A bill to address remedies in bankruptcy for negligent, reckless, or fraudulent assertion of claim.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Fighting Fraud in Bankruptcy Act of 
2011''.

SEC. 2. REMEDIES FOR NEGLIGENT, RECKLESS, OR FRAUDULENT ASSERTION OF 
              CLAIM.

    Chapter 1 of title 11, United States Code, is amended by adding at 
the end the following:
``Sec. 113. Remedies for negligent, reckless, or fraudulent assertion 
              of claim
    ``(a) In this section--
            ``(1) a person `asserts a claim' by, without limitation, 
        preparing, signing, filing, submitting, or later advocating a 
        proof of claim under section 501 of this title, a motion 
        seeking relief from the stay imposed under section 362 of this 
        title, or other paper, representing to the court that a claim 
        is owed or that it is owed in a specific amount;
            ``(2) a person who assists another person in asserting a 
        claim shall also be deemed to have asserted the claim, 
        including--
                    ``(A) any officer, director, employee, or agent of 
                the person asserting a claim; and
                    ``(B) any attorney, accountant, or other 
                professional person who is employed by or is assisting 
                the person asserting a claim; and
            ``(3) the term `relief' means, without limitation, and in 
        addition to any legal, equitable, monetary or injunctive relief 
        otherwise available under any provision of this title or other 
        provision of law, or under a court's inherent powers--
                    ``(A) an order or judgment imposing upon a person 
                in one or more cases, wherever situated, in which the 
                person has asserted a claim or claims in violation of 
                subsection (b) a civil penalty of not more than $5,000 
                for each such claim;
                    ``(B) an order or judgment requiring a person in 
                one or more cases, wherever situated, in which the 
                person has asserted a claim or claims in violation of 
                subsection (b), to pay actual damages to an injured 
                debtor, or trustee; and
                    ``(C) an order or judgment imposing upon a person 
                in one or more cases, wherever situated, in which the 
                person has asserted, or could assert, a claim or claims 
                in violation of subsection (b) of this section, other 
                prospective or retrospective relief, including but not 
                limited to declaratory relief, injunctive relief, or an 
                auditing requirement.
    ``(b) Notwithstanding any other provision of Federal or State law, 
and in addition to any other remedy provided under Federal or State 
law, if a court, on its own motion or on the motion of the United 
States trustee (or bankruptcy administrator, if any), finds, based upon 
a preponderance of the evidence, that a person has, through negligence, 
recklessness, or fraud, improperly asserted a claim in any case under 
chapter 7 or chapter 13 of this title before the court, the court may--
            ``(1) enter relief against the person in the case before 
        the court; and
            ``(2) enter relief against the person in any other case 
        under chapter 7 or chapter 13 that is pending or might 
        thereafter be filed under this title, wherever situated, to the 
        extent the court deems it necessary--
                    ``(A) to rectify the person's negligent, reckless, 
                or fraudulent assertion of a claim; or
                    ``(B) to prevent the person from asserting any 
                negligent, reckless, or fraudulent claim.
    ``(c)(1) Civil penalties imposed under this section in judicial 
districts served by United States trustees shall be paid to the United 
States trustees, who shall deposit an amount equal to such fines in the 
United States Trustee Fund.
    ``(2) Civil penalties imposed under this section in judicial 
districts served by bankruptcy administrators shall be deposited as 
offsetting receipts to the fund established under section 1931 of title 
28, and shall remain available until expended to reimburse any 
appropriation for the amount paid out of such appropriation for 
expenses of the operation and maintenance of the courts of the United 
States.''.

SEC. 3. DUTY OF THE UNITED STATES TRUSTEE TO ADDRESS CLAIMS.

    Section 586(a) of title 28, United States Code, is amended--
            (1) in paragraph (7)(C), by striking ``and'' at the end;
            (2) in paragraph (8), by striking the period at the end and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(9) when the United States trustee deems it appropriate--
                    ``(A) monitor and investigate the conduct of other 
                parties in interest with respect to claims; and
                    ``(B) take action that the United States trustee 
                deems necessary to prevent or remedy any negligent, 
                reckless, or fraudulent assertion of a claim, as 
                defined in section 113(a) of title 11, by exercising 
                any of the United States trustee's powers and 
                authorities under this title and under title 11 
                respecting claims, including--
                            ``(i) filing, pursuing, or commenting upon 
                        any action brought under section 113 of title 
                        11; and
                            ``(ii) filing, pursuing, or commenting upon 
                        any civil action, or upon any civil proceeding 
                        arising under title 11, or arising in or 
                        related to a case under title 11.''.

SEC. 4. PROCEDURES FOR THE AUDITING OF PROOFS OF CLAIM.

    (a) Title 28.--Section 586 of title 28, United States Code, is 
amended by adding at the end the following:
    ``(g)(1) Claims Audit Procedures.--
            ``(A) The Director of the Executive Office for United 
        States Trustees shall establish audit procedures to determine 
        the accuracy, veracity, and completeness of proofs of claim 
        filed under section 501(a) of title 11, with respect to cases 
        filed under chapter 7 or 13 of title 11, in which the debtor is 
        an individual.
            ``(B) The procedures established pursuant to subparagraph 
        (A) shall--
                    ``(i) establish a method of selecting appropriate 
                qualified persons to contract to perform audits;
                    ``(ii) establish a method of selecting proofs of 
                claim to be audited, except that the number of audits 
                to be performed shall be within the sole discretion of 
                the Director of the Executive Office for United States 
                Trustees; and
                    ``(iii) establish procedures for providing, not 
                less frequently than annually, public information 
                concerning the aggregate results of such audits, 
                including the percentage of cases, by district, in 
                which inaccurate, untrue, or incomplete proofs of claim 
                were filed.
    ``(2) The United States trustee for each district is authorized to 
contract with auditors to perform audits of proofs of claim designated 
by the United States trustee, in accordance with the procedures 
established under paragraph (1). An audit may, in the discretion of the 
United States trustee, encompass multiple proofs of claim filed by the 
same entity in one case or multiple cases, whether in the same district 
or multiple districts. The United States trustees from multiple regions 
may contract with a single auditor to audit proofs of claim filed by 
the same entity in districts within their regions.
    ``(3)(A) The report of each audit performed pursuant to paragraph 
(2) shall be filed with the court where the case is pending and 
transmitted to the United States trustee and to any trustee serving in 
the case. Each such report shall clearly and conspicuously specify any 
findings that the claim asserted in the proof of claim is--
            ``(i) not valid;
            ``(ii) not owed in the amount claimed; or
            ``(iii) not supported by adequate documentation.
    ``(B) If a claims audit report identifies deficiencies in the proof 
of claim as described in paragraph (2)(A), the United States trustee 
shall--
            ``(i) if appropriate, report the deficient filing to the 
        United States Attorney pursuant to section 3057 of title 18; 
        and
            ``(ii) if advisable, take appropriate action, including 
        objecting to the proof of claim under section 502(b) of title 
        11, or commencing an action under section 113(b) of title 11, 
        against entities responsible for the deficiencies.''.
    (b) Title 11.--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 ``; or''; and
            (3) by adding at the end the following:
            ``(10) the court finds the entity filing a proof of claim 
        that was selected for audit under section 586(g) of title 28 
        failed to make available to the auditor for inspection 
        necessary accounts, papers, documents, financial records, 
        files, or other papers, that were requested by the auditor.''.

SEC. 5. TREATMENT OF SERVICEMEMBERS IN FORECLOSURE.

    Section 362(d) of title 11, United States Code, is amended by 
adding at the end of the undesignated matter following paragraph (4) 
the following: ``In any case under this title involving a 
servicemember, as defined in section 101 of the Servicemembers Civil 
Relief Act, to whom section 303 of that Act applies, no action may be 
taken under this subsection unless the party in interest certifies, 
under penalty of perjury, that the requirements of section 303 of the 
Servicemembers Civil Relief Act have been met.''.

SEC. 6. EFFECTIVE DATES.

    (a) Remedies; Duty To Address Claims.--The provisions of section 
113 and section 362(d) of title 11, United States Code, and paragraph 
(9) of section 586(a) of title 28, United States Code, added by this 
Act, shall become effective with respect to all cases filed or pending 
under title 11, United States Code, on or after the date of enactment 
of this Act.
    (b) Auditing of Proofs of Claim.--Section 586(g) of title 28, 
United States Code, as added by this Act, shall become effective 18 
months after the date of enactment of this Act for all cases filed or 
pending on or after that date of enactment, except that the Director of 
the Executive Office for United States Trustees may, in the sole 
discretion of the Director, establish an earlier effective date by 
publishing notice in the Federal Register at least 2 weeks before the 
proposed effective date.

Summary: Fighting Fraud in Bankruptcy Act of 2011 - Amends federal bankruptcy law to prescribe remedies, including civil penalties, for a negligent, reckless, or fraudulent assertion of claim in a bankruptcy proceeding under either chapter 7 (liquidation) or chapter 13 (adjustment of debts of an individual with regular income).

Prohibits the court, in any case involving a service member, from granting relief from an automatic stay upon request of a party in interest unless such party certifies under penalty of perjury that the requirements of the Servicemembers Civil Relief Act pertaining to mortgages used as security on real or personal property have been met.

Amends the federal judicial code to confer upon the U.S. trustee the duty to exercise the trustee's powers and authorities to prevent or remedy any negligent, reckless, or fraudulent assertion of a claim.

Requires the Director of the Executive Office for U.S. Trustees to establish specified audit procedures to determine the accuracy, veracity, and completeness of proofs of claim filed under federal bankruptcy laws.