with the requirements of this section. 
‘‘(5) At any time after the date on which an order 
rejecting a collective bargaining agreement is entered, or 
in the case of a collective bargaining agreement entered 
into between the trustee and the labor organization pro-
viding mutually satisfactory modifications, at any time 
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after that collective bargaining agreement has been en-
tered into, the labor organization may apply to the court 
for an order seeking an increase in the level of wages or 
benefits, or relief from working conditions, based upon 
changed circumstances. The court shall grant the request 
only if the increase or other relief is not inconsistent with 
the standard set forth in paragraph (2)(E). 
‘‘(e) During a period during which a collective bar-
gaining agreement at issue under this section continues 
in effect and a motion for rejection of the collective bar-
gaining agreement has been filed, if essential to the con-
tinuation of the business of the debtor or in order to avoid 
irreparable damage to the estate, the court, after notice 
and a hearing, may authorize the trustee to implement 
interim changes in the terms, conditions, wages, benefits, 
or work rules provided by the collective bargaining agree-
ment. Any hearing under this subsection shall be sched-
uled in accordance with the needs of the trustee. The im-
plementation of such interim changes shall not render the 
application for rejection moot and may be authorized for 
not more than 14 days in total. 
‘‘(f)(1) Rejection of a collective bargaining agreement 
constitutes a breach of the collective bargaining agree-
ment, and shall be effective no earlier than the entry of 
an order granting such relief. 
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‘‘(2) Notwithstanding paragraph (1), solely for pur-
poses of determining and allowing a claim arising from 
the rejection of a collective bargaining agreement, rejec-
tion shall be treated as rejection of an executory contract 
under section 365(g) and shall be allowed or disallowed 
in accordance with section 502(g)(1). No claim for rejec-
tion damages shall be limited by section 502(b)(7). Eco-
nomic self-help by a labor organization shall be permitted 
upon a court order granting a motion to reject a collective 
bargaining agreement under subsection (d) or pursuant to 
subsection (e), and no provision of this title or of any other 
provision of Federal or State law may be construed to the 
contrary. 
‘‘(g) The trustee shall provide for the reasonable fees 
and costs incurred by a labor organization under this sec-
tion, upon request and after notice and a hearing. 
‘‘(h) A collective bargaining agreement that is as-
sumed shall be assumed in accordance with section 365.’’. 
SEC. 202. PAYMENT OF INSURANCE BENEFITS TO RETIRED 
EMPLOYEES. 
Section 1114 of title 11, United States Code, is 
amended— 
(1) in subsection (a), by inserting ‘‘, without re-
gard to whether the debtor asserts a right to unilat-
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erally modify such payments under such plan, fund, 
or program’’ before the period at the end; 
(2) in subsection (b)(2), by inserting ‘‘, and a 
labor organization serving as the authorized rep-
resentative under subsection (c)(1),’’ after ‘‘section’’; 
(3) by striking subsection (f) and inserting the 
following: 
‘‘(f)(1) If a trustee seeks modification of retiree bene-
fits, the trustee shall provide a notice to the authorized 
representative that modifications are being proposed pur-
suant to this section, and shall promptly provide an initial 
proposal. Thereafter, the trustee shall confer in good faith 
with the authorized representative at reasonable times and 
for a reasonable period in light of the complexity of the 
case in attempting to reach mutually satisfactory modi-
fications. 
‘‘(2) The initial proposal and subsequent proposals 
by the trustee shall be based upon a business plan for the 
reorganization of the debtor and shall reflect the most 
complete and reliable information available. The trustee 
shall provide to the authorized representative all informa-
tion that is relevant for the negotiations. The court may 
enter a protective order to prevent the disclosure of infor-
mation if disclosure could compromise the position of the 
debtor with respect to the competitors in the industry of 
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the debtor, subject to the needs of the authorized rep-
resentative to evaluate the proposals of the trustee and 
an application pursuant to subsection (g) or (h). 
‘‘(3) Modifications proposed by the trustee— 
‘‘(A) shall be proposed only as part of a pro-
gram of workforce and nonworkforce cost savings 
devised for the reorganization of the debtor, includ-
ing savings in management personnel costs; 
‘‘(B) shall be limited to modifications that are 
designed to achieve a specified aggregate financial 
contribution for the retiree group represented by the 
authorized representative (taking into consideration 
any cost savings implemented within the 12-month 
period before the date of filing of the petition with 
respect to the retiree group), and shall be no more 
than the minimum savings essential to permit the 
debtor to exit bankruptcy, such that confirmation of 
a plan of reorganization is not likely to be followed 
by the liquidation, or the need for further financial 
reorganization, of the debtor (or any successor to 
the debtor) in the short term; and 
‘‘(C) shall not be disproportionate or overly bur-
den the retiree group, either in the amount of the 
cost savings sought from such group or the nature 
of the modifications.’’; 
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(4) in subsection (g)— 
(A) by striking the subsection designation 
and all that follows through the semicolon at 
the end of paragraph (3) and inserting the fol-
lowing: 
‘‘(g)(1) If, after a period of negotiations, the trustee 
and the authorized representative have not reached agree-
ment over mutually satisfactory modifications and further 
negotiations are not likely to produce mutually satisfac-
tory modifications, the trustee may file a motion seeking 
modifications in the payment of retiree benefits after no-
tice and a hearing. Absent agreement of the parties, no 
such hearing shall be held before the expiration of the 21- 
day period beginning on the date on which notice of the 
hearing is provided to the authorized representative. Only 
the debtor and the authorized representative may appear 
and be heard at such hearing. 
‘‘(2) The court may grant a motion to modify the 
payment of retiree benefits only if, based on clear and con-
vincing evidence— 
‘‘(A) the court finds that the trustee has com-
plied with the requirements of subsection (f); 
‘‘(B) the court has considered alternative pro-
posals by the authorized representative and has de-
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termined that such proposals do not meet the re-
quirements of subsection (f)(3)(B); 
‘‘(C) the court finds that further negotiations 
regarding the proposal of the trustee or an alter-
native proposal by the authorized representative are 
not likely to produce a mutually satisfactory agree-
ment; 
‘‘(D) the court finds that implementation of the 
proposal shall not cause irreparable harm to the af-
fected retirees; and 
‘‘(E) the court concludes that an order granting 
the motion and immediate implementation of the 
proposal of the trustee is essential to permit the 
debtor to exit bankruptcy, such that confirmation of 
a plan of reorganization is not likely to be followed 
by liquidation, or the need for further financial reor-
ganization, of the debtor (or a successor to the debt-
or) in the short term. 
‘‘(3) If, during the bankruptcy, a trustee has imple-
mented a program of incentive pay, bonuses, or other fi-
nancial returns for insiders of the debtor, senior executive 
officers of the debtor, the 20 highest compensated employ-
ees of the debtor who are not insiders or senior executive 
officers, any department or division managers of the debt-
or, or any consultants providing services to the debtor, or 
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such a program was implemented within 180 days before 
the date of the filing of the petition, the court shall pre-
sume that the trustee has failed to satisfy the require-
ments of subsection (f)(3)(C).’’; and 
(B) in the matter following paragraph 
(3)— 
(i) by striking ‘‘except that in no 
case’’ and inserting the following: 
‘‘(4) In no case’’; and 
(ii) by striking ‘‘is consistent with the 
standard set forth in paragraph (3)’’ and 
inserting ‘‘assures that all creditors, the 
debtor, and all of the affected parties are 
treated fairly and equitably, and is clearly 
favored by the balance of the equities’’; 
(5) in subsection (h)(1), by inserting ‘‘for a pe-
riod of not longer than 14 days’’ before the period; 
and 
(6) by striking subsection (k) and redesignating 
subsections (l) and (m) as subsections (k) and (l), 
respectively. 
SEC. 203. PROTECTION OF EMPLOYEE BENEFITS IN A SALE 
OF ASSETS. 
(a) REQUIREMENT TO PRESERVE JOBS AND MAIN-
TAIN TERMS AND CONDITIONS OF EMPLOYMENT.—Sec-
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tion 363 of title 11, United States Code, is amended by 
adding at the end the following: 
‘‘(q)(1) In approving a sale or lease of property of 
the estate under this section or a plan under chapter 11, 
the court shall give substantial weight to the extent to 
which a prospective purchaser or lessee of the property 
will— 
‘‘(A) preserve the jobs of the employees of the 
debtor; 
‘‘(B) maintain the terms and conditions of em-
ployment of the employees of the debtor; and 
‘‘(C) assume or match the pension and health 
benefit obligations of the debtor to the retirees of 
the debtor. 
‘‘(2) If there are two or more offers to purchase or 
lease property of the estate under this section or a plan 
under chapter 11, the court shall approve the offer of the 
prospective purchaser or lessee that will best carry out the 
actions described in subparagraphs (A) through (C) of 
paragraph (1).’’. 
(b) CHAPTER 11 PLANS.—Section 1129(a) of title 
11, United States Code is amended by adding at the end 
the following: 
‘‘(17) If the plan provides for the sale of all or 
substantially all of the property of the estate, the 
VerDate Sep 11 2014 
02:13 Jan 28, 2025
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